Segmenting Global Markets:Segmenting Global Markets:

By: V. Kumar and Anish NagpalBy: V. Kumar and Anish Nagpal

Look Before You LeapLook Before You Leap

““I am a citizen, not of Athens or Greece, I am a citizen, not of Athens or Greece, but of the world.” but of the world.” -Socrates-Socrates

Before implementing a Before implementing a global market global market segmentation strategy,segmentation strategy, it’s critical to it’s critical to understand both local and global issuesunderstand both local and global issues

Global Marketing: Global Marketing: emphasizes 4 activitiesemphasizes 4 activities• Cost efficienciesCost efficiencies• Opportunities to transfer products, ideas, etc.Opportunities to transfer products, ideas, etc.• Emergence of global customersEmergence of global customers• Better links between national marketing Better links between national marketing

infrastructuresinfrastructures

What is GMS?What is GMS?

Global marketing segmentation (GMS) is Global marketing segmentation (GMS) is the process of identifying specific the process of identifying specific segments of potential customers, across segments of potential customers, across countries with similar attributes who are countries with similar attributes who are likely to exhibit similar buying power.likely to exhibit similar buying power.

The goal of GMS is to break down the The goal of GMS is to break down the world market for a product or service into world market for a product or service into different groups of consumers that differ in different groups of consumers that differ in their response to the firm’s marketing mix their response to the firm’s marketing mix program.program.

Targeted segments in GMS should Targeted segments in GMS should possess these properties:possess these properties:

MeasurabilityMeasurability: Easy to define and measure: Easy to define and measure SizeSize: Large enough to go after: Large enough to go after AccessibilityAccessibility: Easy to reach via the media: Easy to reach via the media ActionabilityActionability: Effective marketing programs : Effective marketing programs

should be easy to developshould be easy to develop Competitive intensityCompetitive intensity: Should not be : Should not be

preempted by the firm’s competitionpreempted by the firm’s competition Growth potentialGrowth potential: High return on investment : High return on investment

should be attainableshould be attainable

How to Implement GMSHow to Implement GMS

Six step processSix step process1.1. Identify the purpose.Identify the purpose.

2.2. Select segmentation criteria.Select segmentation criteria.

3.3. Collect relevant information.Collect relevant information.

4.4. Segment the countries/consumers according Segment the countries/consumers according to criteria.to criteria.

5.5. Reevaluate the fit of the segment after Reevaluate the fit of the segment after implementation of the intended program.implementation of the intended program.

6.6. Update/reassign segment membership.Update/reassign segment membership.

Categories for Selecting Categories for Selecting Segmentation CriteriaSegmentation Criteria

Demographics: Measurable characteristics Demographics: Measurable characteristics of population.of population.

Culture: Religion, education, and language.Culture: Religion, education, and language. Geography: World region, economic stage Geography: World region, economic stage

of development, and population.of development, and population. Environment: Political, legal, and business Environment: Political, legal, and business

environments. environments.

4 Critical Equivalencies4 Critical Equivalencies

Construct EquivalenceConstruct Equivalence

Whether the segmentation basis has Whether the segmentation basis has the same meaning and is expressed the same meaning and is expressed similarly in different countries and similarly in different countries and cultures.cultures.• Example: Bicycles in the U.S. are classified under the Example: Bicycles in the U.S. are classified under the

recreation-sports industry, whereas inrecreation-sports industry, whereas inIndia and China they are considered aIndia and China they are considered ameans of transportation.means of transportation.

Scalar EquivalenceScalar Equivalence

Results from marketing research Results from marketing research should have the same meaning and should have the same meaning and interpretation in different countries.interpretation in different countries.

• Example: The U.S. generally uses a 5 or 7 point scale Example: The U.S. generally uses a 5 or 7 point scale while in France the most common scale is a 20-point while in France the most common scale is a 20-point scale.scale.

Measurement EquivalenceMeasurement Equivalence

Whether the measures used to Whether the measures used to operationalize the segment are operationalize the segment are comparable across countries.comparable across countries.

• Example: Household income is difficult to compare Example: Household income is difficult to compare across countries due to differences in tax structure and across countries due to differences in tax structure and the purchasing power.the purchasing power.

Sampling EquivalenceSampling Equivalence

Identifies comparable populations Identifies comparable populations and selects samples that are and selects samples that are representative of other populations representative of other populations and comparable across countries.and comparable across countries.• Example: In the U.S., office supplies are often purchased Example: In the U.S., office supplies are often purchased

by secretaries, while in manyby secretaries, while in manyother countries this decision is made byother countries this decision is made bya middle-level manager or CEO.a middle-level manager or CEO.

Think Globally, Act LocallyThink Globally, Act Locally

Segmentation allows global marketers to take Segmentation allows global marketers to take advantage of standardization while addressing the advantage of standardization while addressing the needs and expectations of a specific target group.needs and expectations of a specific target group.

To be successful, GMS needs to achieve a balance To be successful, GMS needs to achieve a balance between the local and global concerns of the between the local and global concerns of the customers.customers.