CHAPTER THREE

International Market Segmentation, Selection, and Positioning

Market segmentation represents an effort to identify and categorize groups of customers and

countries according to various characteristics. Targeting is the process of evaluating the

segments and focusing marketing efforts on a country, region, or group of people that has

significant potential to respond. Such targeting reflects the reality that a company should

identify those consumers it can reach most effectively and efficiently. Finally, proper

positioning is required to differentiate the product or brand in the minds of target customers.

3.1. International Market Segmentation and Selection

3.1.1 International Market Segmentation

@ International market segmentation is the process of dividing the world market into distinct

subsets of customers that behave in the same way or have similar needs.

@ It is "the process of identifying specific segments- whether they be country group who are

likely to exhibit similar buying behavior”. Each subset may conceivably be chosen as a

market target to be reached with a distinctive marketing strategy.

@ The process begins with a basis of segmentation-a product-specific factor that reflects

differences in customers’ requirements or responsiveness to marketing variables

(possibilities are purchase behavior, usage, benefits sought, intentions, preference, or

loyalty).

3.1.1.1 Criteria’s for International Market Segmentation

The requirements for effective market segmentation in a domestic marketing context also

apply in international market segmentation. In particular, segments ideally should possess the

following set of properties:

1. Identifiable: The segments should be easy to define and to measure. This criterion is

easily met for ‘‘objective’’ country traits such as socioeconomic variables (e.g., per capita

income).

2. Sizable: The segments should be large enough to be worth going after.

3. Accessible: The segments should also be easy to reach through promotional and

distributional efforts.
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4. Stability: If target markets change their composition or behavior over time, marketing

efforts devised for these targets are less likely to succeed.

5. Responsive: For market segmentation to be meaningful, it is important that the segments

respond differently from each other to differentiated marketing mixes.

6. Actionable: Segments are actionable if the marketing mix necessary to address their

needs is consistent with the goals and the core competencies of the company.

3.1.1.2 Reasons for International Market Segmentation

The major reasons why international marketers implement international market segmentation

are:

A. Country screening (preliminary C. Entry decisions

screening of countries) D. Positioning Strategy

B. Global marketing research E. Resource allocation

F. Marketing mix policy

3.1.2 Bases of Market Segmentation

Today, international companies (and the advertising agencies that serve them) are likely to

segment world markets according to one or more key criteria: Geography, demographics

(including national income and size of population), psychographics (values attitudes, and

lifestyles), behavioral characteristics, and benefits sought. It is also possible to cluster

different national markets in terms of their environments (e.g. the presence or absence of

government regulation in a particular industry) to establish groupings. Another powerful tool

for international segmentation is vertical vs. horizontal segmentation by user category.

1. Geographic Segmentation

Geographic segmentation is dividing the world into geographic subsets. The advantage of

geography is proximity: Markets in geographic segments are closer to each other and easier

to visit on the same trip or to call on during the same time window. Geographic segmentation

also has major limitations: The mere fact that markets are in the same world geographic

region does not meant that they are similar. Japan and Vietnam are both in East Asia, but one

is a high-income, postindustrial society and the other is an emerging, less developed,

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preindustrial society. The differences in the markets in these two countries overwhelm their

similarities. Geography was ranked lowest as a basis for market segmentation.

2. Demographic Segmentation

 Demographic segmentation is based on measurable characteristics of population such as

age, gender, income, education, and occupation.

 A number of demographic trends aging population, fewer children, more women working

outside the home, and higher incomes and living standards - suggest the emergence of

international segments.

 For most consumer and industrial products, national income is the single most important

segmentation variable and indicator of market potential.

 Annual per capita income varies widely in world markets, from a low of $81 in the Congo

to the high of $38,587 in Luxembourg.

 The U.S. market, with per capita income of $29,953, more than $8.3 trillion in 2000

national income and a population of more than 275 million people is enormous. Thus,

Americans are the favorite target market.

 Many global companies also realize that for products with a low enough price-e.g.

cigarettes, soft drinks and some packaged goods-population is a more important

segmentation variable than income. Thus, China and India with respective population of

about 1.3billion and 1.0 billion might represent attractive target markets.

 To know the standard of living of people in a country, it is necessary to determine the

purchasing power of the local currency. In low income countries the actual purchasing

power of the local currency is much higher than the implied by exchange values.

 Age is another useful demographic variable. One global segment based on demographics

is global teenagers-young people between the ages of 12 and 19. Teens, by virtue of their

interest in fashion, music and a youthful life style, exhibit consumption behavior that is

remarkably consistent across borders.

 Another global segment is so called elite: older, more affluent consumers who are well

travelled and have the money to spend on prestigious products with an image of

exclusivity. This segment’s needs and wants are spread over various product categories:
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  Durable goods e.g. luxury automobiles

 Non-durables e.g. upscale beverages such as rare wines and champagne

 Financial services e.g. American express gold and platinum Cards

3. Psychographic Segmentation

Psychographic segmentation involves grouping people in terms of their attitudes, values, and

lifestyles. Data are obtained from questionnaires that require respondents to indicate the

extent to which they agree or disagree with a series of statements.

An example of the general-type lifestyle segmentation approach is GfK Roper Consulting’s

Value scope model. Each year, the market research company conducts 30,000 interviews

around the world to monitor consumer values. Based on the responses, Value scope identified

seven values segments:

1. Achievers place high importance on obtaining and showing social status. They put their

own interests ahead of others’.

2. Traditionalist believe that their inherited way of life is the best and does not need any

changes. Religious beliefs and cultural traditions rule their lives.

3. Survivors try to always give their best effort while being modest. They are not looking

for a lot of money, just enough to eke out a living. They want to keep their life as simple

and uncluttered as possible.

4. Nurturers place high value on maintaining long-term commitment to friends and family.

In building relationships with friends and relatives, they find it important to be sincere

and to have integrity.

5. Hedonists need instant gratification. They are always looking for new experiences. They

need to feel young and want to have a good time.

6. Social-rationales view the world as a large and diverse place where differences should be

respected.

They value open-mindedness and try to save the world because they feel it is sensible to

do so.

7. Self-directed value freedom of action and thought so they can choose their own goals and

achieve them.

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Darcy Massius Benton & Bowles's Euroconsumer Study

DMBB's research team focused on Europe and produces a 15-country study titled "The

Euroconsumer: Marketing Myth or Cultural Certainty?" The researchers identified four

lifestyle groups: Successful Idealists, Affluent Materialists, Comfortable Belongers, and

Disaffected Survivors. The first two groups represent the elite; the latter two, mainstream

European consumers:

A. Successful Idealists- Comprising from 5 to 20 percent of the population, this segment

consists of persons who have achieved professional and material success while

maintaining commitment to abstract or socially responsible ideals.

B. Affluent Materialists- These status-conscious “up-and-comers”—many of whom are

business professionals—use conspicuous consumption to communicate their success to

others.

C. Comfortable Belongers- Comprising one-fourth to one-half of a country’s population,

this group, like Global Scan’s Adapters and Traditional, is conservative and most

comfortable with the familiar. Belongers are content with the comfort of home, family,

friends, and community.

D. Disaffected Survivors- Lacking power and affluence, this segment harbors little hope for

upward mobility and tends to be either resentful or resigned. This segment is concentrated

in high-crime, inner-city-type neighborhoods. Despite Disaffected, lack of societal status,

their attitudes nevertheless tend to affect the rest of society.

4. Behavioral Segmentation

@ Behavioral segmentation focuses on whether people buy and use a

product, as well as how often and how much they use it.

@ Consumers can be categorized in terms of usage rates - for example,

heavy, medium, light, and nonuser.

@ Consumers can also be segmented according to user status: potential

users, nonusers, ex-users, regulars, first-timers, and users of

competitors' products. Although bottled water may be considered a

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 luxury product in some high-income markets, Nestle is marketing

bottled water in Pakistan where there is a huge market of nonusers

who, despite their low income, are willing to pay 18 rupees a bottle for

clean water because of the widespread presence of arsenic poisoning

in well water and the pollution of surface water. Tobacco companies

are targeting China because the Chinese are heavy smokers.

5. Benefit Segmentation

International benefit segmentation focuses on the numerator of the value equation – the B in

V=B/P. This approach can achieve excellent results by virtue of marketer's superior

understanding of the problem a product solves or the benefit it offers, regardless of

geography. Benefit segmentation is often used in global marketing for product positioning,

product design or product adaptation purposes. While benefit segments overlap different

countries, their relative size often differs in each market.

3.2 International Market Targeting

As discussed earlier, segmenting is the process by which marketers identify groups of

consumers with similar wants and-needs. Targeting is the act of evaluating and comparing the

identified groups and then selecting one or more of them as the prospect(s) with the highest

potential. A marketing mix is then devised that will provide the organization with the best

return on sales while simultaneously creating the maximum amount of value to consumers.

3.2.1 Criteria For International Market Targeting

The three basic criteria for assessing opportunity in global target markets are the same as in

single-country targeting: current size of the segment and anticipated growth potential;

competition; and compatibility with the company’s overall objectives and the feasibility of

successfully reaching a designated target.

1. Current Segment Size and Growth Potential

Is the market segment currently large enough that it presents a company with the opportunity

to make a profit? If it is not large enough or profitable enough today, does it have high

growth potential so that it is attractive in terms of a company’s long-term strategy? Indeed,

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one of the advantages of targeting a market segment globally is that, whereas the segment in

a single-country market might be too small, even a narrow segment can be served profitably

with a standardized product if the segment exists in several countries.

2. Potential Competition

A market or market segment characterized by strong competition may be a segment to avoid

or one in which to utilize a different strategy. Often a local brand may present competition to

the entering multinational.

3. Compatibility and Feasibility

If a global target market is judged to be large enough, and if strong competitors are either

absent or not deemed to represent insurmountable obstacles, then the final consideration is

whether a company can and should target that market. In many cases, reaching global market

segments requires considerable resources such as expenditures for distribution and travel by

company personnel. Another question is whether the pursuit of a particular segment is

compatible with the company’s overall goals and established sources of competitive

advantage.

3.2.2 Selecting a Global Target Market Strategy

If, after evaluating the identified segments in terms of the three criteria presented earlier, a

decision is made to proceed, an appropriate targeting strategy must be developed. There are

three basic categories of target marketing strategies: standardized marketing, concentrated

marketing, and differentiated marketing.

1. Standardized Global Marketing

Standardized global marketing is analogous to mass marketing in a single country. It involves

creating the same marketing mix for broad market of-potential buyers. This strategy calls for

extensive distribution in the maximum number of retail outlets. The appeal of standardized

global marketing is clear: greater sales volume, lower production costs, and greater

profitability. The same is true of standardized global communications: lower production costs

and, if done well, higher quality and greater effectiveness of marketing communications.

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Coca-Cola, one of the world’s most global brands, uses the appeal of youthful fun in its

global advertising. Its sponsorship program is global and is adapted to events that are popular

in specific countries such as soccer in -other parts of the world versus football in the United

States.

2. Concentrated Global Marketing

The second global targeting strategy involves devising’ a marketing mix to reach a single

segment of the global market. In cosmetics, this approach has been used successfully by the

House of Lauder Channel and other cosmetics houses that target the upscale prestige segment

of the market. This is the strategy employed by the hidden champions of global marketing:

companies that most people have never heard of that have adopted strategies of concentrated

marketing on a global scale.

These companies define their markets narrowly. They go for global depth rather than national

breadth. For example, winter halter (a German company) is a hidden champion in the

dishwasher market, but the company has never sold a dishwasher to a consumer. It has also

never sold a dishwasher to a hospital, school, company, or any other organization. It focuses

exclusively on dishwashers for hotels and restaurants. It offers dishwashers, water

conditioners, detergents, and service.

Juergen Winter halter commented in reference to the company’s narrow market definition:

“This narrowing of our market definition was the most important strategic decision we ever

made. It is the very foundation of our success in the past decade.

3. Differentiated Global Marketing

The third target marketing strategy is a variation of concentrated global marketing. It entails

targeting two or more distinct market segments with different marketing mixes. This strategy

allows a company to achieve wider market coverage.

3.3 International Market Positioning

Positioning is the location of your product in the mind of your customer. Thus, one of the

most powerful tools of marketing is not something that a marketer can do to the product or to

any element of the marketing mix: Positioning is an act of developing the company’s
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offerings and image to occupy a distinct place in the minds of the target market. The position

that a product occupies in the mind of a customer depends on a host of variables, many of

which “are controlled by the marketer”.

3.3.1 International Positioning Strategies

Marketers have utilized a number of general positioning strategies. These include positioning

by attribute or benefit, quality and price, use or user, or competitor.

A. Attribute or Benefit

A frequently used positioning strategy exploits a particular product attribute, benefit, or

feature. Economy, reliability, and durability are frequently used attribute/benefit positions.

Volvo automobiles are known for solid construction that offers safety in the event of a crash.

By contrast, BMW is positioned as “the ultimate driving machine,” a reference that signifies

high performance.

B. Quality and Price

This strategy can be thought of in terms of a continuum from high fashion/quality and high

price to good value (rather than “low quality”) at a reasonable price.

C. Use or User

Another positioning strategy represents how a product is used or associates the brand with a

user or class of users. For instance, Max Factor makeup is positioned as “the makeup that

makeup artists use.” Pulsar watch associates the brand with a handsome man who is

“addicted to reality TV” and enjoys reading Dostoevsky.

D. Competition

Implicit or explicit reference to competitors can provide the basis for an effective positioning

strategy.