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CHAPTER 7
GLOBAL SEGMENTATION AND POSITIONING
CHAPTER OBJECTIVES
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
CHAPTER OVERVIEW
It is a corporate reality that few companies can be all things to all people. Instead of
competing across the board, most companies will identify and target the most attractive
market segments that they can serve effectively. Variation in customer needs is the
primary motive for market segmentation.
Though there is a homogenization trend of customer needs, marketers are finding that
their companies (by following policies of micromarketing) are attempting to offer more
possibilities (all targeted to specific and individual needs) to the global consumer. This
presents an interesting challenge.
Normally, marketers will use the marketing mix to orient product and service offerings
around the specific needs of the global consumer. Marketing programs are then
developed that are in tune with the particular needs of each of the “slices of the marketing
pie” that the company wants to serve.
In global marketing, market segmentation becomes especially critical given the
sometimes incredibly wide divergence in cross-border consumer needs and preferences.
Focus in this chapter is on motivations for international market segmentation, which
segmentation criteria to use, difficulties in segmentation, tools to use, and how to position
using segmentation guidelines.
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CHAPTER OUTLINE
A. Reasons for International Market Segmentation
1. The goal of market segmentation is to break down the market for a product or a
service into different groups of consumers which differ in their response to the
firm’s marketing mix program.
a. A firm can tailor its marketing mix to each individual segment.
b. Marketing segmentation is the logical outgrowth of the marketing concept.
2. Requirements for effective market segmentation (in either the domestic or the
global environment) are that the segment be:
a. Identifiable--be easy to define and to measure.
b. Sizable--large enough to be worth going after.
c. Accessible--easy to reach through the media.
d. Stable—must be stable over a long period of time.
e. Responsive—the segments respond differently from each other.
f. Actionable--should be actionable.
3. Major reasons why international marketers implement international market
segmentation are:
a. Country Screening. Companies usually do a preliminary screening of countries
before identifying attractive market opportunities for their product or service.
1). Primary and secondary data can be used.
2). Different criteria will be used to screen countries, depending on the nature
of the product.
b. Global Market Research.
1). Companies increasingly make an effort to design products or services that
meet the needs of customers in different countries.
2). Standardization versus adaptation must be considered.
3). The key question is which countries to choose for the marketing effort.
a). Group by clusters based on homogeneous characteristics and choose
a prototypical member from each group.
b). Research efforts will be concentrated on this key member initially.
c. Entry Decisions.
1). The strategic logic of many entry decisions is to launch products in
countries that in some regards are highly similar to the country where the
product has already been introduced.
d. Positioning Strategy.
1). Segmentation decisions are instrumental in setting the company’s product
positioning strategy.
2). The company must decide on how it wants to position its products or
services in the mind of the prospective target customers.
e. Resource Allocation.
1). Market segmentation will also be useful in deciding how to allocate the
company’s scarce marketing resources across different countries and
markets.
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f. Marketing Mix Policy.
1). Segmentation and positioning decisions will dictate a firm’s marketing mix
policy.
2). One difficulty is how to balance standardization versus customization.
3). Strategies for each element of the marketing mix have to be carefully
thought out.
*****Use Exhibit 7-1 Here*****
B. International Market Segmentation Approaches
1. Global marketers approach the segmentation process from different angles.
a. The standard country segmentation procedure classifies prospect countries on
a single dimension (e.g., per capita Gross National Product).
b. Another approach is to classify based on multiple socio-economic, political,
cultural criteria available from secondary data sources known as country-assegments or aggregate segmentation.
c. Other approaches include disaggregate international consumer segmentation
and two-stage international segmentation.
*****Use Exhibits 7-2 and 7-3 Here*****
d. Multiple sets of variables can normally be collapsed into mobility, health, trade,
lifestyle, and cosmopolitanism.
2. From a marketer’s perspective, the practical usefulness of macro-level
segmentation is questionable.
3. An alternative method is a procedure described as:
a. Step 1--Criteria Development--determine your cut-off criteria.
b. Step 2--Preliminary Screening--examine which countries meet your threshold.
c. Step 3--Microsegmentation--develop microsegments of each country.
1). Derive microsegments in each country individually.
2). Alternatively, you could jointly group individuals in all the prospective
countries to come up with cross-border segments.
C. Segmentation Scenarios
When segmenting international markets, the following three choices are available:
universal/global segments, regional segments, and unique/diverse segments. The
size of the different segments varies, depending on the country. In most cases,
there is a mixture of universal, regional, and country-specific market segments.
*****Use Exhibit 7-4 Here*****
*****Use Review Question #1 Here*****
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D. Bases for Country Segmentation
1. The first step in doing international market segmentation is deciding which
criteria to use in the task.
2. Since there are many variables that can be used, (for segmentation to be
meaningful) there should be a linkage between the market segments and the
response variable(s) the company is interested in.
3. The different forms of variables that are most commonly used for country
segmentation purposes are:
a. Demographics.
1). This information is reasonably available and accurate.
2). Classifications are similar to those used in domestic segmentation.
*****Use Discussion Question #3 Here*****
*****Use Global Perspective 7-1 “Ford Fiesta in China” Here*****
b. Socio-economic Variables.
1). Consumption patterns for many goods and services are largely driven by
consumer wealth or the country’s level of economic development in
general.
2). The following caveats also apply under country segmentation:
a). Monetization of transactions within a country.
b). Gray and black sectors of the economy.
c). Income disparities.
3). Countries can be analyzed using the purchasing power parity (PPP)
analysis, Socio-Economic Strata (SES) analysis and Human Development
Index.
*****Use Exhibit 7-6 Here*****
*****Use Review Questions #2 and Discussion Question #6 Here*****
c. Behavior-Based Segmentation.
1). Just as in domestic marketing, segments can be formed on the basis of
behavioral variables.
2). Segmentation based on diffusion-based criteria include factors such:
speed of adoption, the time-of-sales peak, and the propensity to innovation.
*****Use Exhibit 7-7 Here*****
*****Use Discussion Question #2 Here*****
e. Lifestyle.
1). This measure looks at attitudes, opinions, and values.
2). This form is very popular in advertising circles.
3). Consumers can be grouped according to their lifestyles.
4). According to a study by Robert Starch Worldwide, international markets
encompass six global values segments:
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a). Strivers (23 percent).
b). Devouts (22 percent).
c). Altruists (18 percent).
d). Intimates (15 percent).
e). Fun Seekers (12 percent).
f). Creatives (10 percent).
5). Concerns about lifestyle segmentation are:
a). Values are too general to relate to consumption patterns or brand choice
behavior within a specific product category.
b). Value-based segmentation schemes are not always “actionable”.
c). Value segments are not stable since values typically change over time.
d). International applicability is limited.
6). Lifestyle segmentation has been applied to the positioning of new brands,
the repositioning of existing ones, identifying new product opportunities,
and the development of brand personalities.
*****Use Exhibit 7-5 Here*****
*****Use Review Question #3 Here; Use Discussion Question #1 Here*****
E. International Positioning Strategies
1. Once the MNC has segmented its international markets for a particular product or
service, the firm needs to decide which segments to pursue and what positioning
strategy to use to reach the chosen segment(s).
a. Developing a positioning theme involves the quest for a unique selling
proposition (USP).
2. There are several choices that the marketing manager may pursue with respect to
positioning:
a. Uniform Versus Localized Positioning Strategies. With this option, the MNC
pursues a universal segment and uses the same positioning theme to appeal to
this particular segment.
b. Universal Positioning Appeals. Companies might pursue universal
positioning appeals. Products that offer benefits or features that are universally
important would meet the criterion of a universal benefit/feature positioning.
Emotional appeals (e.g. lifestyles positioning) are usually difficult to translate
into a universal theme.
*****Use Exhibits 7-8 and 7-9 Here*****
*****Use Global Perspective 7-2 “Selling the Energy Drink that Gives you Wings”
Here;
*****Use Global Perspective 7-3 “UBS –The Concept of ‘Two-Ness’”*****
*****Use Review Question #4 Here*****
*****Use Discussion Question #3 Here*****
F. Global, Foreign, and Local Consumer Culture Positioning.
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Brand managers can position their brands on the basis of a global consumer
culture, a foreign culture, and a local culture. The three positioning methods
are:
(a). Global Consumer Culture Positioning (GCCP).
(b). Local Consumer Culture Positioning (LCCP).
(c). Foreign Consumer Culture Positioning (FCCP).
*****Use Exhibit 7-10 Here*****
APPENDIX
Country Segmentation Tools
The following segmentation tools are used in international marketing:
1. Cluster Analysis.
a. Cluster analysis is an umbrella term that embraces a 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.
*****Use Exhibits 7-11, 7-12 and 7-13 Here*****
*****Use Discussion Question #4 Here*****
b. The basic notion is to group countries together that are “similar” in value for the
segmentation bases of interest.
2. Regression.
a. This method assumes that there exists a relationship between a response
variable (Y) and one or more so-called predictor variables (Xs).
b. For each of the parameter estimates, the regression analysis will also produce
a standard error.
c. The higher the R2 value, the better the ability of the regression model to predict
the data.
REVIEW QUESTIONS
INSTRUCTOR’S NOTE: The following chapter review questions are meant to challenge
the student to think about material presented in the chapter and formulate a creative
answer to the review questions. Many of the answers require judgments rather than
specific line-by-line quotation of facts. The answers provided are meant to provide
stimulation of creative answers.
1. Under what conditions should companies pursue universal market segments?
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Marketers should pursue universal market segments when characteristics or segments are
found that transcend national borders. Marketers appealing to universal segments have
two approaches to reach their targets. One option is to adopt a largely standardized
strategy. Alternatively, they might go for a country-tailored strategy that recognizes
differences between various countries. The undifferentiated approach will lead to
economies of scale. The country-tailored approach (a differentiated strategy) often
creates more demand and is more market-oriented.
2. What are the major issues in using per capita GDP or GNP as a country
segmentation criterion?
One method of segmenting countries is to use monetization of transactions within a
country (a socio-economic variable). To compare measures such as per capita GNP
across countries, figures based on a local currency need to be translated into a common
currency. However, official exchange rates seldom reflect the purchasing power parity
(PPP) of a currency. So, income figures based on GNP or GDP do not really tell one how
much a given household in a given country is able to buy.
The PPP (especially in countries with wide income disparity) protects against the
shortcomings of the standard “per capita income” segmentation measures. Another
method is the Socio-Economic Strata analysis (SES). Under this method, income classes
are created and studied.
3. Discuss the weaknesses of lifestyle-based segmentation schemes. For what kind
of applications would lifestyle segmentation be appropriate?
Using this method, segmentation occurs on a consumer’s attitudes, opinions, and values.
This is a popular method in advertising circles, however, some of these schemes can be
very general and not related to a specific product category.
Lifestyle segmentation has been applied to the positioning of new brands, the
repositioning of existing ones, identifying new product opportunities, and the
development of brand personalities. Concerns are that: a) values are too general to relate
to consumption patterns or brand choice behavior within a specific product category; b)
value-based segmentation schemes are not always “actionable;” c) value segments are not
stable since values typically change over time; d) their international applicability is quite
limited since lifestyles vary greatly.
4. Sometimes local brands use a global consumer culture positioning approach.
Explain.
Since GCCP strategy tries to project the brand as a symbol of a given global consumer
culture, it is not surprising that local brands use this method to appeal to their clientele.
By using GCCP, local manufacturers aim at bringing a global local culture to their
products which capitalizes the cosmopolitan image and brand familiarity. The GCCP’s
positioning strategy is used by many manufacturers overseas.
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DISCUSSION QUESTIONS
INSTRUCTOR’S NOTE: Discussion Questions are found at the end of each chapter in
the text. These questions (in many cases) are too lengthy to repeat in this manual.
Suggestions for answering and discussing the questions are presented in this section.
Many of the questions require student opinion and judgment.
1. This question is an extension of Review Question #3. To answer this question, one
should review the material found in the chapter on the subject and then formulate an
opinion. To formulate that opinion, consider the categories which are suggested for
lifestyle segmentation (as mentioned in the text). To support the position taken, try to
find evidence to support the argument. Be sure to deal with the issue of the popularity of
the measure in a developed country like the United States and the lack of use in an under
developed country. Consider whether individualism has a bearing on this issue (as in the
case of the differences between U.S. [individualism] versus Japanese [group motivated]
consumers).
2. Fiat’s market entry into Singapore is an interesting example. Fiat needs to localize its
strategy because of differences in climate and culture. Hence, universal positioning
strategy may not work in Singapore.
3. Before answering this question, the students should re-read Global Perspective 7-1
“The Asian Teenagers Segment: A Boon for the Nikes of the World.” Generally
speaking, the teenage segment is like all other segments--there is some universality and
some individuality (with respect to country). Age is the common denominator, however,
income, freedom, education, mobility, health, work necessity and habits, and exposure to
the mass media may account for significant differences between not only countries but
the teenagers themselves. Try to find support arguments (or evidence) for your position.
4. This question is a project oriented question. See question instructions and directions.
5. In this assignment, after picking your four ads, share your analysis with the class.
6. An indication that a country has reached the “high mass-consumption” stage is that it
has a significant middle class with a significant discretionary income. A middle class can
derive pleasures from a variety of “little things” such as bonuses, free time, home care,
work place perks, vacations, education for children, parks, et cetera. The emerging
nations have a growing middle class because of the increased production and productivity
that is taking place in these countries. The small perks in these countries may not be
much by Western standards but they are significant in the countries that are now
experiencing them. In addition, the confidence level and optimism are increasing
dramatically. This usually means that purchasing will go up.
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STUDENT PROJECTS and INTERNET FOCUS
1. Take a product of your choice. Then pick four international countries and describe the
various market segments that might be present for your product. Try to be specific in
your analysis of the segments. In addition to presenting your findings, describe where
you found your data and how you made your conclusions.
2. Go to the library. Find examples of international magazines/newspapers (see:
Business Week, Financial Times, The Economist, Latin Trade, etc.). From these
magazines, photocopy (DO NOT TEAR OUT) examples of ads. These ads can be for
familiar or unfamiliar products. Now try to identify the market segments that are the
subject of the ads. What can you tell about the segments from the ads? How did you
determine facts about the segment? What other segments might the ad appeal to? Are
there any comparisons with this market (and its segments) to the U.S. market (and its
segments) for the same product?
INSTRUCTOR’S NOTE: The following projects require the students to both use and
understand the Internet. If students do not understand how to use the Internet,
explanation should be given before these projects are undertaken. The Web sites
provided were current at the time of this writing. However, since Web addresses change
frequently, the instructor should re-affirm the site addresses and the content of the site
before making an assignment.
3. Go to the following Web sites and describe what market segments are being pursued
by the various companies. In addition, (if possible) describe what segmentation and/or
positioning strategies are being used by the firms.
a). SAP
(http://www.sap.com/usa/index.epx)
b). Acer
(http://www.acer.com/worldwide/selection.html)
c). Procter & Gamble
(http://www.pg.com/en_US/index.shtml)
d). HSBC
(http://www.hsbc.com/1/2/)
e). Vodafone
(http://www.vodafone.com/index.US.html)
f). UPS Global Connections
(http://pressroom.ups.com/globalconnections/)
4. Go to the Brand Channel’s Brand Papers Web site
(http://www.brandchannel.com/papers.asp) and investigate 2-3 products of your choice.
Cite the products you studied, indicate what type of information might be available on
this site and the products’ position relative to competition.
5. Go to the Web site of Bandai, a toy maker at (http://www.bandai.com) and learn about
the company and its products. Your assignment is to devise a product introduction
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strategy for this company into the U.S. market. Consider steps that you would see as
critical. Remember to include some form of plan for all of the marketing mix variables
(product, price, promotion, and distribution). Be sure to designate which market
segments would be the primary ones for your product introduction. Be sure to describe
the segments and relate why you think that they would be prime prospects.
WEB RESOURCES
Abbott Wool’s Market Segment Resources
(http://www.awool.com/)
The Advertising Research Foundation
(http://www.thearf.org/)
The American Customer Satisfaction Index
(http://www.theacsi.org/)
American Demographics
(http://adage.com/americandemographics/)
Consumer Psychology, Advertising World, The University of Texas at Austin
(http://advertising.utexas.edu/world/PROD75_017359.html)
Marketing, General, Advertising World, The University of Texas at Austin
(http://advertising.utexas.edu/world/PROD75_017387.html)
Marketing Links
S. T. Anwar
(http://wtfaculty.wtamu.edu/~sanwar.bus/otherlinks.htm#Marketing_Links)
Marketing Management, Wikipedia
(http://en.wikipedia.org/wiki/Marketing_management)
Marketing Management & Marketing Strategy, KnowThis.com
(http://www.knowthis.com/management.htm)
Marketing Virtual Library, KnowThis.com
(http://www.knowthis.com/)
VALS, SRI Business Consulting Intelligence
(http://www.sric-bi.com/VALS/)
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