1. Khon Kaen University International College   International Product and Pricing Strategy   Course number First semester 2012 Monday 10:40 room 732 Friday 10:40 room 823   Lecturer: Michael Cooke office room 817

2. Quiz: Pass/Fail = 50%
1. WalMart Mexico is accused of violating the FCPA because:
A) Company representatives paid facilitation fees to local building contractors (think of Southern Shrimp Alliance)
B) The company is suspected of having systematically paid substantial bribes to government officials
C) The company paid ‘grease money’ to local government planning officials
D) All of the above
2. Host country as used in this course refers to
A) The country in which the business has headquarters
B) A foreign country in which the multinational is allowed to do business
C) Any country with a robust tourism sector
3. Marketing can mitigate host country political risk by which of the following?
A) Creating the perception of being a host country business or product
B) Opposing Compulsory Licensing (CL) legislation whenever it is proposed
C) Systematically bribing host government officials
D) Joining the WTO (World Trade Organization)
4. Foreign direct investment is a way to gain entry to certain markets, however it carries risks, such as:
A) Risk of expropriation or nationalization of assets by a host government
B) Risk of a loss of control over processes or intellectual property
C) Risk of confiscation of assets (such as for suspicion of money laundering)
5. A small highly motivated advocacy group can affect any aspect of marketing in a foreign country
A) True
B) False
6. WTO rules to protect intellectual property allow exceptions for public health or emergencies
Answers: 1=B, 2=B, 3=A, 4=D, 5=A, 6=A

3. Homework for week 5
Skim chapter 8 (fairly long, try to get a sense of the contents)
Read P&G case 8-2 (pages ). Look for the P&G trademark on supermarket goods.
Skim the Aaker article (link in the syllabus)

4. How should Gulf Coast shrimpers market the product?
Wally Stevens, the chief operating officer of Slade Gorton, a seafood distributor in Boston, argues that the damage is self-inflicted. The American Seafood Distributors Association, of which Mr. Stevens is president, maintains that farmed shrimp is more consistent in size and quality than domestic shrimp. He also says the domestic industry has tried to compete on price alone—impossible, since trawlers and fuel are so expensive—instead of marketing to a niche. The sort of sophisticated consumers who seek out boutique pinot noirs from Oregon and artisanal cheeses from Vermont would presumably pay a little extra for wild-caught Louisiana shrimp. The shrimpers reply that better marketing alone won't keep them in business, and that a big advertising blitz would eat up money few of them have.*
The salmon fishing industry had a similar problem from salmon raised on farms in the USA, Chile, and elsewhere. The higher cost product found a viable lucrative niche among wealthier and health conscious consumers.
*Source: The Economist 4 July, 2004 (
Niche: Narrowly defined group of customers having unique needs.

5. Chapter Overview – Segmentation and Positioning
1. Reasons for International Market Segmentation 2. International Market Segmentation Approaches 3. Segmentation Scenarios 4. Bases for Country Segmentation 5. International Positioning Strategies 6. Global, Foreign, and Local Consumer Culture Positioning Appendix – making sense of data Note: Much of the material covered in these slides can be found in Chapter 7 of ‘Global Marketing Management’
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.

6. Copyright (c) 2009 John Wiley & Sons, Inc.
Introduction
Variation in customer needs is the primary motive for market segmentation.
Most companies will identify and target the most attractive market segments that they can effectively serve.
In global marketing, market segmentation becomes especially critical because of wide divergence in cross-border consumer needs and lifestyles.
Once management has chosen its target segments, management needs to determine a competitive positioning strategy for its products.
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.

7. Reasons for International Market Segmentation
Country Screening (consideration of a market is based on initial screening criteria)
Global Market Research
Cluster countries across relevant characteristics
Focus research efforts on a representative sample
Market Entry Decisions
Product launches based on shared relevant characteristics across countries
Country differences on other dimensions can hinder success
Positioning Strategy (influencing customer perception of the product relative to competitors)
Where will marketing efforts have greatest impact?
Target market segments might change due to consumer preferences or population changes
How the products or service is positioned will follow the opportunity
Resource Allocation (Exhibit 7-1)
Market share clusters (increase penetration)
Consumption clusters (developing the market)
Marketing Mix Policy
Countries in same segment might have similar mix strategy (design, pricing, promotion, distribution)
Similarities on one dimension might be offset by differences on another (such as price sensitivity)

8. Exhibit 7-1: Market Clustering Approach for Instant Coffee
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

9. Requirements for International Market Segmentation
Identifiable
Should be easy to define and measure
Value or lifestyle measures typically difficult to gauge
Sizable
Segments should be large enough to be worth pursuing
Small segments aggregated across countries might work
Accessible
Segments should be easy to reach
Infrastructure differences across countries
Stable target market behavior and composition
Responsive – segments have unique responses
Actionable – the required marketing mix is consistent with the company goals and competencies
Chapter 7
Adapted from 2009 John Wiley & Sons, Inc.

10. International Market Segmentation Approaches
International segmentation procedures:
Country-as-segments or aggregate segmentation
(Exhibits 7-2 & 7-3.)
Geographic single dimension or several dimensions
Marketing irrelevance of many country boundaries
Difficulty of determining which variables to use for geo segments
Disaggregate international consumer segmentation
Consumer segments defined by similarities along chosen characteristics
Consumer bases might be geographically disbursed – logistical issues
Two-stage international segmentation
First aggregate countries (macro level) screens out countries
Second segment consumers within the country cluster (micro)
Market oriented and accessible
For numerous country traits, use data reduction techniques such as factor analysis (SAS Proc Factor).
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.

11. Exhibit 7-2: Nestlé’s Geographic Segmentation of the Americas
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.

12. Exhibit 7-3: Macro-Level Country Characteristics
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

13. Psychological basis Information filtering (sensory filtering)
Occurs among even lowest organisms (react to heat, light. Other aspects of environment ignored by primitive senses)
Highest life forms still limited in gathering and processing information from environment
We learn to filter information irrelevant to a situation
Often the most highly educated among us filter most
We fail to see/hear or recall much of what is available to us
Under the right conditions (context) we might recall what we otherwise would not
Our filtering and recall changes through life and with circumstances
Marketers try to determine which audiences might be receptive to the product message, and how to enable recall
Distances between high SES among countries might be less than between SESs within a country (life circumstances and education factors)

14. Segmentation Scenarios
Universal or global segments (go beyond boundaries)
Customers belonging to universal segments have common needs
Could be a universal niche (example: global elite, business travelers)
Common customer needs higher in some product categories (high-tech or travel related)
Regional segments
Differentiated versus undifferentiated strategies apply to global segments as well
Differentiated strategy tailors marketing to local market conditions
An undifferentiated strategy is often followed by some high-tech companies – uniform worldwide marketing, scale economies
Unique (diverse) segments
Substantial differences in cross country customer preferences
Localized marketing mix programs
Food products may have country specific segments
Degrees of segmentation often follow degrees of market development (emerging markets usually have a simple consumer market structure – high price or low price only)

15. Bases for Country Segmentation
Demographics
Demographic variables are among the most popular criteria
Socioeconomic Variables
Per Capita income
Issues in using per capita income as an indicator:
Transactions valued in an international currency (monetization of transactions)
Official exchange rates seldom reveal true buying power within a country
Services are provided in-country using local currency
Goods not traded across borders (housing, etc)
Gray and Black Market sections of the economy (cash or barter)
Income disparities (wide gap between rich and poor) – Gini index
Lower number means more income equality
Scandinavian countries have most equality (lowest index number)
Thailand, China, USA relatively unequal (higher index)
UN’s Human development index (HDI) classification
Life expectancy at birth
Adult literacy
PPP per capita income – in-country basket of goods
Socioeconomic Strata (SES) Analysis (education, consumption)
Chapter 7
Adapted from John Wiley & Sons, Inc.

16. Demographics Segmentation
Easy to measure
Fairly accurate and easy to obtain
The elderly are an often overlooked segment
Unique needs
Self perceptions (active, not old)
Global middle class family is highly sought
Definition is tricky
HH income figures ignore purchasing power differences
Vast differences between countries in how income is spent
Chinese spend less than 5% on rent, transport, health
US consumers spend 50%
Income distinctions ignore education and values

17. Example of population clusters, from Japanese ad agency study of Asian women (Exhibit 7-5):
Socially conscious (8%) Community oriented
My Small World (26%) Family oriented
Happy as I am (26%) Satisfied with current lifestyle
I want more (26%) Like to try new things
Look at me (13%) Ambitious, want status
Ford Fiesta’s ‘Beautiful’ strategy in China targets which group?
Would Ford use an identical strategy in Europe?
Personalization versus standardization
Note that the often ignored elderly:
Have unique needs (wish to perceive self as active, ‘not old’)
Are a growing % of the population in developed countries (soon up to 1/3 of total population in some countries)
May have high disposable income

18. Exhibit 7-5: Six Types of Chinese Pre-Elders
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

19. Bases for Country Segmentation Product Related (Exhibit 7-7)
Attitudes toward product attributes
Country of origin
Status related (microwaves in living room)
Usage rate (product consumption per capita or per HH)
Product penetration
Percentage of target market that uses the product
An often used measure of new sales potential
Consumption infrastructure (electricity, etc.)
Chapter 7

20. Copyright (c) 2007 John Wiley & Sons, Inc.
Exhibit 7-7: Benefit Segments of Toothpaste Market in the U.S.A., China, and Mexico
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

21. Other Bases for Country Segmentation Lifestyles
Roper Consulting Valuescope Model (1998)
Strivers (largest WW segment) have material goals
More likely to be men
More common in developing Asia than in developed Asia
Devout (second largest segment) emphasis on tradition and duty
Women more than men
Least common in Europe, highest in Saudi Arabia
Altruists (18% of all adults) interests in social issues
Women more than men, and older people
Latin America and Russia
Intimates value personal relationships and nuclear family
Europe and North America (especially UK)
Fun Seekers (12% of population) more common in developed Asia (highest in Brazil)
Creative (10% of population) have strong interest in education and technology
People in different segments buy different products, use different media
Tailor messages to parts of the population most likely to buy
Tools for refining strategies
Potential customers
Reinforcing loyal customers
Chapter 7

22. A last thought on segments
For many forms of marketing, the higher the likelihood of getting a sale, the higher the cost per target consumer.
Before internet, mailing lists were sold with a price per name. Marketers considered cost of sending mail
The more specific the segment (higher likelihood of getting a response) the higher the unit cost
How do international Google ads fit this model?
How does worldwide spam fit into this economic model?
How does this rule change when there is no cost to deliver a message? What sort of filtering mechanisms would we have?

23. Quiz: Pass/Fail = 50%
For global marketing careful segmentation is critical because:
A. Different countries have big differences in customer lifestyles
B. Marketing departments need something to do
C. Many host countries require the use of segments
D. None of the above
Motives for market segmentation include:
A. Variation in individual needs
B. Differences in how people perceive
C. Cost of delivering communication
D. All of the above
3. Which of the following countries is most likely to have a prosperous middle class:
A) High average income, low income differences (Sweden)
B) Low average income, low income differences (Ukraine)
C) Medium average income, high income differences (South Africa)
D) Low income, high income differences (Central African Republic)
4. Differences in needs and perceptions can be due to which of the following:
A) Age differences
B) Cultural differences
C) Education differences
D) All of the above
5. Product related country segmentation would consider attitudes toward country of origin because:
A) In some circumstances foreign products carry prestige or status
B) In some circumstances local products are preferred
C) Both A and B
D. International Marketing staff have travel expense budgets
6. International segmentation can involve macro level country screening and then customer screening (micro level)
A) True
B) False

24. International Positioning Strategies
Positioning: The presentation of a product or service to evoke a positive and differentiated mental image in the consumer’s perception (International Marketing; Czinkota and Ronkainen)
Position: The place a product, brand or group of products occupies in consumer’s minds relative to competing offerings. (Introduction to Marketing 9th edition; McDaniel, Lamb, Hair)
Effective positioning (local or global) requires:
Finding and assessing competing products
Understanding the important aspects of competitor positions
Choosing a position to maximize the impact of marketing efforts
Product differentiation involves distinguishing a product from competitor’s products.

25. International Positioning Strategies
Uniform versus Localized Positioning Strategies
Target a universal segment
May involve same positioning worldwide
Might involve tailoring to different markets
Pursue different segments in different markets
Typically customize positioning appeals to each segment
Universal Positioning
Consistent image worldwide
Can use global media
Difficult to devise a theme that appeals across markets (differences in culture, economics, competition, product lifecycle)
Successful appeals may target specific buying groups
Quality or performance for business customers
Features or benefits for consumer non-durables
Quality or performance for consumer durables
User groups share common characteristics
A mainstream brand in a home market might be upscale in overseas markets

26. Global, Foreign, and Local Consumer Culture Positioning
Global consumer culture positioning (GCCP)
Brand as a symbol of a given global consumer culture (self image of buyer is cosmopolitan)
Global brands might confer status in less developed economies
High tech consumer products symbolize modernism
Consumers share core values
Local consumer culture positioning (LCCP)
Brand as an intrinsic part of the local culture
Brand is portrayed as consumed buy local people
Brand may be depicted as using local supplies or ingredients
Multi-local brands are perceived as local across several countries
Foreign consumer culture positioning (FCCP)
Brand mystique built around a specific foreign culture
A company might employ all of these at the same time (cosmopolitan, with foreign origins, using local ingredients, etc)
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.

27. Copyright (c) 2007 John Wiley & Sons, Inc.
Exhibit 7-10: McDonald’s Promoting Its Local Community Support in New Zealand
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

28. Appendix: Segmentation Tools
Segmentation techniques and tools:
Cluster Analysis: Collection of statistical procedures for dividing objects into groups (clusters). The grouping is done in such a manner that members belonging to the same group are very similar to one another but quite distinct from members of other groups (no overlap). (SAS Proc Cluster)
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.

29. Appendix: Segmentation Tools
Regression Analysis: In regression, one assumes that there exists a relationship between a response variable, Y, and one or more so-called predictor variables, X1, X2 and so on. (SAS Proc Reg)
The higher the R2 value, the better the ability of the regression model to predict the data.
With multivariate regression the user has the ability to determine which bases are most explanatory.
Chapter 7

30. Exhibit 7-11: Principles of Cluster Analysis
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

31. Copyright (c) 2007 John Wiley & Sons, Inc.
Exhibit 7-12: Plot of Concentration versus Category Growth Chocolate Market
Chapter 7
Copyright (c) 2007 John Wiley & Sons, Inc.

32. Exhibit 7-13: Cluster Analysis
Chapter 7
Copyright (c) 2009 John Wiley & Sons, Inc.