INTERNATIONAL MARKET SEGMENTATION:Market coverage strategy, Socio-economic variables

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International Marketing MKT630

Lesson # 36

INTERNATIONAL MARKET SEGMENTATION

International Market Targeting

International market targeting:

International marketers need to evaluate available international segments for their potential and

actionability to choose most viable market segments for targeting;

Evaluating market segments

Market segments can be evaluated on the following criteria;

segment size & growth

segment's structural analysis

· competition within the segment

· existing or potential substitute products

· relative power of buyers / suppliers

company's objectives & resources

· environment, social responsibility, if it is core business, can employ skills & resources

superior to those of competition

Market coverage strategy:

Factors needed to be considered when choosing a market coverage strategy

company resources and capabilities

degree of product variability

product's stage in the life-cycle

market variability

competitors' marketing strategies

Product differentiating variables:

· Product

features, performance, conformance, durability, reliability, reparability, style, design

· Services

ordering ease, delivery, installation, customer training, customer consulting, maintenance and

repair

· Personnel

competence, courtesy, credibility, reliability, responsiveness, communication

· Channel

coverage, expertise, performance

· Image

symbol, written and audiovisual media, atmosphere, events

Service differentiating variables:

People

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Physical environment

Process

Image

|Defining `Positioning':

A product's position is how potential buyers see the product. Positioning is expressed relative to the

position of competitors. The term was coined in 1969 by Al Ries and Jack Trout in the paper

"Positioning" is a game people play in today's me-too market place" in the publication Industrial

Marketing. It was then expanded into their ground-breaking first book, "Positioning: The Battle for

Your Mind".

Positioning is something (perception) that happens in the minds of the target market. It is the aggregate

perception the market has of a particular company, product or service in relation to their perceptions of

the competitors in the same category. It will happen whether or not a company's management is

proactive, reactive or passive about the on-going process of evolving a position. But a company can

positively influence the perceptions through enlightened strategic actions.

In marketing, positioning has come to mean the process by which marketers try to create an image or

identity in the minds of their target market for its product, brand, or organization. It is the 'relative

competitive comparison' their product occupies in a given market as perceived by the target market.

Re-positioning involves changing the identity of a product, relative to the identity of competing

products, in the collective minds of the target market.

De-positioning involves attempting to change the identity of competing products, relative to the identity

of your own product, in the collective minds of the target market.

Positioning in international market segments for competitive advantage:

can be positioned based on

product attributes

product benefits

usage occasions

classes of users

can also be positioned relative to competition

against a competition

away from competitors

against product classes

combination of above strategies

International positioning strategies:

· Developing a positioning theme involves the quest for a unique selling proposition (USP). In this

regard there are two choices: target a universal segment across countries or pursue different segments

across countries. Similarly MNC's may select same positioning world-wide or positioning themes

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that are tailored to individual markets.

- Universal Segment / Uniform Positioning Theme

The challenge is to come-up with a selling proposition that makes

consumers

tick

everywhere and that transcends local peculiarities.

- Universal Segment / Different Positioning Themes

- Different Segments / Different Positioning Themes

Choosing and implementing a positioning strategy:

Identify possible competitive advantages(offering consumers greater value)

product differentiation

· features, performance, style & design, consistency, durability, reliability, reparability

services differentiation

· delivery, installation, repair, customer training

personnel differentiation

image differentiation

Selecting the right competitive advantages

how many differences to promote

which differences to promote the differences should be

important

distinctive

superior

communicable

pre-emptive

affordable

profitable

Should develop a unique selling position (USP) for a brand

avoid over / under / confused positioning

Positioning errors:

· As companies increase the number of claims for their brand, they risk disbelief and a loss of clear

positioning. In general a company must avoid four major positioning errors:

Underpositioning

· buyers have only a vague idea of the brand

Overpositioning

· buyers may have too narrow an image of the brand

Confused positioning

· buyers may have a confused image of the brand resulting from the company's making too

many claims or changing the brand's positioning too frequently

Doubtful positioning

· buyers may find it hard to believe the brand claims in view of the product's features, price, or

manufacturer

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Global segmentation and positioning:

· A common theme in many findings on global marketing is the growing convergence of consumer

needs.

· This phenomenon of increasing globalization is especially visible for many upscale consumer goods

and a variety of business to business goods and services that are bought by multinational customers.

· At the same time, new technological advances in interactive marketing open up many untapped

opportunities for increasingly refined segmentation.

· This paradox, the increasing homogenization of customer needs versus the possibilities offered by

micro-marketing, offers a challenge to global marketers entering the twenty first century.

Global segmentation process:

· Five procedural steps may be followed to gain information and insights into the segmentation criteria

for classifying world markets.

1. Developing a market taxonomy for classifying world markets.

2. Segment all countries into homogenous groups having common characteristics.

3. Determine theoretically the most efficient method of serving each group.

4. Choose the group in which the marketer's own perspective

(its product / service and

strengths) is in line with the requirements of the group.

5. Adjust this ideal classification to the constraints of the real world (existing commitments, legal

and political restrictions, practicality, and so forth)

Basis for country segmentation:

The first step in doing international market segmentation is deciding which criteria to use in the task.

Literally hundreds of country characteristics could be used as inputs. However, for the segmentations to

be meaningful, there should be a linkage between the market segments and the response variable (s) the

company is interested in.

Demographics:

Demographic variables age structure, population size, degree of urbanization, ethnic composition and

death / birth rates are among the most popular segmentation criteria. They are easy to assess.

Moreover, information on population variables is mostly reasonably accurate and readily available.

The manner in which countries are to be grouped will depend, to a large extent, on the nature of

company's product or product lines. Companies marketing capital goods may find economic

variables more relevant for segmentation. On the other hand, companies in the consumer durable-

goods field may find that grouping countries by personal consumption expenditures is a more

meaningful way to study world-wide activities.

Socio-economic variables

Per capita income

The usual caveats in using per capita income as an economic development indicator apply also

when this measure is used for country segmentation.

- Monetization of transactions within a country - per capita GNP may not be a good basis of

comparing countries due to purchasing power parity (PPP)

- Grey and Black sectors of the economy - Many countries have a sizable gray sector consisting

of largely untaxed or under taxed exchanges.

- Income Disparities - Per-capita GNP may be misleading due to wide income disparities.

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Issues in international market segmentation:

Technical Issues:

- Poor data quality

- "Noisy" Variables because of reporting errors sampling mistakes

- Presence of Outliers

Managerial Issues:

- Stability of segments overtime

- Managerial usefulness - country segmentation based on macro-economic aggregates seldom bear

any resemblance to sales-pattern-based groupings.

Effective international market segmentation:

- Market Segment is a "craft" rather than a "science".

- Guidelines for effective segmentation are:

1. Keep things simple

There is no need to exhaust each possible permutation & combination of variables. Ultimately,

the goal is to come up with a viable set of target markets

that will allow the company to peruse

its goals effectively.

2. Consider several levels of aggregation, not just one.

As more disaggregate levels of aggregations are considered, a wide range of

possible

segmentation schemes open up.

3. Two ways to fine tune an existing segmentation scheme

Realize that there are always two ways to augment precision; either sub-divide an

existing variable (e.g. low/high income becomes low/medium/high income) or

introduce

new segmentation variable.

Communicating and delivering the chosen positioning:

It is easier to come up with a good positioning strategy than to implement it

establishing a position or changing one is difficult & takes a long time but can quickly be lost

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