In Market Segmentation, we divide the target market into groups based on shared consumer characteristics like age, gender, needs, geography, etc.
This last segmentation variable ‘Geography’ usually groups together people from the same country or region into a single marketing segment because the assumption is that people living in the same geography will have similar buying habits, likes, dislikes, and decision-making processes.
However, sometimes customers in different geographies may also exhibit similar needs, buying habits and product preferences.
Intermarket Segmentation does away with ‘Geography’ as a segmentation variable and segments the market ignoring national or regional boundaries.
Instead, it focuses on what’s common between consumers from different markets like needs, sensitivity to price, and perceived benefits.
Intermarket Segmentation: A Definition
Intermarket Segmentation is the marketing strategy where customers with similar needs and buying behavior across different geographic markets are grouped together for a combined marketing strategy.
The goal of Intermarket Segmentation is to create a single target market that can be reached with a unified message and identical products, rather than multiple markets with different messages and strategies.
Benefits of Intermarket Segmentation
Common Marketing Strategies across geographies
Having a single target market across geographies can result in a more efficient use of marketing resources as the same marketing messages can be communicated to all customers in the geographically distributed single market.
Marketing strategies are also easier to manage and monitor as there is only one target market instead of multiple ones across different countries.
The only caveat is that some amounts of language and cultural localization will be required as different geographies may have different languages and cultures. But the core marketing messages can remain the same.
Economies of Scale benefit Product Development
A single market across many geographies is usually a large market with similar needs and requirements. This makes it easier to design and develop products as a single version of a product can cater to the needs of many customers in different countries.
Economies of scale can help bring down unit production costs and improve return on investment.
This is especially the case with software products, where the marginal cost of producing a new unit is zero.
Optimized Sales teams
Intermarket Segmentation also allows sales teams to operate across geographic and national boundaries.
This helps build optimized sales teams rather than duplicating sales efforts in every region and every country.
Optimized sales teams are composed of specialists, rather than generalists, which makes them highly efficient and effective in closing deals and converting customers.
Higher Profit Margins
With Intermarket Segmentation, a single marketing strategy can work across different geographies. So, marketing costs can be lower compared to when different strategies need to be created and executed in each country that a company operates in.
Similarly, by addressing a large target market, product development costs on a per-unit basis go down. This is the benefit of economies of scale.
Also, as we’ve seen, smaller sales teams are able to serve the entire market thus lowering the cost of operating the sales effort.
All of this means that by following Intermarket Segmentation, a company can lower its unit costs thus creating an opportunity for generating higher profit margins.
Examples of Intermarket Segmentation
Computer users who are conscious of security and data protection and would like to have a solution that protects their computers and their online privacy have similar needs and buying habits in all parts of the world.
This is why software companies that make computer security software, like antivirus software, have an identical product for virtually every part of the world. The only localization that they might do will be for language. But the core security functionality is always the same.
Every tennis player in any part of the world needs a tennis racket.
And their requirements from a racket are governed not based on where they live but usually on their level of expertise of the sport or perhaps on their height and strength.
So, a beginner teenage tennis player in the United States will have similar requirements from a tennis racket compared to a beginner teenager in Europe or in Asia.
Similarly, a male expert player in one part of the world will have similar requirements as a male expert player somewhere else.
In short, the needs of tennis players are not based on their geographic location but on other characteristics like their height, strength, type of court, and level of expertise in the sport.
So, manufacturers of tennis rackets can use intermarket segmentation to create segments of tennis players who live and play in different parts of the world but who share the same characteristics when it comes to playing the sport.
This way they can create products for segments like “beginners” or “occasional players” or “budding professionals” and market to these segments independent of the physical location of the customers in each segment.
Intermarket segmentation is a form of market segmentation that groups consumers or customers with comparable needs, demands and purchasing patterns from multiple geographic locations into a single customer segment.
This means common marketing strategies can be built to address customers in different countries and regions. This makes marketing easier to manage and monitor and helps lower costs.
Costs can be further lowered by the benefits gained from economies of scale which come as a result of addressing a very large market. A single market across geographies also helps in optimizing the sales effort and can leave room to companies to either cut their prices and be more competitive or to benefit from higher profit margins.