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Global Market Segmentation, Targeting Advertising Strategy, Advertising Media

Market Segmentation  Represents an effort to identify and categorize groups of customers and countries according to common characteristics Targeting The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond Positioning The process of occupying a favorable position in the consumers mind as opposed to competition Global Marketing Global marketing refers to marketing activities of companies that emphasize four activities: (1 ) cost efficiencies resulting from reduced duplication of efforts; (2) opportunities to transfer products, brands, and ideas across subsidiaries in different countries; (3) emergence of global customers, such as global teenagers or the global elite; and (4) better links between national marketing infrastructures, which paves the way for a global marketing infrastructure that results in better management and reduced costs.

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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. Properties of Targeted segments Measurability. The segments should be easy to define and measure. Objective country traits such as socioeconomic variables (e.g., per capita income) can easily be gauged, but the size of the segments based on culture or lifestyles is much harder to measure. Thus, a larger scale survey may be required for segmenting global markets depending upon the basis of GMS. Size. Segments should be large enough to be worth going after. Britain and Hong Kong can be grouped together in the same segment, because of previous British supremacy in Hong Kong, but their population sizes differ.

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Accessibility. The segments should be easy to reach via the media. Because of its sheer size, China seems to be attractive market. However, because of its largely rural population, it has less access to technology. Properties of Targeted segments Actionability. Effective marketing programs (the four Ps) should be easy to develop. If segments do not respond differently to the firm's marketing mix, there is no need to segment the markets. Certain legal issues need to be considered before implementing an advertisement campaign. For example, many countries, such as India, do not allow direct slandering of the competitor's products. Competitive Intensity. The segments should not be preempted by the firm's competition. In fact, in global marketing, small companies often prefer entry of less competitive markets and use this as one of the segmentation criteria when assessing international markets. Growth Potential. A high return on investment should be attainable. Typically, marketers face a trade-off between competitive intensity and growth potential. Currently, Latin American markets have good growth potential, but the instability of local currencies causes major problems. Contrasting views of global segmentation Conventional Wisdom      Assumes heterogeneity between countries Assumes homogeneity within a country Focuses on macro level cultural differences Relies on clustering of national markets Less emphasis on within-country segments

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Unconventional Wisdom     Assumes emergence of segments that transcend national boundaries Recognizes existence of within-country differences Emphasizes micro-level differences Segments micro markets within and between countries

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Global Market Segmentation Demographics Psychographics Behavioral Characteristics

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Benefits sought Psychographic Segmentation Grouping people according to attitudes, value, and lifestyles  SRI International and VALS 2

Porshe 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

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Behavior Segmentation How much they use it 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 Benefit Segmentation Benefit segmentation focuses on the value equation  Value = Benefits / Price

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Based on understanding the problem a product solves, the benefit it offers, or the issue it addresses Assessing Market Potential Be mindful of the pitfalls  Tendency to overstate the size and short-term attractiveness of individual country markets The company doesn’t want to ‘miss-out’ on a strategic opportunity Management’s network of contacts will emerge as a primary criterion for targeting

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Targeting: 9 Questions Who buys our product?

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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? Target Market Strategy Options Standardized global marketing   Mass marketing on a global scale Undifferentiated target marketing

Concentrated global marketing   Niche marketing Single segment of global market

Differentiated global marketing   Multi-segment targeting Two or more distinct markets

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Positioning The process of occupying a favorable position in the consumers mind as opposed to competition     Attribute or Benefit Quality and Price Use or User Competition

International Advertising
1. Perform marketing research. 2. Specify the goals of the communication. 3. Develop the most effective message(s) for the market segments selected. 4. Select effective media. 5. Compose and secure a budget. 6. Execute the campaign. 7. Evaluate the campaign relative to the goals specified.

Top 20 Global Advertisers ($ millions) • • • • Top 100 Global Advertisers ($ millions) Top 10 Russian Advertisers ($ millions) Top 10 Chinese Advertisers ($ millions) Global Advertising and the Communications Process

The Message Challenges : International communication may fail for variety of reasons:  Media Inadequacy  Message not understood by intended audience because of different cultural interpretations  Message may reach intended audience and be understood but have no effect because marketer did not correctly asses the needs and wants or the thinking process of the target market • Communication Process

1. An informative source : An international marketing executive with a product message to communicate 2. Encoding : The message from the source converted into effective symbolism for transmission to a receiver. 3. A message Channel : The sales force and or/ advertising media that convey the encoded message to the intended receiver. • Communication Process

4. Decoding : The interpretation by the receiver of the symbolism transmitted from the information source. 5. Receiver : Consumer action by those who receive the message and are the target for the thought transmitted. 6. Feedback: Information about the effectiveness of the message that flows from the receiver ( the intended target ) back to the information source for evaluation of the effectiveness of the process.

7. Noise : Uncontrollable and unpredictable influences such as competitive activities and confusion the detract from the process and affect any or all of the other six steps.. • • Global Advertising and the Communications Process If not properly considered, the different cultural contexts can increase the probability of misunderstandings Effective communication demands the existence of a “psychological overlap” between the sender and the receiver It can never be assumed that “if it sells well in one country, it will sell in another” The International Communications Process

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Eg. : What’s in a Word…California? • It can never be assumed that if it sells well in one country it will sell in another ! Eg. Bicycles, Toothpaste

…. If basic needs are incorrectly defined, communications fail because an incorrect or meaningless message is received even though the remaining steps in the process are executed properly. • The Encoding step causes problems even with a “ proper” message .

Factors are Color, Timing, Values, beliefs, humor, tastes and appropriateness of spokesperson can cause the international marketer to symbolize the message correctly. Example – Perfume • Problems of Literacy, media availability and types of media create problems in the communication process at the encoding step. Decoding errors may occur accidently!

Example – Colgate- Palmolive’s selection of the brand name ‘Cue’ for the toothpaste • Barriers to Effective Communication   Legal Constraints Linguistic Limitations

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Cultural Diversity Media Limitations and Production and Cost Limitations

The International Environment Creative Challenges Language “lost in translation” Color e.g. green = cool in Europe, but green = danger/disease in tropics Timing e.g. seasons & clothing fashions Values e.g. bicycle = recreation in USA, but bicycle = transport in Asia; French’s mustard boycotted in US in 2003 when France didn’t go along with US attack on Iraq Beliefs e.g. rain = refreshing in Europe, but rain = fertility in Africa Humor Tastes Appropriate endorser e.g. who is most recognizable athlete in world? Literacy e.g. using print ads when small % of target market can read Media availability e.g. using Internet when small % of target has access Feedback step of communications (ad testing; noise) Endorsements Legal Constraints Comparative advertising - not allowed in Germany, Belgium, Luxembourg; okay in UK, Spain, Portugal; restricted in India, Philippines Advertising of specific products - restrictions on advertising pharmaceuticals in Canada, toys, tobacco, liquor in many countries Control of advertising on TV - strictly controlled in many countries; no subliminal advertising in Russia; all commercials on Malaysian TV must be made in Malaysia Limitations on length & number of commercials - 32 minutes per day in Kuwait; no ads on BBC in UK, < 7 minutes/hour on UK commercial stations; Germany TV ads must be 20 minutes apart & <12 minutes/hour Internet services - EU addressing regulation; should TV rules apply?

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Special taxes that apply to advertising e.g. Austria has multiple levels of ad taxation depending on states, municipalities and ad medium. Legal Environment

International Laws and Regulations • • Pricing and distribution laws and regulatory restrictions vary by country. Some countries/regions ban ads for certain product Thailand, Hungary, Hong Kong, and Malaysia have bans on certain types of tobacco advertising Truthful ads can be banned for the public good Federal ban on junk faxes is valid

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Contests, promotions, and direct mail are illegal in some countries. Message-related Issues False advertising is a message that is untrue. Misleading claims are grossly exaggerated claims made by advertisers about products. Puffery is “advertising or other sales representations, which praise the item to be sold with subjective opinions, superlatives, or exaggerations, vaguely and generally, stating no specific facts.” Product-related Issues Unhealthy or dangerous products—agencies must consider if they can honestly promote these products including fast food, tobacco, liquor, or beer. In 1997, the FDA loosened controls on drug companies, and prescription drug ads skyrocketed. Reactions to Concerns about Unhealthy or Dangerous Products McDonald’s and Disney both added healthier choices to their menus. In 1996, the FDA restricted tobacco advertising within 1,000 feet of a school, and said ads in publications with 55% readership under age 18 could only run black and white text ads. The FDA’s Master Settlement Agreement required the tobacco industry to pay $206 billion over 25 years to 46 states, half of which supports antismoking ads targeting children. Tobacco companies voluntarily curbed ads to youth. Liquor companies and television networks have voluntarily reduced alcohol advertising. Regulatory Environment

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Federal Trade Commission (FTC) • Established in 1914, the FTC regulates deceptive and misleading advertising, focusing on: Fairness: unfair competition and deceptive practices Deception: issues cease and desist orders Violations: can fine companies for violating 1) a trade regulation rule or, (2) cease and desist order. Consumer participation: funds consumers groups and other interest groups in making rules Also oversees advertising involving weight loss products, children and elderly, telemarketing, and

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the entertainment industry. • Liquorice Allsorts language controversy

1980s: Government forbade mixing languages in advertising, so banned “LEKKERISH LIQUORICE” • Cultural Diversity

Problems associated with communicating to people in diverse cultures present one of the great creative challenges in advertising. • • • • • • • • Knowledge of cultural diversity must encompass total advertising project Existing perceptions based on tradition & heritages often hard to overcome Subcultures Changing traditions Advertising Subject to Regulation Linguistic Limitations Language is one of the major barriers to effective communication through advertising Translation challenges Three types of translation errors can occur in international marketing: • • • Simple carelessness Multiple-meaning words Idioms

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Low literacy in many countries Multiple languages within a country Linguistic Limitations Examples : A Company marketing tomato paste in the middle east found that in Arabic the phrase “ tomato paste” translates as “ tomato glue”. The word ‘ball’ translates in Spanish as bola, which means ball in one country, revolution in another, a lie or fabrication in another, and is an obscenity in yet another Cultural Diversity Knowledge of cultural diversity must encompass the total advertising project Existing perceptions based on tradition and heritages are often hard to overcome Subcultures Changing traditions Media Limitations and Production and Cost Limitations Media limitations may diminish the role of advertising in the promotional program Examples of production limitations: Poor-quality printing Lack of high-grade paper

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Low-cost reproduction in small markets poses a problem in many countries 4. Media Planning & Analysis – Tactical Considerations Availability - huge variations among countries Cost - agents & negotiation Coverage - difficult to reach some sectors; lack of info re coverage Lack of market data - accurate data uncertain Newspapers - too many in some countries, too few in others Magazines - few with large circulation; best for technical products Radio & TV - major communications media in most countries Satellite & cable TV - increasing importance

Media Planning & Analysis – Alternatives & New Options Direct mail - especially important when other media not available Internet - evolving; B2B; catalogs; many consumer goods companies have e-stores New Social Media - Word-of-Mouth (WOM) / BUZZ marketing & peer recommendations always key; Internet has advanced pace & reach of WOM; e.g. Papa John’s Pizza blog Other media e.g. cinema; billboards (high illiteracy) El Toro billboards originally advertising Osborne Brandy in Spain The original London Black Taxicab

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Now they come in all colors, though the iconic shape is still the same. • Media Penetration in Selected Countries (per 1,000 persons) Social Networking Goes Mobile (% of Respondents) Media Planning and Analysis – Tactical Considerations • • • • • • • Availability Cost Coverage Lack of market data Newspapers Magazines Media Planning and Analysis – Tactical Considerations Radio and television Satellite and cable TV Direct mail The Internet Other media

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Campaign Execution and Advertising Agencies Managed by advertising agencies Local domestic agency Company-owned agency Multinational agency with local branches

Compensation Commonly 15 percent throughout the world Some companies moving to reward-by-results

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Campaign Execution and Advertising Agencies International Control of Advertising: Broader Issues International Control of Advertising: Broader Issues Consumer criticism Deceptive advertising Decency and blatant use of sex Self-regulation Government regulations Microsoft Microsoft Summary An integrated marketing communications (IMC) program includes coordination among advertising, sales management, public relations, sales promotions, and direct marketing. Currently companies are basing their advertising strategies on national, subcultural, demographic, or other market segments. The major problem facing international advertisers is designing the best messages for each market served. The availability and quality of advertising media vary substantially around the world. Advances in communication technologies are causing dramatic changes in the structure of the international advertising and communications industries.

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International Advertising
Of all elements of marketing mix, decisions involving advertising are most often affected by cultural differences. 1. Perform marketing research 2. Specify goals of communication 3. Develop most effective message(s) for market segments selected (most daunting) 4. Select effective media 5. Compose and secure a budget 6. Execute campaign 7. Evaluate campaign relative to goals specified • • Global Marketer’s Dilemma 4. Media Planning & Analysis – Tactical Considerations

Imagine the ingenuity required of advertisers confronted with these situations :  In Brazil, TV commercials are sandwiched together in a string of 10 to within one station break. 50 commercials

 National Coverage in many countries means using as many as 40 to 50 different media.  Specialized media reach small segments of the market only. In the Netherlands, there are catholic, Protestant ,socialist, neutral, and other specialized broadcasting systems

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Media Planning & Analysis – Tactical Considerations
 In Germany, TV scheduling for an entire year must be arranged by August 30 of the preceding year, with no guarantee that commercials intended for summer viewing will not be run in the middle of winter.  In viewing, advertising in newspapers and magazines is limited to 110 percent of space, and to 5 percent of time, or three minutes an hour, on radio and TV •  4. Media Planning & Analysis – Tactical Considerations Availability - huge variations among countries

One of the contrasts of international advertising is that some countries have too few advertising media and others have too many. In some countries, certain advertising media are forbidden by government edict to accept some advertising material  Cost - agents & negotiation Media prices are susceptible to negotiation in most countries. Agency space discounts are often split with the client to bring down the cost of media. The advertiser may find that the cost of reaching a prospect through advertising depends on the agent’s bargaining ability. The per-contract cost varies widely from country to country • Giant 3-D murals for flip flop launch bus stop Red Bull car Supermarket trolley • El Toro billboards originally advertising Osborne Brandy in Spain Media Planning & Analysis – Alternatives & New Options Direct mail - especially important when other media not available;

For example, in Chile, direct mail is virtually eliminated as an effective medium because the sender pays only part of the mailing fee; the letter carrier must collect additional postage for every item delivered. Obviously, advertisers cannot afford to alienate customers by forcing them to pay for unsolicited advertisements • • Internet - evolving; B2B; catalogs; many consumer goods companies have e-stores The original London Black Taxicab

Now they come in all colors, though the iconic shape is still the same. Vehicular ads make an effective advertising medium • • 2009: 21,000 licensed black cabs in London 2008: This is definitely a growing trend! London's black cabs are ubiquitous and famous all over the world and by law they have to be kept in excellent condition. The average black taxi covers 126 miles per day in major UK cities carrying 38.4 million people to their chosen destinations each year! That is an amazing reach and coverage over the UK. Research has shown that when interviewed 71% of adults said they notice taxi advertising and people in the 15 - 34 year bracket are 24 times more likely to notice taxi advertising than the average person.

Media Strategy
 Medium     Efficiency Contextual fit

Scheduling Television Advertising: Advantages and Disadvantages High reach Some targeting Low cost per exposure Auditory & visual Strong visual impact Repetition possible High prestige Limited targeting High total cost Hard to convey complex info Short exposure time Easy to avoid seeing Perishable message Some distrust Clutter Radio Advertising: Advantages and Disadvantages Local coverage Some targeting (geog./station/program) Low cost Quick

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High frequency Sound, humor, imagery Low production costs Limited targeting Local coverage Auditory only Clutter Low attention Short exposure time Perishable message Hard convey complex info Little research info available Magazine Advertising: Advantages and Disadvantages Good targeting Quality of color High information content Can convey complex info Longevity of ad Can be saved Pass-along readership Long lead time for placement Limited control of placement Visual only Visual clutter Newspapers: Advantages and Disadvantages High local coverage

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Low cost Short lead time Placement in interest sections Quick placement & changes Reader controls exposure Can be saved Can be used for coupons Limited targeting Short life Low attention-getting Short attention span No page position control Poor reproduction Clutter Selective reader exposure Poor pass-along Outdoor Advertising: Advantages and Disadvantages Low cost Location specific High visibility Low message competition Repetition opportunity Low targeting Short exposure time Limited content Poor image Local restrictions

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Direct Mail Advertising: Advantages and Disadvantages Good targeting Can be personalized Intense coverage Speed Flexible format High information content Can be saved No ad competition High cost per contact Poor image Clutter May not read How Much Do We Need to Spend? Percent of (Expected) Sales Competitive Parity  i.e., “share of voice”

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Objective & Task "Sophisticated" Modeling The Language of the Media Buyer What It Means

Reach The number of different people or households exposed to an advertisement. Rating The percentage of households in a market that are tuned to a particular TV show or radio station. Frequency The average number of times an individual is exposed to an advertisement.

Gross rating points frequency.

Reach (expressed as a percentage of the total

market) multiplied by

Cost per thousands The cost of advertising divided by the number of thousands of individuals or households who are exposed.   Advertising Scheduling Frequency     Duplication Wear-in, wear-out

Evaluating the Effectiveness of the Ad Pretesting (copy testing)    Portfolio tests Jury tests Theater tests

Post testing     Aided recall (recognition) Unaided (free) recall Attitude tests Sales tests