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Services

- Simultaneous production and consumption


- Perishability
- Heterogeneity instead of Homo

- Stage of PLC to take product internationally

7 Ps of Marketing
Factors that Affect International
Product Decisions
• Social-Cultural Factors
– Values, beliefs (religions) and customs esp. in food & drink,
fashion and tastes
• Usage Factors
– the same product used in different ways or in different
quantity
• Legal Standards
– very country-specific even within the EU e.g. pharmaceutical and
chemical
• Product Liability
– litigation can lead to huge financial settlements. May need to
adapt product content, packaging, labelling etc.

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Factors that Affect International
Product Decisions
• Product Acceptability
– Perceptions of value and satisfaction can vary considerably e.g. try
selling instant coffee in France or Italy
• The Big “E”ssues
– Climate change, sustainable development, pollution and waste
management
• Stages of PLC
– Product reaches different stages and maintain at varying length of
time in different countries

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Components of a Product or Service Offer
Standardization vs. Adaptation in international markets

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Product Strategies

One Product Product


Product, Extension, Adaptation, Dual Product
One Promotion Promotion Adaptation Invention
Message Adaptation Extension

Same
One Sound, Adapt
product, Total
One Vision, product to
localise Adaptation Tailored,
- Global suit local
promotion new to
Reliability market
e.g. market
conditions
e.g. Insurance,
e.g. Coke-
University Banking, e.g.
Cola, Rolls e.g. IBM
Degrees, Constructio Limited
Royce Computing
Jack n editions
Aero Solutions
Daniel’s
Engines
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The International Product Life Cycles

• A PLC is useful in depicting the


life of a product or group
charting its infancy to maturity
• Many firms are multi-product,
serving multi-markets – a
combinations of stages of life
cycles
• Resources implications and
allocation are complex
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International Trade of Services
• The value of cross-border trade in services is estimated US$3.25 trillion, or about
20% of total cross-border trade
• Its true size is underestimated as much of which takes place through establishment in the
export market, and is not recorded in the balance- of-payment statistics.
• The largest commercial services are transportation services and travel
i.e. services that facilitate businesses that take place globally and, hence, are
invisible in the statistics
• Most developed countries have an interest in the increasing globalization of services as
their economies are now largely made up of trade in services.
– E.g. 77% of US GDP is generated from the services sectors which employ 80% of its
workforce
– The UK economy shares a similar pattern with 70% of GDP
generated from services and only 18% from manufacturing.
– In Hong Kong, it is 89% of GDP and 80% of employment.

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The services and intangibility continuum

The consumer-producer interaction


Six-Sector Service Taxonomy Lovelock and Yip (1996)
Categories of Service

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Drivers for Growth in Cross-Border
Services
Intangibility Vs. Environmental Sensitivity

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Challenges of Marketing Services
Internationally Intangibility

• Most services cannot be experienced or tested by customer


prior to making the purchase
• High perceived risks associated with purchase decision
• Communicating service benefits to an international target
customer is difficult due to language, physical and cultural
barriers
• International communication must be sensitive to the meaning
that the customers give to the symbols, images and wording

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Challenges of Marketing Services Internationally
Heterogeneity

• Unlike production of tangible products, it is


difficult to ‘standardize’ the production of
services due to their variable nature
• Challenge for service providers to ensure a
predetermined standard of quality and
satisfaction level across all markets
• To minimize heterogeneity, service
providers can standardize procedures,
communication, systems etc. to maximize
consistency
• Rigorous training programme for
employees and use of new, interactive
technologies
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Challenges of Marketing Services
Internationally Inseparability
• Customer is an active participant and ‘essential ingredient’ in the
service production process
• Service production and consumption often need to take place
simultaneously
– Service provider and customer must ‘interact’ to complete
transaction
– Each market would varies significantly due to an
idiosyncratic blend of politico-economic and socio-cultural
influences
• It creates difficulties in applying segmentation strategies and
matching the company’s offerings to intended targets
• It is therefore costly to internationalize services that are difficult
to separate the production and consumption processes

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Challenges of Marketing Services
Internationally Perishability

• The lower the tangibility level, the higher the


level of perishability in a service
• For most services, it is not possible
‘inventorize’ them if it is not consumed at a
given time and place e.g. hotel
• This problem is further complicated by
fluctuations in the pattern of demand and
supply e.g. seasonality
• If sales projection is wrong, service providers
will need to turn customer away OR suffer
losses due to unsold services

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Strategic Considerations
(People as asset)

Knowledge as a Source for Advantage


• Service organizations often go to great length to set standards to
improve the service quality
• In ‘high-contact’ services, people become the most important component,
which determines the success or failure of the service
• Employees must understand appropriate behaviour, service procedures and
systems in a way which is consistent with the values of the company
• It is primarily through the effective management of people and its knowledge base
that the service organization takes control of the ‘service factory’ in the production
• Effective management of knowledge can provide the basis for developing a
source for competitive advantage
• Effective knowledge management is about smart ways of
managing people
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The Development of Effective Knowledge Management

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Strategic Options for Cross-Border Services Marketing

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Using Physical Evidence to
Communicate Service Quality
• In the absence of a
physical product,
service providers use
'tangible cues' such as
pleasant atmosphere
which customers use
to make a judgement
on the service quality

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