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The Life Cycle Segmentation Marketing Essay

Info: 5442 words (22 pages) Essay
Published: 1st Jan 2015 in Marketing

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Geographic Segmentation: Refers as it sounds to segmenting the market according the region of a country or the world, market size, market density, or climate. Nokia for example. Has targeted rural India for years by manufacturing rugged, yet sleek, cell phones ad sending army of customer service vans all over the countryside to demonstrate the company’s commitment to helping customers. This way, Nokia holds 60% of Indian’s handset market [1] .

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Demographic Segmentation: Some common bases of demographic segmentation are age, gender, income, ethnic background, and family life cycle. The first one, of course refer to different groups including, new-born, infants, young children, teens, adults, and seniors. All of them can have a lot of potential, for example, through allowances, earnings and gifts, children account for and influence a great deal of consumption although they do not have specifically a wage.

Gender Segmentation, in the US, women make over 70% of purchases of consumer goods each year, this information is gold for marketers in these industries, it allows them to know how to approach in the communication strategy.

Income segmentation is a popular demographic variable for segmenting markets since it can determine the consumer’s buying power. It doesn’t really mean that the low segments which enter into the category ” poor” are not targeted by any brand. There are many study cases where international companies have targeted this low-income segment, especially in developing countries such India, China or Brasil, and had many success, as the article from Prahalad indicates in ” The fortune at the bottom of the pyramid”. [2] 

The Life Cycle Segmentation is used as, frequently, consumption patterns among people of the same age and gender differ because they are in different stages of this cycle, which is to be intended as a series of stages determines by a combination of age, marital status, and the presence or absence of children. To make a practical example, we can say that according psychological studies, it has been proved that when young married move into the young divorced stage, their consumption patterns often revert back to those of the young single stage of the cycle. Moreover, consumers are especially receptive to marketing efforts at certain points in the life cycle.

Psychographic segmentation: All the previous variables mentioned before, frequently are very useful to make marketers decide about specific strategies to use, but sometimes they don’t paint the entire picture of everything. Demographics provide the skeleton, whereas we can say that psychographics add meat to the bones. Some of the most important variables of this segmentation technique are the personality, which reflects a person’s attitude, traits, and habits. Motives, marketers of baby products and life insurance appeal to consumer’s emotional motives.

Lifestyles: this divides people into groups according to the way they spend their time, the importance of the things around them, their beliefs, and socioeconomic characteristics such as income and education.

Geodemographics: it clusters potential customers into neighborhood lifestyle categories. It combines geographic, demographic and lifestyle segmentations.

Benefit segmentation: This process clusters into same groups customers according the benefits they sought. For example, the snack food market, can be divided into six benefits : nutritional snackers, iweight watchers, guilty snackers, party snackers, indiscriminate snackers, and economical ones. This way, customer profiles can be developed by examining demographic information associated with people seeking certain benefits.

Usage-rate Segmentation: Divides a market by the amount of product bought or consumed. Categories vary with the product, but they are likely to include some combination of: former users, potential users, and heavy users. This type of segmentation allows marketers to focus their efforts on heavy users or to develop multiple marketing mixes aimed at different segments. In fact, there is a principle called ” the 80/20 principle” which stated that 20% of customers generate 80% of the demand, although this principle is not numerically exact always of course, general the idea often holds the truth. Developing customers into heavy users then, is the goal behind any frequency/loyalty programs like the airline’s frequent flyer programs. Many supermarkets and other retailers have also designed loyalty programs that reward the heavy-user segment with deals available only to them.

International Segmentation:

We have analyzed the potential opportunities that globalization allows to business. Segmentation though can be very useful in this case as well, where marketers try to find in different countries or regions customers groups whom expectations are shared and are more worthy than cultural or national values.

Sometimes, these segments for each country can be very small, but gathered all together can represent a very big and attractive market to go in, therefore, this products are conceived in a very general way, in order to fit in every market.

There are three different approaches marketers can adopt for international segmentation, and this is through :

– Similar geographic countries, with similar culture and infrastructures

– Universal segments within every country

-Different segments within different countries.

The first one, refers to homogeneous countries under the economical and cultural points of view. This could be the example of the Scandinavian countries. Unfortunately due the growing regionalisms marketers can find in some continents such as in Europe but not only even within the same country very different cultures and even languages that is why, this approach is hard to undertake successfully all the time.

The second approach, as seen before, regards multinational brands which are know and accepted globally. Particularly this could be the case for the automobile industry, cosmetics, audio products etc. This kind of products in fact, are used by segments which are considered universal despite the country of origin. In this case, the hardest barrier, is to find a precise marketing strategy to recall the customers. An example for this approach, could be represented for the elite class on every country we can think, whom are probably interested in the same products produced by elite brands such as Hermes, Mercedes, Gucci, Chivas, etc, despite if these people comes from Tokyo, New Delhi, London or wherever.

Finally, the third refers to different segments within different countries whom might be interested for the same product, although they have different expectations and use. For example, the commercialization of the model AE-1 Canon. It was presented in Japan as a substitute and secondary product for young people, in the US the same model was launched as a premium camera, whereas in Germany, it was targeting the most experts and exigent consumers although it was the end line of the best products available in this market.

Every single of these three approached have its pros and cons. Maybe the most used is the first one, which find and distinguishes consumers through national barriers. The second, allows the firm to acquire a strong and stable brand image, besides scale and experience economies. Finally, the third one can be risky since the product can be perceived differently according to the country of usage, although this differentiation might allow to fit every country better.

Positioning

Firms use a variety of basis for positioning, in order to after it create what is called a perception map which will be explained soon. Some of this positioning criteria includes the following:

– Attribute: This way the product is associated with an attribute, feature, or customer benefit.

-Price and quality: In this case, the positioning base may stress high price as signal of quality or emphasize low prices as an indication of value. For example Walmart has successfully followed the low price and value strategy.

Use or application: The application of a product can be effective to position it with buyers. Danone for example introduced its Kahlua liqueur using advertising to point 228 ways to consume the product.

-Product user: This method focuses on a personality or type of user. Gap Inc. which have different brands offers basic casual pieces, such as jeans and t-shirts to middle of the road consumers, while with their Old Navy brand offers low priced, trendy casual wear geared to youth and college age groups, finally with Banana Republic targets with luxurious and casual wear 25-35 year olds.

-Competitor: Positioning against competitors as said previously is part of any positioning strategy. One famous example is the one of Avis positioning themselves as number two compared to Herz.

-Emotion: In this case the positioning happens according what the customer feels. For example, Nike’s ” Just do it” campaign didn’t tell consumer’s what “it” is, but most got the emotional message of achievement and courage.

Perceptual Mapping

This is a tool which displaying or graphing, in two or more dimensions, products, brands, or organizations shows their location in consumer’s mind. To make this concept more comprehensive we can show an example, from the cordless phone market (exhibit n° 11).

Exhibit n° 11

This way, if we imagine a new cordless company brand which tries to enter into this market, it would be convenient to address themselves these questions regarding their own company and competitors:

What attributes does the brand own? What attributes do competitors own?

Are there gaps in the market that may be filled by the client brand?

How should we be positioned to be both relevant to the market and differentiated from the competition?

In addition to the map itself, analysis of the raw brand ratings, importance ratings, gaps, and ideal market position adds further insight into brand positioning opportunities.

Positioning in an international environment

Positioning is a very important step for marketers before starting with the development of a marketing mix strategy, since this process influences potential customers, the overall perception of a brand, organization or product line. Basically, it can be said that positioning is the place that a product, brand, or group occupies in the consumer’s minds in relation with the competition. Normally, it can be said that good marketers concerned particularly about this, for example P&G markets 11 different laundry detergents, but each one of these occupies a unique positions, such as allergen-free, softening, or ultra concentrated.

Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the organization’s marketing effort will have the greatest impact. The distinctions can be either real or just perceived, for example, many everyday products, such as bleaches and soaps, differentiate between them just by brand names, packaging, color, smells etc. On the other hand, some firms instead of using the differentiation strategy, position themselves as being similar to other competing brands, for example artificial sweeteners advertised as tasting like sugar or margarine tasting like butter.

In an multinational environment the most difficult task for marketers regarding positioning is to maintain the coherence in the perception and awareness of their products or brands. For example, some fashion brands could be considered top of line in some regions while regular middle in others. Sometimes, marketers can actually not maintain the same awareness and coherence from its brand, in order to keep or get an advantage in a particular region. An example of what said before is Pizza Hut in China, who is trying to build an image different from the one they have in the US ( a fast food pizza restaurant) , to a trendy more selected type one.

Repositioning

Sometimes companies reposition themselves or their products in order to sustain growth, for example when they are heading near the declining stage of the PLC as mentioned before, or when they want to correct some positioning mistakes. Important multinational companies, such as P&G do this, for example, they cut prices of its premium laundry detergent called “Cheer” in order to reposition it as a value brand. [3] An entire industry of firms that need to think about repositioning is the supermarkets one. For more than a decade already, Walmart has been expanding, not only in urban but also in rural areas, causing devastating results to its competition, especially independent grocers. The thing is that according to the consulting firm “Retail Forward” predicts that two supermarkets will go out of business for every Walmart that opens in the US. This is because they position themselves as a low-price chain, with great economies of scale which presents unbeatable prices to its smaller competition, whom if do not want to exit the market will have to reposition for a more specific niche.

Cross cultural negotiations

Since the concept of globalization and foreign markets expansion are main issues regarding global marketing, it is furthermore very important to study and analyze from the human point of view how the cultural differences between the managers who are in charge of closing the deals can affect the future of the business.

Faced with different customs, perceptions and language, usually the human tendency is to stereotype the others, reason for why it is highly recommended to make some researching of the characteristics of a foreign culture before conducting negotiations. Understanding other cultures is often based on tolerance. Trust and respect are essential conditions for several cultures, e.g. the Japanese, Chinese, Mexican, and most Latin American cultures. The Japanese may ask for several meetings before actual negotiation issues are discussed, while North Americans and North Europeans are more inclined to do business as soon as possible.

Even the language of negotiation can be deceptive. Compromise for US and Europeans people is equal to morality, good faith and fair play. To the Mexicans and other Latin Americans compromise means losing dignity and integrity; in Russia and the Middle East it is a sign of weakness, while members of other cultures may regard the common western ideal of a persuasive communicator as aggressive, superficial and insincere. From Hofstede’s [4] work we see that there are differences between national cultures. Each of four dimensions, the ones whose represent the corporate culture patterns exhibited across countries. In the following, implications of Hofstede’s four dimensions on the company’s international negotiation strategies will be briefly presented and discussed

Masculinity/Feminity ƒ  Masculine cultures, such as the Mexican i.e. , value assertiveness, independence, task orientation and self-achievement. Usually seek for competitiveness and negotiations end often in a win-lose situation. On the other side, female negotiators are more likely to be concerned with the agreement’s aesthetics and longer-range effects; they feel that the details can be worked out later.

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Uncertainty avoidance ƒ  This dimension refers to the comfort level of a culture in an unclear or risky situation. High uncertainty avoidance cultures have bureaucratic negotiation rules, rely on standards, and trust only family and friends. Low uncertainty avoidance cultures prefer to work informally and without specific ritual procedures. Negotiators from high-risk avoidance cultures are likely to seek arrange determined commitments in terms of volume, timing and requirements.

Power distance ƒ  This dimension refers to the acceptance of authority differences between negotiators whom have power and those affected by power. Between equals negotiations are basically a western concept and are not found in status-oriented societies such as Japan, Korea or Russia. European and US negotiators are normally informal and refer to themselves by using first names, dressing in casual attire, etc. Completely on the other side, some cultures, such as the

Japanese, they dress conservatively, and you address to your counterparts by their proper titles and function in the company. Frankness and directness are important in the western world, but are not desirable in Asia for example.

Individualism/collectivism ƒ  Individualistic cultures tend to put tasks before relationships and value independence highly, one of the most individualistic cultures we can take as an example is the American one, this culture tolerates open conflicts and place the needs of the individual over the needs of a group, community or society. In contrast managers from a collectivistic culture, such as China, will seek a stable long term relationship, stressing above all the establishment of a personal relationship.

PART IV –

DESIGNING THE GLOBAL MARKETING PROGRAMME

One of the main research questions mentioned in the preface paragraph regarded the way, or model firms should take in consideration when This very known term refers to a unique blend of product, place, promotion and pricing strategies designed to produce mutually satisfying exchanges with a target market. With this, the marketing manager can control each component of the marketing mix, but the strategies for all four components must be blended to achieves the best results you can get. Any marketing mix is only as good as its weakest component. The Marketing Mix is a major issue, and it must be designed fully to satisfy targeted markets. At first glance for example, Mc Donald’s and Wendy’s may appear to have very similar marketing mixes since they both are in the fast food hamburger business, but the first one has been more successful at targeting parents with young children for lunchtime meals, whereas Wendy’s targets the adult crowd for lunches and dinners, in the same way, the first one has playgrounds, and happy meals whereas the other has salad bars, carpeted restaurants of no playgrounds. This is the way how astute marketers by manipulating these elements can fine-tune the customer offering and achieving competitive success. Globally talking, there can’t be such a thing as a standard mix for a multinational company, i.e. Coca Cola in order to reach their rural customers in India, had to adapt its place ( distribution) dimension due the lack of proper highways and hard reachability using bikes and small moving car groceries shops. Next, the four dimension will be discussed with practical cases on the global market field.

Product decisions

Usually the product decisions is the starting point in creating a marketing mix strategy, nothing can be set ( price, design, or promotion) until the firm has the product to sell. The same way, and excellent distribution channel, persuasive campaign and fair price have no value when the product offering is poor or inadequate.

A product, may be defined as everything, both favorable and unfavorable, that a person receives in an exchange, it may be a tangible good, a service or an idea, even a combination of these three. On the other hand, packaging, style, color, options, and size are some typical product features. Just as important are intangibles such as service, image and reputation. On the global field, all this characteristic should take into consideration the hosting culture i.e. Chevrolet launched a car name NOVA, which in the Spanish talking countries means ” it doesn’t work” having not a good performance on these markets, at the same time, while color white in the western world is symbol of purity and joy, in Japan it is associated to death.

Branding

Part of the success on any business or consumer products depends on the target market’s ability to distinguish one product from another, in this sense, branding is the main tool for marketer to distinguish a product from its competition one.

A brand, is the name, term, symbol, design or combination of these, that identifies a seller’s product. It can be said, that a brand has three main purposes, the product identification which builds brand equity ( this is a concept that refers to a brand which has gained a high awareness level, is very well perceived, good reputation, quality and brand loyalty among customers). Through a strong brand, furthermore it is possible to build a strong global brand, which refers to a brand that obtains at least a third of its earning from outside its home country, is recognizable outside its home base of customers, and has publicly available marketing and financial data. Second, the best generator of repeat sales is satisfied customers. Branding helps consumers identify products they wish to buy again and avoid those they do not. Brand loyalty, a consistent preference for one brand over all others, is quite high in some product categories such as cigarettes, brand identity is essential to build brand loyalty. The third main purpose of branding is to facilitate new-product sales. Having a well known and respected company and brand name is extremely useful when introducing new products.

As seen, issues regarding branding are not easy to handle, so are the decisions to undertake strategies regarding this issue. In fact, firms may choose to follow a policy of using manufacturer’s brands, private brands or both. In either case, they must then decide among a policy of individual branding, family branding, or a combination of individual and family branding. Another usual strategy undertaken is the Co-branding, in which two or more brand names entail on a product or package. One main issue companies need to take into consideration, and most of the time represents a hard problem to solve, especially when commercializing an own brand in developing countries is the Tradermark issue. This, is the exclusive right to use a brand or part of it, others, are prohibited from using the brand without its permission.

In fact, it is no long time since counterfeiting has become a big issue, actually before 1980 it was a relative small business restricted to some particular items, luxury ones, as watched and leather goods. Nowadays, it has been transformed to a much bigger industry, with a full scale production and distribution channels of false versions of many different brands.

Especially in emerging markets, piracy might represent a big issue, but firms have the option to choose from many strategies to face it. These alternatives range from identifying the retail outlets and destroy the production facilities of the pirates, to even convert them into a legitimate business.

However, piracy is not only connected to negative issues, brand piracy in fact, can be seen as a positive element for a brand’s value as it is a good indicator of a brand’s strengths. If the company’s product is copied, it is doing the right thing. Some brands embrace the counterfeit market rather than seeing it as a threat.

In 2004, Giorgio Armani was on a trip to Shanghai, where he purchased a fake Armani watch for $25 instead of the $710 ( price of the original one). He said: ‘It was an identical copy of an Armani watch…I’m flattered to be copied. If you are copied, you are doing the things right’.

Although this was a publicity stunt, it does highlight the fact that consumers of fake brands are opposites to consumers of the authentic product and so pose no threat to the brand owner.

Packaging

Packages have always served a practical function, that is, simply, to hold contents together and protect good as they move through the distribution channel. Today, however packaging is also a container for promoting the product and making it easier and safer to use.

Besides its relative principal function of protecting the product, packaging also promotes the product as said before, facilitates storage, use, and convenience of products. Lately, a fourth function that is becoming increasingly important is to facilitate recycling and reduce environmental damage, as it was seen in the first chapters regarding the importance of being environment friendly.

Global issues in branding and packaging

When planning to expand into a new foreign market with an existing product, the company has three options for handling the brand same:

One brand everywhere : This strategy is coherent when the firm markets mainly one product and the brand name does not have negative connotations. An example of this is Coca Cola. The advantages of a one-brand-name strategy are of course greater identification of the product, and ease of coordinating promotion.

Adaptation and modification : If the brand of a company cannot be pronounced in a foreign market, or it has a negative connotation, then it is better to adapt the name of it modify it.

Different brand names in different markets : Local brand name are often used when translation or pronunciation problems occur, when the marketer wants the brand to appear to be a local brand, or when the regulations require localization. For example, Sprite had to be renamed Kin in Korea to satisfy a government prohibition on the unnecessary use of foreign words.

In addition to global branding decisions, companies must consider global packaging needs. The three more important international issues regarding this are labelling, aesthetics, and climate considerations. The first one, (labeling) refers properly translating ingredients, promotional, and instructional information on labels, in some countries such as Belgium, it is more difficult due products require bilingual packaging.

The aesthetics requires also attention, since some logos or visual elements can be different perceived among different countries. For example, as said before colours may influences consumers decisions.

Lastly, extreme climates and long distance shipping necessitate sturdier and more durable packages for goods overseas. Spillage, spoilage and breakage are all more important concerns when products are shipped long distances or frequently handled during shipping and storage.

New products development in global markets

Increasing globalization of markets and competition, it’s enough reason for global companies to launch new products from a worldwide perspective. It is easier for a company which starts from the beginning with a global strategy to design products that will be commercialized worldwide. Some companies design their products to meet regulations in their major markets and then, when it is mandatory, meet the smaller market’s requirements country by country. This happens because through this strategy firms can take advantage of economies of scales thanks to the standard production requirements. If marketers undertake an efficient and accurate market research of how make the product diffusion as efficient as possible and develop a new product which meets the needs of the customers, big part of the success is guaranteed. Of course, product matters are not the only ones that will decide wheatear the company will have success or not, as we will analyze the other components of the marketing mix.

Distribution decisions

Also know as marketing channel, it can be intended as a large canal through which products, their ownership, financing and payment and communication flow to the consumer. This is represented as a business structure between interdependent organizations that reach from the point of production to the point of reaching the consumer. The distributions channels facilitate the physical movement of goods through the supply channel and encompassing the process involved in getting the right product to the right place and time.

The channel member, which are called intermediaries, or resellers, negotiate one with the other, buying and selling the product, changing its ownership during its movement from the manufacturer to the final consumer. Besides the principal objective, moving the goods, channel members provide specialization and division of labor, overcoming discrepancies and provide contact efficiency.

Before choosing a particular marketing channel, managers must answer some questions, which depend on some factors, such as: who are we selling? How do they buy? Where do they buy? The location in fact and the size of the market are very important. The choice depends also on the product factor, since more complex customized, and expensive tend to benefit from shorter and direct marketing channels, for example pharmaceuticals and scientific instruments. The PLC is also an important factor.

On the other hand, producer’s characteristics must be taken into consideration as well before choosing the best distribution channel. In general, producers with large financial resources are better able to use more direct channels, since they are able to train own sale forces, warehouse their own goods, and extend credit to its customers.

Levels of distribution intensity

Organizations have three option for intensity of distribution, exclusive, selective and intensive.

Intensive distribution aims to cover the maximum level of the market. That means trying to have their product available in every outlet where potential customers might want to buy it.

The selective distribution is achieved by screening dealers and retailers, eliminating some few in the targeted geographical area. An example of this type of intensity is the one used by DKNY clothing, which is sold only in selected retail outlets, mainly full price department stores. The third type of intensity is the so called, exclusive one, the most restrictive form of market coverage, which entails only one or a few dealers within a giving area. Usually retailers commit time and money to promote the products as long as the manufacturer guarantees them the exclusivity area.

Channels and distribution decisions for global markets

As we know, the globalization process has been eased by the spread of free trade agreements and treaties in the last decades ( EU, NAFTA, UNASUR..) making the distribution channels more complex and evolved.

Executives should recognize the unique cultural, economic, institutional, and legal aspects of each market before trying to design marketing channels abroad. Producers introducing products in foreign markets have to decide whether this product will be marketed through intermediaries, directly, by the company salespeople, or local ones, or maybe through distributor or agents.

Each decision may have a positive side, but at the same time a backhanded result, for example the use of the company’s salespeople would provide more control and lower the risk than using local foreign intermediaries, at the same time, local people know better how to communicate and behave with their local market.

Furthermore, marketer must be aware an get information about the particularities of the channel structures in the particular market they are targeting. Normally, highly developed economic nations are more specialized, so it will be perhaps more easier to marketers to find more options and availabilities in countries such as Germany or Jap

 

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