Segmentation Targeting and Positioning Global Marketing Chapter 7

Segmentation, Targeting, and Positioning Global Marketing Chapter 7 1

Introduction • How to identify like groups of potential customers? • How to chose the groups to target? • How to segment those groups? • How to position the brand in the mind of the customer? There are 4. 2 million horseback and cart riders in Inc. Great Britain. © 2011 Pearson Education, publishing as Prentice Hall 7 -2

Market Segmentation • Represents an effort to identify and categorize groups of customers and countries according to common characteristics 77. 5 million dogs are owned in the U. S. © 2011 Pearson Education, Inc. publishing as Prentice Hall Who owns whom? 7 -3

Targeting • The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond • Focus on the segments that can be reached most effectively, efficiently, and profitably 7 -4 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Global Market Segmentation • Defined as the process of identifying specific segments—whether they be country groups or individual consumer groups—of potential customers with homogeneous attributes who are likely to exhibit similar responses to a company’s marketing mix. 7 -6 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Global market segmentation is based on the premise that companies should attempt to identify consumers in different countries who share similar needs and desires. • However, the fact that significant numbers of pizzaloving consumers are found in many countries, they are not eating the exact same thing (e. g. , Dominos in France, serves pizza with goat cheese and strips of port fat know as lardoons. • In Taiwan, toppings include squid, crab, shrimp, and pineapple). 7 -7 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• The process of market segmentation begins with the choice of one or more variables to use as a basis for grouping customers. • Common variables include demographics (including income and population), psychographics (values, attitudes, and lifestyles), behavioral characteristics, and benefits. 7 -8 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Global Market Segmentation • Demographics • Psychographics • Behavioral characteristics • Benefits sought Skiing became a sport in Norway where it was invented 4, 000 years ago. © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -9

Demographic Segmentation • • • Income Population Age distribution Gender Education Occupation What are

Demographic Facts and Trends • A widening age gap exists between the older populations in the West and the large working -age populations in developing countries • In the European Union, the number of consumers aged 16 and under is rapidly approaching the number of consumers aged 60 -plus • Asia is home to 500 million consumers aged 16 and under • Half of Japan’s population will be age 50 or older by 2025 7 -11 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Demographic Facts and Trends • America’s three main ethnic groups—African/Black Americans, Hispanic Americans, and Asian Americans —represent a combined annual buying power of $1 trillion • The United States is home to 28. 4 million foreignborn residents with a combined income of $233 billion • By 2030, 20 percent of the U. S. population— 70 million Americans—will be 65 or older versus 13 percent (36 million) today • India has the youngest demographic profile among the world’s large nations: More than half of its population is under the age of 25 7 -12 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Statistics such as these can provide valuable insights to marketers who are scanning the globe for opportunities. • Demographic changes can create opportunities for marketing innovation. In France, for example, two entrepreneurs began rewriting the rules of retailing years before Sam Walton founded the Wal-Mart chain. Marcel Fournier and Louis Defforey opened the first Carrefour ("crossroads") hypermarket in 1963. At the time, France had a fragmented shop system that consisted of small, specialized stores with only about 5, 000 square feet of floor space such as the boulangerie and charcuterie. 7 -13 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• The shop system was part of France's national heritage, and shoppers developed personal relationships with a shop's proprietor. However, time pressed, dual-parent working families had less time to stop at several stores for daily shopping. The same trend was occurring in other countries. By 1993, Carrefour SA was a global chain with $21 billion in sales and a market capitalization of $10 billion. By 2008, sales had reached $124 billion; today, Carrefour operates 15, 400 stores in 30 countries. As Adrian Slywotzky has noted, it was a demographic shift that provided the opportunity for Fournier and Defforey to create a novel, customer-matched, cost-effective business design. 7 -14 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Segmenting by Income and Population • Income is a valuable segmentation variable – 2/3 s of world’s GNP is generated in the Triad but only 12% of the world’s population is in the Triad • Do not read into the numbers – Some services are free in developing nations so there is more purchasing power • For products with low enough price, population is a more important variable 7 -15 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• When a company charts a plan for global market expansion, it often finds that income is a valuable segmentation variable. After all, a market consists of those who are willing and able to buy. • For low cost items such as soft drinks and candy, population is often a more valuable segmentation variable than income. For a vast range of industrial and consumer products offered in global markets today, income is a valuable and important macro indicator of market potential. 7 -16 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Per Capita Income 7 -17 © 2011 Pearson Education, Inc. publishing as Prentice Hall

10 Most Populous Countries 7 -18 © 2011 Pearson Education, Inc. publishing as Prentice

Age Segmentation • Global Teens–young people between the ages of 12 and 19 – A group of teenagers randomly chosen from different parts of the world will share many of the same tastes • Global Elite–affluent consumers who are well traveled and have the money to spend on prestigious products with an image of exclusivity. • The global elite is normally associated with older individuals who have accumulated wealth over the course of a long career, it also includes movie stars, musicians, elite athletes, and others who have achieved great financial success at a 7 -19 relatively young age. © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Young consumers may not yet have conformed to cultural norms; indeed, they may be rebelling against them. This fact, combined with shared universal wants, needs, desires, and fantasies (for name brands, novelty, entertainment, trendy, and imageoriented products), make it possible to reach the global teen segment with a unified marketing program. This segment is attractive both in terms of its size (about 1. 3 billion) and its multi-billion dollar purchasing power. Coca-Cola, Benetton, Swatch, and Sony are some of the companies pursuing the global 7 -20 teenage segment. © 2011 Pearson Education, Inc. publishing as Prentice Hall

Gender Segmentation • In focusing on the needs and wants of one gender, do not miss opportunities to serve the other • Companies may offer product lines for both genders – Nike, Levi Strauss 7 -21 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• In 2000, Nike generated $1. 4 billion in global sales of women's shoes and apparel, a figure representing 16 percent of total Nike sales. Nike executives believe its global women's business is poised for big growth. To make it happen, Nike is opening concept shops inside department stores and creating free-standing retail stores devoted exclusively to women. In Europe, Levi Strauss is taking a similar approach. In 2003, the company opened its first boutique for young women, Levi's for Girls, in Paris. 7 -22 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Psychographic Segmentation • Grouping people according to attitudes, values, and lifestyles – SRI International and VALS 2 • Porsche example – – – Top Guns (27%): Ambition, power, control Elitists (24%): Old money, car is just a car Proud Patrons (23%): Car is reward for hard work Bon Vivants (17%): Car is for excitement, adventure Fantasists (9%): Car is form of escape • Porsche will use the profiles to develop advertising tailored to each type. © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -23

• Data are obtained from questionnaires that require respondents to indicate the extent to which they agree or disagree with a series of statements. Psychographics is primarily associated with SRI International, a market research organization whose original VALS and updated VALS 2 analyses of consumers are widely known. 7 -24 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Psychographic Segmentation • A research team at D'arcy Massius Benton & Bowles (DMBB) focused on Europe and produced a 15 -country study entitled “The Euroconsumer: Marketing Myth or Cultural Certainty? ” • The Euroconsumer: – Successful Idealist–Comprises from 5% to 20% of the population; consists of persons who have achieved professional and material success while maintaining commitment to abstract or socially responsible ideals – Affluent Materialist–Status-conscious ‘up-and-comers’ – many of whom are business professionals – use conspicuous consumption to communicate their success 7 -25 to others © 2011 Pearson Education, Inc. publishing as Prentice Hall

Psychographic Segmentation • The Euroconsumer: – Comfortable Belongers • 25% to 50% of a country’s population • conservative • most comfortable with the familiar • content with the comfort of home, family, friends, and community – Disaffected Survivors • Lack power and affluence • harbor little hope for upward mobility • tend to be either resentful or resigned • concentrated in highcrime urban inner city • attitudes tend to affect the rest of society 7 -26 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Psychographic Segmentation: Sony’s U. S. Consumer Segments 7 -27 © 2011 Pearson Education, Inc.

Behavior Segmentation • Focus on whether people purchase a product or not, how much, and how often they use it • User status • Law of disproportionality/Pareto’s Law– 80% of a company’s revenues are accounted for by 20% of the customers 7 -28 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Behavior segmentation focuses on whether or not people buy and use a product, as well as how often, and how much they use or consume. • Consumers can be categorized in terms of usage rates: for example, heavy, medium, light, and non -user. • Consumers can also be segmented according to user status: potential users, non-users, ex-users, regulars, first-timers, and users of competitors’ products. 7 -29 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Benefit Segmentation • Benefit segmentation focuses on the value equation – Value=Benefits/Price • Based on understanding the problem a product solves, the benefit it offers, or the issue it addresses 7 -30 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Marketers of health and beauty aids also use benefit segmentation. Many toothpaste brands are straightforward cavity fighters, and as such they reach a very broad market. However, as consumers become more concerned about whitening, sensitive teeth, gum disease, and other oral care issues, marketers are developing new toothpaste brands suited to the different sets of perceived needs. 7 -31 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Ethnic Segmentation • The population of many countries includes ethnic groups of significant size • Three main groups in the U. S. include African. Americans, Asian. Americans, and Hispanic Americans • Hispanic Americans – 40+ million Hispanic Americans (14% of total pop. ) with $560 billion annual buying power – CA Mexicans have aftertax income of $100 billion – The number of Hispanic teens will rise from 12 percent of the U. S. teen population to 18 percent in the next decade 7 -32 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Assessing Market Potential • After segmenting the market by one or more of the criteria just discussed, the next step is to assess the attractiveness of the identified segments. • It is at this stage that global marketers should be mindful of several potential pitfalls associated with the market segmentation process. 1. There is a tendency to overstate the size and shortterm attractiveness of individual country markets, especially when estimates are based primarily on demographic data such as income and population. 7 -33 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• 2. There is a tendency to target a country because shareholders or competitors exert pressure on management not to “miss out” on a strategic opportunity. • 3. There is a danger that management’s network of contacts will emerge as a primary criterion for targeting. 7 -34 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Assessing Market Potential • Three basic criteria: – Current size of the segment and anticipated growth potential – Potential competition – Compatibility with company’s overall objectives and the feasibility of successfully reaching the target audience 7 -35 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Current Segment Size and Growth • Is the market segment currently large enough to present a company with the opportunity to make a profit? • If the answer is ‘no, ’ does it have significant growth potential to make it attractive in terms of a company’s longterm strategy? 7 -36 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Potential Competition • Is there currently strong competition in the market segment? • Is the competition vulnerable in terms of price or quality? 7 -37 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Feasibility and Compatibility • Will adaptation be required? If so, is this economically justifiable in terms of expected sales? • Will import restrictions, high tariffs, or a strong home country currency drive up the price of the product in the target market currency and effectively dampen demand? 7 -38 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Feasibility and Compatibility • Is it advisable to source locally? Would it make sense to source products in the country for export elsewhere in the region? • Is targeting a particular segment compatible with the company’s goals, brand image, or established sources of competitive advantage? 7 -39 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• If a market segment is judged to be large enough, and if strong competitors are either absent or deemed to be vulnerable, then the final consideration is whether a company can and should target that market. • The feasibility of targeting a particular segment can be negatively impacted by various factors. For example, significant regulatory hurdles may be present that limit market access. 7 -40 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• A company may also encounter cultural barriers. Other marketing issues may arise such as in India, it takes 3 – 5 years to build a distribution system for many consumer products. • Finally, it is important to address the question of whether targeting a particular segment is compatible with the company’s overall goals, its brand image, or established sources of competitive advantage. 7 -41 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Framework for Selecting Target Markets • Demographic information is a starting point but not the decision factor • Product-Market must be considered – Market defined by product category • Marketing model drivers must be considered – Factors required for a business to take root and grow • Are there any enabling conditions present? – Conditions whose presence or absence will determine success of the marketing model 7 -42 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Global marketing expert David Arnold has developed a framework that goes beyond demographic data and considers other, marketing -oriented assessments of market size and growth potential. • Instead of a “top-down” segmentation analysis beginning with, say, income or population data from a particular country, Arnold’s framework is based on a “bottom-up” analysis that begins at the product-market level. 7 -43 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• After marketing-model drivers and enabling conditions have been identified, the third step is for management to weigh the estimated costs associated with entering and serving the market with potential short- and long-term revenue streams. • Does this segment or country market merit entry now? Or, would it be better to wait until, say, specific enabling conditions are established? 7 -44 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• The term product-market refers to a market defined by a product category; in the automotive industry, for example, phrases such as "luxury car market" and "minivan market" refer to specific product-markets. By contrast, phrases such as "the Russian market" or "the Indian market" refer to country markets. • Marketing model drivers are key elements or factors required for a business to take root and grow in a particular country market environment. The drivers may differ depending on whether a company serves consumer or industrial markets. 7 -45 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Enabling conditions are structural market characteristics whose presence or absence can determine whether the marketing model can succeed. • For example, in India, refrigeration is not widely available in shops and market food stalls. This creates challenges for Nestlé and Cadbury Schweppes as they attempt to capitalize on Indians' increasing appetite for chocolate confections. 7 -46 © 2011 Pearson Education, Inc. publishing as Prentice Hall

9 Questions for Creating a Product-Market Profile • • • Who buys our product? Who does not buy it? What need or function does it serve? Is there a market need that is not being met by current product/brand offerings? What problem does our product solve? What are customers buying to satisfy the need for which our product is targeted? What price are they paying? When is the product purchased? Where is it purchased? 7 -47 © 2011 Pearson Education, Inc. publishing as Prentice Hall

TARGET MARKET STRATEGY OPTIONS • After evaluating the identified segments in terms of the three criteria presented, a decision is made whether to pursue a particular opportunity or not. • If the 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 • Differentiated marketing 7 -48 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Target Market Strategy Options • Standardized global marketing – Mass marketing on a global scale – Undifferentiated target marketing – Standardized marketing mix – Minimal product adaptation – Intensive distribution – Lower production costs – Lower communication costs 7 -49 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Standardized global marketing is analogous to mass marketing in a single country. it involves creating the same marketing mix for a broad mass market of potential buyers. • Standardized global marketing is also known as undifferentiated target marketing. In addition, that mass market is served with a marketing mix of standardized elements. Product adaptation is minimized. Intensive distribution ensures that the product is available in the maximum number of retail outlets. 7 -50 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• The appeal of standardized global marketing is clear: lower production costs; the

Target Market Strategy Options • Concentrated global marketing – Niche marketing – Single segment of global market – Look for global depth rather than national breadth – Ex. : Chanel, Body Shop • Differentiated global marketing – Multi-segment targeting – Two or more distinct markets – Wider market coverage – Ex. : P&G markets Old Spice and Hugo Boss for Men 7 -52 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Concentrated Global Marketing involves devising a marketing mix to reach a niche. • A niche is simply a single segment of the global market. • In cosmetics, the House of Lauder, Chanel, and other cosmetics marketers have used this approach successfully to target the upscale, prestige segment of the market. 7 -53 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Similarly, Body Shop International PLC caters to consumers in many countries who wish to purchase "natural" beauty aids and cosmetics that have not been tested on animals. • Germany’s Winterhalter, a hidden champion in the dishwasher market, who focuses exclusively on dishwashers and water conditioners for hotels and restaurants. • © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -54

• Differentiated global marketing, also known as multisegment marketing, this approach entails targeting two or more distinct market segments with multiple marketing mix offerings. • In the cosmetics industry, Unilever NV and Cosmair Inc. pursue differentiated global marketing strategies by targeting both ends of the perfume market. Unilever targets the luxury market with Calvin Klein and Elizabeth Taylor's Passion; Wind Song and Brut are its mass-market brands. 7 -55 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Positioning • Locating a brand in consumers’ minds over and against competitors in terms of attributes and benefits that the brand does not offer – Attribute or Benefit – Quality and Price – Use or User – Competition © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -56

• Marketers have utilized a number of general positioning strategies. These include positioning by attribute or benefit, quality and price, use or user, and competitor. • Recent research has identified three additional positioning strategies that are particularly useful in global marketing: global consumer culture positioning, local consumer culture positioning, and foreign consumer culture positioning. 7 -57 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 (e. g. , Volvo is known for solid construction that offers safety in the event of a crash). 7 -58 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Quality and Price • This strategy runs from high fashion/quality and high price to good value (rather than “low quality”) at a reasonable price. Use or User • Another positioning strategy represents how a product is used or associates the brand with a user or class of users. For example, Max Factor makeup is positioned as “the makeup that makeup artists use. ” 7 -59 • © 2011 Pearson Education, Inc. publishing as Prentice Hall

Competition • Implicit or explicit reference to competitors can provide the basis for an effective positioning strategy. • Body Shop founder, Anita Roddick, emphasized that her products stood for natural ingredients, no animal testing, and recyclable containers. 7 -60 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Positioning Strategies • Global consumer culture positioning – Identifies the brand as a symbol of a particular global culture or segment – High-touch and high-tech products • Foreign consumer culture positioning – Associates the brand’s users, use occasions, or product origins with a foreign country or culture Beer is associated with this German’s culture; the symbol on his shirt is not German! © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -61

• Certain categories of products lend themselves especially well to GCCP. High-tech and high-touch products are both associated with high levels of customer involvement and by a shared “language” among users. • High-tech products are sophisticated, technologically complex, and / or difficult to explain or understand. • High-touch products, are generally energized by emotional motives rather than rational ones. 7 -62 © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Global consumer culture positioning: “United Colors of Benetton” means the unity of humankind. • High-tech: MP 3 players, cell phones, luxury cars, financial services, Canon cameras, Adidas. • High-touch: Nescafe coffee. • Foreign consumer culture positioning: Foster’s. Australian for beer 7 -63 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Positioning Strategies • Local consumer culture positioning – Identifies with local cultural meanings – Consumed by local people – Locally produced for local people – Used frequently for food, personal, and household nondurables – Ex. : Budweiser is identified with small-town America Clydesdale = Which Beer? © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -64

• Local consumer culture positioning (LCCP) is a strategy that associates the brand with local cultural meanings, reflects the local culture’s norms, portrays the brand as consumed by local people in the national culture, or depicts the product as locally produced for local consumers. • A long-running campaign for Foster’s Brewing Group’s U. S. advertising proudly trumpeted the brand’s national origin. “How to speak Australian”. 7 -65 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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