Cultural Considerations in the Segmentation Process: a Case Study of the Wine Market

ABSTRACT - Wine consumption patterns were examined across several countries. The results indicate that segmentation model developed by Dubow is effected by cultural background. However, transnational market segments were identified and can be used by wine marketers as the basis of an undifferentiated strategy.

Citation:

John Hall, Michael Shaw, and Isobel Doole (1994) ,"Cultural Considerations in the Segmentation Process: a Case Study of the Wine Market", in AP - Asia Pacific Advances in Consumer Research Volume 1, eds. Joseph A. Cote and Siew Meng Leong, Provo, UT : Association for Consumer Research, Pages: 292-299.

Asia Pacific Advances in Consumer Research Volume 1, 1994      Pages 292-299

CULTURAL CONSIDERATIONS IN THE SEGMENTATION PROCESS: A CASE STUDY OF THE WINE MARKET

John Hall, Victoria University

Michael Shaw, Monash University

Isobel Doole, Sheffield Hallam University

ABSTRACT -

Wine consumption patterns were examined across several countries. The results indicate that segmentation model developed by Dubow is effected by cultural background. However, transnational market segments were identified and can be used by wine marketers as the basis of an undifferentiated strategy.

INTRODUCTION

During the past decade there has been much debate as to how companies can develop strategies to survive in the globally competitive international marketplace. Most scholars agree that to survive global competition, companies need to target products and services to specific segments across different countries. Thus to compete in international markets companies need to develop effective strategies to deal with similar consumer response patterns that transcend national boundaries (Farley 1986 p.19). This decade has already witnessed the formation of the European Union and the inception of the North American Free Trade Area. The competitive landscape is changing dramatically. In Europe as the barriers between countries come tumbling down companies looking for regional market expansion are developing strategies to gain competitive advantage across the Pan European market. Trends towards regionalisation, the emergence of trading blocs and globalisation of markets are all contributing to changing the perception of what constitutes a market. Increasingly markets may no longer be defined by national boundaries as borders lose their significance and thus the traditional way of segmenting international markets also begin to lose their significance.

Market segmentation is the strategy by which a firm partitions a market into sub markets or segments likely to manifest similar responses to marketing inputs. The aim is to identify the segments on which a company can concentrate their resources and efforts to achieve maximum penetration of that market rather than a spreading strategy where the aim is to get a presence, however small in as many markets as possible.

The traditional and common practice in international marketing has been to segment a market using environmental factors as the primary base for segmenting international markets perhaps classifying countries by political systems or level of economic development into distinct categories such as:

The Primary Markets, where the best opportunities for long term strategic development are seen.

The Secondary Markets, where opportunities are identified but political or economic risk is perceived as being too high to make long term irrevocable commitments.

The Tertiary Markets, Catch what you can markets. These markets will be perceived as high risk and so allocation of resources will be minimal.

The pareto law usually applies to international marketing strategies with its full vigour. The most broadly-based and well-established international firms find that 20 per cent of markets will generate at least 80 per cent of the revenue. Obviously these consumers must receive greater managerial attention and allocation of resources.

Once the prime markets have been identified and targeted companies then use standard segmentation techniques to segment the markets within countries, by the use of such variables as, Demographic/economic factors, lifestyles, or Psycho graphics, etc.

Thus in international marketing strategy the base unit of the segmentation process is often the country, not necessarily the consumer. The prime segmentation base is environmental, a descriptive variable which does not necessarily help predict a type of common response to any given marketing stimuli. Finally the secondary segmentation bases are developed country by its markets. Such companies need a trans-national approach to the segmentation strategy, one that transcends national boundaries and focuses on consumers and how they may respond to marketing stimuli rather than environmental variables which merely describe what consumers are.

Recent literature shows there are a number of researchers and companies working on this issue. Kale and Sudarshan (1987) were one of the first to argue that to achieve an internationally competitive position firms needs trans-national view of segmentation to formulate strategically equivalent segments (SES) that transcend national boundaries. If this was done then the marketing strategy would be based on the premise that world markets consist of both similarities and differences and that the most effective strategies reflect full recognition of similarities and differences across markets rather than within markets.

They argue that companies competing internationally should segment markets on the basis of consumers not countries. Segmentation by purely geographical factors leads to national stereotyping, ignores the differences between customers within a nation and ignores similarities across boundaries. According to Kale and Sudharsen (1987) to achieve SES, the segmentation process needs to be carried out in stages.

Firstly identifying the countries that have the infrastructure to support the product and are accessible to the company. Secondly screen those countries to arrive at a shorter list of countries that meet certain qualifying criteria, and thirdly developing micro segments, irrespective of country. Each micro segment would then be rated on several strategic factors in terms of potential response and cluster analysis used to identify meaningful trans national segments. It is argued this would enable markets to design strategies at a trans national segment level and so take a more dynamic approach to international marketing. Similar inter market segmentation approaches are also proposed by, Krutzer (1988) and Wind & Douglas (1972), Vandermeuvwe (1988) has suggested a restructuring of segments within the European market on a similar base, concluding that segments formed will be either regional mass segments, pan euro-niche segments and local segments.

Several global advertising agencies have been working to provide segmentation tools to help markets support their international market development decisions. Backer Spielvagel Bates WorldWide (BSBW) the worlds third largest advertising agency network have since 1985 carried out a continuing global survey of consumer values, attitudes, media habits and buying patterns. A total of more than 15,000 consumers are now being surveyed every year in 14 countries across the Americas, Europe and the Pacific. The objective of globscan is to build information on product and brand purchasing behaviour, family lifestyles and insights into the hopes, fears and motivation of consumers across the globe. Through this they have endeavoured to ascertain the feasibility of formulating realistic global consumer segmentation bases that cross national lines. Their latest findings give key broad based indicators that appear in every country surveyed. BSBW have by using psycho graphic segmentation techniques identified five distinct consumer segments which appear in all countries surveyed and so can be used as a basis for developing global consumer segments which transcend national boundaries.

Young & Rubican's Cross Cultural Consumer Characterisation use a similar methodology to measure and segment people based on their goals, motivations, and values. People in 12 countries have been classified into segments by the system.

All of these procedures disregard the political boundaries of countries, treat the whole globe as one single market, and look for groups of consumers which transcend national boundaries but possess common characteristics relevant to the marketing activity. However some writers argue that companies still need a secondary segmentation level to identify the key countries where these trans-national segments can be found and so fragmentation can still occur.

CCN with their Euro Mosaic segmentation system take a bottom up rather than the top down approach of the ones discussed above. Euro Mosaic build portfolios of individual customers with common needs, this has made increasingly possible through techniques of one to one marketing and trans-national database marketing.

All of these approaches are attempting to build segmentation bases that are consistent across international markets. However, whilst a large number of variables were used in the studies discussed it is still difficult to identity procedures that take into account active marketing variables that may determine the identify of segments which are trans-national and evoke manifestly differing responses from a marketing input. Whilst the studies discussed are attempting to focus segmentation procedures on the consumer rather than the country, they are still using passive descriptors of consumers rather than behavioural variables. The authors argue that it is behavioural variables that need to be understood in order to predict potential differing marketing response from varying segments. Malhotra & Baalbaki (1992) argue that the focus should be on marketing management variables, i.e. the use of marketing mix factors to segment international markets.

In this paper we intend to examine the plausibility of using product related buyer behaviour variables to achieve trans-national segments.

RESEARCH RATIONALE

The focus of the research is the Australian wine market. The major wine markets can be divided into the premium market, which is represented by the fine bottled wine and the wine beverage market, which is predominantly mass production of wine and has much in common with the beer, spirits and soft drinks market. Until recently, Australian wines predominantly were marketed internationally as an inexpensive beverage to the mass market, often with little consumer research and few attempts by the wine companies to build brand loyalty. Market demand was buoyant and mass marketing, mass merchandising, and volume selling were the key to success. However the growing competitiveness of the international marketplace now requires a more in-depth analysis of buyer behaviour as a means of need satisfaction and the development of consumer loyalty. The wine market is growing in sophistication, and the opportunities for market segmentation are increasing. (Spawton 1991). Rising levels of consumption of wine have been noted in a number of international markets and as the market becomes more sophisticated there is a move to premium products world wide. To build a competitive advantage therefore the Australian Wine Companies need to adopt an effective target marketing strategy which will allow them to build a global brand position in the international wine market. This was reinforced in a recent forum on the global market place by Jennings (1993) when he said that the ability to specialise and segment markets within a global marketing strategy was a major ingredient of success.

RESEARCH OBJECTIVES

The aim of the research was to:

1. Build a profile of buyer behaviour and usage patterns of the wine drinker by examining the motivations and needs which influence wine drinking occasions.

2. To identify behavioural variables that are common amongst a variety of cultures.

3. To identify meaningful segments that transcend national and cultural boundaries.

RESEARCH BASE

Motivational factors were determined using 32 wine consumption benefits (see Table 1) drawn from Dubow's (1992) segmentation study in the wine market in the US. In this 1150 wine drinkers were sampled reporting 1720 wine consumption occasions. Our intention was to use these factors to identify motivational factors that were common across cultural groupings. A likert type scale was used to determine which motivational factors were significant in the consumption of wine in each cultural group.

Cultural background can play an important role in the purchasing of products both in terms of users and occasions of consumption. Personal values are a major component in predicting purchase behaviour and those vary according to cultural background, those culture offers a practical segmentation base, particularly with regard to wine.

Kluckohn (1951b) has produced a composite definition which is normally used by modern researchers into culture and cultural differences:

"Culture consists of patterned ways of thinking, feeling and reacting acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including the embodiments in artefacts; the essential core of culture consists of traditional (ie. historically derived and selected ideas and especially their attached values. Culture is an abstraction from behaviour. We do not see culture but observe manifestations of it, just as we do not see electricity or gravity but observe manifestations of them. Nobody observes a total culture directly, but only parts of it, such as words, actions and thinks."

RESEARCH METHODOLOGY

The research was carried out in Melbourne, Australia. Melbourne is the cultural melting pot of the southern hemisphere and it was decided that for our pilot study a good cross cultural representation could be obtained in this area prior to our carrying out a full international study should the findings prove significant. Australia has a population of 17.3 million, 23% was born overseas and a further 19% of the population has one or both parents born overseas.

TABLE 1

THE 32 MOTIVATIONAL FACTORS IN CONSUMING WINE

A sample of 482 respondents with a cultural break down as follows:

109 Australia

118 Italian

120 Greek

135 German

The choice of cultural background was a subjective decision made by the respondent. respondents were asked to consider whether an overseas culture from their family background had an influence on their actions, motivations, or decision making processes. The respondents with an Australian cultural background were selected randomly. A convenience sample was used for respondents of other cultural backgrounds.

The data was collected by personal interviews using an attitudinal battery developed from the 32 wine consumption motives identified above. The measurements were obtained by a 5 point Agree/disagree scale.

It has long been accepted that consumption habits, which are part of the behaviour patterns of individuals, are deeply affected by the prevailing culture of the society in which people live. Individuals may react quite differently to the same situation, according to their culture background, inherited value system and general experience. The cultural values of a society find expression in the products and services that are demanded, or more concisely from Hobel (1960)

"the integrated sum total of learned behavioural traits that are manifest and shared by members of a society."

While there are many types of segmentation, benefit segmentation is the approach investigated in this study. Benefit segmentation is an approach that divides the market into segments based upon benefits sought by different consumer groups. (Simpson 1992).

When considering international marketing a global strategy vis-a-vis a tailored marketing strategy can be debated, each strategy has its proponents and critics. The two strategies are not necessarily mutually exclusive, (Yavas 1992) examines the viability of a middle ground approach that considers the heterogeneity among nations and homogeneity across national segments. A consumer survey was undertaken with comparable samples of consumers in the US, Mexico, the Netherlands, Turkey, Thailand, and Saudi Arabia. The results clearly indicate that consumers in the six countries do differ in their risk perception and brand loyalties. However, the results also demonstrate the existence of consumer segments that transcend national boundaries. Thus, marketers could adopt a modified global marketing approach and market to different countries with a common strategy.(Yavas 1992).

To do this organisations consider the similarities and differences that cultural background has in the consumption of wine.

ANALYSIS OF FINDINGS

When Considering wine preference it is apparent that a greater proportion of Italians and Greeks have a preference for red wine, while a greater proportion of Germans and Australians have a preference for white wine. only a small proportion of all cultural groups have a preference between cultural groups apart from the German component being slightly higher.

The Italian and Greek cultural groupings have a greater preference for sweet wines while the German and Australian cultural groupings have a greater preference for dry wine.

Tables 2 and 3 show the wine preferences of the different cultural groupings. It is interesting to note that whilst there are variations between cultures, these differences are no more significant than the differences within cultures. Australians distinctly prefer white dry wines but other cultural preferences were much more evenly balanced.

SIMILARITIES IN WINE CONSUMPTION MOTIVES BY C.B.G.

The 32 wine consumption motives for each of the four C.B.G. categories were compared. This involved the comparison of the mean rankings between pairs of cultural groups. (The comparison used multiple application of pairwise t-tests for the mean score in each category).

The results showed that 18 of the 32 motives did not distinguish between the C.B.G. of the consumer. Those motives included both the behavioural factors and psychological dimensions. Social factors which are typically strong motives in wine consumption included, such as 'To be sociable', 'To be friendly' and 'Socially acceptable' did not distinguish between C.B.G. Characteristics of the wine such as 'Low alcohol', 'Less filling', 'Low in calories', 'A mild tasting drink' and 'A refreshing drink' were also factors that did not show any differentiation. Psychological dimensions that are similar between the categories are 'Feeling lonely', 'Watching weight' and 'Feeling depressed'.

TABLE 2

WINE PREFERENCE: RED V WHITE

TABLE 3

WINE PREFERENCE: SWEET V DRY

TABLE 4

MOTIVES FOR WINE CONSUMPTION

Table 4 summarises these motives and indicates the average direction of the score in terms of agreement or disagreement with the dimension as a major reason for wine consumption.

These factors provide some guidance as to which issues may be considered more generic, that is those factors that override cultural boundaries in the choice and consumption of wine. These are the trans-cultural factors.

The factors listed in Table 4 are motivational factors which influence the consumption of wine. In all factors listed there is little or no cultural diversity and therefore can be used in further analysis.

THE DIFFERENCES BETWEEN CULTURAL BACKGROUND GROUPS

Those factors that show a significant variation between specific cultural groups are described in Table 5. It should be noted that the analysis demonstrates differences between the European cultural groups as well as differences between the European and Australian Groups.

The overall hypothesis of variation in ranking scores can be tested by analysis of variance. The ANOVA test employed was used to determine if the individual mean scores found are likely to come from a population with the same means score.

The group by group comparison reveals some interesting differences between different culturals.

A total of ten of the factors showed some significant differences between the C.B.G. These were:-

'To have fun' - which was lower for Greek C.B.G. and higher for German C.B.G.

'To celebrate something' - was more typically a Greek factor and was less likely to be German.

'The aroma' - was a factor for German C.B.G. but not for 'Italian'.

'No hurry' - was the factor that significantly differs between Australian C.B.G. and the others.

'Special to Share' - is also an Australian factor.

'Natural drink' - is an issue for Australians rather than other ethnic groups.

'Romantic' - is most typical a Greek motive and significantly less likely to be German.

The 'Distinctive' character of the wine is less likely to be a motivation for Italians.

The image or 'Stylishness' of the wine is not overall an important factor, and is much less so for the German and Italian.

The personal 'Treat for myself' is more likely to be a positive factor for the German C.B.G.

USER BASED SEGMENTATION

The classical segmentation basis for many segmentation studies establish and compare categories of users.

The research carried out by Dubow (1992) suggests that there are five basic user groups in terms of a segmentation based on wine consumption motives for each individual. The hypothesis that cultural background groups should vary in their specific motives for wine consumption was tested using a MANOVA procedure. The model structure for MANOVA is based on the multiple combination of dimensions related to wine consumption and the cultural background category to which the respondents belong. [Both ANOVA and GLM procedures in SAS were used to analyze the data. Although ANOVA prefers balanced designs--equal respondents in each comparative cell--the results were almost identical to those achieved by the General Linear Models routines.]

X₁ + X₂ + X₃ ....... + X_n = Y₁

Where X_{1 .... Xn} are the wine consumption motives and Y₁ the cultural background category.

The test is whether the mean vectors for the underlying dimension are significantly different for each of the cultural groups.

Table 6 shows the statistical significance of the factor scores based on this multivariate analysis.

This analysis by motives indicates that cultural background could have a significant role to play in modifying the interpretation of the user based clusters.

The combination motives that group respondents into four of the five 'Dubow" user segments show significant differences between cultural groups.

These segments are 'The wine itself', which refers to the physical characteristics of the wine, and the behaviourally related segments, which refer to the properties that impact on people's physical and social behaviour. ('Semi-temperate' and 'Social'). The other dimension is 'Image conscious' which relates to psychological needs.

For this user based segmentation the only factor not to show some significant difference is the Introspective segment, those who drink to relax, to sleep or because they are depressed or lonely.

OCCASION BASED CLUSTERS

The occasion based clustering used in this survey is based on the dimensions obtained by Dubow. The dimensions included in the cluster solution vary from those that are important in the user based model.

The MANOVA analysis shows that three of the five factors show significant differences on the basis of the cultural background. These are Social, Introspective and Oenophilic segments.

Using the occasion based combination of motives, two clusters do not seem to show any differences by cultural background. These are Semi-temperate and Food enhancement.

Comparison of Cultural Diversity show that factors one, four and five have most commonalty across cultural groups it is therefore proposed that these factors could be used as parameters for identifying trans-national segments. Taking the Hedonistic factor as one variable and the extroversion factor as the second, a positioning grid could be constructed mapping out possible segmentation positions (Figure 1).

The extroversion variables denote occasion based motivations, romantic, social and celebration personifying the range of occasions where wine may be drunk. The hedonistic factors are much more product dependent and related to the benefit being sought from the wine, perhaps the image sought or the feeling of well being that is expected outcome of the consumption of the wine.

It is proposed by the authors that such research is useful in attempting to identify ways of looking at the wine market without the restrictions of constantly viewing cultural differences as a barrier to achieving a trans-national competitive position. Examining markets from this perspective can enable market planners to take a much more integrated approach to their international marketing strategy.

This is of particular importance to the Australian Wine Industry. As Australian wines have expanded internationally, success has been undoubtedly great. However in targeting countries and segments within countries, the different wine companies are competing against each other in the same segment rather than competing against the French or other European wines. A segmentation of the type suggested above would help mangers develop new perceptions of the market place.

We have examined the debate of the methodologies that should be used to segment international markets and established that managers need to take a trans-national view when segmenting these markets.

In examining how best such as approach can be achieved we have examined the wine market and researched motivational forces in the consumption of wine. Cross cultural analysis showed that many motivational factors influencing the consumption decision were consistent across cultures and that these would be used as a base for any segmentation strategy.

TABLE 5

CULTURAL BACKGROUND

TABLE 6

USER-BASED CLUSTERS

CONCLUSION

The analysis of the factors and clusters developed by Dubow in his construction of segmentation models for the wine market have shown to be significantly effected by cultural background.

The overall implications are that cultural factors do play a role in differentiation of wine consumption. It suggests that wine produces in the international market would do well if they examine the issues of cultural difference and if they choose undifferentiated strategy to use dimension that are trans cultural.

This investigation concludes that cultural factors do play a role in wine consumption, both in the local market and the international market. An undifferentiated marketing strategy however is possible by utilising factors that are trans cultural.

TABLE 7

OCCASION-BASED CLUSTERS

TABLE 8

FACTOR ANALYSIS OF KEY MOTIVATIONAL INFLUENCES

TABLE 9

COMPARISON OF ETHNIC GROUPS ON EACH FACTORS

FIGURE 1

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