GLOBAL MARKET SEGMENTATION
Clarke Ricks School of Business,
Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
June 8, 2022
GLOBAL MARKET SEGMENTATION
Segmentation is an important strategic tool in international marketing because the main
difference between calling a firm international and global is based on the scope and bases of
segmentation. An international firm has different marketing strategies for different segments of
countries, while a global firm views the whole world as a market, and then segments this whole
world based on viable segmentation bases. Generally, there are three approaches to
segmentation in international marketing: macro-segmentation, micro-segmentation and the
hybrid approach.
Macro-segmentation:
Macro-segmentation or country-based segmentation identifies clusters of countries that
demand similar products. Macro-segmentation uses geographic, demographic and
socioeconomic variables such as location, GNP per capita, population size or family size to
group countries intro market segments, and then selects one or more segments to create
marketing strategies for each of the selected segments. This strategy enables a company to
centralize its operations and save on production, sales, logistics and support functions.
However, macro-segmentation doesn’t take into consideration consumer differences within
each country and among the country markets that are clustered together, and fails to
acknowledge the existence of segments that go beyond the borders of a particular geographic
region. Therefore, the company may be leaving money on the table, because the firm may be
losing opportunities to solve the need of consumer segments across these country segments.
Macro-segmentation leads to misleading national stereotyping, which results in neglect of
within-country heterogeneity. Ignoring similarity in needs across country boundaries results in
countries losing economies of scale benefits that can be achieved by serving the needs of a
wider population across country (macro-segment) boundaries.
Segmenting by Behavior
Behavioral segmentation divides people and organization into groups according to how
they behave with or act toward products. Benefits segmentation—segmenting buyers by the
benefits they want from products—is very common. Take toothpaste, for example. Which
benefit is most important to you when you buy a toothpaste: The toothpaste’s price, ability to
whiten your teeth, fight tooth decay, freshen your breath, or something else? Perhaps it’s a
combination of two or more benefits. If marketing professionals know what those benefits are,
they can then tailor different toothpaste offerings to you (and other people like you).
Another way in which businesses segment buyers is by their usage rates—that is, how
often, if ever, they use certain products. Companies are interested in frequent users because
they want to reach other people like them. They are also keenly interested in nonusers and
how they can be persuaded to use products. The way in which people use products can also be
a basis for segmentation.
Segmenting by Demographics
Segmenting buyers by personal characteristics such as age, income, ethnicity and
nationality, education, occupation, religion, social class, and family size is called demographic
segmentation. Demographics are commonly utilized to segment markets because demographic
information is publicly available in databases around the world.
Age
At this point in your life, you are probably more likely to buy a car than a funeral plot.
Marketing professionals know this. That’s why they try to segment consumers by their ages.
You’re probably familiar with some of the age groups most commonly segmented (see Table
6.8 “U.S. Generations and Characteristics”) in the United States. Into which category do you
fall?
Today’s college-age students (Generation Y) compose the largest generation. The baby
boomer generation is the second largest, and over the course of the last thirty years or so, has
been a very attractive market for sellers. Retro brands—old brands or products that companies
“bring back” for a period of time—were aimed at baby boomers during the recent economic
downturn. Pepsi Throwback and Mountain Dew Throwback, which are made with cane sugar—
like they were “back in the good old days”—instead of corn syrup, are examples (Schlacter,
2009). Marketing professionals believe they appealed to baby boomers because they reminded
them of better times—times when they didn’t have to worry about being laid off, about losing
their homes, or about their retirement funds and pensions drying up.
So which group or groups should your firm target? Although it’s hard to be all things to all
people, many companies try to broaden their customer bases by appealing to multiple
generations so they don’t lose market share when demographics change. Several companies
have introduced lower-cost brands targeting Generation Xers, who have less spending power
than boomers. For example, kitchenware and home-furnishings company Williams- Sonoma
opened the Elm Street chain, a less-pricey version of the Pottery Barn franchise. The Starwood
hotel chain’s W hotels, which feature contemporary designs and hip bars, are aimed at
Generation Xers (Miller, 2009).
The video game market is very proud of the fact that along with Generation X and
Generation Y, many older Americans still play video games. (You probably know some baby
boomers who own a Nintendo Wii.) Products and services in the spa market used to be aimed
squarely at adults, but not anymore. Parents are now paying for their tweens to get facials,
pedicures, and other pampering in numbers no one in years past could have imagined.
As early as the 1970s, U.S. automakers found themselves in trouble because of changing
demographic trends. Many of the companies’ buyers were older Americans inclined to “buy
American.” These people hadn’t forgotten that Japan bombed Pearl Harbor during World War II
and weren’t about to buy Japanese vehicles, but younger Americans were. Plus, Japanese cars
had developed a better reputation. Despite the challenges U.S. automakers face today, they
have taken great pains to cater to the “younger” generation—today’s baby boomers who don’t
think of themselves as being old. If you are a car buff, you perhaps have noticed that the once-
stodgy Cadillac now has a sportier look and stiffer suspension. Likewise, the Chrysler 300 looks
more like a muscle car than the old Chrysler Fifth Avenue your great-grandpa might have
driven.
Automakers have begun reaching out to Generations X and Y, too. General Motors (GM)
has sought to revamp the century-old company by hiring a new younger group of managers—
managers who understand how Generation X and Y consumers are wired and what they want.
“If you’re going to appeal to my daughter, you’re going to have to be in the digital world,”
explained one GM vice president (Cox, 2009).
Income
Tweens might appear to be a very attractive market when you consider they will be buying
products for years to come. But would you change your mind if you knew that baby boomers
account for 50 percent of all consumer spending in the United States? Americans over sixty-five
now control nearly three-quarters of the net worth of U.S. households; this group spends $200
billion a year on major “discretionary” (optional) purchases such as luxury cars, alcohol,
vacations, and financial products (Reisenwitz, 2007).
Income is used as a segmentation variable because it indicates a group’s buying power and
may partially reflect their education levels, occupation, and social classes. Higher education
levels usually result in higher paying jobs and greater social status. The makers of upscale
products such as Rolexes and Lamborghinis aim their products at high-income groups.
However, a growing number of firms today are aiming their products at lower-income
consumers. The fastest-growing product in the financial services sector is prepaid debit cards,
most of which are being bought and used by people who don’t have bank accounts. Firms are
finding that this group is a large, untapped pool of customers who tend to be more brand loyal
than most. If you capture enough of them, you can earn a profit (von Hoffman, 2006). Based on
the targeted market, businesses can determine the location and type of stores where they want
to sell their products.
Gender
Gender is another way to segment consumers. Men and women have different needs and
also shop differently. Consequently, the two groups are often, but not always, segmented and
targeted differently. Marketing professionals don’t stop there, though. For example, because
women make many of the purchases for their households, market researchers sometimes try to
further divide them into subsegments. (Men are also often subsegmented.) For women, those
segments might include stay-at-home housewives, plan-to-work housewives, just-a-job working
women, and career-oriented working women. Research has found that women who are solely
homemakers tend to spend more money, perhaps because they have more time.
Family Life Cycle
Family life cycle refers to the stages families go through over time and how it affects
people’s buying behavior. For example, if you have no children, your demand for pediatric
services (medical care for children) is likely to be slim to none, but if you have children, your
demand might be very high because children frequently get sick. You may be part of the target
market not only for pediatric services but also for a host of other products, such as diapers,
daycare, children’s clothing, entertainment services, and educational products. A secondary
segment of interested consumers might be grandparents who are likely to spend less on day-to-
day childcare items but more on special-occasion gifts for children. Many markets are
segmented based on the special events in people’s lives. Think about brides (and want-to-be
brides) and all the products targeted at them, including Web sites and television shows such as
Say Yes to the Dress, My Fair Wedding, Platinum Weddings, and Bridezillas.
Resorts also segment vacationers depending on where they are in their family life cycles.
When you think of family vacations, you probably think of Disney resorts. Some vacation
properties, such as Sandals, exclude children from some of their resorts. Perhaps they do so
because some studies show that the market segment with greatest financial potential is
married couples without children (Hill, et. al., 1990).
Keep in mind that although you might be able to isolate a segment in the marketplace,
including one based on family life cycle, you can’t make assumptions about what the people in
it will want. Just like people’s demographics change, so do their tastes. For example, over the
past few decades U.S. families have been getting smaller. Households with a single occupant
are more commonplace than ever, but until recently, that hasn’t stopped people from
demanding bigger cars (and more of them) as well as larger houses, or what some people
jokingly refer to as “McMansions.”
The trends toward larger cars and larger houses appear to be reversing. High energy costs,
the credit crunch, and concern for the environment are leading people to demand smaller
houses. To attract people such as these, D. R. Horton, the nation’s leading homebuilder, and
other construction firms are now building smaller homes.
Ethnicity
People’s ethnic backgrounds have a big impact on what they buy. If you’ve visited a
grocery store that caters to a different ethnic group than your own, you were probably
surprised to see the types of products sold there. It’s no secret that the United States is
becoming—and will continue to become—more diverse. Hispanic Americans are the largest and
the fastest-growing minority in the United States. Companies are going to great lengths to court
this once overlooked group. In California, the health care provider Kaiser Permanente runs
television ads letting members of this segment know that they can request Spanish-speaking
physicians and that Spanish-speaking nurses, telephone operators, and translators are available
at all of its clinics (Berkowitz, 2006).
As you can guess, even within various ethnic groups there are many differences in terms of
the goods and services buyers choose. Consequently, painting each group with a broad brush
would leave you with an incomplete picture of your buyers. For example, although the common
ancestral language among the Hispanic segment is Spanish, Hispanics trace their lineages to
different countries. Nearly 70 percent of Hispanics in the United States trace their lineage to
Mexico; others trace theirs to Central America, South America, and the Caribbean.
Segmenting by Geography
Suppose your great new product or service idea involves opening a local store. Before you
open the store, you will probably want to do some research to determine which geographical
areas have the best potential. For instance, if your business is a high-end restaurant, should it
be located near the local college or country club? If you sell ski equipment, you probably will
want to locate your shop somewhere in the vicinity of a mountain range where there is skiing.
You might see a snowboard shop in the same area but probably not a surfboard shop. By
contrast, a surfboard shop is likely to be located along the coast, but you probably would not
find a snowboard shop on the beach.
Geographic segmentation divides the market into areas based on location and explains
why the checkout clerks at stores sometimes ask for your zip code. It’s also why businesses
print codes on coupons that correspond to zip codes. When the coupons are redeemed, the
store can find out where its customers are located—or not located. Geocoding is a process that
takes data such as this and plots it on a map. Geocoding can help businesses see where
prospective customers might be clustered and target them with various ad campaigns,
including direct mail. One of the most popular geocoding software programs is PRIZM NE,
which is produced by a company called Claritas. PRIZM NE uses zip codes and demographic
information to classify the American population into segments. The idea behind PRIZM is that
“you are where you live.” Combining both demographic and geographic information is referred
to as geodemographics or neighborhood geography. The idea is that housing areas in different
zip codes typically attract certain types of buyers with certain income levels.
Segmenting by Psychographics
If your offering fulfills the needs of a specific demographic group, then the demographic
can be an important basis for identifying groups of consumers interested in your product. What
if your product crosses several market segments? For example, the group of potential
consumers for cereal could be “almost” everyone although groups of people may have different
needs with regard to their cereal. Some consumers might be interested in the fiber, some
consumers (especially children) may be interested in the prize that comes in the box, other
consumers may be interested in the added vitamins, and still other consumers may be
interested in the type of grains. Associating these specific needs with consumers in a particular
demographic group could be difficult. Marketing professionals want to know why consumers
behave the way they do, what is of high priority to them, or how they rank the importance of
specific buying criteria. Think about some of your friends who seem a lot like you. Have you
ever gone to their homes and been shocked by their lifestyles and how vastly different they are
from yours? Why are their families so much different from yours?
Psychographic segmentation can help fill in some of the blanks. Psychographic information
is frequently gathered via extensive surveys that ask people about their activities, interests,
opinion, attitudes, values, and lifestyles. One of the most well-known psychographic surveys is
VALS (which originally stood for “Values, Attitudes, and Lifestyles”) and was developed by a
company called SRI International in the late 1980s. SRI asked thousands of Americans the
extent to which they agreed or disagreed with questions similar to the following: “My idea of
fun at a national park would be to stay at an expensive lodge and dress up for dinner” and “I
could stand to skin a dead animal” (Donnelly, 2002).
Hybrid Segmentation
Hybrid or Universal segmentation looks for similarities across world markets. This strategy
solves the disadvantages of using macro- and micro-segmentation bases to segment
international markets, as they tend to ignore similarities and highlight only the differences.
Certain segments identified in a micro-segmentation strategy may have the same
characteristics present on a global scale. One such segment is the Global Teen segment – young
people between the ages of 12 and 19. It is likely that a group of teenagers randomly chosen
from different parts of the world share many of the same tastes. Another such global segment
is the Global Elite segment, comprising affluent consumers who have the money to spend on
prestigious products with an image of exclusivity. The global elite segment can be associated
with older individuals who have accumulated wealth over the course of a long career, including
movie stars, musicians, athletes, and people who have achieved financial success at a relatively
young age.
Hybrid segmentation involves looking for similarities across micro–segments identified in
the countries selected in the final step of the CAA procedure. Under this process, country
borders are honorary, as the segmentation process considers the countries selected in the final
step of the CAA procedure as one market and searches for similar segments across these
countries.
