SEGMENTATION, TARGETING, AND POSITIONING

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Global Marketing

Chapter 7

MARKET SEGMENTATION

Represents an effort to identify and categorize groups of customers and countries according to common characteristics

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TARGETING

The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond

Focus on the segments that can be reached most effectively, efficiently, and profitably 7-

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POSITIONINGPositioning is required to differentiate the product or brand in the minds of the target market.

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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.

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CONTRASTING VIEWS OF GLOBAL SEGMENTATION

Conventional Wisdom

• Assumes heterogeneity between countries

• Assumes homogeneity within a country

• Focuses on macro level of cultural differences

• Relies on clustering of national markets

• Less emphasis on within-country segments

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 7-

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GLOBAL MARKET SEGMENTATION

Demographics

Psychographics

Behavioral characteristics

Benefits sought

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DEMOGRAPHIC SEGMENTATION

Income

Population

Age distribution

Gender

Education

OccupationWhat are the

trends?

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AGE SEGMENTATIONGlobal Teens–young people between the ages of 12 and 19

• A group of teenagers randomly chosen from different parts of the world will share many of the same tastes

Global Elite–affluent consumers who are well traveled and have the money to spend on prestigious products with an image of exclusivity

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GENDER SEGMENTATIONIn focusing on the needs and wants of one gender, do not miss opportunities to serve the other

Companies may offer product lines for both genders

• Nike, Levi Strauss

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PSYCHOGRAPHIC SEGMENTATION

Grouping people according to attitudes, values, and lifestyles Porsche example from SRI International

• 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

Focus on whether people purchase a product or not, how much, and 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

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BENEFIT SEGMENTATION

Benefit segmentation focuses on the value equation

• Value=Benefits/PriceBased on understanding the problem a product solves, the benefit it offers, or the issue it addresses

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ETHNIC SEGMENTATION

The population of many

countries includes ethnic

groups of significant size

Hispanic Americans

• 40+ million Hispanic Americans

(14% of total pop.) with $560 billion

annual buying power

• CA Mexicans have after-tax income

of $100 billion

• The number of Hispanic teens will

rise from 12 percent of the U.S. teen

population to 18 percent in the next

decade

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TARGET MARKETING STRATEGIES

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CONCENTRATED MARKETINGThe focus is acquiring a large share of one or a few segments of niches.

Generally, there are fewer competitors.

The Internet is ideal for targeting small niche markets.

There is some risk in focusing on only one market.

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TARGET MARKET STRATEGY OPTIONS

Concentrated global marketing

• Niche marketing• Single segment of global market

• Look for global depth rather than national breadth

• Ex.: Chanel, Body Shop

Differentiated global marketing

• Multi-segment targeting

• Two or more distinct markets

• Wider market coverage

• Ex.: P&G markets Old Spice and Hugo Boss for Men

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DIFFERENTIATED/ MULTI SEGMENT MARKETING

Firm targets several market segments and designs separate offers for each.

The goal is to have higher sales and a stronger position with each market segment.

This approach increases the costs of doing business.

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POSITIONINGLocating a brand in consumers’ minds over and against competitors in terms of attributes and benefits that the brand does and does not offer

• Attribute or Benefit• Quality and Price• Use or User• Competition

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POSITIONING MAP

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POSITIONING STRATEGIES

Global consumer culture positioning

• Identifies the brand as a symbol of a particular global culture or segment

• High-touch and high-tech products

Foreign consumer culture positioning

• Associates the brand’s users, use occasions, or product origins with a foreign country or culture

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Beer is associated with this German’s culture; the symbol on his shirt is not German!

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POSITIONING STRATEGIES

Local consumer culture positioning

• Identifies with local cultural meanings

• Consumed by local people

• Locally produced for local people

• Used frequently for food, personal, and household nondurables

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IMPORTING, EXPORTING, AND SOURCING

Global Marketing

Chapter 8

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INTRODUCTION

This chapter looks at:

• Export selling and export marketing

• Organizational export activities

• National policies on imports and exports

• Tariff systems• Key export participants

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Export selling involves selling the same product, at the same price, with the same promotional tools in a different place

Export marketing tailors the marketing mix to international customers

Export Selling vs. Export Marketing

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REQUIREMENTS FOR EXPORT MARKETING

An understanding of the target market environment

The use of market research and identification of market potential

Decisions concerning product design, pricing, distribution and channels, advertising, and communications

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NATIONAL POLICIES GOVERNING EXPORTS AND IMPORTS

Most nations encourage exports and restrict imports

Goods and services imported into the U.S. almost doubled in seven years

In 2008, the total was $2.5 trillion

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GOVERNMENT PROGRAMS THAT SUPPORT EXPORTS

Tax incentives

Subsidies

Governmental assistance

Free trade zones

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GOVERNMENTAL ACTIONS TO DISCOURAGE IMPORTS AND BLOCK MARKET ACCESS

Tariffs ( “Three R’s”)

Nontariff barriers• Quotas• Discriminatory procurement policies

• Restrictive customs procedures

• Arbitrary monetary policies

• Restrictive regulations

Port Authority of Thailand: Laem Chabang

EXAMPLES OF TRADE BARRIERS

Table 8.3 p. 277EU- 16.5% antidumping tariffs on Shoes from China

10% on shoes from Vietnam

China- 28% on foreign made auto parts

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GOVERNMENTAL ACTIONS TO DISCOURAGE IMPORTS

A nontariff trade barrier (NTB) is any measure other than a tariff that is an obstacle to the sale of products in a foreign market. NTBs are also known as hidden trade barriers.

A quota is a government-imposed limit or restriction on the number of units or the total value of a particular product or product category that can be imported.

• In 2005, for example, textile producers in Italy and other European countries were granted quotas on 10 categories of textile imports from China.

Discriminatory procurement policies can take the form of government rules and administrative regulations that give local vendors priority.

• The Buy American Act of 1993

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TARIFF SYSTEMS

Single-column tariff

• Simplest type of tariff• Schedule of duties in which rate applies to imports from all countries on the same basis

Two-column tariff

• General duties plus special duties apply

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TARIFF SYSTEMS

Sample Rates of Duty for U.S. Imports

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PREFERENTIAL TARIFF

Reduced tariff rate applied to imports from certain countries

GATT prohibits the use, with three exceptions:

• Historical preference arrangements already existed

• Preference is part of formal economic integration treaty

• Industrial countries are permitted to grant preferential market access to LDCs

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CUSTOMS DUTIES

Ad valorem duty• Expressed as percentage of value of goods

Specific duty• Expressed as specific amount of currency per unit of weight,

volume, length, or other unit of measurement• $1 per pair of Shoes• 1000 Baht per ton of the goods imported

Compound or mixed duties• Apply both ad valorem and specific on the same

items

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OTHER DUTIES AND IMPORT CHARGES

Anti-dumping Duties

• Dumping is the sale of merchandise in export markets at unfair prices

• Special import charges equal to the dumping margin• 48.5% added to tax against Chinese imports of bicycles

in EUCountervailing Duties

• Added duties to offset the subsidies granted in the export countries

Temporary Surcharges

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Key Export Participants (Self Study)

Foreign purchasing agents

Export brokers Export merchants Export management

companies

Export distributor Export commission

representative Cooperative

exporter Freight forwarders Manufacturer’s

export representatives

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ORGANIZING FOR EXPORTING IN THE MARKET COUNTRY

Direct market representation

• Advantages: control and communications

Representation by independent intermediaries

• Advantages: best for situations with small sales volume

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EXPORT FINANCING AND METHODS OF PAYMENT

Documentary credits (Letter of Credit)

Documentary collections (Bill of Exchange)

Cash in advance

Sales on open account

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FLOW CHART OF DOCUMENTARY CREDIT

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SOURCING

Must emphasize benefits of sourcing from country other than home country

Must assess vision and values of company leadership

Advantage can be gained by • Concentrating some of the marketing activities in a

single location• Leveraging company’s know-how• Tapping opportunities for product development and

R&D

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FACTORS THAT AFFECT SOURCING

Management vision

Factor costs and conditions

Customer needs

Logistics

Country infrastructure

Political risk

Exchange rate, availability, and convertibility of local money

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DUTY DRAWBACK

Refunds of duties paid on imports that are processed or incorporated into other goods AND re-exported

Reduce the price of imported production inputs

Used in the U.S. to encourage exports

After NAFTA, U.S. reduced drawbacks on exports to Canada and Mexico

China had to reduce drawbacks in order to join the WTO

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LOOKING AHEAD TO CHAPTER 9

Global Market Entry Strategies: Licensing, Investment, and Strategic Alliances