Global Marketing Segmentation.

by jwvercher (student)

University Degree Business and Administrative studies

Segmentation

Global Market Segmentation

Jared Wayne

International Marketing

December 5, 2011

Abstract

In businesses-to-business marketing, as well as, in business-to-customer marketing, marketers are usually charged with developing effective global pricing strategies for customers characterized by different cultures, and different utilities for product attributes. The purpose of this article is to examine how marketers use demographic and geographical market segmentation to introduce products and how they use segmentation to introduce services, in an international setting. The article begins with a discussion on the definitions of international market segmentation, types of strategies used and brand creating, as well as, discussing the way markers divide market into distinct segments. A conclusion will follow with a review of the information gathered.

Introduction

“With the increasing globalization of the business world, international segmentation becomes an ever more important concept in marketing. The globalization forces now at work push many companies to extend or reorganize their marketing strategies across borders and target international segments of consumers” (Horn and Oz 1996 p53). A successful strategy for global marketing depends on an organization’s ability to segment its markets so that uniform sets of marketing decisions can be applied to specific groups that exist horizontally, that is, across nations or cultures (Sethi 1971). It is in a company’s best advantage to offer products and services that are personalized to each and every one of their customers. In most circumstances this is something that cannot be done. It is imperative that marketers seek out others methods to try and offer products and services; that are personalized for different groups, ages, cultures, social economic statues, or more simply, segments of the market. Last century’s standard of mass media advertising focus is not longer viable in the more unpredictable 21st century markets. “International market segmentation is the basis of other market actions. It will require a big management effort to direct strategy to each market niche and also the necessary investigation, implementation, and control for realizing a correct segmentation” (Kraus 2000, p 191). The primary goal of market segmentation is to advance the position of an organization so as to better serve the needs and want of the target customers.

Discussion

The goal of market segmentation, both nationally and internationally, is to recognize individual consumers who want similar benefits and show signs of similar behaviors and form somewhat homogeneous segments such that there is heterogeneity across segments (Wedel and Kamakura, a, 1999). In international markets, “groups of consumers in different countries often have more in common with one another than with other consumers in the same country” (Hofstede, Wedel, and Steenkamp 2002, p. 174). The world is made up from billions of buyers with their own sets of needs and behaviors. Segmentation aims to match groups of purchasers with the same set of needs and buyer behaviors (Milne, Rohm, Bahl, a, 2009). To achieve this, market segmentation must be used because it allows, product differentiation by preparing appropriate marketing mixes for each market segment, organizes international distribution according to buyer characteristics and it better focuses media advertising according to habits and lifestyles (Milne, Rohm, Bahl, b, 2009). Achieving global market segmentation will not be an easy task, Wedel and Kamakura (b, 1999) states, market segmentation is particularly challenging in international markets because of cultural and economical differences influence consumer preferences and characteristics.

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When an organization has successfully identified the segments within a market, the next step is to target these segments with products or services that closely match the needs of the customers within that segment. Sacks (2011) has listed several categories of target strategies. Concentrated strategy, or single-segment strategy is a one-market segment that uses one marketing mix. A single-segment approach is often the strategy of choice for smaller organizations with limited resources. Differentiated strategy utilizes different marketing mixes that are offered to different segments. The product of service itself may or may not be different. In many cases only the promotional message or distribution channels vary. Product specialization is when a firm specializes in a particular product or service and tailors it to different market segments. Market specialization is when an organization specializes in serving a particular market segment and offers that segment a variety of different products and services. The last strategy that Sacks writes about is full market coverage, with this, the organization tires to serve the entire market. This coverage can be done by means of either mass-market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is used for each segment.

Brand is classified as a method of differentiation in marketing. In global marketing, the brand can develop social or behavior characteristics as with Benetton or Porsche. Also, the brand concept is dynamic, not static. This can develop according to each market (Patterson, 2007). A brand is created by augmenting a core product with distinctive values that have distinguished itself from the competition (Liu, Chen, Chen, a, 2011). This is the process of creating brand value. All products have a series of core benefits, benefits that are delivered to all consumers. Consumers are rarely prepared to pay a premium for products or services that simply deliver core benefits. They are expected to justify a core price. Successful brands are those that deliver added value in addition to core benefits. Those added values enable the brand to differentiate itself from the competition. When done well, the consumer recognizes the added value in an augmented product and chooses that brand in preference (Liu, Chen, Chen, b, 2011).

International Segmentation for Services

Services that are global are described as “deeds, performances, and efforts conducted across national boundaries in critical contact with foreign cultures” (Clark, Rajaratnam, and Smith 1996, p. 15). The international service sector is growing steadily in relation to that of the international goods sector (Knight 1999). Due to low cost factors and the ability to compete in near by regional markets, companies are taking more of an interest in international services (Bradley 1995). Patterson and Cicic (1995) have stated that global services cause particular challenges for marketing managers, because of the intangibility of services, the degree of customization and the differences in preferences across cultures. Research on international services has been conducted over the last few decades; some has focused on entry-mode choices (e.g., Erramilli 1990), geographical roles (e.g., Kassem 1989), technology growth (e.g., Fisk 2001) different strategies used across services (e.g., Nicolaud 1989) and service influences on national competitive advantage (e.g., Porter 1990). Due to the increased competition for international services, Kinnear (1999) believe that more research on horizontal market segmentation that goes beyond borders is needed.

Just as in domestic markets, Erramilli (1992) states that in international markets price sensitivity is a vital market segmentation variable, and services involve improved connections between members of buying and selling companies, in which price perceptions often differ considerably across market segments. Even though there are many research articles on international market segmentation for services Steenkamp and Hofstede (2002) contend that it is still in the beginning stages of development both theoretically and methodologically.

International Segmentation for Products

The goal of market segmentation is not to have a universal product worldwide but to make a product that is standardized as much as possible, while at the same time allowing for local regions to modify as necessary and desired (Keegan and Schlegemich 1999). Durable goods often have quite a few attributes; different products consist of a different combination of attributes. People place value in different product attributes by their purchasing decisions (Li, Wang, and Li 2011). When introducing a product into a new market one of ways of segmenting that market, whether it is nationally or internationally, is categorize by demographics. Demographic segmentation consists of diving the market by personal characteristics, like, race, income, gender, age, sexual orientation, and level of educations is segmenting demographically. An example provided by Zou and Cavusgil (2002) is that of clothing manufacturers, jewelers and cosmetics. Clothing manufactures consider age to be the dividing factor, they segment by older adult, preteen, infant and so on. For jewelers, gender is used to segment and cosmetics divide markets mostly on the basis of race and social economic levels.

When entering a foreign market another way to segment the population is by geographical locations. Where do people live? This is the question asked. You can have large geographic segments such as, countries, provinces, states, or a relatively small geographic segment, such as, cities or even neighborhoods. “Consideration related to grouping may include the makeup of the areas, that is, urban, suburban, or rural; size of the area; climate of population” (Yoo and Donthu 2002 p. 381).

Conclusion

Individual consumers have different needs and want when it comes to services or products. This is why market segmentations is needed and that the older paradigm of mass marketing to an entire populations is no longer relevant. With the world becoming more globalized, more international market segmentation is needed. Uniform international market segments can be applied to specific sets of customers. International market segmentation will hold more challenges that domestic market segmentation because of the cultural and economic differences. International market segmentation for services has grown progressively more compared with that of products. Global services have a lower cost and they are better able to compete with closer regions. Though, research in international market segmentation has been conducted more steadily in last couple few decades, many marketers believe more research is required. International market segmentation for products is quite similar to market segmentation domestically. The target market is segmented into specific categories, groups or attributes. Age, sex, social economic statues, race, and education levels are all possible ways a market can be divided. Geographic locations are another way to segment markets. This can be done with whole countries to specific neighborhoods.

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