Global Marketing ManagementGlobal Marketing Management

Global Segmentation and Global Segmentation and PositioningPositioning

Chapter OverviewChapter Overview

1. Reasons for International Market 1. Reasons for International Market SegmentationSegmentation

2. International Market Segmentation 2. International Market Segmentation ApproachesApproaches

3. Segmentation Scenarios3. Segmentation Scenarios

4. Bases for Country Segmentation4. Bases for Country Segmentation

5. International Positioning Strategies5. International Positioning Strategies

Chapter Overview (contd.)Chapter Overview (contd.)

6. Global, Foreign, and Local Consumer 6. Global, Foreign, and Local Consumer

Culture PositioningCulture Positioning

IntroductionIntroduction

Variation in customer needs is the primary motive Variation in customer needs is the primary motive for market segmentation.for market segmentation.

Most companies will identify and target the most Most companies will identify and target the most attractive market segments that they can attractive market segments that they can effectively serve.effectively serve.

In global marketing, market segmentation In global marketing, market segmentation becomes especially critical because of wide becomes especially critical because of wide divergence in cross-border consumer needs and divergence in cross-border consumer needs and lifestyles.lifestyles.

Introduction (contd.)Introduction (contd.)

Once the management has chosen its target Once the management has chosen its target segments, management needs to determine a segments, management needs to determine a competitive positioning strategy for its products.competitive positioning strategy for its products.

1. Reasons for International Market 1. Reasons for International Market SegmentationSegmentation

Segments ideally should possess the following set Segments ideally should possess the following set of propertiesof properties::– IdentifiableIdentifiable– SizableSizable– AccessibleAccessible– StableStable– ResponsiveResponsive– ActionableActionable

1. Reasons for International Market 1. Reasons for International Market Segmentation (contd.)Segmentation (contd.)

Country ScreeningCountry Screening Global Market ResearchGlobal Market Research Entry DecisionsEntry Decisions Positioning StrategyPositioning Strategy Resource AllocationResource Allocation Marketing Mix PolicyMarketing Mix Policy

– Balance between standardization and Balance between standardization and customizationcustomization

2. International Market Segmentation 2. International Market Segmentation Approaches Approaches

International segmentation procedures:International segmentation procedures:– Country-ad-segments or aggregate Country-ad-segments or aggregate

segmentationsegmentation– Disaggregate international consumer Disaggregate international consumer

segmentationsegmentation– Two-stage international segmentationTwo-stage international segmentation

The standard country segmentation procedure The standard country segmentation procedure classifies prospect countries on a single dimensionclassifies prospect countries on a single dimension

2. International Market Segmentation 2. International Market Segmentation Approaches (contd.)Approaches (contd.)

(e.g., per capita GNP) or on a set of multiple(e.g., per capita GNP) or on a set of multiple

socioeconomic, political, and cultural criteria socioeconomic, political, and cultural criteria available from secondary data sources.available from secondary data sources.

When there are numerous country traits, use When there are numerous country traits, use smaller set of dimensions using data reduction smaller set of dimensions using data reduction techniques such as factor analysis.techniques such as factor analysis.

3. Segmentation Scenarios3. Segmentation Scenarios

Universal or global segmentsUniversal or global segments Regional segmentsRegional segments Unique (diverse) segmentsUnique (diverse) segments

4. Bases for Country Segmentation4. Bases for Country Segmentation

DemographicsDemographics– Demographics variables are among the most Demographics variables are among the most

popular criteria.popular criteria. Socioeconomic Variables Socioeconomic Variables

– Caveats in using per capita income as an Caveats in using per capita income as an economic development indicator:economic development indicator:

» Monetization of transactions within a Monetization of transactions within a countrycountry

4. Bases for Country Segmentation 4. Bases for Country Segmentation (contd.)(contd.)

» Gray and Black Market sections of the Gray and Black Market sections of the economyeconomy

» Income disparitiesIncome disparities– Purchasing Power Parity (PPP) criteriaPurchasing Power Parity (PPP) criteria– Socioeconomic Strata (SES) AnalysisSocioeconomic Strata (SES) Analysis– Human development index (HDI) classificationHuman development index (HDI) classification

Behavior-Based SegmentationBehavior-Based Segmentation

PPPPPP

Purchasing power parityPurchasing power parity ( (PPPPPP) is a theory ) is a theory of long-term equilibrium of long-term equilibrium exchange ratesexchange rates based on relative price levels of two based on relative price levels of two countries. The concept is founded on the countries. The concept is founded on the law of one pricelaw of one price; the idea that in absence of ; the idea that in absence of transaction costs, identical goods will have transaction costs, identical goods will have the same price in different markets.the same price in different markets.

Big Mac IndexBig Mac Index An example of one measure of PPP is the Big Mac Index popularized by An example of one measure of PPP is the Big Mac Index popularized by

The EconomistThe Economist, which looks at the prices of a , which looks at the prices of a Big MacBig Mac burger in burger in McDonald'sMcDonald's restaurants in different countries. restaurants in different countries.

If a Big Mac costs If a Big Mac costs US$US$4 in the 4 in the United StatesUnited States and and GBPGBP£3 in the United £3 in the United Kingdom, the PPP Kingdom, the PPP exchange rateexchange rate would be £3 for $4. The Big Mac Index is would be £3 for $4. The Big Mac Index is presumably useful because it is based on a well-known good whose final price, presumably useful because it is based on a well-known good whose final price, easily tracked in many countries, includes input costs from a wide range of easily tracked in many countries, includes input costs from a wide range of sectors in the local economy, such as agricultural commodities (beef, bread, sectors in the local economy, such as agricultural commodities (beef, bread, lettuce, cheese), labor (blue and white collar), advertising, rent and real estate lettuce, cheese), labor (blue and white collar), advertising, rent and real estate costs, transportation, etc.costs, transportation, etc.

The Big Mac Index is inaccurate in certain cases because of the different market The Big Mac Index is inaccurate in certain cases because of the different market conditions that exist in differing McDonald's locations. For instance, a Big Mac conditions that exist in differing McDonald's locations. For instance, a Big Mac in downtown in downtown ChicagoChicago is likely to be priced higher than one in is likely to be priced higher than one in WisconsinWisconsin. .

Such pricing differences existing in one country demonstrate the imperfection of Such pricing differences existing in one country demonstrate the imperfection of the Big Mac Index. In addition, in some emerging economies western fast food the Big Mac Index. In addition, in some emerging economies western fast food represents an expensive niche product price well above the price of traditional represents an expensive niche product price well above the price of traditional staples - i.e. the staples - i.e. the Big MacBig Mac is not a mainstream 'cheap' meal as it is in the west but is not a mainstream 'cheap' meal as it is in the west but a luxury import for the middle classes and foreigners. Although it is not perfect, a luxury import for the middle classes and foreigners. Although it is not perfect, the index still offers significant insight and an easy example to the understanding the index still offers significant insight and an easy example to the understanding of PPP.of PPP.

SES SES Socioeconomic statusSocioeconomic status (SES) is an economic and sociological (SES) is an economic and sociological

combined total measure of a person's work experience and of an combined total measure of a person's work experience and of an individual's or family’s economic and social position relative to others, individual's or family’s economic and social position relative to others, based on based on incomeincome, education, and occupation. When analyzing a , education, and occupation. When analyzing a family’s SES, the household income earners' education and occupation family’s SES, the household income earners' education and occupation are examined, as well as combined income, versus with an individual, are examined, as well as combined income, versus with an individual, when their own attributes are assessed.when their own attributes are assessed.

Socioeconomic status is typically broken into three categories, high Socioeconomic status is typically broken into three categories, high SES, middle SES, and low SES to describe the three areas a family or SES, middle SES, and low SES to describe the three areas a family or an individual may fall into. When placing a family or individual into an individual may fall into. When placing a family or individual into one of these categories any or all of the three variables (income, one of these categories any or all of the three variables (income, education, and occupation) can be assessed. Socioeconomic status is education, and occupation) can be assessed. Socioeconomic status is typically broken into three categories, high SES, middle SES, and low typically broken into three categories, high SES, middle SES, and low SES to describe the three areas a family or an individual may fall into. SES to describe the three areas a family or an individual may fall into. When placing a family or individual into one of these categories any When placing a family or individual into one of these categories any or all of the three variables (income, education, and occupation) can be or all of the three variables (income, education, and occupation) can be assessed.assessed.

HDIHDI

The The Human Development IndexHuman Development Index ( (HDIHDI) is a ) is a composite statistic used as an index to rank composite statistic used as an index to rank countries by level of "human development" and countries by level of "human development" and separate developed (high development), separate developed (high development), developing (middle development), and developing (middle development), and underdeveloped (low development) countries. The underdeveloped (low development) countries. The statistic is composed from statistics for Life statistic is composed from statistics for Life Expectancy, Education, and GDP collected at the Expectancy, Education, and GDP collected at the national level using the formula given in the national level using the formula given in the Methodology section below.Methodology section below.

5. International Positioning Strategies5. International Positioning Strategies

The formulation of a positioning strategy (local or The formulation of a positioning strategy (local or global) includes the following steps:global) includes the following steps:

1. Identify the relevant set of competing 1. Identify the relevant set of competing products or brands.products or brands.2. Determine current perceptions held by 2. Determine current perceptions held by consumers about your product/brand and the consumers about your product/brand and the competition.competition.3. Develop possible positioning themes.3. Develop possible positioning themes.4. Screen the positioning alternatives and select 4. Screen the positioning alternatives and select the most appealing one.the most appealing one.

5. International Positioning Strategies 5. International Positioning Strategies (contd.)(contd.)

5. Develop a marketing mix strategy.5. Develop a marketing mix strategy.

6. Over time, monitor the effectiveness of your 6. Over time, monitor the effectiveness of your positioning strategy and if needed, conduct an positioning strategy and if needed, conduct an audit.audit.

Uniform vs. Localized Positioning StrategiesUniform vs. Localized Positioning Strategies Universal Positioning AppealsUniversal Positioning Appeals

– Positioning themes:Positioning themes:» Specific product features/attributesSpecific product features/attributes» Product benefit, solutions for problemsProduct benefit, solutions for problems

5. International Positioning Strategies 5. International Positioning Strategies (contd.)(contd.)

» User applicationUser application» LifestylesLifestyles

6. Global, Foreign, and Local Consumer 6. Global, Foreign, and Local Consumer Culture PositioningCulture Positioning

Global consumer culture positioning (GCCP)Global consumer culture positioning (GCCP)– Brand as a symbol of a given global consumer cultureBrand as a symbol of a given global consumer culture– It's about positioning a product / service in a unique culture or It's about positioning a product / service in a unique culture or

marketplace where certain cultural norms are required. For marketplace where certain cultural norms are required. For example if McDonald's opens up a store in India it has to abide by example if McDonald's opens up a store in India it has to abide by the cultural norms of the Hindu philosophy which is means no the cultural norms of the Hindu philosophy which is means no beef eating because of the sacredness of the cow. Because of this beef eating because of the sacredness of the cow. Because of this the company has re-positioned its menu and its products to appeal the company has re-positioned its menu and its products to appeal to the market -- they deleted the beef items and added items like a to the market -- they deleted the beef items and added items like a vegan burger and lamb oriented products. It is about adapting to a vegan burger and lamb oriented products. It is about adapting to a marketplaces' unique cultural norms. marketplaces' unique cultural norms.

Local consumer culture positioning (LCCP)Local consumer culture positioning (LCCP) Brand as an intrinsic part of the local culture.Brand as an intrinsic part of the local culture. Foreign consumer culture positioning (FCCP)Foreign consumer culture positioning (FCCP)

– Brand mystique built around a specific foreign cultureBrand mystique built around a specific foreign culture

7. Appendix7. Appendix

Segmentation techniques and toolsSegmentation techniques and tools::– Cluster AnalysisCluster Analysis: Collection of statistical : Collection of statistical

procedures for dividing objects into groups procedures for dividing objects into groups (clusters). The grouping is done in such a (clusters). The grouping is done in such a manner that members belonging to the same manner that members belonging to the same group are very similar to one another but quite group are very similar to one another but quite distinct from members of other groups.distinct from members of other groups.

– Regression AnalysisRegression Analysis: In regression, one : In regression, one assumes that there exists a relationship between assumes that there exists a relationship between a response variable, Y, and one or more so-a response variable, Y, and one or more so-called predictor variables, X1, X2 and so on.called predictor variables, X1, X2 and so on.

7. Appendix (contd.)7. Appendix (contd.)

– For each of the parameter estimates, the For each of the parameter estimates, the regression analysis will also produce standard regression analysis will also produce standard error.error.

– The higher the The higher the R2R2 value, the better the ability value, the better the ability of the regression model to predict the data.of the regression model to predict the data.