Geographic segmentation identifies marketing strategies based on variations in language, climate, and lifestyle within regions, countries, and population densities. Companies adjust their marketing mix for various regions based on transportation costs, competition, and demand. High barriers to entry may indicate a monopoly subject to international antitrust scrutiny.
A market classified by geographic segmentation is a geographic market. Geographic segmentation seeks to identify marketing strategies by taking into account variations within geographic markets in terms of language, climate and lifestyle. Geographic markets may vary in size or market definition. Three geographic units that distinguish geographic markets are regions, countries, and population densities; each of these units can be divided into subunits.
A regional geographic market can be segmented in various ways. Countries, counties, and metropolitan areas all represent different geographic regions. Regions can also vary in size and population density. Examples of regions in the UK include Scotland, Wales and Northern Ireland.
Geographic markets separated by country are often broken down by level of development, size or belonging to a particular region. Various levels of development may include state, industry level, and growth rate. Size segmentation can be based on population or financial standing; this may include marketing to countries with a certain gross domestic product. Geographic markets based on country affiliation can refer to continents, countries with similar systems or with similar languages.
Geographic segmentation by population density may include dividing areas into urban, suburban or rural areas. Population density marketing often divides larger geographic regions or countries into smaller subunits. The smaller the subset, the more precise the marketing mix can become, but the smaller the market, the higher the cost to implement individual marketing plans.
Geographic segmentation is most frequently used by global and multinational companies. Operating across a large geographic subset often means that companies need to adjust their marketing mix for various regions. These companies may choose to modify a product based on market segmentation or keep a generic product. Both options must take into account geographical differences, languages and lifestyle preferences.
The elements that companies consider when choosing parameters for a geographic market are transportation costs, geographic competition and demand. High transportation costs can deter firms from entering distant geographic markets. High competition and high entry barriers can also dissuade organizations from pursuing a particular geographic market.
A geographic market with high barriers to entry, for example, may be an unprofitable investment despite other favorable factors. Many barriers to entry can exist, including predatory pricing and high advertising expenditures by incumbent firms, making it difficult for new industries to enter the market. Very high or absolute barriers to entry may indicate a monopoly which, depending on location, could be subject to international antitrust scrutiny.
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