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In Figure 9.

4, it has been pointed out how the same segmentation dimensions (demographic,
psychographic, etc.) can be applied both to the Business to Consumer and the Business to Business
market strategy. However, several major differences become apparent when one compares the
segmentation process in the consumer marketplace and the business-to-business environment. The most
apparent one is the size of the markets. While consumer marketers often have to contend with a market
that reaches in the many thousands and even millions of individual consumers, the business-to-business
marketplace for a company rarely exceeds several hundreds of companies and only a few very large firms
can claim a business client base of many thousands. However, when purchasing capacity is considered,
the scenario is reversed. Business purchasing volume far outstrips individual consumer purchasing,
especially when compared on a single transaction basis.13 Another differentiating point is the dynamics of
the actual purchasing process. From motivation to selection to execution, business purchasing is a
distinctly more complex affair, given the number of people, factors, and systems involved, than the steps
involved in an individual consumer’s purchasing decision and ultimate action.

TARGETING
Once all viable segments have been identified in the targeted markets, the process of selecting the most
promising segments—those with the highest potential to generate sales and profits for the company and
deciding how to address their needs begins.
Criteria for Targeting
Just as in the second screening of prioritization, the criteria used for selecting the best potential target
segments are extremely important. Some of the basic and most widely used targeting criteria are:
• market size—the larger the segment, the more sustainable and profitable it is likely to be;
• growth rate—the faster a segment is growing, the more sales it is likely to generate;
• competitive position—the less competitive offerings are available for the target segment, the more
likely the company is to gain large market share

• market accessibility—the more cost-effectively and quickly a segment can be reached, the more
attractive it will be;
• customer fit—the more compatible the segment is with the company’s brand and resources, the more
likely it is that sales will follow.

The question of customer fit—whether the pursuit of a particular segment is compatible with the
company’s overall goals and established sources of competitive advantage—is illustrated with the
example below of a small soft drinks producer that was able to challenge the global conglomerates thanks
to a good targeting strategy.

Although Pepsi and Coca-Cola are firmly entrenched in the Latin American market, a small Peruvian
competitor, Kola Real, was not afraid to take them on. At the time of Kola Real’s entry, the two soft drink
giants had nearly 100 percent of the Peruvian cola market. This would appear to be a difficult position to
challenge, but because Kola Real used a no-frills, minimal advertising, and low price strategy that was
appealing to its target segments, it was able to quickly capture almost 20 percent of the Peruvian market
and successfully carve out a place for itself in Ecuador, Venezuela, and Mexico. Today Kola Real has
become an important brand of AJE Group (Geo Box 9.2) that is one of the largest multinational beverage
companies, with presence in more than 20 countries in Latin America, Asia, and Africa.

Often, several criteria are used simultaneously to develop a detailed analysis of the most attractive
segments. For example, China is an attractive market based on its huge market size and fast-growing
middle class, especially in large metropolitan areas. However, in general it is important to consider the
specific product category to evaluate the variables that are relevant for the targeting strategy, as pointed
out in Box 9.2 for the toy market.

How are these global companies targeting their new markets? There are two main questions that allow
the identification of the target market strategy. The first one is: should the company opt for concentration
or diversification? And the second one follows: should the company develop an undifferentiated,
concentrated, or differentiated approach?
Concentration Versus Diversification
Expansion into markets abroad requires management to decide between two main strategies:
concentration or diversification. Both strategies require different levels of marketing effort and resources.

A concentration strategy involves focusing marketing effort and resources on one or a few key markets in
the short run and gradual expansion into other markets in the long run. For example, considering the
countries selected after the first and second screening, and combining with information gathered with the
micro-segmentation, a company can decide to target country A, and only later on to target country E,
followed by countries H and P.

A diversification strategy, on the other hand, requires investing marketing effort and resources into a
larger number of markets in the short run. In our example, the four countries will be targeted
simultaneously.

In both cases, the amount of resources required depends on the entry mode. For example, fewer
resources are required for exporting than for direct investment in subsidiaries. Given a fixed amount of
resources, the amount assigned to each market in a diversification strategy would be less than for
concentration. Therefore, for SMEs, which are often characterized by small amounts of resources, an
export concentration strategy would be preferable in order to reduce the risk of low effectiveness in the
countries of entry. Concentrating marketing effort and resources in one or a few markets should gain
larger market share and, subsequently, higher profits. However, if competition is intense, then small firms
should avoid direct competition with larger firms. In this case, it would be preferable to have small
market shares in a larger number of markets. Therefore firm size and market factors (such as
competition) are variables that influence expansion strategies. In addition, there are market factors such
as growth rates and sales stability in each market and the need for standardization or adaptation of
products and advertising messages. For example, if sales are not stable and/or the market growth is
limited, it is risky to concentrate only in one country and it is better to diversify. Vice versa, if entering in
a foreign market requires adaptation of the product or the advertising (that means, as will be pointed out
in the following chapters, higher costs), the company will probably opt for concentrating all its efforts in
one country and only later expanding in other markets.

The costs of penetrating a market are among the most important considerations in choosing an expansion
strategy. One of the tools available, the sales response function, is a calculation that relates the value of
investment (x) in marketing effort to the revenue (y) generated (or profit, units sold, etc.). Figure 9.9
shows that the sales curve can be S-shaped or concave, and demonstrates the different functions of both
curves.

Expanding into one market and investing at point “A” will yield a return of “C” sales if the curve is S-
shaped, and a return of “E” sales if the curve is concave. However, an additional marketing investment in
the same market of “F” will yield sales of “J” if the curve is S-shaped, but only “H” if the curve is concave.
Therefore, if the market is characterized by an S-shaped curve, it would pay to select a concentration
strategy and invest more resources. In fact, a limited investment would lead to limited sales because in
the first stage, market entry is based on building brand awareness and demand. Afterwards, further
investment in marketing effort results in growing market share and marginal revenue, much like the
growth stage in the product life cycle. This is based on studies that show that high market shares are
associated with higher profitability. Vice versa, a market with a concave curve immediately responds to a
limited investment. Then further investment in one or a few markets would result in low or no marginal
revenue, hence making preferable a diversification approach to get the maximum sales from different
markets since the beginning. Additional factors that point to a diversification strategy (and opposite for a
concentration strategy) are low growth rates and sales stability (e.g. seasonality, that suggest to sell
simultaneously in different markets in order to improve sales stability), short competitive lead time
(which makes it important to enter markets quickly), high spillover effects between countries (e.g. the use
of the same patents), little need to adapt products and promotion, and little gain from distribution
economies of scale. In reality, these factors are not dichotomous (either high or low), but somewhat
in between.
Undifferentiated, Concentrated, and Differentiated Approach
Are they simply transferring their existing products to Russia or are they developing new or modified
products in order to reach specific segments within this market? The strategies used to target attractive
global markets can vary, but their difference can always be traced back to the age-old question in global
marketing of standardization versus adaptation, that will be analyzed in depth in chapters 10 to 13
dedicated to the marketing mix analysis. The three most common market selection approaches used in
targeting are the undifferentiated approach, the differentiated approach and the concentrated approach.

Undifferentiated Approach
Also called mass marketing or standardized marketing, at the center of the undifferentiated approach to
target marketing is the assumption that customer segments across the world will accept the same
product or service regardless of their cultural, behavioral, or socio-economic differences. In other words,
when using an undifferentiated approach, a company is basing its marketing on the common needs of its
customers, instead of on the differences.

Very few brands have managed to be successful on a global scale by using a standardized, global strategy.
It is easier if they have the same positioning worldwide (for example, Disney), if they focus on a single
product category (such as Intel), or if the company name is the brand name and all marketing dollars are
concentrated on that one brand (as is the case of GE and IBM).

For some products, especially commodities such as gasoline or sugar, or for brands that dominate the
global business-to-business market, such as Boeing and Airbus, this standardized marketing approach is
more viable. However, even in the most commoditized markets, the undifferentiated marketing strategy
is beginning to fade away as competition intensifies around the world. Some studies have found empirical
evidence that standardized marketing in similar target markets may have a significant positive effect on
the performance of a brand over time. However, this positive effect is often distorted by the simultaneous
tendency to centralize decision-making when undifferentiated strategy is pursued.

Differentiated Approach
In contrast to undifferentiated marketing, the differentiated approach aims to adapt the product and the
marketing mix to each target market segment. Most global brands today use a version of this approach to
stay competitive and expand their appeal to more market segments through products and advertising
designed specifically for their needs and tastes. An example is the beauty industry. Despite the
commonalities that can be found at a global level, companies have to opt for adapted strategies. In fact,
within the global segment of women characterized by the same needs, in mature developed markets,
sales growth is driven through developing presence in specific niches based on age, gender, and ethnicity,
with a price ranging from low to high. In emerging markets, facing an increasing level of competition, it is
becoming important to customise product benefits to suit regional preferences, offer brands at accessible
pricing points, and develop appropriate packaging sizes.

Concentrated Approach
Sometimes called niche targeting, the concentrated approach is used when a company focuses intensely
on one segment of the market and designs its marketing efforts with that segment in mind. Think of the
company that targets skateboarders across the world or the services firm that focuses on attracting
government contracts only. Focusing on a single segment can have its benefits, such as decreased
competition and (if successful) dominant market share. However, when executives end up “putting all of
their eggs in one basket,” the risk of losing all is also a possibility. If skateboarding declines in popularity,
for example, or global economic crisis forces governments to decrease spending, the companies servicing
those markets exclusively are likely to suffer. The same happens also when political instability or a war
forces companies to exit the only market of export: there is no way to compensate with sales in other
countries. Take the case of Coca-Cola and the sportswear maker Adidas. Both companies have been hit by
the escalating standoff between Russia and the West. A lot of western products have been banned from
the Russian market, significantly affecting market shares of western companies. For Adidas, Russia is the
third biggest market, and not only did the German company have to drastically scale back store openings
in the country, but they are now also suffering from a general low profitability due to boycotting of their
products. Luckily both these companies have a wide portfolio of countries, which can compensate this
negative trend in Russia.
Customized Approach
With the advent of the Internet age, online sales and communication channels, and social media networks,
a new approach to marketing has been gaining success and popularity. Called the customized or
micromarketing approach, it entails an even deeper segmentation of the target market and the creation of
even more nuanced and specialized products and marketing campaigns aimed at very specific sub-
segments of consumers. The “I ♥New York” campaign is an example. As Thomas Ranese, the CMO at the
New York office of the government agency responsible for attracting tourists to New York State, notes, “In
marketing today, you’re trying to find the market of one.” To do that, his agency relaunched the famous “I
♥New York” campaign. In contrast to previous years, about half of the campaign budget has been spent
on the Internet for customizable brochures and videos, as well as for search engine marketing and
targeted banner ads. In addition, the geographic reach of the campaign has been much more targeted,
with specific messaging and designs for the audiences in nearby states and Canadian provinces only. With
these investments, the “I ♥New York” Facebook page is adding about 70,000 fans per week, from all
over the world, allowing the development of a new relationship and engagement that without the new
technology a few years ago would have been impossible.

Such a tailored approach to marketing to individuals with very specific needs and near very specific
places has been available to marketers only in most recent years. The online environment has played a
key role in the growth of the marketing customization trend, particularly since sophisticated data analysis
programs have made it easy to track and report return on marketing investment (ROMI) for online
campaigns.

While micromarketing can become expensive, advancements such as mobile marketing, embedded global
positioning systems (GPS), behavioral tracking on the Internet (via cookies), and digital printing for direct
mail continue to make it easier and more cost-effective to implement for smaller and smaller target
segments of the market.

POSITIONING
Positioning is a process that is, for the most part, out of the hands of marketers, since it represents “the
way consumers, users, buyers, and others view competitive brands or types of products.”21 In fact,
positioning is something that happens mainly in the mind of the consumer, who, by comparing similar
brands and products, creates a sort of mental map of how each of them relates to his or her individual
needs and wants. Thus, as marketers devise their positioning strategies (planned positioning), the goal is
to influence the position their brands have in the minds of consumers (perceived positioning).

Successful positioning should result in strong, long-term emotional ties to the brand for the consumer.
Such connection can only be built by consistently sending marketing messages that resonate on a
personal level with the consumer and following through with products and services that deliver on the
promises made.

The promise is implemented through the marketing mix and the perceived promise represents the
positioning in the mind of consumers. The critical point of this process in global marketing strategies is
how consumers perceive the brand: in different countries there are different competitors, different needs
and buying behavior, different motivations, culture, and attitudes. Furthermore, the control of the channel
of distribution can be weak, and the distribution strategies and tactics can be implemented by
intermediaries in the wrong way; similarly, price sensibility can be different and communication requires
adaptation. Will the company be able to transform the planned positioning in the consumer perceived
positioning? This is one of the big challenges that marketing managers have to face every day. For
example, Xiaomi Mi Note smartphone, recently launched by Xiaomi Technology Co., Ltd, is trying to
position itself as an innovative product, and the company has all the characteristics of an innovator in the
industry, but unfortunately its brand image fails to shed its continuing image as an Apple and/or Samsung
follower.

In order to succeed, it becomes extremely important to define a correct positioning strategy that
underlines the connection between the brand, its target, the product type (important for the identification
of direct competitors), the point of difference, the benefits, the brand personality, and, in summary, the
unique selling proposition (USP) that identifies in practice what makes the brand different from
the others (Figure 9.10).

The main challenges in the development of a brand positioning strategy are:


• Evaluating if the positioning strategy can be standardized in different countries or it has to be adapted:
for example, can the point of difference or the supporting evidence be the same?
• Communicating the chosen position.
• Developing a marketing mix that is able to support the chosen strategy. As we will see in the following
chapters, in global markets this is far from easy, and it will probably require an adaptation of the product,
pricing, distribution, or promotion.

Another factor to be considered is that positioning has to be analyzed and managed at product and brand
level. Positioning at product level reflects how a product category is perceived by consumers. This
perception can be different across countries: for example, the role of food, perfumes, fashion, etc. Hence
the positioning of the brand has to also take into consideration the perception at product level.
Positioning at brand level is often conceptualized with a positioning map, also called a perceptual map. As
pointed out in Figure 9.11, brands are positioned in the map in relation to positioning bases (in the
example, price and style). The map clearly points out the position occupied by the brand (for example,
Brand A) and by competitive brands in the mind of consumers. In different countries, due for example to
cultural differences, consumers’ perception can be different, and also competitive brands can vary. In the
map it is also possible to identify what the position of the ideal brand is for the target segment. Brand A is
quite far from the ideal product, and to be successful the company has to plan a repositioning strategy in
order to move closer. Repositioning strategies can be very expensive, especially if carried out at a global
level.

Finally, as pointed out in Figure 9.11, positioning requires the identification and communication of the
POD (point of difference) that will be operationalized through the USP (unique selling proposition). The
POD can be based on one or more of the following different criteria:
• Benefit, attribute or price: the “Everyday Low Price” by Walmart is an example, as well as companies
focusing on performance, high quality, or design.
• Usage situation: After Eight mints are positioned as a dessert for after dinner (but not only).
• Product use: Studio 6, by the French hotel group Accor, is communicated as a Long stay hotel (“extend
your stay, not your budget”).
• Users: HSBC, one of the largest banking and financial services institutions in the world, underlines its
focus on a global business clientele.
• Against competitors: this positioning is based on pointing out the differences against some direct
competitors, typically with comparative advertising. Examples are Pepsi versus Coke and Nike versus
Adidas.
• Product class: Weight Watchers is a global brand associated with weight loss food.
• Company’s image: this criteria is based on the company’s characteristics. For example, Danieli, an Italian
company that ranks among the three largest worldwide suppliers of plants and equipment to the metals
industry, is positioned on the concept of innovation. This concept wants to indicate “innovation in action,”
thanks to the remarkable number of innovative process technologies successfully developed and applied
by the company.

Guinness, the popular and distinctive Irish stout nowadays owned by Diageo, uses a virtual community to
position and reinforce its marketing to a devout fan base that spans the globe. From selling product-
related items in their Internet store, to their 1759 Society for “true Guinness Draught lovers,” to the
collectors community site, and the free downloadable screensavers, different segments of Guinness
drinkers are consistently reminded of what the product is all about while forging emotional connections
with it and with other Guinness drinkers. Thanks to the web, Guinness has found a way to connect with
drinkers around the world and encourage its members to stay in touch with the company, with fellow
consumers, and with the brand, dramatically increasing its “real estate” in the consumers’ minds, and
remaining consistent in its positioning across the globe. The cohesion around the brand has been
reinforced by the recent advertising campaign that is conveying an impactful and unique message
promoting qualities like dedication, loyalty, and friendship: global values that can be recognized despite
cultural differences. Guinness wants to communicate that beer-drinkers can be both strong and sensitive.
The commercial shows a game of wheelchair basketball followed by a pint of Guinness. Actually only one
of the basketball players is a wheelchair user: the others are his friends who are playing wheelchair
basketball to have fun all together, without distinctions.

Can such positioning consistency work on a global basis for most brands? Much depends on whether the
brand can appeal to universal human needs and desires or whether it is suitable for more limited
audiences with specific lifestyles, cultural preferences, or particular tastes. Certain positioning themes,
such as quality, price, or performance can transition easily from local to global scale and back. Think of
Nestlé’s “Good Food, Good Life,” Walmart’s “Everyday Low Prices,” or Nike’s “Just Do It” positioning
statements—they represent broad and broadly appealing sentiments to which people from around the
world can relate. This can also be the case for small companies targeting global segments, such as the
Italian high-end furnishing company Moroso (Box 9.3). Nevertheless, cultural preferences or traditions
also can have a lasting effect on the global positioning strategy for a brand, however. Hence some brands
reposition their products based on the benefits considered most appealing to the local market.

SUMMARY
• Through market segmentation, the similarities and differences of potential buying customers can be
identified and grouped.
• In a global context, marketers can use macro-segmentation based on a country’s or a region’s
demographic and economic statistics, or a micro-segmentation method based on individuals’ or
companies’ geographic, demographic, socio-economic, psychographic, and behavioral patterns to define
market segments.
• The first screening in market analysis and selection is based on macro-segmentation that allows to
group countries into market segments. The purpose of the second screening is to identify markets that
have the best potential for the company: this screening can be done with directional policy matrices
(McKinsey/General Electric matrix) and/or with portfolio analysis.
• Market size is one of the most important factors to be considered in the analysis of market
attractiveness. Different methods are available for calculating market potential and the use of more than
one method can increase the reliability of the estimation.
• Micro-segmentation is carried out after the macro-segmentation and the identification of countries with
the highest opportunities (prioritization). A company operating internationally can decide to make a
micro-segmentation country by country (multinational segmentation) or across multiple countries
(global or horizontal segmentation).
• To target the appropriate consumer segments, marketers must evaluate and compare them on the basis
of market size, growth potential, market accessibility, competitive position, and compatibility.
• In selecting the right market targeting strategy, marketers must decide to opt for concentration or
diversification. Secondly, if the company wants to use an undifferentiated, differentiated, concentrated, or
customized approach. Each requires a different degree of standardization or adaptation of the product
and the marketing mix for each segment.
• Positioning occurs in the mind of the consumer, who, by comparing similar brands and products, creates
a mental map of how each of them relates to his or her individual needs and wants. Marketers strive to
influence the position their brands have in the minds of consumers in relation to competitor brands