Chapter 6
Part 1
Markets and segmentation
in an international context
Review of the last session
• List the six entry mode
options that brands may
choose from to start a foreign
venture
• Business leaders may pursue
any of these three theories
to guide their selection of the
most befitting mode of entry
– share the list of theories
• What three criteria are useful
for the evaluation of an
optimal entry mode strategy?
2
3
Learning objective #1
What is market segmentation and how does
international market segmentation differ from
domestic market segmentation?
Markets and market segments
A market consists of people with
wants and needs, money to spend,
and the willingness to spend money
on those wants and needs.
International markets vary due to
several factors. Marketers consider
many factors when developing
international segmentation strategies.
Market segmentation consists of identifying all potential customer
groups that are viable for the purposes of marketing products.
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International market segmentation
• The process of identifying specific
segments – country groups, other
businesses or individual consumer
groups – of potential customers with
homogeneous attributes across
different countries, or within a single
foreign market, that are likely to
exhibit similar responses to a
company’s marketing mix.
• When identifying market segments,
marketers seek to understand the
cultural factors that exist across
marketplaces, as well as all of the
other forces in the international
marketing context.
Beef or Chicken Patties?
6
The STP approach to markets
Segmentation consists of identifying
all potential customer groups that are
viable for the purposes of marketing
products and services.
• Most companies not able to reach every
available market segment
Targeting component of the STP
approach involves selecting the
market segments the firm intends to
target or reach.
Nike ad for high-schoolers
Positioning is creating perceptions in
the minds of consumers about the
nature of a company, its brands, and
its products and services.
7
Learning objective #2
What are the primary factors used to identify
international consumer and business-to-business
market segments?
International market segmentation
Market Segment: Set of Businesses or Group of Consumers with
distinct characteristics
Viability of a Market Segment
Those within the
segment should be
homogenous or have
similar characteristics.
The segment must
differ from other groups
and the population as a
whole.
Sufficient demand must
be present to make the
segment financially
feasible.
Methods to reach the
market must exist, both
in terms of physical
delivery of the item and
in terms of the
marketing messages
that would entice
customers to make
purchases.
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International consumer market
segments
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Demographics
• Demographics are
population characteristics,
and
perceptions/consumption
differences related to these
characteristics may vary
wildly internationally.
– Gender
– Age
– Income
– Education
– Ethnicity
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Psychographics
• Psychographic profiles emerge from
a person’s activities, interests, and
opinions.
– Vary widely by culture due to
influence by divergent factors
such as religious training,
customs, language, and even
the popularity of local sports
• Psychographics are influenced by
cultural differences.
– Cultures with individualistic
tendencies offer opportunities to
market personalized products
and items that make a person
stand out from the crowd.
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Geographic area
• Marketing appeals can be
made to people in a
geographic area or region.
• Many times differences exist in
purchasing patterns in rural
versus urban areas, creating
unique target markets.
• Germany can be divided into
several distinct regions:
– Bavaria, the Black Forest,
Germany’s East, the North
and Baltic Sea area, the
Rhine Valley, and Ruhrpott
13
Geodemographic segmentation
• A hybrid form of geographic
segmentation allows companies to
enrich geographic approaches to
segmentation by adding
demographic and psychographic
information.
• Geodemographic segmentation
may also be useful when various
regions feature differences.
• Several companies focus
specifically on geographic and
geodemographic research.
– ESRI provides executives with
cutting-edge technologies for
utilizing data from around the
world.
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Benefit segmentation
• Focuses on the advantages
consumers receive from a
product rather than the
characteristics of
consumers themselves.
• A given product may
feature one benefit in a
given country and a
separate benefit in another.
15
Global consumer types
• Global consumers refer to the
consumers in different nations
that earn similar incomes and
hold roughly the same social
status levels.
– Exhibit similar purchasing
patterns
– Less likely to focus on price
and instead buy products
that meet global quality
standards
– Normally located in urban
settings and exhibit high
levels of cosmopolitanism
16
Global consumer types
Glocal consumers
have a dual
consumption
patterns (global
and local).
Local consumers
rarely consume
foreign products.
• Buy global products, but the purchase represents a
special occasion
• More likely to purchase products that mimic global
products but are priced slightly lower
• For either economic or taste reasons, maintain
traditional consumption patterns
• Often live in rural settings where they only infrequently
have the opportunity to purchase foreign goods
• Exhibit high levels of ethnocentrism, or the belief that
one’s culture is superior to others
17
International business-to-business
market segmentation
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Dual channel marketing
• Firms that sell virtually the same goods or
services to both consumers and businesses
• The approach fits several situations.
– A product sold in business markets is then
adapted to consumer markets.
– Individuals buy a particular brand at work
have positive experiences and purchase
the same brand for personal use (spin-off
sales).
• One marketing decision involves how to
represent the product in each channel.
– Feature similarities between the two
markets unless there are significant
differences
• Dual channel marketing opportunities often
grow as a result of economic development.
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Summary
1. Viable market segments
–
Similar characteristics
–
Different from other segments and
population
–
Sufficient demand for financial
feasibility
–
Reachable – communication and
product delivery
3. Primary factors for segments
– Consumer: Demographics,
Psychographics, Geographic,
Geodemographic, Consumer
behavior
– Business: Industry, Size,
Location, Product usage,
customer value
2. International market segmentation
–
Heterogeneity with home country
–
Homogeneity within host country
–
Macro-level cultural differences
–
Segments that transcend national
boundaries
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Chapter 6
Part 2
Markets and segmentation
in an international context
Review of the last session
Share what makes market segments viable
Identify the differences in international as
compared to domestic market segmentation
List the primary factors for consumer and
business segmentation
2
3
Learning objective #3
How can the marketing team use regional and
national segmentation methods to improve a
company’s global marketing program?
Methods for regional and national
segmentation
•
•
•
•
Wants and Needs
Money to Spend
Willingness to Spend
Language
5
Selected per capita incomes
6
Bottom-of-the-pyramid consumers
Bottom-of-the-pyramid consumers,
the final global segment, consists of
the 4 billion people worldwide who
live on $2 or less per day.
These individuals experience wants
and needs but have only limited
money to spend.
Even with a small profit margin, the large size and equivalent large
potential volume makes this segment increasingly attractive.
7
Bottom-of-the-pyramid consumers
• To target this group
effectively, the marketing
mix must be adjusted,
including changes in
products, prices, and
delivery systems, and in
some cases, brands.
– The goal of these
changes is to create the
capacity to consume by
lowering the barriers to
purchase.
8
Targeting BOP consumers
Products
• Changing the product – design of the item to meet
a slightly different need or by simply lowering the
quantity offered per purchase
• Changing the product and price.
Pricing
• BOP consumers are prone to switching.
• Reduce price but maintain quality
• Exchange systems, or the methods of facilitating
payment, may vary within the economies of
bottom-of-the-pyramid countries.
• Barter may be present, whereby an individual
trades one good or service for another
Credit
McDonald’s Menu in India
• May be difficult, dependent on individual
relationships.
• Providing small credit for purchases $10 to $15
can help create the capacity to consume
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Targeting BOP consumers…contd
• Distribution: Involves finding
delivery systems that match a
local region
– Electricity available on a
routine basis? Running
water?
– Product modifications may
be needed to facilitate
distribution.
– Necessitates innovations in
refrigeration, batteries, and
more-efficient energy
consumption.
10
Targeting BOP consumers…contd
• Promotion
– Arguably least important
part of the marketing mix for
BOP consumers as
knowledge of products is
often already present.
– Literacy and overall levels
of education may be limiting
factors.
– Word-of-mouth
endorsements and other
less-traditional promotional
tactics are valuable tools.
11
Percentage of country population
living on less than $1 per day
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Green marketing and sustainabilityoriented segments
• Consumer Preferences
– The majority of customers
only purchase green
products when the item
maintains the same level of
price, quality, convenience,
and performance.
• Green by Necessity
– In many bottom-of-thepyramid nations,
sustainability has become a
driving force in purchases.
– Such products save the
consumer money.
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Market segment analysis
• Market potential represents the total number of individuals
or businesses that could purchase a product in a given
area.
• Market demand consists of the total sales of all brands sold
in an area or within a product industry.
• Company or brand demand is the estimated demand for a
company’s brand.
– May also be called market share
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Learning objective #5
How to assess market potential of a selected
market segment?
Assessing market potential
Availability of financial resources
Availability of potential substitutes
Ability to offer attractive benefits
Current product availability
Consumer awareness of the product
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Assessing market potential
Measurability: Can the segment be quantified and
identified?
Accessibility: Can the segment be reached?
Profitability: Is the segment large enough to
generate profits?
Actionability: Can a marketing program be
designed to stimulate interest and behavioral
responses (purchases)?
17
Ethical issues in international
segmentation
• Demographics may reinforce
stereotypes.
• Segmentation may reinforce
gender discrimination.
– Females may be confined
to submissive and
subservient roles.
• Targeting lower-income
segments may be viewed by
some critics as being the
process of creating
overconsumption by people
who can least afford to do so.
18
Ethical issues in international
segmentation…contd
– Purchasing less-healthy food products such as fast food
– Purchasing clothes designed to create status rather than
to offer functionality
• Market segmentation programs may limit access to certain
goods or services to only the rich.
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Summary
1. Regional and national segmentation methods to improve a
company’s global marketing program
o
o
o
o
Wants and Needs
Money to Spend
Willingness to Spend
Language
2. Market potential, market demand, and brand demand
numbers can show a clear picture of the market
3. Bottom of the Pyramid customers are 4 Bn globally
representing a huge economic opportunity
4. Environment friendly and sustainable consumption is
being preferred by younger generation
5. Marketers need to be sensitive to ethical issues in IM
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Intl Mktg News Article Search Rubric
Format: Arial font size 12, single space
Title
1. Look and Feel
2. News Article Summary:
Content Expected
Customize the design of your write-up to make it
attractive to the reader
Attract attention to key data and findings
The content is to the point
Summarize the key details from the news article details that you desire to bring to the reader’s
attention
Points Available
Points Received
Needs Work
2
No or poor customization to the
template
Font, structure, headings, not
meeting specifications
Cover placeholder picture not
0 changed
5
Content is missing
0 Grammar and spelling errors
Fair
1
Partial customization of the template
Report highlights, table headings are missing
Report does not bring attention to key
data/findings
Some of he content is superfluous
2
The write-up is designed to attract attention
The picture on the front page reflects the
essence of the write-up
The color combination is easy on the eye
Data visulaization helps comprehension
1-2
Content is partial: E.g., key points unrelated
to the topic
No grammar and spelling errors
3-5
Content is complete
Terms used in the course are applied.
No grammar and spelling errors
1-2
Content is partial:
No connection or partial connection between
the article and the inferences.
No grammar and spelling errors
3-5
3. New Article Inferences:
Share how the facts presented in the news article
explain the phenomenon being discussed here.
5
Total:
12
Findings, Interpretations, or
Inferences are missing
0 Grammar and spelling errors
Excellent
Content is complete:
Clear reference is made to the observations
in the news to make inferences.
Terms/models used in the course are applied.
No grammar and spelling errors
Group # , Assignment #
TITLE
Group Member Names: Alicia Star, Mary Super | Date
GUIDELINES
This section is for your information only. Please remove from the final
submission.
Use the format provided.
•
•
•
•
Limit up to 3 pages of write-up, one page for the summary, one for the
inference, and one for sharing the news article.
Use Arial 12-point font as specified in the template.
Attach the downloaded article as well as include the weblink in the writeup. You may attach a picture of the article whose size you may adjust so
that it fits the space available.
Replace the placeholder picture on the title page to reflect the essence of
the news article.
The assignment will be judges based on the rubric provided. Make sure you
cover the following three criteria:
− Relevance to the assignment topic: Find an article which has very specific
information related to the topic. For example, if the assignment topic is
“Demographics,” the news item should specify different age, income,
education – topics that are covered under demographics and their impact
on business in that country.
− Inferences: Now that you have an example of how “Demographics”
influence the business in that country draw a parallel connecting the
theory covered that week and the news article.
− Grammar, spellings, and writing comprehension: Please check for any
errors, ensure clarity and logical flow in your writing.
LOOK AND FEEL (2 POINTS)
Customize the title page – replace with a relevant picture, include the specified
information.
PAGE 1
NEWS ARTICLE SUMMARY (5 POINTS)
Summarize the key take away from the news article. Connect to the theory
covered this week.
PAGE 2
NEWS ARTICLE INFERENCE (5 POINTS)
You might like the photo on the cover page as much as we do, but if it’s not ideal
for your report, it’s easy to replace it with your own.
Just delete the placeholder picture. Then, on the Insert tab, click Picture to select
one from your files.
PAGE 3
NEWS ARTICLE LINK
To replace the placeholder text on this page, you can just select it all and then
start typing. But don’t do that just yet!
First check out a few tips to help you quickly format your report. You might be
amazed at how easy it is.
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