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Present Stock Market Valuation of Targeting Decisions

13 July 2007 - Features - Editor

Knowledgeable stock market circles invariably value segmentation and targeting operations. Finance professionals never tire of taking pot shots at colleagues in the Marketing function, but categorizing the total market and selecting pieces to address, are moves which always command respect, because they aim to save money and to improve productivity.

Conventional methods of market segmentation hide assumptions which may not always be clear to the stock market. Targeting adolescents in the hope that they will develop in to brand loyal adults is an exception, because most marketing exercises are geared towards today’s consumers. This is understandable because survey methods, which are the best ways on producing objective primary data, focus on the present: respondents are not generally trusted with projections.

The stock market shift from the stable first world to exotic territories in emerging markets has changed the way in which market segmentation should be valued. Socio-economic groupings in countries such as India and China are in flux. It is tempting for new entrants from western markets to target the most affluent sections of society in conditions with which they are unfamiliar, though domestic players with invaluable local experience value dense segments more.

It would not be unusual for stock market circles to side with profitability at the cost of volumes, but this traditional math is not relevant for the dynamic demographics of the emerging world. Territories such as China and India are populated by vast numbers of upwardly mobile potential customers of the future. Surveys show that such consumers tend to be more brand loyal than their more affluent peers, and that they value umbrella corporate brands more than individual products as well.

The present values of projected stock market cash flows are likely to be better if brand owners target middle-classes of tomorrow. Affluent customers are suitable for niche marketing alone when one transits from mature economies to rising ones. Large populations demand focus on a median economic segment. The experiences of luxury automobiles are telling in this regard: many of them have had to enter lower segments in order to reach critical mass in a market such as India.

Do companies in which you have important stakes have their sights set on the right segments of overseas markets?

 


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