Market segmentation is the process of identifying groups or set of potential customers at national or international level who exhibit similar buying behaviour. International market segmentation, thus, is the process of dividing the total market into one or more parts (submarkets or segments) each of which tends to be homogeneous in all significant aspects. A market segment refers to a submarkets (a part) of the market which is homogeneous in all significant aspects.
Market segmentation allows a marketer to take a heterogeneous market (a market consisting of a customers with diverse characteristics, needs, wants and behaviour), and carve it up into one or more homogeneous markets (markets made up of individuals or organisations with similar needs, wants and behavioural tendencies). Segmenting helps in designing the marketing mix as per requirements of the customer which is beneficial not only to the marketers but also to the customers.
Bases of International Market Segmentation
Markets may be segmented according to several criteria such as geographic, demographic (including national income, size of population), psychographic (values, attitude and lifestyle), behavioural characteristics and benefits sought. It is also possible to cluster different national markets using dimensions of business and market environment such as government regulations and regional groupings.
Let us discuss the basic criteria for segmenting international markets.
1. Geographic Segmentation – In this type of segmentation, the market is divided into different geographical units such as nation’s, states, regions, provinces and cities. The company can operate in one or few geographical areas or operate in all but pay attention to local variations in geographical needs and preferences.
When a company does business in more than one country, there are two approaches to the market. Target market can be identified as :
i. All consumers within the borders of a country.
ii. Global market segments – all consumers with the same needs and wants in groups of country markets.
Most international marketers have traditionally viewed each country as a single market segment unique to that country.
This approach has three limitations :
I. It is based on country variables and not on consumer behaviour patterns.
II. It assumes total homogeneity of the country segment.
III. It overlooks the existence of homogeneous consumer segments that exist across national boundaries. Global segmentation identifies group of consumers with similar needs and wants in multiple country markets. These may come from different countries, have different backgrounds, and speak different languages, but they do have commodities – they have similar sets of needs for a product. Consumer in global market segment share common characteristics that make them a relatively homogeneous group of buyers.
2. Demographic Segmentation – It is based on measurable characteristics of population such as age, gender, income, education and occupation. These variables are the most popular bases for distinguishing customer groups for segmentation. One of the reasons for such type of segmentation is that the consumer wants, preferences, and usage rates are often associated with demographic variables. Further these variables are easier to measure.
For most consumer and industrial products, national income and per capita income constitute the single most important segmentation variable and indicator of market potential. This enables the companies to cluster countries into segments of high, middle and low income and then target the country which had the desired income level.
3. Psychographic Segmentation – In psychographic segmentation, buyers are divided into different groups on the basis of attitudes, values, lifestyles or personality. People within the same demographic group can exhibit very different psychographic profiles.
4. Behaviour Segmentation – Behaviour Segmentation focuses on whether or not people buy and use a product as well as how often, and how much they use it. Behavioural variables such as occasions, user status, usage rate, loyalty status, and buyer readiness stage enables the companies to segment the market accordingly.
Buyers can be distinguished according to the occasion for which they need to purchase a product or use a product. Occasion segmentation can help a firm expand product usage. Heavy users are often a very small percentage of the market but account for a high percentage of total consumption.
Markets can also be segmented into non-users, ex-users, potential users, first time users and regular users of a product. The company’s market position will also influence it’s focus. Market leaders will focus on attracting potential users, whereas smaller firms will try to attract current clients of the market leaders.
5. Benefit Segmentation – Markets could also be classified according to the benefits the consumer seek from a particular product.
Knowing which segment dominant in a country helps the marketing efforts and enables advertiser’s to tailor their message to those parts of the population most likely to buy them.
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