Globalization of marketing strategies in the light of segmentation and cultural diversity

Table of Contents

Introduction

The concept of culture

Segmentation – methods and bases

Physical Attribute Bases

Behavioral attribute segmentation

Segmentation and Culture

Global products and global segments

Motorola –solving the dilemma?

Segment 1: The technology enthusiasts

Segment 2: Status Seekers

Segment 3: Personnel Connectors

Segment 4: Business people

Conclusion

Reference list

Introduction

Globalization is one of words used nowadays to describe the convergence of cultures. Cultures are believed to move closer together as a result of increased travel, better communication methods and enhanced transportation opportunities (Hassan,1991). Companies try to anticipate this change by offering standardized products to a global audience. Examples of global products are credit cards, mobile phones, automobiles, food and beverages. The Big Mac, for example, is a standardized products market globally that it is used by economists to measure the purchase power of different currencies, the famous Big Mac Index. Marketers face many challenges in this global village but one of the most interesting challenge is how far can standardization of marketing efforts be pursued. Cultural differences are a logical barrier to standardization of the marketing strategies on a global scale. As there are countless cultures on this planet, there are also many different needs that must be satisfied by adapted marketing mixes. Therefore, standardization ignores the cultural differences for the sake of simplicity and cost savings. The knowledge of cultures and the understanding of cultures is important to develop effective marketing strategies across cultures. Simplifying cultures is done via segmentation. Segmentation helps clustering groups of people that might respond in the same manner to specially adapted marketing strategies. Segmentation plays a vital role in the process of standardizing marketing efforts. It helps standardizing customer groups. How far can companies go in standardizing their marketing efforts? This topic is discussed by many authors as mentioned later in this article and represent a dilemma global companies face. Either they simplify their marketing strategies to save costs but ignore cultural differences or they adapt their marketing strategies to local needs and incur rather high costs and high efforts. The main problem this article investigates is how can the concept of culture be used to resolve the dilemma faced by global companies in standardizing or adapting their marketing efforts?

First, this article investigates the concept of culture. Then a section on segmentation follows. Both concepts are integrated in the third section. The standardization/adaptation debate is enlighten in the section on global products and global segments. There the reconciliation methodology of Fons Trompenaars is applied to solve the dilemma. A practical example how this methodology is used is described in the last section of this article about Motorola. The paper end s with a short conclusion.

The concept of culture

Culture is the ‘collective programming of the mind’ according to Hofstede (1980). Hoecklin (1995) identifies four major characteristics of culture: (1) a shared system of meanings, (2) relative, (3)learned and (4) collective. Both definitions are very similar. The shared system of meanings means that groups have a common understanding of behaviors, meanings and events. An individual learns this common understanding from the group and is able to anticipate the behaviors of other group members. Culture is never absolute, it is relative because the group actively selects, reacts and creates it’s environment. Still there is not one group member that could be representative for a culture. Culture must be seen in the context of the group that shares the same system of meaning. Many individuals of this group do not realize their cultural context. They are part and actively part of a culture that the culture is taken for granted. Trompenaars and Hampden-Turner (1993, p.21) say the most difficult question to ask is “can you name anything that is not encompassed by the concept of culture?”. Hofstede (1980) and Trompenaars and Hampden-Turner (1993) researched the concept of culture with the help of bipolar dimensions. The most important bipolar dimensions mentioned by both researches are power distance, uncertainty avoidance, collectivism/individualism and universalism/ particularism. Power difference shows how convinced people are that differences in power are given and accepted. Uncertainty avoidance measures how much people are expecting the unexpected. Collectivism/individualism points out the importance of the group relative to the individual. Universalism/particularism indicates if the rule itself or the person that makes the rule is more important. These dimensions are thought of to be good indicators to measure cultural differences. To better understand the concept of culture Trompenaars and Hampden-Turner developed a model of culture. For them, culture has an outer (explicit) layer. It is the ‘observable reality’ (p.21) consisting of food, language, symbols, buildings, monuments, dance and many more symbols. Those symbols stem from the inner layer. The symbols are representing the middle layer, norms and values. Values and norms interact with each other. The norms of a culture must be in balance with the values. Norms are informal (social control) or formal (written) to represent the mutual sense of a group. Values in contrast are the definition of what is right or what is wrong in a moral sense. Norms can become values but the norms must reflect the values of the group. If not, the culture is in unstable condition. The difference in values between groups reflects the difference in basic assumptions different cultural groups make. A basic assumption is one that is not questionable or never questioned before. The core assumptions are not directly visible and one can only experience those by participating in the group. In other words one has to learn those For better understanding the different layers of culture are shown in graph 1 below.

Graph 1: layers of culture

Abbildung in dieser Leseprobe nicht enthalten

Source: Riding the Waves of Culture, Fons Trompenaars & Hampton-Turner, 1993

Segmentation – methods and bases

Segmentation is a term describing how companies try to identify customer groups with homogenous needs. The advantages of segmentation for companies are straightforward. By knowing the needs of specific customer groups (segments) companies are able to adopt their marketing strategies accordingly and can undertake efforts to satisfy the needs of those segments more efficiently and effectively. The definition for a market segment is a customer group with similar or homogenous needs (Weinstein, 1987).

Weinstein believes that segmentation is worth undertaking if several conditions are met: homogeneity within the segment, heterogeneity between the segments, sizable population and access to meaningful segmentation data. The first two conditions, homogeneity within and heterogeneity between segments are of particular interest in the context of cultural diversity. Homogeneity within the segment means that individuals in a segment “should fit some sort of typical profile” as Weinstein puts it (p.12) or in other words members of one segment should show similarities in purchase behavior. Heterogeneity between segments points out the difference between the segments. The personalities within a segment distinct themselves from other segments by different needs and buying motives. The last two conditions mentioned by Weinstein, meaningful data and sizable population, are more of practical character. Sizable population indicates that companies should not ‘over-segment’ and split up the customers into too small segments as this is costly and ineffective/inefficient. The same holds for the meaningful data requirement. If there is no data available one cannot form a base to segment on. If data must be gathered by the firms themselves the cost of segmentation are likely to exceed the benefits. There is no best way to segment markets, but Weinstein mentions a dichotomy to help identifying segmentation bases: the physical versus the behavioral base.

Companies usually segment customers according to physical attributes or behavioral attributes. Physical attributes are the geographic bases, demographics and socioeconomic. Psychographics, product usage and benefit segmentation are the most common examples of behavioral attribute segmentation. The major physical and behavioral dimensions are summarized below following Weinstein’s approach of classification of segmentation bases.

Physical Attribute Bases

Market scope factors and geographic market measures are the two geographic segmentation dimensions. Market scope is a geographic segmentation dimension that clusters geographic areas by geographic attributes. A company can choose to segment departing from a global market. A typical sub grouping of the global market would be in either international regional markets (e.g.: Europe) or selected international markets (e.g. Belgium and The Netherlands) or the domestic market (e.g. The Netherlands). Other geographic attributes can be used: one can segment on population density (cities with 10.000.000 or more inhabitants) or climate (Mediterranean, Nordic). Segmentation on the bases of geographic attributes is the simplest way to segment. Demographics and socio economics are a the next step in identifying customers’ needs more detailed. Demographics and socio-economic attributes are statistics dealing with characteristics of a given population. Socio-economic factors, as the name implies, deal with statistics concerning a population social class and economic measures. Demographic factors are used most often to classify the different geographic segments mentioned above into smaller clusters. Population, age, gender, race, nationality and religion are common demographics to cluster customer segments. Socio-economic bases are for example monetary factors like income, homeownership and social class.

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