PP 5 – Market Research, Segmenting, Targeting, Positioning Flashcards
An international research complication:
Information must be communicated across cultural boundaries.
Executives in the home country (such as Canada) must be able to “translate” their research questions into terms that consumers in the target country (such as Germany, France or China) can understand.
The answers must then be put into reports and data summaries that Canadian managers can comprehend (with cultural biases and assumptions being the primary barrier).
Preliminary Research: Prior to starting this project, the Marketing Team will need to collect the following (progressive) data:
General information about the country, area, and market.
Environmental information related to predicting future social, economic, technological, political and legal changes.
General consumer and industry trends within the market.
Specific market information related to product, promotion, distribution, and price decisions (to develop marketing plans).
An internal review to confirm the company has the capabilities to undertake the international venture.
Sources of Market Information: Personal Sources
Company executives based abroad who have contact with distributors, consumers, suppliers and government officials.
Friends, acquaintances, professional colleagues, consultants, and prospective employees.
Sources of Market Information: Direct Sensory Perception
The ‘Sensory Experience’: visit the country; observe the buying habits and competition.
Steps in the Research Process
- Identify the information requirement.
- Redefine the information requirement while addressing the ‘Self-Reference Criterion’ issue.
- Choose a geographic range.
- Collect secondary data.
- Assess the time/investment needed to acquire the missing data.
- Design the research method and collect that data.
- Analyze the data (based on the initial information requirement).
- Present the findings.
Step 1: Identify the Information Requirement
What information do I need to start the research process?
What questions will I need to ask that will allow me to ‘segment’ my research data?
Early in the Product Life Cycle: an unknown product; only indirect secondary data is available.
Late in the Product Life Cycle: customers know the product; substantial secondary data is available.
Step 2: Redefine While Addressing the ‘Self-Reference Criterion’ Issue.
Self-Reference Criterion occurs when a person evaluates a foreign culture in terms of ‘right vs wrong’ instead of ‘different’.
Making the Executive (who have requested that data as part of a strategic plan) aware of SRC issues will often:
- Enhance management’s willingness to conduct market research (in terms of time and investment).
- Ensure that research is designed with minimal home-country bias.
- Prepares management for results that don’t align with their expectations.
Step 3: Choose a Geographic Range
Will the market be:
An economic region (such as within a trade zone).
A country.
A province/state.
A city, neighbourhood.
Town, village.
This decision is often driven by time and budget restrictions.
Step 4: Collect Secondary Data
Internal Sources: company records, staff.
External Sources: trade journals, Government sites, third-party sources (especially for economic or transparency scoring).
Note: almost all government data is biased to enhance positive aspects and minimize negative aspects.
Step 5: Assess the Time/Investment Needed to Acquire the Missing Data
What is the information worth (in terms of knowledge value) vs what it will cost to collect (in terms of time and investment)?
What will the company gain with this information?
- Is substitution possible?
What will it cost if the data are not collected (in terms of a knowledge gap)?
Step 6: Design the Research Method
Common options: survey, focus group, observation (using technology).
-> Observation of purchasing patterns and repeat behaviour are more useful (honest and accurate) than surveys.
Use multiple indicators; do not rely on one set of data, but be aware of ‘diminishing returns’ beyond three reliable (independent) sources.
Use proven tools to save time and money, but customize them specific to the industry, product, or culture.
Advantages in Data Collection - Surveys
A large amount of data can be collected (subject to time and expense limitations).
Both quantitative and qualitative data are possible (assuming that a properly-designed and culturally-sensitive survey was designed).
Cost effective if self-administered using technology.
Issues in Data Collection - Surveys
Subjects often give inaccurate responses.
Technology limitations.
SCR could bias questions; use back and parallel translations to ensure accuracy and validity.
Gathering Primary Data: Quantitative Research
Survey research is generally associated with quantitative research.
–> The structured responses received in a survey can be summarized in percentages, averages, or other statistics.
Direct observation of consumers regarding choice or product usage situations is an effective quantitative approach to marketing research.
Gathering Primary Data: Qualitative Research
Questions are almost always open-ended or in-depth; the intent is to get access to the person’s thoughts and feelings on the subject.
Qualitative research seeks to interpret what the people in the sample are ‘feeling’. Their attitudes and opinions will predict their actions.
However, this is also the type of survey that is prone to the greatest effect of SRC during both the question-design stage and interpretation of the comments made by the participants.
Problems of Gathering Primary Research
A lack of willingness to respond.
Incomplete and out-of-date government population statistics.
No accurate maps of population centres. Thus, no cluster (area) samples can be developed.
Questions translated incorrectly makes answering them impossible (or it provides a useless answer).
Literacy issues would make written questionnaires useless; the questions would need to be read to the person.
Different dialects can make a national questionnaire survey useless.
Issues in Data Collection - Surveys part 2
Scale Development requires a type of measure, ranking, or interval to a response. Example: “Strongly Agree, Somewhat Agree, Agree”.
–> Flaw: Collective cultures will always select the neutral ‘Center’ position (to avoid saying anything negative or taking a strong positive stand).
Probability Sampling: survey is focused on the target audience. Accurate results, but they could be skewed because all other groups have been ignored.
Non-Probability Sampling: random and expensive. It provides more negative comments but also a more complete image.
Data Collection Methods
Consumer Panels: A sample of respondents whose behaviour is tracked over time.
In regard to television:
–> Either manually-entered journals or electronic tracking will record the viewing habits of the target audience.
–> The data is used to evaluate: (i) who is watching which shows, and (ii) how much to charge for each advertising second.
This model has dropped in popularity (and effectiveness) over the past decade because of technology improvements (‘cookies’ and search profiles) and viewing habits (less television, more smart-phone streaming).
Data Collection Methods - Focus Groups
A trained moderator leads a discussion focused on the launching of a new product or advertisement.
The individuals invited for the discussion are (based on research) a valid representation of the target audience.
A skilled moderator will always ask open-ended questions to invite honest comments (not just one-word responses). The emotional component of those comments provides the true feelings toward the proposal.
Every aspect of the marketing proposal is evaluated; technical as well as emotional perspectives are questioned.
Data Collection Methods: Observation:
Observation: using people, cameras or (most likely) technology.
Some common technology applications include: (i) cameras, (ii) real-time purchase scanners, (iii) location-tracking based on smart-phone technology, (iv) social preference and eating/drinking habits based on social media postings.
–> The result; a correlation of data that provides an accurate profile of a target audience.
–> The application: a grocery store retailer adjusts the opening or closing hours based on its hour-by-hour sales.
Two issues regarding the collection of observational data:
Reactivity and Privacy
Reactivity:
people react differently if they know they are being watched.
Privacy:
legal issues. At what point does data collection become an ‘invasion of privacy’? Do people care? Do people understand?
Step 7: Analyze the Data (based on the initial information requirement)
Segment the data and use:
–> Graphic models to present the data.
–> Statistical techniques to predict outcome variations (with probability) based on altering controllable variables.
Data Collection Results- Survey results may identify:
Latent Market and Incipient Market
Latent Market:
an undiscovered segment that will demand the product when they are educated and it is made available (first-mover advantage is key).
Incipient Market:
an undiscovered segment that is not yet ready for the product, but (based on certain economic. demographic, political, or sociocultural trends), it will demand the product in the near future; first-mover advantage (with patience) is key.
Step 8: Interpretation and Presentation
Your Report must clearly address Step 1 (ie: provide the information being sought by the Executive).
Executives are interested in briefings, findings, recommendations and conclusions; not raw data. Therefore, present graphical summaries; not details.
Will the Executive understand the report (from a technical as well a cross-cultural perspective)?
Will the Executive believe the report if they are told something that is not consistent with their culture’s expectations.
Example 1: target audience; teenagers (for soft drinks or skateboards). The home culture’s traditions indicate that teenagers like adventures and are willing to take risks (i.e.: knowingly not conforming to society’s expectations). But the target culture’s research of the same age group shows more loyalty to tradition.
–> Will the marketers adjust their advertising?
Example 2: target audience; seniors. Issue: the degree of independent living. The home culture’s traditions believe that seniors should live with their children; a parent left to live in their own would be socially unacceptable (the image of ‘abandonment’). But the target culture’s same age group prefers ‘independence’.
–> Will the marketers adjust their advertising?
Segmentation
Contains International Segmentation, targeting and Positioning
International Segmentation:
the process to identify customer preferences and categorize them in terms of national, cultural or sub-cultural characteristics.
Targeting:
the process to evaluate all segments (regardless of geographic dispersion) with intent to identify those groups who will respond positively to your products and services. The evaluation is based on effectiveness and profitability.
Positioning:
how to present your product or service to the chosen segment (in terms of preferences based on your research and segmentation).
Global Segmentation Assumptions- Pre-Internet Assumptions:
Every country is different.
Cultural preferences are consistent within an entire country.
Sub-culture differences within one country are minor; it is better to focus on the macro view of a country’s culture.
Clustering of national markets that are beside each other will always gain economies of scale (with minimal effect to marketing outcomes).
It is not cost-effective to segment within one country.
Global Segmentation Assumptions - Post-Internet Assumptions:
Identical segments exist in different countries.
Multiple segments exist in each country.
Research sub-cultural preferences (not national preferences) for highest quality research.
Multiple micro-markets (if crossing borders) can justify a business case.
Global Market Segmentation
Global companies use market segmentation to identify customer wants and needs; national borders play a minimal role on a worldwide basis.
Global marketers will use that data to develop either a standardized or customized marketing mix.
Subject to the product’s key characteristics, the segmentation process is often based on one of these four criteria:
Demographics.
Psychographics.
Behavioural Characteristics/Preferences.
Desired Benefits (reflects accurate market research).
Demographic Segmentation
Income: Is your product a ‘luxury’ or a ‘necessity of life’?
Population: Density reflects on research costs.
Age Distribution: Different products for different age groups.
Gender: Can a product designed for one gender be rebranded for the other gender?
Education: Works best for individualist cultures.
Demographics - Economic Dualism
This term was first used (in 1953) to describe an economy and society that are divided between the traditional (agricultural) sector and the modern, capitalist sector.
It defines two or more economic (or social) classes that exist at the same geographic locations. This characteristic creates two distinct economic and marketing opportunities.
–> “It is possible for two groups of people to live within one kilometer of each other, yet exist a century apart. These groups have only one thing in common; a desire to improve their existing conditions”.
Economic Dualism part 2 (2 segments)
The modern segment is based on urban design and has a working middle class; mainly in factories and offices.
The traditional segment is rural; an agriculture-based economy that uses technology a century behind the urban dwellers.
The two sectors can be geographically close, but their demands and expectations are distinct.
An international marketer will recognize that almost all products or services are not suitable for both segments.
Psychographics - Consumer Profiles
Idealists and Materialists, Lower and Upper Middle-Class, Lower Working Class
Idealists
5% to 10% of the population; wealthy, successful, but do not feel a need to advertise their success. They are willing (and financially able) to spend money on socially responsible ideals (based on the charities they support and the products they purchase).
Materialists
Status-sensitive business professionals who use obvious consumption to communicate their success. This group also includes those who use debt to project a false image of wealth.
Lower and Upper Middle-Class
25% to 50% of a country’s population.
Slightly center-of-left and center-of-right; no extremist views; prefers stability.
Supports social and ethical concepts, but purchases are governed by economics.
Lower Working Class
Debt, no savings, no power or influence.
Minimal expectations for a positive future; resentful.
Concentrated in high-crime urban inner cities.
Behaviour Segmentation
The intent is to determine when and why people purchase a product; how much, and how often.
80/20 Pareto’s Law:
–> 80% of a company’s revenues come from 20% of its products.
–> 80% of a company’s revenues come from 20% of its customers.
–> 80% of a business’s customer-service time will be spent with 20% of its customers.
Benefit Segmentation
This process is based on a marketer’s education of the audience to recognize that a problem exists and how a product will solve that problem at an acceptable price.
Ethnic Segmentation:
The population of many countries include ethnic groups of significant size. Specific groups may willingly accept (or immediately reject) your product.
Assessing International Segments
Be aware that decision makers will often make the following errors:
- Overstate the immediate market size (or underestimate any growth potential into geographically-close similar segments).
- Focus on only the estimated short-term profits.
- Move fast to gain a perceived ‘first mover advantage’, but forget to properly evaluate the associated risks.
- Use only established business contacts to evaluate viable segments (a restrictive view).
- Ignore compatibility issues with the company’s overall Mission Statement and/or objectives (often a price-quality issue).
Selecting Target Markets
Marketing Model Drivers, Enabling Conditions, the estimated cost to enter, and Timing
Marketing Model Drivers:
Defined as the factors that will determine success (such as leveraging a company’s reputation to launch a new brand name).
Enabling Conditions:
Mostly the logistics that determine success.
The Estimated Cost to Enter:
From a short and long term revenue perspective.
Timing:
This issue relates to the ‘first-mover advantage’. The conventional wisdom is that the first company to enter a market has the best chance of becoming the market leader. But the first mover into a new market also has the greatest chance of failure.
Selecting Target Markets – Matching your Product to a Specific Segment
Which segment will buy the product in its current form? Which other segment will buy the product with minimal modification?
Which segments will not buy the product? Why?
What function does our product serve? What problem does it solve?
Is the preferred segment already buying the product? Why are they not buying our version? Is it an issue related to the 4 P’s, real quality or perceived (quality) image?
Target Market Strategy Options
Standardized, Niche Marketing, Multi-Segment Marketing:
Standardized
Standardized: Mass marketing; a single marketing mix.
–> Minimal advertising costs; one plan for everyone.
–> No product adaptation, minimal packaging changes.
–> Low costs, relying on high volumes for profits.
Niche Marketing:
Niche Marketing: a single marketing mix is applied to the same type of segment that is located in several geographic areas.
–> Designed for intense depth into multiple identical segments; breadth is not offered.
–> Expensive perfume, industrial air compressors, portable power stations.
Multi-Segment Marketing:
a single marketing mix is applied to similar segments that are located in several geographic areas. The result is a wider market coverage.
–> The position is not perfect, but several more segments can be covered for the same cost.
Positioning
Given that:
- segmenting identified different groups.
- targeting found those groups who are interesting in your products,
- ‘positioning’ uses that information to decide how you will ‘present yourself’ to the chosen segment.
Want to be in the sweet spot of a) What customers want, b) What the competition does best c) what you do best
Positioning Strategies – General
Attribute or Benefit:
–> Economic: an obvious cost saving.
–> Reliable: eliminates a perceived problem.
–> Safe: a relative comparison (safer than the current situation).
–> Durable: relates to reliability – implies a long-term solution.
Quality: real or perceived; can be either or both.
Price: implies a quality signal. This fact is especially important when the consumer can’t evaluate the quality.
Positioning Strategies – International
‘National Pride’ (Local) Positioning, ‘Foreign Perception’ Positioning, and Global Brand Equity Positioning.
‘National Pride’ (Local) Positioning:
a high degree of national pride; prefers local products (all other things being equal).
–> Consider using a joint venture or acquisition to gain local reputation.
‘Foreign Perception’ Positioning:
a high quality perceived with an explicit culture.
–> Design logistics to be able to declare the preferred country on the packaging.
Global Brand Equity Positioning:
identifies the product as part of a global branding strategy.
–> Minimize the reference to any country; stress the brand name.
To Summarize
The Research Process provides the data that justifies moving towards segmentation.
Global Market Segmentation follows the same guidelines as domestic segmentation (subject to cultural preferences).
Target Market Selection is a combination of cost, timing, logistics, market size and the company’s existing strategic policies.
‘Positioning’ follows the same guidelines as domestic positioning strategies (subject to local, foreign or global brand equity preferences).
