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I’m just about over it but it still ain’t over. Yet another revision essay…
Topic: Discuss the major reasons why international marketers implement international market segmentation. List and discuss the properties that these segments should ideally possess. Comment on when marketers should pursue univeral/global segments, regional segments, and unique/diverse segments.
Like domestic marketers, international marketers conduct segmentation in order to decide on their positioning strategy. However, the benefits and process for international segmentation are significantly different to domestic positioning. There are also several different methods of segmenting the global market, depending on demand patterns and consumer behaviour related to the company’s product.
Segmentation of the international market derives several main benefits: allowing the company to generalise their marketing research conclusions, entry strategy and marketing mix across a few segments instead of every market, helping to allocate scarce resources and determining the company’s positioning strategy. This is in contrast to domestic segmentation, which also determines positioning and allows the company to address the market in sections, but is more specific as it groups together people with similar behaviours instead of countries.
In order to gain the benefits listed above, segments need to be as homogenous as possible internally but discrete from each other. Segmentation will usually occur according to behaviour in relation to the marketing mix and the market conditions. There are six key requirements for segments. They must be:
- identifiable – they can be defined and measured
- sizeable – large enough to be worth targeting
- accessible – can be separated from other groups
- responsive – will respond differently to different marketing mixes
- stable – will not change membership
- actionable – divided according to company values
International marketing research is a costly exercise, and companies with a global presence find it difficult and expensive to conduct proper research in every market. Hence if they can identify several markets which will have behaviour which is substantially similar enough to form a segment, they may be able to apply marketing research findings from one market to the rest of the segment.
Segments also group together countries with market conditions which are materially the same in relation to the company’s product. This means that an entry strategy that works well in one market may be successful for other markets in the same segment. Marketing mix, as a key factor in determining segments, is usually standardised across segments also.
However, marketers must also be mindful that while segments allow them to standardise, there may be instances where they need to localise within a segment. Entry strategies such as exporting may be affected by political, legal and economic factors peculiar to a specific market. Some countries place a higher tariff on goods sold by foreign companies, which may make the market more conducive to a strategic alliance with a local company. Some aspects of the marketing mix can also fluctuate between markets in a segment. For example, advertising regulations and preferences are vastly different across Asia. Government censors often restrict different types of behaviour according to the different cultural taboos. There are also different preferences in depiction of race: Malaysian law requires Malaysian ads to feature mostly Malays, whereas Koreans prefer Korean faces and the Japanese usually have Caucasian faces in their ads.
There are three general types of international segmentation: global, regional and unique. Global segmentation is used when there is a group of consumers with common needs that crosses national borders. This kind of segment is usually the youth segment, the affluent segment or related to internet services. Regional segmentation may be used when the similarity in needs/preferences only extends across the region or several countries. Firms will often use this when they want to capitalise on the financial savings of global segmentation but would like to localise more. But if they want or need to completely localise they may choose unique segments, which take the preferences of a segment within one country. This is usually necessary for products such as news services or speciality foods. However, most marketing plans will involve all three types of segments according to the responses to the marketing mix.
By dividing the global market into segments according to behaviour, firms can save costs in both forming and implementing their marketing strategies. The spread of these segments will depend largely on the nature of the consumer needs they are trying to fulfil and whether they would like to standardise globally for cost reduction or adapt locally to better appeal to the consumer. Ultimately, as long as their segmentation is consistent with the six key factors outlined, the firm will have a solid base to position themselves in the global market.
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