The Asian Market

The Asian Market

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Nowadays, emerging markets are becoming more and more attractive for multinational companies. Particularly the Asian market, headed by China, represents an enormous potential. Asians consumers are motivated by a complex range of cultural factors and are becoming more interested in pursuing brands to experience their reputation, to stand out from the crowd or to create new trends of a modern high-class lifestyle in purchasing items of established, mostly western brands. Especially the uprising group of young urban professionals, the so-called Yuppies, is eager to spend big amounts of their comparatively high income on upscale brands. Hence, many multinational companies, particularly those selling premium fashion, luxurious accessories or sought-after consumer electronics on the Asian market, recognize a steady double-digit percental increase in sales. Nevertheless, the raising income levels of Asian high earners are still relatively low compared to more developed economies. In fact annual income levels within the peer group of Asian Yuppies living in tier one metropolises reached in 1999 from $ 12.000 in Thailand to $ 18.000 in Taiwan to about $ 35.000 in Korea and China. Moreover housing costs throughout the Asian cities are comparatively high. This is why not every Asian Yuppie is able to spend excessively, and young professionals generally stay with their parents even after starting work and beyond. Consequently, this segment of the Asian yuppies cannot be considered as homogenously, since some are able to spend on expensive upscale brands and others have to focus on middle class brands, offering products that pretend to be high class.
Thus, the potential of the Asian market appears to be an attractive and challenging field to a wide range of companies. However, entering a new market is not trivial; strategies must be established according to the market and the target group to provide a distinguished marketing mix. The Asian market is composed by many countries what also involve different cultures and preferences, as well as unequal living standards.
To get an approach to the unknown market in order to design the marketing mix the segmentation of the market is the primary step. There are three main different ways to segment the market; geographically, demographically and psychographically.
Generally the geographical market segmentation is based on variables such as region, country size, and density of the population. Referring to Asia the market is very diverse in the geographical aspect. So, the geographical segmentation should be the first step. On the one hand there are wide agrarian or barren areas with little infrastructure, sparsely populated by inhabitants with low incomes on average.

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On the other hand there are jam-packed, overcrowded mega cities with high living standards as well as upper level incomes. Consequently, the first step of geographical segmentation before entering the Asian market should be concentrating on the big Asian metropolises with their high density of inhabitants. But still the percentage of high earners with disposable incomes in the huge tier one cities is very little, therefore this segmentation is very scarce and will not lead to final success. In the second step of clustering this very rough local segmentation one has to take the demographic variables into consideration.
The demographic segmentation concerns all critical statistics regarding the market. By using demographic facts, it will be required firstly to ascertain all the statistics features of your customers. In the case that the company targets the final consumer, the “demo segmentation” is characterized by many features like ages, sex, educational level, professional and social categories, marital status as well as ethical or religious aspects. By focusing on these aspects, companies are able to put up a quite precise customer profile and get a first idea of their possible consumer behavior.
There is a wide range of existent criteria to analyze the demo segmentation; however it is essential to take all of the available variables into account. Decision makers should be able to determine which target features are the most appropriate to the product or service they want to bring to market. For instance, in Asia the most important demographic criteria will be firstly the level of education that determines income, secondly the age group and finally the cultural orientation. Regarding to this classification, the most important target within huge Asian cities could be the group of highly educated young professionals aged 20 to 45, which is highly motivated to spend their high incomes. This group of status conscious high earners is supposed to be very open-minded about new trends and styles. In fact, this is what makes them an outstanding target group to companies entering the market, but at the same time, the fast moving coexistent streams within their peer group make it hard for a foreign respectively a multinational organization to keep up with. Therefore this group’s segmentation just by demo variables is not sufficient and it is needed to add a psychographic segmentation to further homogenize this complex group and identify what influences this group of people and to get to know what leads to new trends as well.
Since the psychographic segmentation refers to the personality and the emotional behavior (e.g. habits) that influence the buying process, it is the logical following step to determine the way of communication to the target group. This is the neuralgic point where culture has to be taken into account, since it has a very strong influence on the consumer’s behavior, it could provide important information about the product- or even brand-related characteristics that might be essential for the client. Being a multinational brand, the psychographic segmentation can provide information, for instance, if an internationally distributed product should be modified according to different customer needs that will occur on the Asian market.
If the product is not sold for the use but for the image it will be complicated to enter the market. High brand or product differentiation is needed what includes high research cost. It is based on qualitative perception and it must fit to the consumers desires otherwise the target group will not be reached.
It could be interesting to focus on the Starbucks strategy in order to better understand the way they are successfully entering the Asian market. Knowing as a fact that housing in Asian cities presents difficulties and high costs what explains low superficies. Moreover, cities are crowded due to the growing level of urbanization in order to find better jobs and gain higher incomes. So, the strategy applied by Starbucks is mainly psychographic. They try to create a special atmosphere in their shop. They want the client coming more for the ambience of their cafés which are large and comfortable than for the product. Here, the idea is to distinguish Starbucks from his competitors by being a pleasant place more than utile. It could be seen as a calm place of refuge from the teeming cities. Moreover, Starbucks locates its cafés in famous places as the Forbidden City. There are two main reasons for the choice of locations; it is firstly for the traffic, what means the abundance of potential clients. Secondly, being present in famous places facilitates the international image and reinforces the presence of the brand.
In order to enter new emerging markets, companies firstly have to adapt a distinguished segmentation strategy in order to create a special marketing mix for every segment. The market complexity cannot be summarized as one segmentation strategy especially in the diversified Asian market. Companies must take all the segmentation strategies into account and mix each of them in order to create homogeneous clusters. So the first step could be to cluster the market geographically, to be able to identify the target group demographically in the second step. Finally, cascading the segmentation further down to the psychographic segmentation will facilitate the process of reaching the customer.
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