The International Consumer Market Segmentation Managerial Decision-Making Process
Craft, Stephen H., SAM Advanced Management Journal
The increasing internationalization of consumers as well as the growth of technology have created important opportunities for marketers to target customers across borders. The growth in international consumer marketing along with the development of sophisticated database-driven customer relationship management (CRM) capabilities has reinforced the interest of practitioners and researchers in customer segmentation. Segmentation continues to be the focus of considerable attention in the popular business press as well as in academic journals. In particular, the international segmentation literature has focused upon criteria to select target countries (Hassan, Craft, and Kortam, 2003; Helsen, Jedidi, and DeSarbo, 1993; Nachum, 1994; Ter Hofstede, Steenkamp and Wedel, 1999) and behavioral bases to select target consumers (Crawford, Garland, and Ganesh, 1988; Dawar and Parker, 1994; Hassan, Craft, and Kortam, 2003; Hassan and Katsanis, 1991; Souiden, 2002; Ter Hofstede, Steenkamp and Wedel, 1999) as drivers in defining segments. Several authors have presented general conceptual models that propose specific segment/product relationships (Domzal and Unger, 1987; Douglas and Craig, 1989; Jain, 1989; Kale and Sudharshan, 1987). While researchers have been successful in identifying market segments suitable for a number of narrowly defined purposes, relatively little of the research offers any insight into the process by which managers make decisions about segmentation in the international consumer market.
As a first step in addressing this topic, this paper examines the decision process by which finns develop international market segmentation strategy. Specifically, this paper synthesizes a substantial body of literature to present an integrated multi-step framework of the international consumer market segmentation strategy-making process. Further, this paper presents qualitative case examples from fieldwork with six international organizations, with the purpose of examining the veracity of the framework in actual practice.
International Segmentation Decision Process
Markets and the customers who make up those markets are not homogeneous (Claycamp and Massy, 1968; Smith, 1956). Wendell Smith (1956) suggested that segmentation, the division of a market into groups of customers who share certain characteristics or propensities toward a product or service, might be an effective way for an organization to manage diversity within a market. Since that time, a rich literature has developed suggesting techniques and bases upon which a single domestic market might be effectively broken into actionable customer segments.
A distinct track of the literature in international segmentation began with Wind and Douglas' pioneering treatment of international market segmentation in 1972. Prior to that, market segmentation was viewed primarily as a domestic strategy, and the occasional mention of international market segmentation in scholarly research was cursory at best. Wind and Douglas (1972) put forward the argument that segmentation is not just equally important in the international market, but in fact may be more important because international markets are more diverse than domestic markets.
The development of international segmentation strategy has been alternately conceptualized as a linear process or as a portfolio of interrelated decisions (Wind and Douglas, 1981).
However, in each case at least two distinct decisions for defining international market segments are implicitly assumed. Wind and Douglas (1972) termed the first decision as the "macro" segmentation decision in which countries are classified and targeted based upon national market characteristics. The second decision is to analyze and sub-divide each qualifying target country by customer characteristics to form market segments (Wind and Douglas, 1972). The two decisions are assumed to be normative.
The two decisions also are assumed to follow a clear temporal order--country selection followed by customer segmentation within the country. …