Khon Kaen University International College International Product and

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Khon Kaen University International College International Product and Pricing Strategy Course number 052 201

Khon Kaen University International College International Product and Pricing Strategy Course number 052 201 - First semester 2013 Mondays at 9: 00 in room 822 Lecturer: Michael Cooke office room 817 E-mail: Michco@kku. ac. th Web: KKU. AC. TH/Michco

Homework for Next Week Global Marketing Strategies �Skim chapter 8 (fairly long, try to

Homework for Next Week Global Marketing Strategies �Skim chapter 8 (fairly long, try to get a sense of the contents) �Read P&G case 8 -2 (pages 287 -288). Look for the P&G trademark on supermarket goods. How did P&G adapt to income differences within China? How does P&G learn about Chinese consumers? Does P&G adapt consumer products for Thailand?

How should Gulf Coast shrimpers market the product? • Wally Stevens, the chief operating

How should Gulf Coast shrimpers market the product? • Wally Stevens, the chief operating officer of Slade Gorton, a seafood distributor in Boston, argues that the damage is self-inflicted. The American Seafood Distributors Association, of which Mr. Stevens is president, maintains that farmed shrimp is more consistent in size and quality than domestic shrimp. He also says the domestic industry has tried to compete on price alone—impossible, since trawlers and fuel are so expensive—instead of marketing to a niche. The sort of sophisticated consumers who seek out boutique pinot noirs from Oregon and artisanal cheeses from Vermont would presumably pay a little extra for wildcaught Louisiana shrimp. The shrimpers reply that better marketing alone won't keep them in business, and that a big advertising blitz would eat up money few of them have. * • The salmon fishing industry had a similar problem from salmon raised on farms in the USA, Chile, and elsewhere. The higher cost product found a viable lucrative niche among wealthier and health conscious consumers. *Source: The Economist 4 July, 2004 (http: //www. economist. com/node/2904934) Niche: Narrowly defined group of customers having unique needs.

Chapter Overview – Segmentation and Positioning 1. Reasons for International Market Segmentation 2. International

Chapter Overview – Segmentation and Positioning 1. Reasons for International Market Segmentation 2. International Market Segmentation Approaches 3. Segmentation Scenarios 4. Bases for Country Segmentation 5. International Positioning Strategies 6. Global, Foreign, and Local Consumer Culture Positioning Appendix – making sense of data Note: Much of the material covered today can be found in Chapter 7 of ‘Global Marketing Management’ Chapter 7 Copyright (c) 2009 John Wiley & Sons, Inc. 4

Introduction �Generally, variation in customer needs is the primary motive for market segmentation. �Most

Introduction �Generally, variation in customer needs is the primary motive for market segmentation. �Most companies look for and target attractive market segments they can effectively serve. �Market segmentation is critical for global marketing because of the differences among international consumer needs and lifestyles. �After choosing target segments, the next task is to create a competitive positioning strategy for its products. 5

Reasons for International Market Segmentation � Country Screening (market entry consideration is based on

Reasons for International Market Segmentation � Country Screening (market entry consideration is based on initial screening criteria) � Global Market Research � Cluster countries across relevant characteristics � Focus research efforts on a representative sample � Market Entry Decisions � Product launches based on shared relevant characteristics across countries � Country differences on other dimensions can hinder success � Positioning Strategy (influencing customer perception of the product relative to competitors) � Where will marketing efforts have greatest impact? � Target market segments might change due to consumer preferences or population changes � How the products or service is positioned will follow the opportunity � Resource Allocation (Exhibit 7 -1) � Market share clusters (increase penetration) � Consumption clusters (developing the market) � Marketing Mix Policy � Countries in same segment might have similar mix strategy (design, pricing, promotion, distribution) � Similarities on one dimension might be offset by differences on another (such as price sensitivity)

Exhibit 7 -1: Market Clustering Approach for Instant Coffee Chapter 7 Copyright (c) 2007

Exhibit 7 -1: Market Clustering Approach for Instant Coffee Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 7

Requirements for International Market Segmentation �Identifiable � Should be easy to define and measure

Requirements for International Market Segmentation �Identifiable � Should be easy to define and measure � Value or lifestyle measures typically difficult to gauge �Sizable � Segments should be large enough to be worth pursuing � Small segments aggregated across countries might work �Accessible � Segments should be easy to reach � Infrastructure differences across countries �Stable target market behavior and composition �Responsive – segments have unique responses �Actionable – the required marketing mix is consistent with the company goals and competencies Chapter 7 Adapted from 2009 John Wiley & Sons, Inc. 8

 International Market Segmentation Approaches �International segmentation procedures: �Country-as-segments or aggregate segmentation (Exhibits 7

International Market Segmentation Approaches �International segmentation procedures: �Country-as-segments or aggregate segmentation (Exhibits 7 -2 & 7 -3. ) � � � Geographic single dimension or several dimensions Marketing irrelevance of many country boundaries Difficulty of determining which variables to use for geo segments �Disaggregate international consumer segmentation � Consumer segments defined by similarities along chosen characteristics � Consumer bases might be geographically disbursed – logistical issues �Two-stage international segmentation � First aggregate countries (macro level) screens out countries � Second segment consumers within the country cluster (micro) � Market oriented and accessible �For numerous country traits, use data reduction techniques such as factor analysis (SAS Proc Factor). Chapter 7 Copyright (c) 2009 John Wiley & Sons, Inc. 9

Exhibit 7 -2: Nestlé’s Geographic Segmentation of the Americas Chapter 7 Copyright (c) 2009

Exhibit 7 -2: Nestlé’s Geographic Segmentation of the Americas Chapter 7 Copyright (c) 2009 John Wiley & Sons, Inc. 10

Exhibit 7 -3: Macro-Level Country Characteristics Chapter 7 Copyright (c) 2007 John Wiley &

Exhibit 7 -3: Macro-Level Country Characteristics Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 11

� Information Psychological basis filtering (sensory filtering) ◦ Occurs among even lowest organisms (react

� Information Psychological basis filtering (sensory filtering) ◦ Occurs among even lowest organisms (react to heat, light. Other aspects of environment ignored by primitive senses) ◦ Highest life forms still limited in gathering and processing information from environment �We learn to filter information irrelevant to a situation �Often the most highly educated among us filter most ◦ We fail to see/hear or recall much of what is available to us � Under the right conditions (context) we might recall what we otherwise would not � Our filtering and recall changes through life and with circumstances � Marketers try to determine which audiences might be receptive to the product message, and how to enable recall � Distances between high SES among countries might be less than between SESs within a country (life circumstances and education factors)

 Segmentation Scenarios � Universal or global segments (go beyond boundaries) � Customers belonging

Segmentation Scenarios � Universal or global segments (go beyond boundaries) � Customers belonging to universal segments have common needs � Could be a universal niche (example: global elite, business travelers) � Common customer needs higher in some product categories (high-tech or travel related) � Regional segments � Differentiated versus undifferentiated strategies apply to global segments as well � Differentiated strategy tailors marketing to local market conditions � An undifferentiated strategy is often followed by some high-tech companies – uniform worldwide marketing, scale economies � Unique (diverse) segments � Substantial differences in cross country customer preferences � Localized marketing mix programs � Food products may have country specific segments � Degrees of segmentation often follow degrees of market development (emerging markets usually have a simple consumer market structure – high price or low price only) 13

Country Segmentation Bases Demographics or population variables � Easy to measure, accessible, stable �

Country Segmentation Bases Demographics or population variables � Easy to measure, accessible, stable � Age and sex measures are predictive and actionable � Socioeconomic Variables � � � Per Capita income � Issues in using per capita income as an indicator: � Difficult to measure HH income in traditional farm economies � Official exchange rates seldom reveal buying power within a country o Services are provided in-country using local currency o Goods not traded across borders (housing, etc) � Gray and Black Market sections of the economy (cash or barter) � Income disparities (gap between rich and poor) – Gini index o Lower number means more income equality o Scandinavian countries have high equality (lowest index number) o Thailand, China, USA relatively unequal (higher index) UN’s Human development index (HDI) classification � � Socioeconomic Strata (SES) Analysis (education, consumption) � 14 Life expectancy at birth Adult literacy PPP per capita income – in-country basket of goods Education can be a powerful variable for large developing markets o How to reach large and growing illiterate or semi-literate populations?

Demographics Segmentation � Easy to measure � Accurate � The and easy to find

Demographics Segmentation � Easy to measure � Accurate � The and easy to find (for most countries) elderly are an often overlooked segment ◦ Unique needs ◦ Self perceptions (active, not old) ◦ Growing number in many countries, including Thailand � Global middle class family is highly sought ◦ Definition is tricky �HH income figures ignore purchasing power differences �Vast differences between countries in how income is spent � Chinese spend less than 5% on rent, transport, health � US consumers spend 50% ◦ Income distinctions ignore education and values

 Example of population clusters, from Japanese ad agency study of Asian women (Exhibit

Example of population clusters, from Japanese ad agency study of Asian women (Exhibit 7 -5): � Socially conscious (8%) Community oriented � My Small World (26%) Family oriented � Happy as I am (26%) Satisfied with current lifestyle � I want more (26%) Like to try new things � Look at me (13%) Ambitious, want status � Ford Fiesta’s strategy in China (p. 232) targets young, single, educated urban women � � � Ford strategy worldwide is standardization of car platforms However after consumer research Ford offers more colors in China than in Europe Personalization versus standardization Ad campaigns targeted the young consumers with bright colors and pop music, via internet A different ad campaign targeted the parents with focus on product safety � Note that the often ignored elderly: � Have unique needs (wish to perceive self as active, ‘not old’) � Are a growing % of the population in developed countries (soon up to 1/3 of total population in some countries) � May have high disposable income

Exhibit 7 -5: Six Types of Chinese Pre-Elders Chapter 7 Copyright (c) 2007 John

Exhibit 7 -5: Six Types of Chinese Pre-Elders Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 17

Bases for Country Segmentation Product Related (Exhibit 7 -7) ◦ Attitudes toward product attributes

Bases for Country Segmentation Product Related (Exhibit 7 -7) ◦ Attitudes toward product attributes �Country of origin � Status related (microwaves in living room) ◦ Usage rate (product consumption per capita or HH) ◦ Product penetration �Percentage of target market that uses the product �An often used measure of new sales potential ◦ Consumption infrastructure (electricity, etc. ) �Infrastructure effects distribution and consumption �Wide variation in basic infrastructure within regions Chapter 7 18

Exhibit 7 -7: Benefit Segments of Toothpaste Market in the U. S. A. ,

Exhibit 7 -7: Benefit Segments of Toothpaste Market in the U. S. A. , China, and Mexico Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 19

Other Bases for Country Segmentation Lifestyles � Roper Consulting Valuescope Model (1998) � Strivers

Other Bases for Country Segmentation Lifestyles � Roper Consulting Valuescope Model (1998) � Strivers (largest WW segment) have material goals � More likely to be men � More common in developing Asia than in developed Asia � Devout (second largest segment) emphasis on tradition and duty � � Women more than men Least common in Europe, highest in Saudi Arabia � Altruists (18% of all adults) interests in social issues � � Women more than men, and older people Latin America and Russia � Intimates value personal relationships and nuclear family � Europe and North America (especially UK) � Fun Seekers (12% of population) more common in developed Asia (highest in Brazil) � Creative (10% of population) have strong interest in education and technology � People in different segments buy different products, use different media � Tailor messages to parts of the population most likely to buy � Tools for refining strategies � Potential customers � Reinforcing loyal customers Chapter 7 20

A last thought on segments �For many forms of marketing, the higher the likelihood

A last thought on segments �For many forms of marketing, the higher the likelihood of getting a sale, the higher the cost per target consumer. �Before internet, mailing lists were sold with a price per name. Marketers considered cost of sending mail �The more specific the segment (higher likelihood of getting a response) the higher the unit cost �How do international Google ads fit this model? �How does worldwide spam fit into this economic model? �How does this rule change when there is no cost to deliver a message? What sort of filtering mechanisms would we have?

 International Positioning Strategies • Positioning: The presentation of a product or service to

International Positioning Strategies • Positioning: The presentation of a product or service to evoke a positive and differentiated mental image in the consumer’s perception (International Marketing; Czinkota and Ronkainen) • Position: The place a product, brand or group of products occupies in consumer’s minds relative to competing offerings. (Introduction to Marketing 9 th edition; Mc. Daniel, Lamb, Hair) • Effective positioning (local or global) requires: – Finding and assessing competing products – Understanding the important aspects of competitor positions – Choosing a position to maximize the impact of marketing efforts • Product differentiation involves distinguishing a product from competitor’s products. 22

 International Positioning Strategies � Uniform versus Localized Positioning Strategies � Target a universal

International Positioning Strategies � Uniform versus Localized Positioning Strategies � Target a universal segment � � May involve same positioning worldwide Might involve tailoring to different markets � Pursue different segments in different markets � Typically customize positioning appeals to each segment � Universal Positioning � Consistent image worldwide � Can use global media � Difficult to devise a theme that appeals across markets (differences in culture, economics, competition, product lifecycle) � Successful appeals may target specific buying groups � � Quality or performance for business customers Features or benefits for consumer non-durables Quality or performance for consumer durables User groups share common characteristics � A mainstream brand in a home market might be upscale in overseas markets 23

Global, Foreign, and Local Consumer Culture Positioning • Global consumer culture positioning (GCCP) –

Global, Foreign, and Local Consumer Culture Positioning • Global consumer culture positioning (GCCP) – Brand as a symbol of a given global consumer culture (self image of buyer is cosmopolitan) – Global brands might confer status in less developed economies – High tech consumer products symbolize modernism – Consumers share core values • Local consumer culture positioning (LCCP) – Brand as an intrinsic part of the local culture • Brand is portrayed as consumed buy local people • Brand may be depicted as using local supplies or ingredients • Multi-local brands are perceived as local across several countries • Foreign consumer culture positioning (FCCP) – Brand mystique built around a specific foreign culture • A company might employ all of these at the same time (cosmopolitan, with foreign origins, using local ingredients, etc) Chapter 7 Copyright (c) 2009 John Wiley & Sons, Inc. 24

Exhibit 7 -10: Mc. Donald’s Promoting Its Local Community Support in New Zealand Chapter

Exhibit 7 -10: Mc. Donald’s Promoting Its Local Community Support in New Zealand Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 25

Appendix: Segmentation Tools • Segmentation techniques and tools: – Cluster Analysis: Collection of statistical

Appendix: Segmentation Tools • Segmentation techniques and tools: – Cluster Analysis: Collection of statistical procedures for dividing objects into groups (clusters). The grouping is done in such a manner that members belonging to the same group are very similar to one another but quite distinct from members of other groups (no overlap). (SAS Proc Cluster) Chapter 7 Copyright (c) 2009 John Wiley & Sons, Inc. 26

Appendix: Segmentation Tools – Regression Analysis: In regression, one assumes that there exists a

Appendix: Segmentation Tools – Regression Analysis: In regression, one assumes that there exists a relationship between a response variable, Y, and one or more so-called predictor variables, X 1, X 2 and so on. (SAS Proc Reg) – The higher the R 2 value, the better the ability of the regression model to predict the data. – With multivariate regression the user has the ability to determine which bases are most explanatory. Chapter 7 27

Exhibit 7 -11: Principles of Cluster Analysis Chapter 7 Copyright (c) 2007 John Wiley

Exhibit 7 -11: Principles of Cluster Analysis Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 28

Exhibit 7 -12: Plot of Concentration versus Category Growth Chocolate Market Chapter 7 Copyright

Exhibit 7 -12: Plot of Concentration versus Category Growth Chocolate Market Chapter 7 Copyright (c) 2007 John Wiley & Sons, Inc. 29

Exhibit 7 -13: Cluster Analysis Chapter 7 Copyright (c) 2009 John Wiley & Sons,

Exhibit 7 -13: Cluster Analysis Chapter 7 Copyright (c) 2009 John Wiley & Sons, Inc. 30