Market Segmentation and Product Development

1
Market Segmentation and Product Development
2
Market Segmentation

• Cant be all things to all people
• Most successful companies identify and target the
  most attractive market segment they can serve
  effectively
• Consumer heterogeneity (differences in needs and
  preferences) is the motivation for market
  segmentation

3
Market Segmentation

• The goal of market segmentation is to break down
  the market for a product into groups of consumers
  who differ in their response to the product such
  that consumer needs can be served more precisely

4
Market Segmentation

• Marketing segments should possess the following
  set of properties
• Identifiable easy to define and measure
• Sizable large enough to warrant interest
• Accessible easily reached
• Stable composition and behavior is stable
• Responsive acts differently than other segments
• Actionable are segments preferences consistent
  with the goals and core competencies of the
  company?

5
International Market Segmentation

• Why are international marketers interested in
  market segmentation?
• Country screening
• Global market research
• Entry decisions
• Positioning strategy
• Resource allocation

6
International Market Segmentation

• Approaches to international market segmentation
• country-as-a-segment or aggregate segmentation
  approach classifies prospective countries
  geographically on particular dimensions
• Disaggregate international consumer segmentation
  focus is on individual consumer regardless of
  country
• Two-stage approach first group countries based
  on general segmentation bases then use
  individual-level data to identify cross-national
  consumer segments within each geographic segment

7
Segmentation Scenarios

• Universal or global segments segments than
  transcend national boundaries
• Regional segments similarity in consumer needs
  and preferences exist at the regional level
• Unique (diverse) segments no overlap in segment
  across region or country marketing programs
  must be localized to be effective

8
Bases for Country Segmentation

• Demographics (e.g., per capita income) and
  socioeconomic variables
• Identifiable but may not be predictive
• Behavior-based segmentation
• Predictive but may not be identifiable
• Lifestyle (attitudes, opinions, and core values)
• Not necessarily predictive or identifiable, but
  commonly used in advertising research

9
International Positioning

• Once market has been segmented and target market
  is chosen, must determine how to position the
  product
• Positioning refers the way the consumer thinks
  about the product relative to competitive
  products
• Uniform versus localized positioning

10
International Positioning
11
International Positioning

• Global consumer culture positioning
• strategy attempts to project brand as symbol of
  global consumer culture reinforces consumers
  feeling of being part of global segment
• Local consumer culture positioning
• brand portrayed as intrinsic part of local
  culture
• Foreign consumer culture positioning
• Strategy to build brand mystique around a
  specific foreign culture with positive
  connotations for the product

12
Product Development for Foreign Markets

• Strategies to penetrate foreign markets
• Extend adapt same product or communication
  policy used in home market
• Adaptation adapt strategy from home to needs
  and wants of foreign consumers
• Invention products designed from scratch for
  global marketplace

13
Product Development for Foreign Markets
Source Keegan, JM 33(1969)
14
Product Development for Foreign Markets

• Strategy 1 One product, One Message, Worldwide
• If product fills same need in all markets under
  identical conditions - market a standardized
  product using uniform communication in all
  countries

15
Product Development for Foreign Markets

• Strategy 2 Product Extension/ Communication
  Adaptation
• If a product fills a different need, but in the
  same conditions then extend the product, but
  adapt the communication strategy
• Ex in US bicycles are for recreation, but in
  Asia they are for transportation can sell the
  same bicycle, but need to change communications
• Ex U.S. farm machinery in LDCs

16
Product Development for Foreign Markets

• Strategy 3 Product Adaptation/ Communication
  Extension
• If a product fills the same need, but conditions
  are different, then adapt the product, but extend
  the communication strategy
• Ex consumers use detergent for same reasons in
  US and Europe, but water conditions require
  different formulations
• Ex agricultural chemicals

17
Product Development for Foreign Markets

• Strategy 4 Dual Adaptation
• If a product used to fill different needs in
  different conditions, then adapt both the product
  and communication strategy
• Ex some consumers wear cloths for status
  others for protection in hot and cold conditions

18
Product Development for Foreign Markets

• Strategy 5 Invention
• Might invent product if consumers cannot afford
  existing products (or invent backwards)
• Invent products with global marketing as the goal
  invent products that will appeal to broad
  consumer needs

19
Product Development for Foreign Markets

• Standardization vs. Customization
• Modular approach develop a range of product
  parts that can be assembled into numerous product
  configurations worldwide
• Core-Product approach stars with design of a
  mostly uniform product (platform) where
  attachments are added to core to meet local needs
• Balance costs w/ meeting consumer need

20
Product Adoption

• How quickly is a new product adopted? What
  influences market penetration?
• Adoption of new products is driven by three
  factors
• Differences in individuals
• Early adopters vs. late adopters
• Personal influences
• Product characteristics

21
Product Adoption

• Effect of product characteristics on adoption
• Relative advantage perceived value relative to
  existing alternatives
• Compatibility is the product consistent with
  existing values and attitudes are there
  switching costs?
• Complexity is the product easy to understand
  and use?
• Triability are prospects able to try out the
  product on a limited basis?
• Observablity how easy is it for potential
  adopters to observe the results or benefits of
  the innovation?

22
Product Adoption

• Country characteristics related to product
  penetration patterns
• Adoption rates higher in countries with more
  homogeneous population
• Adoption rates higher in lag countries, where
  the product is introduced after appearing in
  lead countries
• women in labor force is positively related to
  higher adoption rates
• Hofstedes dimensions

23
Product Adoption
Source Lynn and Gelb, IMR (1996)
24
Product Adoption
Source Lynn and Gelb, IMR (1996)