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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.
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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.
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Who owns whom?
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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
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Positioning
• Positioning is required to differentiate
the product or brand in the minds of
the target market.
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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.
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• 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).
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• 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.
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Global Market Segmentation
• Demographics
• Psychographics
• Behavioral
characteristics
• Benefits sought
Skiing became a sport in
Norway where it was
invented 4,000 years ago.
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7-9
Demographic Segmentation
•
•
•
•
•
•
Income
Population
Age distribution
Gender
Education
Occupation
What are the trends?
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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
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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
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• 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.
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• 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.
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Segmenting by Income
and Population
• Income is a valuable segmentation variable
– 2/3s 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
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• 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
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Per Capita Income
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10 Most Populous Countries
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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
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relatively young age.
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• 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
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teenage segment.
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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
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• 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.
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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.
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• 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.
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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
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to others
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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
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Psychographic Segmentation:
Sony’s U.S. Consumer Segments
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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
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• 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.
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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
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• 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.
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Ethnic Segmentation
• The population of many
countries includes
ethnic groups of
significant size
• Three main groups in
the U.S. include AfricanAmericans, AsianAmericans, 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
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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.
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• 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.
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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
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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?
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Potential Competition
• Is there currently strong competition in
the market segment?
• Is the competition vulnerable in terms
of price or quality?
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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?
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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?
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• 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.
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• 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.
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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
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• 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.
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• 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?
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• 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.
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• 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.
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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?
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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
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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
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• 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.
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• The appeal of standardized global
marketing is clear: lower production costs;
the same is true of standardized global
communications.
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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
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• 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.
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• 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.
•
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• 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.
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Positioning
• Locating a brand in
consumers’ minds over and
against competitors in
terms of attributes and
benefits that the brand
does and does not offer
– Attribute or Benefit
– Quality and Price
– Use or User
– Competition
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• 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.
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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).
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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.”
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•
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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.
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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!
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• 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.
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• Global consumer culture positioning: “United
Colors of Benetton” means the unity of
humankind.
• High-tech: MP3 players, cell phones, luxury cars,
financial services, Canon cameras, Adidas.
• High-touch: Nescafe coffee.
• Foreign consumer culture positioning: Foster’s.
Australian for beer
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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?
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• 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”.
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