Strategic segmentation of markets due to cultural consumer behaviour & advertising

The first appearance of an outlet store took place more than a century ago. This entrepreneurial activity evolved nowadays into a worldwide phenomenon. Some manufacturers even created specific product lines to sell at these stores for low prices. However, it is seen that some manufacturers have none outlets at all in some countries. The outlet phenomenon is not universal for all. This problem is more related to how consumers are different than how companies are different themselves. Our paper takes a deep step on the discrimination due to consumer behaviour. It demonstrates that there are some other consumer characteristics that the manufacturer should take into account when considering the option of opening an outlet in a certain country. The model comprises two different scenarios. The first scenario examines the hypothesis in a developed country, while the second one examines the hypothesis in a developing country. The analysis of this model demonstrates that manufacturer’s decision to open an outlet store is not linked to differences in consumer cultural background, however, there are differences when including advertising to the study. Advertising costs are higher in developing countries, because of the difficulty in reaching the right audience and the generally higher risk aversion of consumers towards switching stores. Therefore, it is demonstrated that the appearance of outlet stores in developing countries is not the most advantageous choice for the manufacturers.