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International Marketing Mix: Using the example of any one country (USA / UK any other) Product Decisions

Product Decisions – Concepts, positioning, design, geographic expansion, strategic alternatives, new products; Statutory Compliance; Product Customization

When launching a product into foreign markets firms can use a standard marketing mix or adapt the marketing mix, to suit the country they are carrying out their business activities in.

Product: The P, that carries your substance

Product Why Crucial???
• Basic marketing concepts tell us that we will sell more of a product if we aim to meet the needs of our target market. • Product decisions are probably the most crucial as the product is the very epitome of marketing planning. • The decision whether to sell globally standardized or adapted products is too simplistic for today's market place. Many product decisions lie between these two extremes.

Product??

• A product can be defined as a collection of physical, service and symbolic attributes which yield satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say, size and shape; and subjective attributes say image or "quality".

Product???

A product's physical properties are characterized the same the world over. They can be convenience or shopping goods or durables and nondurables; however, one can classify products according to their degree of potential for global marketing:
i) local products - seen as only suitable in one single market. ii) international products - seen as having extension potential into other markets. iii) multinational products - products adapted to the perceived unique characteristics of national markets. iv) global products - products designed to meet global segments.

Basic Product Concepts
• A product is a good, service, or idea
– Tangible Attributes – Intangible Attributes Products can also be classified as: Based on users Consumer Goods Industrial Goods

• Product classification
– Consumer goods – Industrial goods

Based on purchase Convenience Preference Shopping Specialty goods
Based on life span Durable, Non-durable Disposable

Product & brands categories:
• Local products
• National products • International products • Global products

Product: What to Sell ?
• The international marketer needs to determine what the market offering should be in a foreign market :
– Defining the product offering – Products versus Services/Rights

The Product Offering
Potential Product Augmented Product Expected Product

Generic Product
Core Benefit

Source : Adapted from: P. Kotler, Marketing Management, 1994

International Product Strategies
Straight Extension
The firm adopts the same policy used in its home market.

Product Adaptation
The company caters to the needs and wants of its foreign customers.

Product Innovation
The firm designs a product from scratch for foreign customers.

Source: W.J. Keegan, Multinational Product Planning: Strategic Alternatives, Journal of Marketing, 33, 1969, pp.58-62

Extend, Adapt, Create: Strategic Alternatives in Global Marketing
• Extension – offering product virtually unchanged in markets outside of home country • Adaptation – changing elements of design, function, and packaging according to needs of different country markets • Creation – developing new products for the world market

International strategic alternatives
Product strategy 1 Extension Communications strategy Extension Product/functions Met Same Conditions of product use Same Pepsi Examples

2 Extension

Adaptation

Different

Same

Soups

3 Adaptation

Extension

Same

Different

Agriculture chemicals

4 Adaptation

Adaptation

Different

Different

Farm implements

5 Invention

New

Same

-

Tyson turbine water pump Thailand tuna

Product Warranty and Service
• Product Warranty :
– Should a company keep the same warranty for all markets or adapt it country by country ? – Should the firm use warranty as a competitive weapon ?

• Product Service :
– Service capability to accredit the firm with foreign suppliers – high investment in facilities, staffing, training, and distribution network

Goods versus Services/Rights
• Instead of marketing a product abroad, the company may also sell rights or services in a foreign market: - rights : brand / trademark / patent

- services : management skills (hotel chain)

Sales of Rights - Examples
• Franchising business : - Coca-Cola : use of its name to licensed bottlers around the world. - Pilkington: licensing of the process of float glass. - Other : Manpower, McDonald's, etc.

Sales of Rights - Examples
• Management Contracts : - Sheraton Hotels :
• Management contract for hotels abroad • Sale of consulting and management contracts • Little equity invested : Sheraton manages almost 400 hotels worldwide but has equity in only 40 of them. • Advantages : minimum risk & strong competitive position.

Sales of Rights - Examples
•Turn-Key operations :
– The firm is selling technical and engineering skills. – The firm is training foreign nationals to run a plant. – The firm is supplying material and equipment.

Product design
• Changes in design are largely dictated by whether they would improve the prospects of greater sales, and this, over the accompanying costs. Changes in design are also subject to cultural pressures. The more culture-bound the product is, for example food, the more adaptation is necessary. Most products fall in between the spectrum of "standardisation" to "adaptation" extremes.

Standardization versus Customization
• Although the products sold abroad generally are not identical to their domestic counterparts, there is always a core of expertise that the firm can carry abroad. • Principle " All Business is local."

Reasons for Product Standardization
• Economies of scale : • Common Consumer needs : • Consumer Mobility : Production, R&D, Marketing

Drinking patterns, car sizes
Customer retention & Loyalty American Express, Kodak, ...

• Home Country Image : US jeans, French Perfumes,...
• Impact of technology : B to B Markets

Reasons for Product Adaptation
• Climate: US Air-conditioning equipment • Skill level of users : Computers in Africa • National consumer habits : - front-loading/top-loading washing machines - car models : four-door (F) - two-door (Germ.) • Government regulations on products, packaging, and labels. • Company history and operations (subsidiaries)

Example: European Toothpaste Market
• Market Size in France: FF 1,8 Bill. (1996) • Trends:
– Multiple number of toothpastes/family – Therapeutic / sophisticated products – Cosmetic products – Volume – Price

• Competitors in France :
– – – – – Unilever Colgate Henkel Smithkline B. P&G 33% 22,5% 19% 12% 0%

Drivers of Product Adaptation Example COLGATE Toothpaste
• (1) Differences in National Regulations
– Triclosan forbidden in Germany – High fluorine content in local water (UK) – Obligation to sell high fluorine content toothpaste in pharmacy (France) – Stringent clinical tests in France

Drivers of Product Adaptation Example COLGATE Toothpaste
• Packaging:
– Ecological Stand-up tubes in Germany – Failure in France (Carrefour)

• Distribution:
– Role of pharmacy in Italy and Spain – Role of drugstore in UK

• Communication:
– Medical in Italy and Spain (recommended by dentist) – Non-medical in UK

Factors behind Standardization
• Factors encouraging standardisation are: • i) economies of scale in production and marketing ii) consumer mobility - the more consumers travel the more is the demand iii) technology iv) image, for example "Japanese", "made in".

Factors encouraging adaptation
i) Differing usage conditions. These may be due to climate, skills, level of literacy, culture or physical conditions. ii) General market factors - incomes, tastes etc. iii) Government - taxation, import quotas, non tariff barriers, labelling, health requirements. Non tariff barriers are an attempt, despite their supposed impartiality, at restricting or eliminating competition. iv) History. Sometimes, as a result of colonialism, production facilities have been established overseas. v) Financial considerations. In order to maximise sales or profits the organisation may have no choice but to adapt its products to local conditions. vi) Pressure. Sometimes, as in the case of the EU, suppliers are forced to adapt to the rules and regulations imposed on them if they wish to enter into the market.

Production decisions
• In decisions on producing or providing products and services in the international market it is essential that the production of the product or service is well planned and coordinated, both within and with other functional area of the firm, particularly marketing. • The main elements to consider are the production process itself, specifications, culture, the physical product, packaging, labelling, branding, warranty and service

Aesthetics
• Global marketers must understand the importance of visual aesthetics • Aesthetic Styles (degree of complexity found on a label) differ around the world

Product Warranties
• Express Warranty is a written guarantee that assures the buyer is getting what they paid for or provides a remedy in case of a product failure • Warranties can be used as a competitive tool

New Products in Global Marketing
• Pursue opportunities in competitive arenas of global marketplace • Focus on one or only a few businesses • Active involvement from senior management • Ability to recruit and retain best employees • Understand the importance of speed in bringing product to market

Identifying New Product Ideas

• What is a new Product?
– New to those who use it or buy it – New to the organization – New to a market

The International New Product Department
• How big is the market for this product at various prices? • What are the likely competitive moves in response to our activity? • Can we market the product through existing structure? • Can we source the product at a cost that will yield an adequate profit? • Does product fit our strategic development plan

Testing New Products
• When do you test a new product?
– Whenever a product interacts with human, mechanical, or chemical elements because there is the potential for a surprising and unexpected incompatibility

• Test could simply be observing the product being used within the market

Key terms and concepts
• Product
– It is everything (both favorable and unfavorable) that a buyer receives in a transaction. – It is not just the “thing” - it‟s the need satisfying offering of a firm

• Quality
– the ability of a product to satisfy a customer – relative to competitors – a moving target - changing expectations

Product Differentiation
• Defined: the degree to which competing products are perceived to be different. • Some products are difficult to differentiate. • Product differentiation is a key to profitability – Motorola had it – have they lost it? • Consider the entry of a new product/service to the market.

Classifications of Consumer Products
Products

Consumer Products

Business Products

Convenience Products

Shopping Products

Specialty Products

Unsought Products

Classification of Consumer Products
• Convenience products
– Inexpensive, little shopping effort expended – Location is paramount

• Shopping products
– More expensive and found in fewer stores than convenience products. There are two types: • Homogenous shopping products: difference is on price • Heterogeneous shopping products: difference is on style/features – What are the implications of marketing each of these two types?

Classification of Consumer Products
• Specialty products
– Products the consumer is willing to spend considerable effort to locate – Need to maintain image, limit outlets to those that will provide specific attention to the product.

• Unsought products
– Products the consumer does not actively seek. – Key is identification of buyers and targeted promotions, including personal selling

The Product Life Cycle (typical)
Intro. Growth Maturity Decline

Total Industry Sales

$0

Total Industry Profit Time

Introduction Stage
• Product category has recently been introduced into the market - consumers are unaware of the product. • Proper capitalization is important. • Industry sales are low, but growing. • Industry profits are negative. • Advertising frequently includes an orientation toward primary demand. • Creating awareness and trial are common marketing objectives. • Sales promotion used to trigger product trial.

Growth Stage
• Sales are rising rapidly. • Profits appear, peak, and begin to decline just before the end of the period. • Profit possibilities attract competitors, but many competitors will be “shaken out” during this phase as well. Why? • Promotion shifts from primary to selective demand. • Building market share is a common marketing objective.

Growth Stage (continued)
• Keys in the growth stage
– Maintain strong distribution networks (must be able to get products to consumers) – Control costs – Product differentiation (better at meeting customer needs) – Incremental improvements in product features/benefits and product quality are critical (competitors are refining/improving marketing mixes)

Maturity Stage
• • • • Sales rise to their peak, then level off. Industry profits are in a slow decline. Competition increases. Promotional costs increase (selective demand), and sales promotion to trigger switching is more common

Maturity Stage (continued)
• Products become more homogenous, triggering price competition. Need to differentiate brand. • Diversify brand and models. • Can be difficult to enter the market in this phase (capturing vs. retaining share) • Efficiency is a key.

Decline Stage
• • • • Sales decrease. Profits decrease and eventually disappear. Declining numbers of competitors. Spend enough on promotion to retain hard core brand loyal customers. • Eliminate unprofitable outlets. • Marketing objective: reduce costs and milk the brand, or drop it.

How to use the PLC
(or, how not to get used by the PLC)
• The PLC applies to product categories/ideas, not individual brands. • The PLC is market-specific. • The PLC is not deterministic. – Increase frequency of use by current customers – Add new users to the product. – Add new uses for the product. – Packaging/quality improvements (industry-wide) which add significant consumer benefits.

New Product Development Process
• Idea Generation • Screening
– Strengths/weaknesses, compatible, ROI estimate

• Idea Evaluation
– Concept testing, cost/sales estimates

• Development
– Develop prototype, test marketing mix, revise ROI estimate

• Commercialization
– Finalize all plans, start production, final ROI estimate

Why New Products Sometimes Fail
• • • • • Inadequate marketing research Product deficiencies Cost overruns Unanticipated competitor reactions Poor timing

Case: Cotton Production/Marketing Interface Spinners Machines are highly flexible, that is they can usually switch to a variety of yarn requirements. The machines are geared to high production, are automated and are of a precision for constant quality provision. There are strict process controls and built - in quality control. Poor raw material, especially when contaminated with metal particles, damages opening mills, grid knives, fans and card clothing. Previous devices employed to remove these (magnets) are becoming less effective. The consequences are damage in the blowroom and carding and danger of fire. Quality is therefore defined as properties of the end use (clothing etc.), efficiency of weaving and knitting and the efficient running of the spinning plant. Spinners require raw cotton which is free of trash, dust, sugar and honey dew contamination, seed coats, bark and foreign fibres and, will not nep the cloth. Further requirements are a certain length (could be short, medium or long), uniformity of length, strength, fineness, maturity and a certain elongation and colour. Suppliers In order to meet these high quality demands, the growers have to ensure that the production, picking and ginning is of a very high standard. Cotton grading The Liverpool Cotton exchange, for one, relied on the skills of its experts to manually classify raw fibre purchases for its clients. It still holds the "standards" for length, colour and trash content. As well as the demands of modem machinery, the lack of standardised measuring and cotton classification procedures has resulted in commercial conflict and legal disputes about the true nature of traded cotton. Now, computer based high volume instrument listing systems of raw cotton (HVI systems) are available. The system can handle large numbers of bales, reduce variation in classification and the need for highly trained bate classifiers. For cotton exporters the system offers the following advantages:  enhanced objectivity in classification  improve communication if similar systems are used by sellers or buyers  reduced conflict and need for arbitration  enhanced competitiveness against synthetic fibres  improved integration with modern spinning machines  reduced costs on training of experts and in measuring time. The system can process 2000 bales per day and give a printout on the seven parameters of grading. These include length and length uniformity, strength and elongation, micronaire or fineness, leaf and colour. Manufacturers include SPINLAR INC. of Knoxville, USA.

managing marketing

International Marketing Mix Decisions
What aspects of Product can be modified?

 Attributes  Brand (Global vs. Local)  Packaging  Quality  Services (after-sale services, support)

 Positioning
.

managing marketing

International Marketing Mix Decisions
Strategic Alternatives in international and global marketing mix decisions. Managerial issues

Advantages and Disadvantages of International Brands

    

Strong customer recognition/reassurance Economies of scale and scope Leverages power with retailers Consolidates efforts across countries Potential for extension

 

Not locally responsive Demotivating for country managers  Difficult to manage  Need to maintain consistency across countries and product-lines
.

Product Types
• Buyer orientation
– Amount of effort expended on purchase – Convenience – Preference – Shopping – Specialty

Brands
• Bundle of images and experiences in the customer‟s mind • A promise made by a particular company about a particular product • A quality certification • Differentiation between competing products • The sum of impressions about a brand is the Brand Image

Brands

Brands
• The added value that accrues to a product as a result of investments in the marketing of the brand • An asset that represents the value created by the relationship between the brand and customer over time

Brands
“We have to shift to high valueadded products, and to do that we need to improve our brand.”
- Noboru Fujimoto, President Sharp Electronics Corporation

Local Products and Brands
• Brands that have achieved success in a single national market • Represent the lifeblood of domestic companies • Entrenched local products/brands can be a significant competitive hurdle to global companies

International Products and Brands
• Offered in several markets in a particular region
– „Euro-brands‟

Naming your product

Alu-Fanny: French Foil wrap Crapsy Fruit: French cereal Kum Onit: German pencil sharpeners Plopp: Scandinavian chocolate

Atum Bom: Portuguese tuna Kack: Danish sweets Mukk: Italian yogurt Pocari Sweat: Japanese sport drink Poo: Argentine curry powder

Pschitt: French lemonade

Naming your product
Phonetic Problems with Brand Names - Bardok (Sounds like Brothel in Russian) - Misair (Sounds like Misery in French) Translations Intent - Stepping Stone - Car Wash - Highly Rated Symbols - Owl Translation - Stumbling Block - Car Enema - Over Rated - Bad Luck in India

Other Countries make mistakes too - Zit (Chocolate from Germany) - Koff (Beer)

Global Products and Brands
• Global products meet the wants and needs of a global market and is offered in all world regions • Global brands have the same name and similar image and positioning throughout the world

Global Products and Brands
A multinational has operations in different countries. A global company views the world as a single country. We know Argentina and France are different, but we treat them the same. We sell them the same products, we use the same production methods, we have the same corporate policies. We even use the same advertising—in a different language, of course. - Alfred Zeien Former Gillette CEO

Country of Origin effect
• Country-of-Origin (COO) Influences on Consumers – For many products, the “made in” label matters a great deal to consumers. Key research findings of COO effects: •COO effects are not stable •Consumers prefer domestic products over imports •Both the country of design and the country of manufacturing/assembly play a role in consumer attraction.

Branding Strategies
• Combination or tiered branding: allows marketers to leverage a company‟s reputation while developing a distinctive identity for a line of products
– Sony Walkman

• Co-branding features two or more company or product brands
– NutraSweet and Coca-Cola – Intel Inside

Branding Strategies
• Brand acts as an umbrella for new products
– Example: The Virgin Group
• • • • Virgin Entertainment: Virgin Mega-stores and MGM Cinemas Virgin Trading: Virgin Cola and Virgin Vodka Virgin Radio Virgin Media Group: Virgin Publishing, Virgin Television, Virgin Net • Virgin Hotels • Virgin Travel Group: Virgin Atlantic Airways, Virgin Holidays

Global Brand Development
• Questions to ask when management seeks to build a global brand:
– Will anticipated scale economies materialize? – How difficult will it be to develop a global brand team? – Can a single brand be imposed on all markets successfully?

Global Brand Development
• Global Brand Leadership
– Using organizational structures, processes, and cultures to allocate brand-building resources globally, to create global synergies, and to develop a global brand strategy that coordinates and leverages country brand strategies

Global Brand Development
• Create a compelling value proposition • Think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization • Research the alternatives of extending a national brand versus adopting a new brand identity globally • Develop a company-wide communication system

Global Brand Development
• Develop a consistent planning process • Assign specific responsibility for managing branding issues • Execute brand-building strategies • Harmonize, unravel confusion, and eliminate complexity

Local versus Global Products and Brands: A Needs-Based Approach
Self-actualization External/Internal Esteem Social Safety Physiological

Country of Origin as Brand Element
• Perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries
– Japan – Germany – France – Italy

Packaging
• Consumer Packaged Goods when the packaging is designed to protect or contain the product during shipping • Eco-Packaging because package designers must address environmental issues • Offers communication cues that provide consumers with a basis for making a purchase decision

Product Packaging and Labeling
Protection
Climate Transport & Handling Buyer's slow usage rate Lack of storage facilites

Promotion
Merchandising ( income level, shopping habits) Minimum breakage / theft Ease of handling Multilingual Labels to Convey an International Image (Zara, Hollywood Chewing Gum)

Legal Constraints
Recycling of Packaging (Duales System, Eco-Emballage) Regulations on consumer info. (Origin, weight, ingredients)

• POM brand Pomegranate juice used a distinctively shaped bottle to gain attention on the grocery shelf

Labeling
• Provides consumers with various types of information • Regulations differ by country regarding various products
– Health warnings on tobacco products – American Automobile Labeling Act clarifies the country of origin, and final assembly point – European Union requires labels on all food products that include ingredients from genetically modified crops

Labeling
As Americans become increasingly concerned about cholesterol, the FDA (Food and Drug Administration) has responded by requiring food manufacturers to list trans fat (i.e., trans fatty acids) on the Nutrition Facts portion of product labels, effective 1/1/06.

Brands
• Brand: A name,sign, symbol intended to identify/differentiate a product from others. • A brand can imply many things to a consumer, including quality and the image of the buyer/user. • Key branding decisions:
– Name – Brand sponsor – Brand strategy

Major Branding Decisions
• Decision #1: Choosing a brand name
– Should suggest product benefits/qualities • Sunkist, Spic and Span, DieHard, Easy-Off – Easy to pronounce, recognize, remember • Tide, Aim, Puffs, but “I Can‟t Believe It‟s Not Butter” works too! – Distinctive • Taurus, Kodak, Exxon – Translates easily into foreign languages – Capable of registration and legal protection

Major Branding Decisions
• Decision #2: Brand Sponsor
– Manufacturer‟s brand or private brand? – Retailers like private brands
• Builds loyalty to the retailer • Frequently better profit margins • But they can be expensive to develop

– Family brand or individual brand?
• Do existing associations work for the new product?

Major Branding Decisions
Decision #3: Brand Strategy
Product Category
Existing Line Extension New Brand Extension

Existing Brand Name New

Multibrands

New Brands

Source: Kotler and Armstrong (1999). Principles of Marketing, 8th edition. Upper Saddle River, NJ: Prentice Hall

International Branding Strategies
One brand name everywhere (greater identification of the product worldwide, but are all consumer needs the same?)
Adaptions and modifications (modifying elements to fit each market – will this help you achieve economies of scale?) Different brand names in different markets (new marketing mixes for each market – will this make you more effective?)

Brand Equity
• A brand has value, called brand equity. Brand equity is based on brand loyalty, name awareness, perceived quality, strong associations, patents, etc. • What are the top brands worldwide for brand equity? • Brand equity makes brand and line extensions easier.

Managing Brand Equity
• Brand equity is an asset, and needs to be managed.
– maintain/improve top-of-mind awareness – improve perceptions of quality – create positive brand associations

• To manage brand equity, you should:
– continuous R & D investment – skillful advertising – avoid short-term actions which undermine the brand in the long-term

Five levels of brand familiarity
• Brand rejection: won‟t buy unless a relevant factor changes • Brand non-recognition: consumers don‟t pay attention to brands (commoditization) • Brand recognition: consumers are aware of the brand and recognize it with/without prompting • Brand preference: consumers usually choose a specific brand • Brand insistence:consumers are willing to prolong search to find the desired brand

Packaging
• Four primary functions
– Containing and protecting products – Promoting products
• Persuasive labeling (critical for many products) • Informational labeling (helps make wsie purchase, lowers cognitive dissonance)

– Facilitating storage, use and convenience – Facilitating recycling and reducing environmental damage

Summary
• The marketing mix, which is the means by which an organisation reaches its target market, is made up of product, pricing, distribution, promotion and people decisions. These are usually shortened to the acronym "5P's". Product decisions revolve around decisions regarding the physical product (size, style, specification, etc.) and product line management.