Solution Manual for Global Marketing Plus 2014 MyMarketingLab with Pearson eText — Pac

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 CHAPTER 7

SEGMENTATION, TARGETING, AND POSITIONING

SUMMARY

A. The global environment must be analyzed before a company pursues expansion into new
geographic markets. Through global market segmentation, a company can identify and
group customers or countries according to common needs and wants. Demographic
segmentation can be based on country income and population, age, ethnic heritage, or
other variables. Psychographic segmentation groups people according to attitudes,
interests, opinions, and lifestyles. Behavioral segmentation utilizes user status and
usage rate as segmentation variables. Benefits segmentation is based on the benefit
buyers seek. Global teens and global elites are two examples of global market
segments.

B. After marketers have identified segments, the next step is targeting: The identified
groups are evaluated and compared, and one or more segments with the greatest potential
is selected from them. The groups are evaluated on the basis of several factors, including
segment size and growth potential, competition, and compatibility and feasibility. Target
market assessment also entails a thorough understanding of the product-market in
question and determining marketing model drivers and enabling conditions in the
countries under study. The timing of market entry should take into account whether a
first-mover advantage is likely to be gained. After evaluating the identified segments,
marketers must decide on an appropriate targeting strategy. The three basic categories of
global target marketing strategies are standardized global marketing, niche marketing,
and differentiated multisegment marketing.

C. Positioning a product or brand to differentiate it in the minds of target customers can be

accomplished in various ways: positioning by attribute or benefit, positioning by
quality/price, positioning by use or user, and positioning by competition. In global
marketing global consumer culture positioning (GCCP), foreign consumer culture
positioning (FCCP), and local consumer culture positioning (LCCP) are additional
strategic options.

LEARNING OBJECTIVES

1 Identify the variables that global marketers can use to segment global markets and give an
example of each

2 Explain the criteria that global marketers use to choose specific markets to target

3 Understand how global marketers use a product-market grid to make targeting decisions

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4 Compare and contrast the three main target market strategy options

5 Describe the various positioning options available to global marketers

DISCUSSION QUESTIONS

7-4. In a recent interview, a brand manager at Procter & Gamble noted, “Historically, we used to
be focused on discovering the common hopes and dreams within a country, but now we’re seeing
that the real commonalities are in generations across geographic borders.” What is the
significance of this comment in terms of segmenting and targeting?

Global market segmentation has been defined as the process of identifying specific
segments—whether they be country or individual consumer groups—of potential
customers with homogeneous attributes who exhibit similar responses to a marketing
mix. Global market segmentation is based on the premise that companies should attempt
to identify consumers in different countries who share similar needs and desires.

Conventional and unconventional wisdom views of the world suggests that just because
consumers share some similar characteristics towards a product that they share all of
those characteristics. 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. Global marketers must determine
whether a standardized or an adapted marketing mix is required to best serve those wants
and needs.

7-5. Identify the five basic segmentation strategies. Give an example of a company that has used
each one.

Global market segmentation identifies and groups customers or countries according to

common needs and wants. Coca-Cola has identified and grouped both customers and
countries.

Demographic segmentation is based on measurable population statistics such as age,

gender, income, occupation, and geography. Volkswagen, Citroen, Chrysler, and other
automakers have identified China as an attractive segment based on the sheer size of its
population.

Psychographic segmentation divides people into lifestyle or personality segments

based on assessments of activities, interests, and opinions. Porsche established
psychographic profiles of its U.S. owners.

Behavior segmentation focuses on whether or not a population’s members use a product,

and, for users, how often, how much, and how loyally they use it. Visa International and

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 other credit card companies target Asian countries, where credit card utilization is much
lower than in the United States. Conversely, tobacco companies such as Philip Morris
and B.A.T. are targeting China and other Asian countries because, compared with the
West, a relatively higher proportion of Asian adults smoke.

Benefit segmentation divides the market according to the benefits buyers seek from a
product or the problem that the product solves for them.

7-6. Explain the difference between segmenting and targeting.

Market segmentation divides a population or market into groups with one or more
common characteristics. Targeting selects one or more market segments and a target
market strategy.

7-7. What is positioning? Identify the different positioning strategies presented in the chapter and
give examples of companies or products that illustrate each.

Positioning represents marketers’ attempts to differentiate their products from all

competing products in terms of consumers’ mental images and representations. The
positioning strategies identified in the chapter include attribute or benefit, quality/price,
use or user, and a company’s competition. Toothpastes, detergents, and similar consumer
products are often positioned by attribute. Premium spirits such as vodka and gin are
positioned at the high end of the quality/price continuum.

7-8. What is global consumer culture positioning (GCCP)? What other strategic positioning
choices do global marketers have?

Global consumer culture positioning (GCCP) is defined as a strategy that identifies the
brand as a symbol of a particular global culture or segment. It has proven effective for
communicating with global teens, cosmopolitan elites, and globe-trotting laptop warriors
(e.g., Sony’s “My First Sony” line is positioned as the brand for youngsters around the
globe).

Another option is foreign consumer culture positioning (FCCP), associating users, use
occasions, or production origins with a foreign country or culture (e.g., the name
“Haägen-Dazs” implies Scandinavia though the ice cream is American).

Local consumer culture positioning (LCCP) associates the brand with local cultural
meanings and norms, local consumption, or local production (e.g., LCCP is seen in
Budweiser’s U.S. ads featuring Clydesdale horses, associated with rural America).

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OVERVIEW

The efforts by global companies to reach low-income consumers in emerging markets highlight
the importance of skillful global market segmentation and targeting.
Market segmentation represents an effort to identify and categorize groups of customers and
countries according to common characteristics. Targeting is the process of evaluating the
segments and focusing marketing efforts on a country, region, or group of people that has
significant potential to respond. Such targeting reflects the reality that a company should identify
those consumers it can reach most effectively, efficiently, and profitably. Finally, proper
positioning is required to differentiate the product or brand in the minds of target customers.

Global markets can be segmented according to buyer category (e.g., consumer, enterprise, and
government), gender, age, income, and a number of other criteria. Segmentation and targeting
are two separate but closely related go-to-market activities. These activities serve as the link
between market needs and wants and tactical decisions by managers to develop marketing
programs and value propositions that meet the specific needs of one or more segments.
Segmentation, targeting, and positioning are all examined in this chapter.

ANNOTATED LECTURE/OUTLINE

GLOBAL MARKET SEGMENTATION

Global market segmentation has been defined as the process of identifying specific segments—
whether they be country or individual consumer groups—of potential customers with
homogeneous attributes who are likely to exhibit similar responses to a marketing mix.

Professor Theodore Levitt advanced the thesis that consumers in different countries increasingly
seek variety, and that the new segments will emerge in multiple national markets (e.g., Ethnic
food such as pizza is in demand worldwide). Levitt suggested that this trend, known variously as
the pluralization of consumption and segment simultaneity, provides an opportunity for
marketers to pursue one or more segments on a global scale.

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 pizza-loving 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).

A. Coskun Samli has developed a useful approach to global market segmentation that compares
and contrasts “conventional” versus “unconventional wisdom”.

For example, conventional wisdom might assume that, consumers in Europe and Latin America
are interested in World Cup soccer while those in America are not. Unconventional wisdom
would note that the “global jock” segment exists in many countries, including the United States.

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CONTRASTING VIEWS OF GLOBAL SEGMENTATION
✓ (Learning Objective #1)

Global marketers must determine whether a standardized or adapted marketing mix is required to
best serve consumers’ wants and needs. By performing market segmentation, marketers can
generate the insights need to devise the most effective approach.

The process of global 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 sought.

It is also possible to cluster different national markets in terms of their environments—for

example the presence or absence of government regulation in a particular industry—to establish
groupings.

Demographic Segmentation

Demographic segmentation is based on measurable characteristics of populations, such as

income, population size, age distribution, gender, education, and occupation.

A number of global demographic trends—fewer married couples, smaller family size, changing
roles of women, higher incomes and living standards, for example- have contributed to the
emergence of global market segments.

Several key demographic facts and trends from around the world:
• Asia has 500 million consumers 16 and under.
• India has the youngest demographic profile among the world’s large nations. More than
half its population is younger than 25; the number of young people below the age of 14 is
greater than the entire U.S. population.
• In the EU, the number of consumers aged 16-and-under is rapidly approaching the
number of consumers 60 and older.
• Half of Japan’s population will be age 50 or older by 2025
• By 2030, 20 percent of the U.S. population—70 million Americans—will be 65 years old
versus 13 percent (36 million) today.
• America’s three main ethnic groups- African/Black Americans, Hispanic Americans, and
Asian Americans – represent a combined annual buying power of $ 2.5 Trillion.
• The United States is home to 28.4 million foreign-born residents with a combined income
of $ 233 billion.

Statistics such as these can provide valuable insights to marketers who are scanning the globe for
opportunities.

Managers at global companies must be alert to the possibility that marketing strategies will have
to be adjusted in response to the aging of the population and other demographic trends.

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Demographic changes can create opportunities for marketing innovations (e.g., France’s
Carrefour began hypermarkets in 1963 based on a demographic shift).

Segmenting Global Markets by Income and Population

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.

About two-thirds of the worlds GNI is generated by the Triad; only 12 percent of the world’s
population is located in the Triad countries.

The concentration of wealth in a handful of industrialized countries has significant implications

for global marketers. After segmenting in terms of a single demographic variable – income- a
company can reach the most affluent markets by targeting fewer than 20 nations; half the EU,
North America, and Japan. But by doing so, however, the marketers are not reaching almost 90
percent of the world’s population!

GNI and other income measures converted to dollars should be calculated according to
purchasing power parities or through direct comparisons of actual prices for a given product
(Table 7-1).

For example, while the U.S. ranks sixth in per capita income; only Norway, Switzerland and
Luxembourg's surpass its standard of living – as measured by what money can buy.

Because the U.S. market is enormous (about $15 trillion in national income, a population that
passed 300 million in 2006), non-U.S. companies target U.S. consumers.

Despite comparable per capita incomes, other industrialized countries are small in terms of total
annual income (Table 7-2).

In Sweden, for example, per capita GNI is $53,170; however, Sweden’s smaller population—9.4
million—means that in relative terms, its market is limited.

Differences between income and standard of living are more pronounced in less-developed
countries (for example, a visit to a mud house in Tanzania will reveal many of the things that an
annual per capita income of $540 can buy: an iron bed frame, a corrugated metal roof, beer and
soft drinks, bicycles).

What Tanzania’s per capita income does not reflect is the fact that instead of utility bills,
Tanzanians have the local well and the sun. Instead of nursing homes, tradition and custom

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ensure that families will take care of the elderly at home. Instead of expensive doctors and
hospitals, villagers utilize the services of witch doctors and healers.

In industrialized countries, a significant portion of national income is the value of goods and
services that would be free in a poor country. Thus, the standard of living in low- and lower-
middle-income countries is often higher than the income data might suggest; in other words, the
actual purchasing power of the local currency may be higher than that implied by exchange
values.

In 2011, the 10 most populous countries in the world accounted for just over 50 percent of the
world income: the 5 most populous accounted for 39 percent. (Table 7-3)

Although, population is less concentrated than income, but pattern of concentration still exists;
the ten most populous countries account for roughly 60 percent of the world's population (Table
7-3).

The concentration of income in the high-income and large-population countries means that a
company can be global by targeting buyers in ten or fewer countries.

World population is now approximately 7 billion; at the present rate of growth will reach 12
billion by the middle of this century.

As mentioned, for low-priced products, population is more important than income for market
potential.

McDonald’s shows the significance of both income and population (e.g., 80% of McDonald’s
restaurants are located in nine countries, which generate 75% of the company’s total revenues).

In rapidly growing economies, marketers must take care when using income, population, and
other macro-level data during the segmentation process. Using averages alone, it is possible to
underestimate a market’s potential; fast-growing higher-income segments are present inside
countries like China and India (e.g., an estimated 100% of the Indian population are “upper-
middle-class”).

The lesson is to guard from being blinded by averages and do not assume homogeneity.

Age Segmentation

One global segment based on demographics is global teens – young people between the ages of
12 and 19. Teens, by virtue of their shared interest in fashion, music, and a youthful lifestyle,
exhibit consumption behavior that is remarkably consistent across borders. (Exhibit 7-2)

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, and desires, make it
possible to reach the global teen segment with a unified marketing program. This segment is

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attractive in both terms of its size (about 1.3 billion) and its multi-billion-dollar purchasing
power.

The global telecommunications revolution is a critical driving force behind the emergence of this
segment. Global media such as MTV, Facebook, and Twitter are perfect vehicles for reaching
this segment.

Another global segment is the global elite: affluent consumers who are well traveled and have
the money to spend on prestigious products with an image of exclusivity. (Exhibit 7-3)

Although,, this segment is often associated with older individuals who have accumulated wealth
over the course of a long career, it also includes movie stars, musicians, elite athletes,
entrepreneurs, and others who have achieved great financial success at a relative young age.
This segment’s needs and wants are spread over various product categories: durable goods
(luxury automobiles such as Rolls-Royce and Mercedes Benz), nondurables (upscale beverages
such as Cristal Champagne and Grey Goose vodka), and financial services (American Express
Platinum cards).

Gender Segmentation

For obvious reason, segmenting by gender is an approach that makes sense for many companies.
Less obvious is the need to ensure that opportunities for sharpening the focus on the needs and
wants of one gender are not unnoticed.

Although some companies—fashion designers and cosmetic companies, for example—market

primarily or exclusively to women, others offer different product lines for both genders (e.g.,
Nike believes its global women’s business will see growth).

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.

Psychographic Segmentation

Psychographic segmentation involves grouping people in terms of their attitudes, values, and
lifestyles.

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 associated with SRI International, a market research organization whose

original VALS and updated VALS 2 analyses of consumers are widely known.

Finland’s Nokia relies heavily on psychographic segmentation of mobile phone users; its most
important segments are “poseurs,” “trendsetters,” “social contact seekers,” and “highfliers.” By
carefully studying these segments and tailoring products to each, Nokia once commanded 40
percent of the world’s market for mobile communication devices.

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Porsche AG, the German sports car maker, turned to psychographics after experiencing a world-
wide sales decline from 50,000 units in 1986 to about 14,000 in 1993. A psychographic study
showed that Porsche buyers could be divided into several distinct categories: Top Guns, Proud
Patrons and Fantasists. Porsche’s U.S. sales improved nearly 50 percent after a new advertising
camping was launched.

Honda’s recent experience in Europe demonstrates the potential value of using psychographic
segmentation to supplement the use of more traditional variable such as demographics.

People of the same age don’t necessarily have the same attitudes. Sometimes it is preferable to
market to a mind-set rather than a particular age group; in such an instance, psychographic
studies can help markets arrive at a deeper understanding of consumer behavior than is possible
with traditional segmentation variables such as demographics.

Such understanding comes at a price; psychographic market profiles are available from a number
of different sources; companies may pay thousands of dollars to use these studies.

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 researchers identified four lifestyle groups:

Successful Idealists: Comprising from 5 percent to 20 percent of the population, this

segment consist of persons who have achieved professional and material success while
maintaining commitment to abstract or socially responsible ideals.

Affluent Materialists: These status-conscious “up-and-comers” –many of whom are

business professionals- use conspicuous consumption to communicate their success to
others.

Comfortable Belongers: Comprising one-fourth to one-half of a country’s population, this

group, like Global Scan’s Adapters and Traditionals, is conservative and most
comfortable with the familiar. Belongers are content with the comforts of home, family,
friends, and community.

Disaffected Survivors: Lacking power and affluence, this segment harbors little hope for
upward mobility and tends to be either resentful or resigned.

The segmentation and targeting approach used by a company can vary from country to country.

Behavior Segmentation

EMERGING MARKETS BRIEFING BOOK

Market Segmentation in Russia

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Several years ago, the DMBB agency created a psychographic profile of the Russian market. The
study divided Russians into five categories based on their outlook, behavior, and openness to
Western products. The categories included Kuptsy, Cossacks, Students, Business Executives, and
Russian Souls.

Members of the largest group, the Kuptsy (the label comes from the Russian word for
“merchant”), theoretically preferred Russian products but looked down on mass-produced goods
of inferior quality.

The study’s marketing implications became clearer in the late 1990s. Market share growth for
many Western brands began to slow; the trend accelerated after the economic crisis of 1998.

At the other end of the price spectrum, the local Nestlé subsidiary has revived several brands of
Russian chocolate candies.

As for behavioral segmentation, Diageo PLC, V&S Vin & Spirit AB, Seagram, and other
marketers of distilled spirits know that Russians consume a great deal of vodka..

As a result of high duties, as well as the marketing goal of retaining a premium image, imports
such as Smirnoff and Absolut are priced significantly higher than local brands.

Even as marketers of distilled spirits adjust their strategies, market preferences are changing;
young Russians are turning to beer. In 2002, expenditures on beer surpassed vodka for the first
time. Local brands are favored, as the weak ruble prices imports out of the reach of the average
consumer.

Some observers attribute the change to the influence of healthier, Western lifestyles. Also, vodka
was associated with heavy drinking during Russia’s tumultuous transition to a market economy
in the 1990s. Even so, vodka is still an $11 billion market in Russia.

Behavior segmentation focuses on whether 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: heavy, medium, light, or non-user.

Consumers can also be segmented in terms of user status: potential users, non-users, ex-users,
regulars, first-timers, and users of competitors’ products.

Marketers sometimes refer to the 80/20 rule (also known as the law of disproportionality or
Pareto’s Law) suggests that 80 percent of a company’s revenues or profits are accounted for by
20 percent of their products or customers.

THE CULTURAL CONTEXT

Food Giants Target “Nutritional” Segment

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In response to increasing worldwide concerns about obesity, diabetes, and other food-related
health issues, some of the world’s largest food and beverage companies have stepped up efforts
to develop new products and new product categories.

Nestlé is in the vanguard of companies that are seeking to expand offerings in the health-food
category. The goal is to create new food products that target diseases.

Groupe Danone SA is pursuing similar types of opportunities. Its Nutricia division has developed
Souvenaid, a beverage that Danone claims helps delay the onset of Alzheimer’s disease by
maintaining brain synapses. Two of Danone’s most profitable brands are Activia, a digestive
health yogurt, and Actimel, a yogurt drink that can strengthen the body’s immune system.

Thanks to the nature of the ingredients and the claims made in ads and on the product labels,
many functional foods are not classified as drugs by government regulators. Even so, regulatory
agencies such as the European Food Safety Authority are pressuring marketers to substantiate
health-benefit claims. Although functional foods appear to have great commercial potential,
some observers caution about exaggerated claims.

Benefit Segmentation

Global benefit segmentation focuses on the numerator of the value equation: the B in V = B/P.

This approach is based on marketers’ superior understanding of the problem a product solves, the
benefit it offers, or the issue it addresses, regardless of geography.

Food marketers are finding success creating products that can help parents create nutritious
family meals with a minimal investment of time. As consumers care about whitening, sensitive
teeth, gum disease, and other oral care issues, marketers are developing new toothpaste brand
extensions suited to the different sets of perceived needs.

Ethnic Segmentation

In many countries, the population includes ethnic groups of significant size. In the United States,
for example, there are three major ethnic segments: African/Black Americans, Asian Americans,
and Hispanic Americans. Each segment shows great diversity and can be further subdivided. For
example: Asian Americans include Thais, Vietnamese, Japanese, and Chinese, each of who
speaks a different language.

The Hispanic American segment is comprised of more than 50 million people, representing
about 16 percent of the population and $978 billion in annual buying power. As a group,
Hispanic Americans are hard working and exhibit a strong family and religious orientation.

From a marketing point of view, these groups offer great opportunity. Companies in a variety of
industry sectors, including food and beverages, consumer durables, and leisure and financial
services, are recognizing the need to include these segments when preparing marketing programs
for the United States.

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From 1999 through 2000, new-vehicle registrations by Hispanics in the United States grew 20
percent, twice the overall national growth rate.

New segmentation approaches are being developed in response to today’s rapidly changing
business environment. For example, the widespread adoption of the Internet and other new
technologies creates a great deal of commonality among global consumers. These consumer
subcultures are comprised of people whose similar outlooks and aspirations create a shared
mind-set that transcends languages or national differences.

ASSESSING MARKET POTENTIAL AND CHOOSING TARGET MARKETS OR

SEGMENTS
✓ (Learning Objective #2)

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 short-term attractiveness of individual

country markets, especially when estimates are based primarily on demographic data
such as income and population.
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. The result can be market entry based on convenience rather than
rigorous market analysis.

With these pitfalls in mind, marketers can utilize three basic criteria for assessing opportunity in
global target markets:
• Current size of the segment and anticipated growth potential
• Potential competition
• Feasibility and compatibility.

Current Segment Size and Growth Potential

Is the market segment currently large enough to make a profit? If the answer is “no” today, does
it have significant growth potential to make it attractive in terms of a company’s long-term
strategy?

Consider these facts about India:

• India is the world’s fastest-growing cell phone market. The industry is expanding at an
annual rate of 50 percent, with 5 to 6 million new subscribers added every month.
• By mid-2008, India had 261 million cell phone users; that number approached 900
million by the end of 2011. Even so, barriers originating in the political and regulatory
environments have shackled private-sector growth.

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 • About 1.3 million cars are sold each year in India; in absolute terms, this is a relatively
small number. However, industry observers forecast that the market will expand to 3
million cars within a decade. In 2008, India overtook China as the world’s fastest-
growing car market.
• Approximately 70 percent of India’s population is under the age of 35. The segment is
increasingly affluent and today young, brand-conscious consumers are buying $100
Tommy Hilfiger jeans and $690 Louis Vuitton handbags. Mohan Murjani owns the rights
to the Tommy Hilfiger brand in India.
As noted earlier, one of the advantages of targeting a market segment globally is that, while the
segment in a single-country might be small, even a narrow segment can be served profitably if
the segment exists in several countries. In the case of a huge country market such as India or
China, segment size and growth potential may be assessed in a different manner.

From the perspective of a consumer packaged goods company, for example, low incomes and the
absence of a distribution infrastructure offset the fact that 75 percent of India’s population lives
in rural areas. The appropriate decision may be to target urban areas only.

Thanks to a combination of favorable demographics and lifestyle-related needs, the United States
has been a very attractive market for foreign automakers.

Potential Competition

A market segment or country market characterized by strong competition may be a segment to

avoid. However, if the competition is vulnerable in terms of price or quality disadvantages, the
newcomer can make inroads.

Over the past several decades, for example, Japanese companies in a variety of industries
targeted the U.S. market despite the presence of entrenched domestic market leaders.

Honda first created the market for small-displacement dirt bikes. Canon outflanked Xerox by
offering compact desktop copiers. By contrast, there are also many examples of companies
whose efforts to develop a position in an attractive country market ended in failure.

Feasibility and Compatibility

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 limit market access. Other marketing issues may
arise such as in India, it takes 3 – 5 years to build a distribution system for many consumer
products.

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Mangers must decide who well a company’s product or business model fits the country market in
question—or as noted—if the company does not currently offer a suitable product, can it develop
one? To make this decision, marketers must consider several criteria:
• Will adaptation be required? If so, is this economically justifiable in terms of the
expected sales volume?
• 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?
• Is it advisable to source locally? In many cases, reaching global market segments
requires considerable expenditures for distribution and travel by company
personnel. Would it make sense to source products in the country for export
elsewhere in the region?

Finally, it is important to address the question of whether targeting a particular segment is

compatible with the company’s overall goals, brand image, or established sources of competitive
advantage.

A Framework for Selecting Target Markets

As one can infer from this discussion, it would be extremely useful to have formal tools or
frameworks available when assessing emerging country markets.

Table 7-6 presents a market selection framework that incorporates some of the elements just
discussed. Using China, Russia, and Mexico as potential country target markets, the table shows
the countries arranged in declining rank by market size. Initially, China seems to hold the
greatest potential, based on size. However, the competitive advantage of our hypothetical firm is
.07 in China, .10 in Russia, and .20 in Mexico. Multiplying the market size and competitive
advantage index yields a market potential of 7 in China, 5 in Russia, and 4 in Mexico.

The next stage in the analysis requires an assessment of the various market access
considerations. In Table 7-6 all these conditions or terms are reduced to an index number of
terms of access. However, the “market access considerations” are more favorable in Mexico
than in Russia. Multiplying the market potential by the terms of access index suggests that
Mexico holds greater export potential than China or Russia.

Global expert David Arnold has developed a framework that is based on a “bottom-up” analysis,
beginning at the product level.

As shown in Figure 7-1, Arnold’s framework incorporates two core concepts: marketing model
drivers and enabling conditions. 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.

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.

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The third step is to weigh the estimated costs associated with entering and serving the market.

The issue of timing is often framed in terms of the quest for first-mover advantage. The
conventional wisdom says that the first company to enter a market has the best chance of
becoming the market leader.

The first company to enter a market often makes substantial investments in marketing only to
find that a late-arriving competitor reaps some of the benefits. There is ample evidence that late
entrants into global markets can also achieve success. One way they do this is by benchmarking
established companies and then outmaneuvering them, first locally then globally.

Late mover can also succeed by developing innovative business models. One way to determine
the marketing model drivers and enabling conditions is to create a product-market profile.

The profile should address the following basic questions:

1. Who buys our product or brand?
2. Who does not buy our product or brand?
3. What need or function does our product serve? Does our product or brand address that
need?
4. Is there a market need that is not being met by current product/brand offerings?
5. What problem does our product solve?
6. What are customers currently buying to satisfy the need and/or solve the problem for
which our product is targeted?
7. What price are they paying for the product they are currently buying?
8. When is our product purchased?
9. Where is our product purchased?

PRODUCT-MARKET DECISIONS
✓ (Learning Objective #3)

The next step in assessing market segments is a company review of current and potential product
offerings in terms of their suitability for the country market or segment.

This assessment can be performed by creating a product-market grid that maps markets as
horizontal rows on a spreadsheet and products as vertical columns. Each cell represents the
possible intersection of a product and a market segment. Table 7-7 shows a product-grid for
Lexus.

TARGET MARKET STRATEGY OPTIONS

✓ (Learning Objective #4)

After evaluating the identified segments in terms of the three criteria presented, a decision is
made whether to pursue a particular opportunity.

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If the decision is made to proceed, an appropriate targeting strategy must be developed.

There are three basic categories of target marketing strategies:

1. Standardized marketing
2. Concentrated marketing
3. Differentiated marketing.

Standardized Global Marketing

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.

The appeal of standardized global marketing is clear: lower production costs; the same is true of
standardized global communications.

Concentrated Global Marketing

The second global marketing strategy, concentrated target marketing, involves devising a
marketing mix to reach a niche.

A niche is simply a single segment of the global market.

Concentrated targeting is also the strategy employed by the hidden champions of global
marketing: companies unknown to most people that have succeeded by serving a niche market
that exists in many countries. These companies define their markets narrowly and strive for
global depth rather than national breadth. For example is Germany’s Winterhalter, a hidden
champion in the dishwasher market, who focuses exclusively on dishwashers and water
conditioners for hotels and restaurants.

Differentiated Global Marketing

The third target marketing strategy, differentiated global marketing, represents a more
ambitious approach than concentrated target marketing. Also known as multisegment targeting,
this approach entails targeting two or more distinct market segments with multiple marketing
mix offerings.

This strategy allows a company to achieve wider market coverage.

POSITIONING
✓ (Learning Objective #5)

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The term positioning is attributed to marketing gurus, Al Ries and Jack Trout, who first
introduced it in 1969. Positioning refers to the act of differentiating a brand in customers’ minds
in relation to competitors in terms of attributes and benefits that the brand does and does not
offer.

Positioning is the process of developing strategies for “staking out turf” or “filling a slot” in the
mind of target customers. Positioning is frequently used in conjunction with segmentation
variables and targeting strategies.

Marketers have utilized a number of general positioning strategies. These include positioning by
attribute or benefit, quality and price, use or user, or 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.

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).

In global marketing, it may be important to communicate that a brand is imported. This approach
is known as foreign consumer culture positioning (FCCP) (e.g., Visa).

Quality and Price

This strategy runs from high fashion/quality and high price to good value (rather than “low
quality”) at a reasonable price.

Quality and price are used in conjunction with benefit/attribute positioning.

Marketers sometimes use the phrase “transformation advertising” to describe advertising that
seeks to change the experience of buying and using a product—the benefit—to justify a higher
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.”

Competition

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Implicit or explicit reference to competitors can provide the basis for an effective positioning
strategy.

Dove's "Campaign for Real Beauty" broke new ground by positioning the brand around a new
definition of beauty.

Global, Foreign, and Local Consumer Culture Positioning

Global consumer culture positioning (GCCP) is defined as a strategy that can be used to target
various segments associated with the emerging global consumer culture.

It has proven to be an effective strategy for communicating with global teens, cosmopolitan
elites, globetrotting laptop warriors who consider themselves members of a “transnational
commerce culture,” and other groups.

For example, Sony’s “My First Sony” line is positioned as the electronics brand for youngsters
around the globe with discerning parents. Heineken’s strong brand equity around the globe can
be attributed in good measure to a GCCP strategy that reinforces consumers’ cosmopolitan self-
images.

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.
Consumers may feel an emotional or spiritual connection with high-touch products, the
performance of which is evaluated in subjective, aesthetic terms rather than objective, technical
terms. Consumption of high-touch products may represent an act of personal indulgence, reflect
the user’s actual or ideal self-image, or reinforce interpersonal relationships.

A brand’s GCCP can be reinforced by the careful selection of the thematic, verbal, or visual
components that are incorporated into advertising and other communications. For marketers
seeking to establish a high-touch GCCP, leisure, romance, and materialism are three themes that
cross borders well. By contrast, professionalism and experience are advertising themes that work
well for high-tech products such as global financial services.

In some instances, products may be positioned globally in a “bipolar” fashion as both high tech
and high touch. This approach can be used when products satisfy buyer’s rational criteria while
evoking an emotional response. (Apple positions its products on the basis of both performance
and design).

To the extent that English is the primary language of international business, mass media, and the
Internet, one can make the case that English signifies modernism and a cosmopolitan outlook.
Therefore, the use of English in advertising and labeling throughout the world is another way to

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achieve GCCP. Benetton’s tag line “United Colors of Benetton” appears in English in all of the
company’s advertising.

Another way to reinforce a GCCP is to use brand symbols that cannot be interpreted as
associated with a specific country culture. Examples include the Nike swoosh, and the Mercedes-
Benz star.

A second option is foreign consumer culture positioning (FCCP) associates the brand’s users,
use occasions, or production origins with a foreign country or culture.

Foster’s Brewing Group’s U.S. advertising proudly trumpets the brand’s national origin; print
ads feature the tag line “Foster’s. Australian for beer.” The “American-ness” of Levi jeans,
Marlboro cigarettes, and Harley-Davidson motorcycles enhances their appeal to cosmopolitans
around the world and offers opportunities for FCCP.

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.

An LCCP approach can be seen in Budweiser’s U.S. advertising; ads featuring the iconic
Clydesdale horses, for example, associate the brand with small-town American culture.

CASES

CASE 7-1

Global Companies Target Low-Income Consumers

Overview: As growth in mature markets slows, executives and managers at many global
companies are realizing that the ability to serve the needs of the world’s poorest consumers will
be a critical source of competitive advantage in the decades to come. Communicating product
benefits and persuading low-income consumers to change long-entrenched behaviors by paying
for new products and integrating them into their lifestyles is not an easy task. In short, it is not
enough to simply launch a low-cost product; markets for that product must be created. The
efforts by global companies to reach low-income consumers in emerging markets highlight the
importance of skillful global market segmentation and targeting.

7-9. Why are companies such as Siemens, GE, Nestlé, and Procter & Gamble targeting the
“bottom of the pyramid”?
4 billion people (2/3's of the world's population) live on less than $2 per day, and
approximately 1.5 billion people do not have access to electricity on a 24 hour basis.
Four billion people is a huge untapped market.

7-10. Review the Chapter 4 discussion of diffusion theory. How might an understanding of the
characteristics of innovations help marketers succeed in emerging markets?

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 Understanding how a product/service diffuses through a market (innovators, early-
adopters, etc.) helps a company plan its marketing strategy to target the most
influential people / country/market and them make these products / services
available to the general public at a later date.

7-11. What types of marketing communications may be necessary to launch an innovative

product such as Procter & Gamble’s PUR in emerging markets? What changes in consumer
attitudes and behavior are required for successfully launching a product such as PUR?

Markets must be created and communicating how these products will benefit the
consumer - albeit even change entrenched customs and habits are the challenges facing
the marketer in the emerging markets as they introduce new products to the
masses.

Education is the key to the marketer's communication strategy in emerging

countries and markets - why are these new products "better" for the consumer than their
old ways. This is especially important when we talk about new medicines,
purification of water, healthier food choices, etc. for the world's population.

7-12. What key concepts discussed in Chapter 1 apply to Nestlé’s experience in Latin America?

Some 30 million Brazilians qualify as “bottom-of-the-pyramid” consumers, and an

estimated 16 million Brazilians live on less than $600 per year. In the mid-2000s,
the president of Nestlé do Brasil initiated a regionalization program. As Ivan Zurita
explains, “In this country, which we consider to be a continent, there are different brands
and different histories in each region. Anyone who tries to operate in Brazil with a single
consumer profile is not going to run into many opportunities.” For example, northeastern
Brazil is the poorest region in the country. There, Nestlé launched Leche Ideal, a
powdered milk mix enriched with vitamins and iron that is sold in 200-gram packets that
are easy to store. In the Brazilian state of Bahia, Nestlé opened a new plant in 2007 that
has the capacity to produce 50,000 tons of food products each year. Crucially, the
products can easily be adapted to local tastes, such as a smoother-tasting coffee. The
success of the regionalization program in Brazil has prompted Nestlé executives to call
for its expansion throughout the region. Notes Mr. Zurita, “I have worked practically
everywhere in Latin America and there is not one place where we can’t apply what we
have done here in Brazil.

In Chapter 1 we learned that global marketing requires marketers to think and act in a
way that is both global and local by responding to similarities and differences in world
markets. But it is important to bear in mind that “global localization” is a two-way street,
and that there is more to the story than “think globally, act locally.” Many companies are
learning that it is equally important to think locally and act globally. In practice, this
means that companies are discovering the value of leveraging innovations that occur far
from headquarters and transporting them back home.

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Case 7-2: Cosmetics Giants Segment the Global Cosmetics Market: The Assignment

Overview: The world’s best-known cosmetics companies are setting their sights on a lucrative
new market segment: the emerging middle classes in countries such as Brazil, Russia, India, and
China. Market research is critical to understanding women’s preferences in different parts of the
world. In China, for example, L’Oreal and its competitors have an opportunity to educate
women about cosmetics, which were banned prior to 1982.

7-13. How do women’s preferences for cosmetics and beauty care vary from country to country?

In China for example, Chinese women apply products in the morning and the
evening and Chinese consumers are price sensitive. In India, millions must live on $ 2
per day; but working women are increasing dramatically and millions of women in
their 20s concerned about gray hair were not satisfied with existing do- it-yourself hair
color. And in Japan, women prefer to use a compact foundation rather than a liquid.

7-14. Assess Estee Lauder’s strategy for China. Does it make sense to focus on premium brands,
or should the company launch a mass-market brand?

Estee Lauder’s strategy is that their products are aspirational. Based on their market
research and psychological research, they feel that Chinese consumers would be willing
to invest in products that are relatively expensive versus their income because they
are confident about the future.

7-15. What is the best positioning strategy for Shiseido as the company expands in Asia? High
touch? High tech? Both?

Shiseido has a corporate advantage because they understand the needs and
requirements of the Asian skin – their positioning strategy is or should be one of
“attribute or benefit” – they like when they see their customers happy! They should
employ a “high touch” product and utilize a global consumer culture positioning.

7-16. Do you think L’Oréal will succeed in changing the buying habits of Brazilian women?

Traditionally, Brazilians have bought their cosmetics from sales representatives who go
door-to-door. By forcing them to go to a department store, albeit for personalized
service, may not be logistically feasible. By utilizing their success of going door-to-door
in India to spread product awareness might be a good first step however.

TEACHING TOOLS AND EXERCISES

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Additional Cases:

“Managing Co-Branding Strategies: Global Brands into Local Markets”. Russell Abratt;
Patience Motlana. HBS BH080.

“How to Market to Generation M(obile).” Fareena Sultan; Andrew Rohm. HBS SMR285.

Activity: Students should be preparing or presenting their Cultural-Economic Analysis and

Marketing Plan for their country and product as outlined in Chapter 1.

Out-of-class Reading: Assign the seminal work on positioning: Al Ries and Jack Trout,
Positioning: The Battle For Your Mind (New York: Warner Books, 1982).

The authors argue that differentiation is largely a creative exercise. According to Ries and Trout,
“Positioning is what you do to the mind of the prospect.” The authors are interested in the
psychological positioning or repositioning of existing products and that in an “over
communicated society,” the marketer’s task is to create product distinctiveness. Students can
apply these ideas to global organizations and give specific examples. They could select
companies already discussed such as McDonald’s and Disney.

Positioning: Students will find advertisements that show different positioning strategies.
Compare and contrast these ads.

Internet Exercise: Recently, Germany’s Volkswagen and Japan’s Suzuki announced a joint
venture in China. Research the Internet and find out what both sides appear to be gaining by this
joint venture and the role(s) that targeting played in their decision.

SUGGESTED READING

Books

Churchill, Gilbert A., Jr. Marketing Research: Methodological Foundations, 7th ed. Chicago:
Dryden, 1999.

Piirto, Rebecca. Beyond Mind Games: The Marketing Power of Psychographics. Ithaca, New
York, American Demographics Books, 1991.
Ries, Al and Jack Trout. Positioning: The Battle for Your Mind. New York: Warner Books,
1982.

Articles

Kao, John. “Tapping the World’s Innovation Hot Spots”. HBS article RO903J.

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Solution Manual for Global Marketing Plus 2014 MyMarketingLab with Pearson eText — Pac

Agarwal, Manoj K. “Developing Global Segments and Forecasting Market Shares: A

Simultaneous Approach Using Survey Data.” Journal of International Business 11, no. 4
(2003), 56-80.

Dubow, Joel S. “Occasion-Based vs. User-Based Benefit Segmentation: A Case Study.” Journal
of Advertising Research 32, no. 2 (March/April 1992), pp. 11-18.

Garland, Barbara C., and Marti J. Rhea. “American Consumers: Profile of an Import Preference
Segment.” Akron Business and Economic Review19, no. 2 (1988), pp. 20-29.

Green, Paul E. and Abba M. Krrieger. “Segmenting Markets with Conjoint Analysis.” Journal of
Marketing 55, no. 4 (October 1991), pp. 20-31.

Hassan, Salah S., and Lea Prevel Katsanis. “Identification of Global Consumer Segments: A
Behavioral Framework.” Journal of International Consumer Marketing 3, no. 2 (1991),
pp. 11-28.

Laroche, M. "Recent advances in globalization, culture and marketing strategy: Introduction to

the special issue" Journal of Business Research, 2012

This is a collection of several articles on a variety of marketing topics, but the majority relates to
segmentation

Link: http://www.sciencedirect.com/science/article/pii/S0148296311004243

Kumar, V. and Anish Pagpal. “Segmenting Global Markets: Look Before You Leap.” Marketing
Research 13, no. 1 (Spring 2001) pp. 8-13.

Pawle, John. “Mining the International Consumer.” Journal of the Market Research Society 41,
no. 1 (1999), pp. 19-32.
Lee, Keong Bong, Wong, Veronica. “New Product Development Proficiency and Multi-Country
Product Rollout Timeliness”. International Marketing Review. no. 27 (2010) .

Steenkamp, Jan-Benedict E.M. and Frankel Ter Hofstede. “International Market Segmentation:
Issues and Perspectives.” International Journal of Research in Marketing 19 (September
2002), pp. 185-213.

Ter Hofstede, Frankel, Jan-Benedict E. M. Steenkamp, and Michel Wedel. “International Market
Segmentation Based on Consumer-Product Relations.” Journal of Marketing Research
36, no. 1 (1999), pp. 1-17.

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