Lecture 4 Markets and Segmentation in an Global Context

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Learning Objectives
1. How a nations or regions culture can influence the international marketing context 2. Why a marketing team should examine culture when entering a host country 3. How culture affects purchasing behavior

4. The primary factors used to identify international consumer and business-to-business market segments 5. How marketing team can use regional and national segmentation methods to improve a companys global marketing program 6. green marketing, and how is it related to concepts of sustainability
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Markets and Market Segments

A market consists of people with: wants and needs, money to spend, and the willingness to spend money on those wants and needs. Market segmentation consists of identifying all potential customer groups that are viable for the purposes of marketing products.
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International Market Variation

International markets vary due to several factors. Marketers consider these factors when developing international segmentation strategies. cultural factors language Political and legal systems Economic conditions, and infrastructure

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Learning Objective #1
How a nations or regions culture can influence the international marketing context

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What is culture?
Culture: beliefs, values and attitude
The term culture can be applied to a nation, a region, a city, or a single business. Culture, and its elements strongly influence international marketing activities.
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Elements of Culture

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Characteristics of Culture
Culture develops over time and various characteristics of culture have strong historical roots.

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Drivers of Culture
What do you think drives culture? History

Geography
location and characteristics of a geographic region affect the development of culture.
Topography Population density Climate Access to other nations and cultures
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 Global celebration Represents how history and geography overlap to create culture and consumption. The celebration is Western European in origin and may even predate its Christian roots. Carnival celebrations are common throughout Europe.
The celebration in the Notting Hill area of London is one of the largest in the world. In Belgium, the celebration dates to at least 1394.
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Creating Cultural Consumption Example: Carnival

 Colonization (migration) spread the celebration of carnival throughout the world. The most famous of these celebrations is probably Carnival in Brazil.
Samba dances are native to Brazil but also influenced by African dancing introduced by slaves.

Creating Cultural Consumption: Carnival (Cont.)

Carnival is also observed throughout the rest of Latin America.

The capital of Uruguay, Montevideo, holds a festival for more than a month. Trinidads event rivals Brazils and includes African culture and calypso and the soca dancing. The Colombian celebration includes a mix of European, African, and indigenous traditions.

Colonization eventually spread carnival to Asia.

India, specifically the former Portuguese city of Goa, celebrates every year. The party includes traditional Christian elements, but also increasingly reflects Indias Hindu roots. Copyright 2012, SAGE Publications, Inc.

Culture and Values

Values are strongly held concepts that are pervasive within a culture. The five main features of values that constitute the common background for research
(1) concepts or beliefs (2) about desirable end states or behaviors (3) that transcend specific situations, (4) guide the selection or evaluation of persons, behavior, and events, and (5) are ordered by relative importance.
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Geert Hofstedes Value Dimensions of Culture

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Project GLOBE
Hofstedes dimensions remain widely used in a number of contexts, including international marketing, although criticisms have emerged.
Hofstedes data was collected in the late 1960s!!

A recent approach, Project GLOBE, is an international effort to respond to these criticisms and to identify and measure cultural dimensions. Elements of the Hofstede analysis continue in the Project GLOBE index.
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Project GLOBE Value Dimensions of Culture

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Applying Cultural Values to Marketing Activities

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 National-level values

Value Levels

Hofstede and GLOBE

Individual-level values (Shalom Schwartz)

Biologically based needs drive individuals to seek out food, shelter, and other basic survival or well-being requirements. Social interactional requirements assist in interpersonal coordination and interaction, or, in more common terms, romance, love, friendships, and social relationships in locations such as the workplace or places of worship. Social institutional demands for group welfare and survival lead individuals to collectively value security, prosperity, and peace.
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Schwartz Individual-Level Values

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Learning Objective #2
Why a marketing team should examine culture when entering a host country

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Culture and Behaviors

Cultural Imperatives
The business customs and expectations that must be met and conformed to or avoided

Cultural Electives
The business customs and expectations that cultural aliens may, but are not required to, conform to or participate in

Cultural Exclusives
Customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred
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Culture and Purchasing Behavior

Cultural influences dictate whether a given region or nation can become a viable target market. A marketer first examines culture to determine whether products match the needs and wants of consumers. Culture affects a variety of consumption patterns and purchasing behaviors, including those affected by aesthetics, religious practices, and dietary preferences.
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Learning Objective #3
How does culture affects purchasing behavior?

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 Aesthetics: the concepts about what constitutes beauty, affect a vast number of purchases.
Cosmetics Jewelry Clothing

Aesthetics

Differences in aesthetics can lead to marketing opportunities.

These opportunities often center on perceptions of human beauty.

Product design can be based on perceptions of aesthetics.

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Religion
One dominant religion in a state or region leads marketers to adjust marketing efforts.
Holy days, rituals, foods, gender roles, and other practices may be examined. Need to determine if a target market exists. Need to determine whether the companys product offerings can be tailored, modified, and positioned to match those markets

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Culture and Dietary Restrictions

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Sub-cultures and Counter-cultures

Subcultures: groups whose values and related behaviors are distinct and set members off from the general or dominant culture.
Ethnic or religious groups often form subcultures featuring their own language, distinctive foods, religious practices, and other customs.

Countercultures: groups whose values set their members in opposition to the dominant culture. Countercultures challenge the cultures core values.
Vegans, Amish
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Cultural Change
Two methods may be used by a marketing department to assess and adapt to cultural change: 1. Seeking cultural congruence, which means products and marketing approaches are designed to meet the needs of the current culture. 2. Promote change within the culture.
Greater risk An increased chance of offending
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Group Task
Think of a culture specific product, maybe one that you use because of your culture.
Would these be products you could potentially market to other cultures? Why or why not? What kind of changes would you need to make to the products or the marketing campaigns to be successful?

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Types of Services Globally

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The STP Approach to Markets

Segmentation consists of identifying all potential customer groups that are viable for the purposes of marketing products and services.
Most companies not able to reach every available market segment

Targeting component of the STP approach involves selecting the market segments the firm intends to target or reach. Positioning is creating perceptions in the minds of consumers about the nature of a company, its brands, and its products and services.
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Learning Objective #4

The primary factors used to identify international consumer and business-tobusiness market segments

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International Market Segmentation

A market segment is: a set of businesses or a group of individual consumers with distinct characteristics.
For a market segment to be viable in the eyes of the marketing team, it must pass four tests:
(1) Those within the segment should be homogenous or have similar characteristics. (2) The segment must differ from other groups and the population as a whole. (3) Sufficient demand must be present to make the segment financially feasible. (4) Methods to reach the market must exist, both in terms of physical delivery of the item and in terms of the marketing messages that would entice customers to make purchases.
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International Consumer Market Segments

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Demographics
Demographics are population characteristics, and perceptions/consumption differences related to these characteristics may vary wildly internationally.
Gender Age Income Education Ethnicity
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Psychographics
Psychographic profiles emerge from a persons activities, interests, and opinions.
Vary widely by culture due to influence by divergent factors such as religious training, customs, language, and even the popularity of local sports

Psychographics are influenced by cultural differences.

Cultures with individualistic tendencies offer opportunities to market personalized products and items that make a person stand out from the crowd.
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Geographic Area
Marketing appeals can be made to people in a geographic area or region. Many times differences exist in purchasing patterns in rural versus urban areas, creating unique target markets. Germany can be divided into several distinct regions:
Bavaria, the Black Forest, Germanys East, the North and Baltic Sea area, the Rhine Valley, and Ruhrpott
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Geo-demographic Segmentation
A hybrid form of geographic segmentation allows companies to enrich geographic approaches to segmentation by adding demographic and psychographic information.

Geo-demographic segmentation may also be useful when various regions feature differences. Several companies focus specifically on geographic and geo-demographic research.
ESRI provides executives with cutting-edge technologies for utilizing data from around the world.
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Benefit Segmentation
Focuses on the advantages consumers receive from a product rather than the characteristics of consumers themselves. A given product may feature one benefit in a given country and a separate benefit in another.

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Global Consumer Types

Global consumers refer to the consumers in different nations that earn similar incomes and hold roughly the same social status levels.
Exhibit similar purchasing patterns Less likely to focus on price and instead buy products that meet global quality standards Normally located in urban settings and exhibit high levels of cosmopolitanism

Glocal (global and local) consumers have a dual consumption patterns.

Buy global products, but the purchase represents a special occasion More likely to purchase products that mimic global products but are priced slightly lower

Local consumers rarely consume foreign products.

For either economic or taste reasons, maintain traditional consumption patterns Often live in rural settings where they only infrequently have the opportunity to purchase foreign goods Exhibit high levels of ethnocentrism, or the belief that ones culture is superior to others Copyright 2012, SAGE Publications, Inc.

International Business-to-Business Market Segmentation

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Dual Channel Marketing

Firms that sell virtually the same goods or services to both consumers and businesses The approach fits several situations.
A product sold in business markets is then adapted to consumer markets. Individuals buy a particular brand at work have positive experiences and purchase the same brand for personal use (spin-off sales). Can you think of an example?

One marketing decision involves how to represent the product in each channel.
Feature similarities between the two markets unless there are significant differences

Dual channel marketing opportunities often grow as a result from economic development.
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Learning Objective #5
How marketing teams can use regional and national segmentation methods to improve a companys global marketing program

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Methods for Regional and National Segmentation

How might you segment regionally or nationally?
Wants and Needs Money to Spend

Willingness to Spend
Language
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Selected Per Capita Incomes

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GLOBE and Ronen and Shenkar (1985) Country Clusters

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Bottom-of-the-Pyramid Consumers
Bottom-of-the-pyramid consumers, the final global segment, consists of the 4 billion people worldwide who live on $2 or less per day.
These individuals experience wants and needs but have only limited money to spend.

Even with a small profit margin, the large size and equivalent large potential volume makes this segment increasingly attractive.
To target this group effectively, the marketing mix must be adjusted, including changes in products, prices, and delivery systems, and in some cases, brands.
The goal of these changes is to create the capacity to consume by lowering the barriers to purchase.
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Global Income Segments

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Targeting BOP Consumers

Products
Changing the product, either in terms of the design of the item to meet a slightly different need or by simply lowering the quantity offered per purchase Changing the product often allows for a change in price.

Pricing
BOP consumers are prone to switching. While it is important to lower the price, also maintain quality Exchange systems, or the methods of facilitating payment, may vary within the economies of bottom-of-the-pyramid countries.
Barter may be present, whereby an individual trades one good or service for another.

Credit may be less available and/or more dependent on individual relationships. Providing credit for purchases that seem relatively small, the equivalent of $10 to $15 can help create the capacity to consume.

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Targeting BOP Consumers (Cont.)

Distribution
Involves finding delivery systems that match a local region
Electricity available on a routine basis? Running water? Product modifications may be needed to facilitate distribution.
Necessitates innovations in refrigeration, batteries, and more-efficient energy consumption.

Promotion
Arguably least important part of the marketing mix for BOP consumers as knowledge of products is often already present. Literacy and overall levels of education may be limiting factors. Word-of-mouth endorsements and other less-traditional promotional tactics are valuable tools.
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Percentage of Country Population Living on Less Than $1 per Day

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Learning Objective #6

Green marketing, and how is it related to concepts of sustainability?

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What is green marketing?

Marketing of environmentally friendly produces Increased over the last two decades Why might there be an increase in green products?

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 Consumer Preferences

Green Marketing and SustainabilityOriented Segments

The majority of customers only purchase green products when the item maintains the same level of price, quality, convenience, and performance.

Green by Necessity
In many bottom-of-the-pyramid nations, sustainability has become a driving force in purchases. Such products save the consumer money.
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Market Segment Analysis

Market potential represents the total number of individuals or businesses that could purchase a product in a given area.

Market demand consists of the total sales of all brands sold in an area or within a product industry. Company or brand demand is the estimated demand for a companys brand.
May also be called market share
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Assessing Market Potential

1. Availability of financial resources 2. Availability of potential substitutes

3. Ability to offer attractive benefits

4. Current product availability 5. Consumer awareness of the product
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Assessing Market Potential (Cont.)

Measurability: Can the segment be quantified and identified? Accessibility: Can the segment be reached?

Profitability: Is the segment large enough to generate profits?

Actionability: Can a marketing program be designed to stimulate interest and behavioral responses (purchases)?
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Ethical Issues in International Segmentation

Demographics may reinforce stereotypes.
Segmentation may reinforce gender discrimination.
Females may be confined to submissive and subservient roles.

Targeting lower-income segments may be viewed by some critics as being the process of creating overconsumption by people who can least afford to do so.
Purchasing less-healthy food products such as fast food Purchasing clothes designed to create status rather than to offer functionality

Market segmentation programs may limit access to certain goods or services to only the rich.
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Group Task
Pick a product you would like to sell in two, very different, international markets. Design product packaging for each country. Include an STP analysis. Such as, what would your segmentation basis be? Draw a mockup of what you would like the packaging and labeling to be in each country. What are the main differences in the two packages? Why?
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Group Task Continued

Design an advertising campaign for each market. What form of advertising would you use? What would be the main differences in your adverting campaigns? Why?

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Tutorial 4

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Identify the key drivers of globalisation.

In your groups: Explain how and why these drivers affect internationalisation from the marketing perspective.

Each nation has distinct differences. Dealing with these differences represent one of the most important challenges for businesses that operate internationally. Identify the key differences In groups: Explain how and why these key differences may influence marketing activities of an organization which operates internationally.
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