Chapter

11
Global Segmentation and
Positioning

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved

 Outline
The Managerial Context
Micro-Segmentation
Macro-segmentation
Targeting Segments
Global Product Positioning
Global S-T-P Strategies
Takeaways.
 The Global Marketer’s Mindset

The typical context for globalized marketing is not the

usual “close to customer” mindset.

Rather, the point is usually to coordinate marketing

activities across a wide variety of markets where the
firm does business.

A top-down approach easily leads to insensitivity

towards local customers and local requirements, and
conflicts with local subsidiaries.
he Global Marketer: Customer-oriented

1. Selling orientation – sell what we make, the

product line is given.
2. Standardization of products as much as
possible.
3. Coordination via new reporting lines to
make sure everyone is on board.
4. Centralization of the marketing effort to
make sure all speak the same language.
 The Global Marketer’s Mindset
Because of the natural inclination to ignore local
variations in customer preferences and local
requirements, global marketing can easily lead to mis-
positioned products and inappropriate promotional
appeals.
It can also, of course, lead to local resistance and
animosity, not good considering anti-globalization and
anti-Americanism sentiments.
The key is to strike the optimal balance between local
adaptation and global efficiency.
 Segmentation-Targeting-
Positioning
The typical way of approaching global marketing
strategy is similar to the so-called S-T-P framework:
1. Segmentation – the splitting up of the total market
into segments of more homogeneous subgroups.
2. Targeting – the selection of which one(s) of these
subgroups the company should market its product to.
3. Positioning – exactly how the company should present
the product to the target market(s) so its perception is
most advantageous relative to competition.
 Two-Stage Global Segmentation
It is common to distinguish two stages of global segmentation
1. Macro-segmentation – the division of a number of countries into
subgroups of more similar clusters
2. Micro-segmentation – the identification of local segments which
are similar across the countries in a cluster.

The micro-segmentation techniques used in domestic markets are

also useful in global segmentation.
 Micro-Segmentation
TYPICAL SEGMENTATION CRITERIA

• Economic- the most basic local segmentation criterion is still

economic development
• Demographic - the age and family structure in different countries
play an important role in determining global segments
• Culture - people care about their identify even though a lot has
been said in the media about the emergence of global segments of
people
• Benefits - the most clear cut segmentation criteria focus on the
benefits sought
• Lifestyle – consumers start developing their own lifestyle with
buying behavior involving more than simple necessities
 Micro-Segmentation
WHICH CRITERIA SHOULD YOU USE TO SPLIT UP THE MARKET?

Useful segmentation criteria must accomplish three

goals:
1. Should show us what influences the segment’s
buying behavior, both consumption level and choice
between competing brands
2. Should be reflected in published data so that the size
of the segment can be calculated
3. Should help identify the media through which
marketers can communicate with the segment
 Micro-Segmentation

WHEN DO YOU HAVE A GOOD SEGMENTATION SCHEME?

Useful market segments possess these characteristics:

• IDENTIFIABLE – what distinguishes them?

• MEASURABLE – how many belong to each segment?
• REACHABLE – how to distribute to, communicate to,
each segment?
• ABLE TO BUY – can they afford it?
• WILLING TO BUY – do they want it?
 Macro-Segmentation
MACROSEGMENTATION – clustering of countries on the basis of
common characteristics deemed to be important for marketing
purposes, e.g. data on:

• Population size •Level of development

• Population character • Rate of growth in GNP
• Disposable income levels • Infrastructure
• Educational background • Political affiliation
• Primary languages
Typical Macro-Segmentation Criteria
Factor Name and number Selected descriptors
number of descriptors

I. Aggregate economic, of Gross national product, radios in use,

level of development (47) passenger kilometers flown.
II. Population size (31) Total midyear population
III. Personal economic, or Income per capita, newsprint consumption
standard of living (32) per capita, birth rate (negatively related)
IV. Canada —conditions on which Newsprint production, visitor arrivals in
Canada ranks highest (12) the U.S. geographic area
V. Linguistic affinity (10) Adults who read English or speak it
VI. YC—Code for private Brand and industry sales of a consumer
descriptors (11) product, number of Roman Catholics
VII. International participation (22) Membership in international organizations ,
foreign tourist arrivals, airfare to Tokyo
VIII. Trade capacity (12) Exports, number of Protestants
IX. Climate or price stability (10) Sunny days per year, temperature
of key city, price index (negative)
X. Mortality (5) Infant death rate, number o f Moslems
 Macro-Segmentation on Standard of
Living and Religion
0
• SWE
.9 • DEN
NOR •
.8 FIN• • UKI
• • AUS
,7 NEZ
• SWI
Factor III .6 •
NET
•
.5 SOT •
Standard of • ISR
GER • AUT
Living .4
• JAP PUE • • • BEL
.3 FRA • CHI
• MAC • VEN
.2 • SPA
.1 TUR PHI • • BRA
• • IND ITA• • PER
0 • • • •
• THI MEX COL
Protestant PAK ARG
-.1

Catholic -.2 -.1 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1.0

Factor VI Religion
Macro-Segmentation on “Think” and
“Feel” Dimensions
Macro-Segmentation Based on Lifestyle

6 PAN-EUROPEAN LIFESTYLE SEGMENTS

TRADITIONALIST 18%
HOMEBODY 14%
RATIONALIST 23%
PLEASURIST 17%
STRIVER 15%
TRENDSETTER 13%

Relative size of segments in percent, of the

European Market, as developed by the RISC
research agency
 Targeting Segments
The choice of which countries and which segment(s) to
target involves an analysis of projected profitability over
the planning horizon.
The basic computation involves forecasting sales in a
segment and the market share that the firm can expect to
achieve. These techniques were covered in the
forecasting chapter (no.4).
Predicting competitive reactions is also necessary,
especially if the target segment is likely to be brand loyal.
The choice of target countries should also consider the
tradeoff between focus and diversification.
 Targeting Segments

Diversification versus Focus Strategy

Diversification Strategy
In developing a global strategy, some companies make a
conscious effort to be a player in different countries and
different market segments. Difficulties in one market segment
or country can be offset by gains elsewhere.
Focus Strategy
Markets and segments can be given more attention and
markets positions fortified. This is particularly advantageous
when the country or segment competitive rivalry is intense (see
hyper-competition in chapter 2, for example).
Diversification vs Focus

Factors Diversity if: Focus if:

Growth rate Low High

Demand stability Low High
Competitive lag Short Long
Spillover High Low
Need to adapt product Low High
Need to adapt promo Low High
Marginal sales Diminishing Increasing
Need for control Low High
Entry barriers Low High
 Global Product Positioning

Product Positioning involves using the marketing mix

(the 4Ps) to present the product to the selected target
market(s) so that it is perceived in the most favorable
way relative to preferences and competition.
To identify the optimal position, global marketing draws
on the same techniques as domestic marketers in
mapping out a visual representation of how the
customers view the competing brands on the market.
This visual mapping is usually called “perceptual space”
or, more commonly, the “product space.”
 U.S. Product Space of Autos 1968
SPORTY

Ford Mustang Jaguar Sedan

AMC Javelin Ideal point for subject I

Plymouth Mercury
Barracuda Cougar
Ford Thunderbird V8
LUXURIOUS
Chevrolet Lincoln
Corvair Continental
Ideal point for subject J Chrysler
Imperial

Ford Falcon Buick Le Sabre

 Global Product Positioning

Four sets of data to construct the product space

Salient Attributes - data on what attributes a customer looks for in a

product

Evoked Set - identifying what brands are considered by the buyer

Attribute Ratings - how the individual rates the brands in the evoked
set on salient attributes

Preferences - how the brands rank in terms of overall preferences

 Product Space with Segment Sizes
Has a touch of class. Distinguished looking

Lincoln
Porsche
Conservative Cadillac 4 5 Sporty
looking BMW
looking
Chrysler .
Mercedes 2
Buick Pontiac
Oldsmobil
e
Chevrole
t Datsun
Appeals to Ford
1
older people Toyota Fun to
Dodge 3 drive.

Plymouth VW

Very practical. Gives good gas mileage.

 Global Product Positioning

THERE ARE THREE DIFFERENT EFFECTS ON BUYERS WHEN A

GLOBALLY STANDARDIZED PRODUCT OR BRAND IS
INTRODUCED ON A LOCAL MARKET:
 1. THE NEW BRAND SIMPLY TARGETS ONE UNTAPPED
SEGMENT.
 2. THE PRODUCT SPACE IS ALTERED, BY ADDING
DIMENSIONS OR EXTENDING ENDPOINTS.
 3. BUYER PREFERENCES ARE CHANGED.

IN PRACTICE, ALL THREE PROCESSES ARE OFTEN AT WORK

SIMULTANEOUSLY.
 Global Product Positioning

 IT IS RARE THAT CUSTOMERS’ PERCEPTIONS REMAIN

UNCHANGED WHEN A GLOBALLY STANDARDIZED PRODUCT
ENTERS THE MARKET.
 EXTENDED PRODUCT SPACE THIS OCCURSWHEN
GLOBALLY STANDARDIZED PRODUCTS OFFER MORE OF
THE SALIENT FEATURES DESIRED. THE NEW FEATURES
TEND TO ENLARGE THE SPACE WHICH DEFINE THE
PRODUCT. (EX: MORE MEMORY IN PCs)
 ADDED DIMENSIONS THIS OCCURS WHEN THE
GLOBALLY STANDARDIZED PRODUCT OFFERS IMPORTANT
NEW FEATURES (EX: CAMERA ON A CELL-PHONE)
Honda Accord Extends the Product
Space
ECONOMY Overall Rating
Honda
Accord

BMW 320i

VW Rabbit Toyota
Datsun Mazda Audi 4000
200SX Celica
PERFORMANCE

Chrysler K-
car

Chevrolet
Citation Ford
Mustang
 Global Product Positioning

 WHEN PRODUCTS ARE STANDARDIZED AND NOT ADAPTED

TO THE PARTICULAR MARKET, THEY ARE OFTEN
“MISPOSITIONED” (NOT HITTING THE TARGET BULLSEYE).

 THERE ARE THREE REASONS WHY CONSUMERS MIGHT

STILL BUY MISPOSITIONED PRODUCTS:
 BRAND IMAGE
 COUNTRY OF ORIGIN
 LOWER PRICE
 Brand Image

 MISPOSITIONED PRODUCTS CAN BE ATTRACTIVE TO

POTENTIAL CUSTOMERS BECAUSE OF BRAND IMAGE AND
STATUS. GLOBAL BRANDS OFTEN DO BETTER THAN LOCAL
BRANDS THAT MAY BE BETTER SUITED TO CUSTOMER
NEEDS FOR THAT AND OTHER REASONS:
 CONSPICUOUS CONSUMPTION --LET EVERYONE SEE
WHAT YOU BUY AND HOW MUCH YOU BUY.
 LOWER PERCEIVED RISK AND COGNITIVE DISSONANCE
-- WHEN GIVING A GIFT, FOR EXAMPLE
 Country-of-Origin

 WHERE A PRODUCT OR BRAND COMES FROM OFTEN

COUNTS A GREAT DEAL WITH CONSUMERS.
 COUNTRY-OF-ORIGIN EFFECT DEALS WITH QUALITY
PERCEPTIONS OF PRODUCTS. THIS EFFECT DIFFERS BY
PRODUCT CATEGORY. ALSO, THE QUALITY LEVEL AT
WHICH A COUNTRY PRODUCES IS FACTORED IN.
 COUNTRY-OF-ORIGIN BIAS CUSTOMERS TEND TO
OVERSTATE THE POSITIVE AND NEGATIVES OF PRODUCT
ATTRIBUTES AND THIS CAN CAUSE A BIAS TOWARDS
PRODUCTS FROM A GIVEN COUNTRY.
 Lower Price

THROUGH A REDUCED PRICE, A CUSTOMER IS OFTEN

INDUCED TO BUY A MISPOSITIONED BRAND BECAUSE
THEY FEEL THAT THEY AR GETTING A “GOOD DEAL.”

HOWEVER, THIS CAN BACKFIRE ON THE MARKETER,

SINCE THE PRICE PAID GRADUALLY LOSES
SALIENCE, WHILE THE LESS DESIRABLE BRAND
STAYS AS A REMINDER.
 Global S-T-P Strategies
Market Segmentation Cases
Similar Segment
The target segment is the same across countries
 Different Segment
The target segment differs across countries
Product Positioning Dimensions
Similar Positioning
Indicates a positioning which is the same across countries
Different Positioning
Indicates that the positioning theme is adapted across
countries.
 Global S-T-P Strategies
Local Micro-Segment

Similar Different

IKEA
Nike
Similar
Mobile phones

Positioning

Volvo Levi’s
Different
Pampers Honda Prelude
 Takeaway

Because global marketing involves coordination of marketing

across countries, the mindset of the global marketer is
different from that of the typical domestic marketer.

It is not as customer oriented in any one local market..

It is important to strike the right balance between a global and

local orientation.
 Takeaway

The typical approach to global segmentation occurs in

two stages:
Macro-segmentation of countries in a first stage,
followed by
micro-segmentation where target segments in the chosen
countries are identified.
 Takeaway

Statistically based clustering techniques can be used

with trade regions to group the countries into macro-
segments of markets with similar economic & cultural
characteristics.
 Takeaway

Successful local positioning of a product or brand requires an

in-depth analysis of how the local market might react to the
entry of a foreign or global brand.
 Takeaway

Even if the target segments are the same across countries,

positioning may differ. And even where the positioning is the
same across countries, the segments might differ.

The reasons involve differing environmental conditions

surrounding product usage and different competitive
situations.