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Global Products Chap 12
Purpose and Positioning What Will Our Business Be? “What wants does the consumer have that are not being adequately satisfied today? ” “It is the ability to answer this question correctly that usually makes the difference between a growth company and one that depends on the rising tide of its industry. ” Peter Drucker, The Practice of Management, 1954
The Two Fundamental Questions 1. What is the deep need that we satisfy? What is our raison d’etre? 2. What is our core competence? What are we really good at?
Product Decisions The global company’s challenge is to develop product & brand policies that are sensitive to market needs, competitors and company resources on a global scale. The product policy must balance the need for adapting to local market preferences, and the competitive advantage that stems from focusing company resources on a limited number of standardized products. The objective of product strategy is to optimize company profits - to optimize the present value of cash flows - over the long term.
Product Decisions Product decisions are important because : • Company’s business is defined by product • Other marketing mix elements must fit product • Product determines the firms costs and competitors • R&D requirement depends on product technology
Definitions Product is defined as a collection of physical, service, and symbolic attributes that yield satisfaction or benefits to the user Brand is a complex bundle of images and experiences in the customer’s mind. Brand image is the sum of impressions, a mental image about the physical product and the company that markets it. Brand equity is the value of a brand to a company as an intangible asset. Develops by the relationship between the brand & the customer over time. Product management is responsible for the set of decisions that affect the customer’s perception of the firm’s product offer. New prds can be evaluated in terms of their local-international-global potential Combination (tiered) branding uses a company name combined with a product brand name. Eg. Sony Walkman Cobranding (dual branding) A variation of tiered branding where two or more different companies or product brand are featured on packaging or advertising. Eg. PC brands and Intel. Brand extensions using established brand name as an umbrella when developing new business or new product.
Local, International and Global Products (company perspective) • Local products & brands are offered to & achieve success in a single national market. (Sokenbicha by Coca Cola in Japan) • International/regional products & brands are offered inseveral markets/ in a particular region. (Euro products- Smart car) • Global products & brands are offered in the global market in all or most World regions with the same name, similar image & positioning. Personal stereos are global products, Sony is a global brand.
Local Products are products that are perceived (within the context of a company) as having potential only in a single market. Eg. Japanese electronic companies producing some products for Japan only, Coca-Cola’s Sokenbicha brand for Japan
The opportunity cost of offering local products may be high because : • Single national market does not provide an opportunity to develop and utilize global leverage from marketing, R&D, production. • Local production does not allow for the transfer of experience gained in one market to other markets. • Local production does not allow the transfer of managerial expertise gained in single product area.
Company must try to add new products with attractive international and global potential to its product line rather than purely local/national products.
International/Regional Products that are perceived as having the potential for extension into a number of international markets/products unique to a particular trading region. Eg. industrial products are good candidates because they are less environment sensitive, Euro brands like Smart cars, Honda’s european car model
Global Products are designed to meet the needs of the global market. In a globalizing industry the companies are under pressure to develop global products. Global products give the firm the opportunity to reduce product R&D costs and may require adaptation of a global design rather than developing a unique design for every country.
Standardization? • Standardization is making great inroads in marketing, many of the world’s markets however are not yet similar • Furthermore, variety within each market increases as economic growth takes place
Localization vs Adaptation • Localization / mandatory adaptation Changes required for a product to function in a new country (new type of plugs). Avoids having customers to reject the product outright. • Adaptation / voluntary adaptation Changes in products made to match customer tastes or preferences. Gives customers positive reason for choosing the product.
standardization/ adaptation of products • Is a continuum with full standardization at one end & full adaptation at the other • Localization is in the middle / mostly mandatory • The offering involves more than the physical product itself. It involves the marketing mix • In full standardization you have a product that fits all markets • In localization & full adaptation(customization) some modifications are imposed by government, others are optional/ at the discretion of the marketer
Pros & cons of standardization Pros: • Cost reduction/scale & scope economies • ımproved quality • Enhanced customer preference • Global customers/demanding uniform quality whereever they happen to be & buy • Global segments/ fits emergence of global customer segments Cons: • Off-target/ stdzed products may miss the exact target in terms of customer preferences in any one country • Lack of uniqueness/ if customization & exclusivity are overriding purchase considerations, stdzn may offer a weak position • Vulnerable to trade barriers/ open trade barriers & economies of scale are necessary • Strong local competitors
Reasons for product standardization failure • ınsufficient mkt research/ similarities assumed rather than proved • Overstandardization/ standardization overriding positioning strategy • Poor follow-up • Narrow vision • Rigid implementation
FULL STANDARDIZATION Multiple-system Compatibility Appropriate in: • Global markets • Homogenization of demand lead to universal products • Walkman, CANON, Sony’s Play. Station II, Hollywood movies, IKEA • Sophisticated industrial equipment Benefits: • Cost reduction; good value offering • Consistent image; enhanced customer preference • Advanced features; up-to-date technology • Improved planning and control
FULL ADAPTATIONCUSTOMIZATION (Discretionary) Appropriate in: • Multi-domestic industries • Food, apparel, restaurant, services • Some consumer goods Benefits: • Meet precise needs of customers • Enjoy unique appeal • Easier to deal with protectionism
The three levels of a product Low Support services Product attributes Core product benefits Delivery, installation, guarantees, after-sales service, spare parts brand, quality, design, packaging, price, country of origin, staff behaviour, size functional features, performance, perceived value, image, technology Ability to standardize product elements High
Environmental factors influencing the balance between standardization and adaptation
Standardization and adaptation of the international marketing mix
The View from Toyota Our global strategy used to center on “world cars, ” which we would modify slightly to accommodate demand in different markets. Today our focus is shifting to models that we develop and manufacture especially for selected regional markets. Examples • North America: Avalon, Camry coupe and station wagon, 1997 Minivan • NUMMI Joint Venture: Tacoma light pickup. • Europe: Carina E • Southeast Asia: Toyota Utility Vehicle (Kijang in Indonesia, Tamaraw in Philippines)
The View from Honda “We are the most international of the Japanese companies. At the moment we are the most diversified, and we will be more diversified in the future. Still, I think it would be very hard to build a one-type world car. In the end, I don’t think it would be very efficient. ” ---Nobuhiko Kawamoto President and CEO, Honda Motor Company
Global Product Design Adaptation to national markets vs a single global design is the strategic choice in global product design decisions. Consideration of four factors is necessary in taking global design decisions: • • Differences in preferences around the world Design related costs along with actual production cost Different laws & regulations in different countries Compatibility with the environment in which the product will be used.
Global Product / Brand Development Steps to create a Global Product / Brand • • • Identify strategic markets Identify and understand needs in those markets Identify global use conditions and requirements Search for commonalities and differences Extend, adapt, or create a product to fill the need
A product’s market potential in global markets is affected by • Product Saturation Levels • Attitude towards Foreign Products • Attitudes Toward the Country of Origin
Product saturation levels Disparities in the demand for a product from one market to another is an indicator of the possible potential of the product in the low saturation level market. Companies must study • Market potential indicators like income and also the determining influences like availabilty, price levels, need, custom, existing of complementary products. • Have an active global scanning system for identifying market saturation levels and potential market opportunities based on demand differences
Product Saturation Levels • Many factors determine a product’s market potential. • Product saturation level increases as national income per capita increases. • The presence or absence of a particular companion product can be significant.
Attitude towards Foreign Products • Stereotyped attitudes toward foreign products and services can favor or hinder marketing efforts. • In some market segments foreign products have a substantial advantage because they are foreign.
The term Country of origin effects refers to the effect on quality perceptions caused by knowledge of the production country location for the product
Attitudes Toward the Country of Origin Country of origin effect is also an important input into product policy decisions. • Attitudes toward foreign products in different countries differ • manufacturing reputation of a country may differ around the world These affect perceptions of quality • Mass communication, use of prestigious retailer, disguising foreign origin in the product, changing attitudes may be responses to related problems
Branding decisions Source: adapted from Onkvisit and Shaw, 1993, p. 534.
• Branding Challenges – Branding Decision: To Brand or Not to Brand? An Overview of Branding Decisions
Brand names • Twist- Matckha/ individual brand names • Tat - ketchup, meyve suyu, / blanket family name • Elidor-hair, Lipton-tea / seperate family names for all products • Eti, Ülker- kek, çikolata; Sony-walkman/ corporate name combined with individual product names
Perspectives on private labels Retailer perspective • Better profit margins • Strengthens retailer image Manufacturer perspective • No promotional expenses • Provides access to shelf space • Requires competing on price • Loss of control • May cannibalise other manufacturer brands
Co-branding describes a form of cooperation between two or more brands, which can create synergies that are valuable for both participants, above the value they would expect to generate on their own. (PC brands and Intell) Can take the form of ingredient branding (Renault advertises that it uses Lassa tires)
The functions of branding • To distinguish a company’s offering and differentiate one particular product from its competitors • To create identification and brand awareness • To guarantee a certain level of quality and satisfaction • To help with promotion of the product
Three brand options Private branding Co-branding Manufacturer’s brand 100% externalizing Brand alliance 100% internalizing
What are Global Brands? • Brands whose positioning, advertising strategy, personality, look and feel are the same from one country to another. • Brands that achieve a clear and consistent identity with its target customer segment regardless of geographic location.
A global brand is a symbol about which customers have beliefs and perceptions. is one that is marketed according to the same strategic principles all around the world. has the same name and similar positioning and image around the world (eg. Coke, Benetton, Nike)
Standardization works for some brands • Hollywood movies; pop stars (Britney Spears) • personal care products or cosmetics (Gillette Sensor, Revlon) • toys (Legos, Barbie) • credit cards (Visa, Master Card) • food (Nestle, Cadbury) • beer (Heineken) • electronics (Sony PS 2, Seiko)…
Appeal of Global Brands • Many are “high touch, ” conspicuous consumer products • Many have widespread appeal; innovative products that seem to fit everyone’s life style; transcending market segments • Many carry tremendous customer franchise, brand recognition and equity. Firms may be reaping the benefits of first-mover advantages • Many rely upon pan-regional, transnational media, leveraging the same brand image all over the world • Some serve as status symbols worldwide • Some are identified with the country of origin and command a certain degree of country appeal (Levi’s “Americanness”) • Some are brands established by Born Global companies eager to establish their products in multiple markets
What are the goals of global branding? • • Global Brand Leadership Global economies of scale Best practice development Assistance in globalizing the enterprise
Disadvantages of global branding • • • Image equity is not universal Economies of scale may not be realized. Forming global brand team may be difficult. Difficult to impose brand on all markets. Corporate culture may hinder development. Marketers have natural bias toward adding value for individual markets.
The Process of Establishing Global Branding • • • Define domestic equities. Analyze customer, competition, brands. Create a company-wide communication network. Raise internal brand awareness. Put success drivers through a cultural prism to invent creative alternatives – test markets. Adhere to formulas that propelled the brand to top at home (Dell in U. S. and China) Tie global brand strategy to country brand strategy (Pepsi in India: Cricket, local celebrities, Indian talent. ) Fight local bias. Overcome an anti-home country prejudice by appealing to shared values (Nike: just do it!) Present a global face to customers. Be perceived as responsible global citizens (Coca Cola. )
Conditions for Global Branding Success • Knowledge of universal desires. • Market research. • Careful grooming of brand (quality cannot be faked. ) • Smart brand management; Global brand manager.
Heineken’s Global Reach 1993 Beer Sales Heineken Anheuser-Busch Rest of the World: 4% Miller Brewing Rest of the World: 5% U. S. : 96% U. S. : 95% In millions Net Revenues Operating Profits Percent Change From 1992 $5, 200 458 9% Source: Company reports, Business Week, 8/1/94, p. 61 13, 000 1, 200 -32% 4, 200 215 -17%
Globalizing Palmolive Soap Combination of competitive packages fragrances shapes
Global Brand Management Brand equity • The “value added to a product as a result of past marketing activity for the brand • The net revenues the brand can be expected to generate over time • The premium a customer would pay for the branded product compared to an identical unbranded version of the same product Sources of BE: • Brand awareness • Brand associations/ brand attributes & brand personality as perceived by the customer lead to brand image (what they think about your brand) -strenght of brand associations -favorability of brand associations -uniqueness of brand associations
Brand equity’s assets and liabilities Brand loyalty Brand awareness Perceived quality Brand associations Other proprietary brand assets
Advantages to using global brands • Demand spillover/ sales in one country may generate demand in another country • Global customers/ in B 2 B markets, travelling consumers • Scale economies/
Global Brand Management Brand globalization potential Question appropriateness or brand fit: • Does the brand make sense outside the source country • If the name suggests a country association, is the effect positive • Is the name available legally in many countries • Does the brand compliment other global brands in the portfolio • Should the growth be limited to the creation of a regional brand
Global Brand Management Implementation Issues in implementing the globalization strategy: • Is the globalization product based • Which local brands should be chosen for the changeover
Global Brand Management Changeover tactics: Once the target brands are identified, standard changeover tactics can be employed • Fade-in/fade-out gradual option-the global brand is linked to the local brand for a while, after which the local brand is dropped NESTLE/ Mis Süt, CIF/ Lux • Summary axing- simply drop the local brand name and introduce the new brand • Extensive forewarning- mars Raider to Twix
Counterfeits • Outright piracy/ fake marketed as genuine product • Imitation/ clone strategy • Wholesale piracy/ • Design counterfeiting/ same product, different name
Global Positioning Position is the location of the product in the mind of the customer relative to competing products. Position depends on numerous variables partly controlled by the marketer (marketing mix)
Global Product Positioning Companies prefer to have globally unified positioning strategy. global positioning is most effective for products for which there is – High level of customer involvement and – A shared language among customers i. e. Products that approach either end of the “hightech/high-touch” continium These products travel well around the world.
Global Positioning • Increases effectiveness – Tried and tested in many countries – Provide basis for commonality in other elements • Increases competitive leverage – Devote resources to built assets to support one positioning
GLOBAL PRODUCT POSITIONING is the act of locating a brand in the customers’ mind against other products in terms of product attributes and benefits that the brand does / does not offer. Several positioning strategies can be used: • Attribute or benefit : BMW • Quality & price : American Express, Discoverer • Use or user : Marlboro • Competition : Chase Manhattan Bank “benefit from experience” campaign • High touch/high tech
Shall we go for Global Positioning? Companies prefer to have a globally unified positioning strategy.
High tech / High touch Positioning in Global Marketing It is found out that global positioning is most effective for products for which there is: *high level of customer involvement and *a shared language among customers ie. Products that approach either end of the “hightech / high-touch” continium These products travel well around the world.
High-Touch Positioning • Buyers are highly involved • Buyers share a common language • Set symbols relating to themes of materialism, romance, wealth • Marketing requires more emphasis on image and less on specialized information
• The emphasis lies more on the product’s image; specialised information appears to be of minor relevance • Suitable for – Products that solve a common problem: soft drinks, – Global village products: cosmetics or fashion – Products that use universal themes like materialism, heroism, procreation
Three categories: 1. Products that solve a common problem : low priced products that provide benefits linked to life’s little moments, eg. soft drinks, coffee 2. Global village products : Broad price spectrum • can be high priced : eg fashion, fragrances (worldwide interest in enhancing social status through an interest in high-quality, highly visible, high priced products is reflected to the demand for fragrances and fashion products) • can be low priced : eg mineral water, pizza • positioned as cosmopolitan • have a global appeal but may imply national origin : eg. ‘American-ness of Marlboro
3. Products that use a universal theme : use basic advantages appeals and themes that makes them transnational eg. Materialism - well being or status play-leisure , recreation heroism - self sacrifice procreation - romance, courtship
High-Tech Positioning • Positioning strategy for products which are frequently purchased on concrete product features; • Buyers typically already posses or wish to acquire considerable technical information • Suitable for – Technical products, such as computers, chemicals, cars – Special-interest products, such as sporting goods-ski
High-Tech Positioning • • The products are purchased on the basis of product features Buyers possess or wish to acquire technical information Three categories: 1. Technical products Buyers have specialized needs Require a lot of product information Share a common language Eg. PCs 2. Special interest products Less technical, more leisure or recreation oriented Shared experience and high involvement among users Common language and symbols Eg sports equipment, cameras
3. Products that demonstrate well Features and benefits speak for themselves and are highly demonstratable in advantage Eg Instant camera • • Products can be positoned in more than one way Within either high tech or high touch poles of the continium. Eg. Cameras-as special interest and as technical In “bi –polar” fashion as both high tech and high touch Eg. Bang and Olufsen consumer electronics
STRATEGIC ALTERNATIVES FOR GEOGRAPHIC EXPANSION : EXTEND, ADAPT, CREATE Extension strategy markets a standardized product, using a standardized communications approach in multiple markets Adaptation strategy markets products by changing elements of design, function or packaging in response to needs or conditions in particular country markets.
The choice of strategy is affected by: • • • Country specific objectives Differences in the economical environment Differences in needs and preferences Laws & regulations of countries Technical requirements & standards
The choice of product and communications strategy in international marketing is a function of: The product defined in terms of the need or function it serves The market defined in terms of • The conditions under which the product is used • Preferences of potential customers • The ability of potential customers to buy the product The costs of adaptationboth development and manufacturing-to the company considering product-communication adaption
(Strategy 1: Product / Communication Extension) DUAL/STRAIGHT EXTENSION uniform product strategy/uniform communication strategy • Company sells exactly the same product or service with the same advertising as used in the home country • Company assumes that all markets are alike • Does not work in all markets • Often used because it saves costs
Examples Credit card, pocket calculators, breakfast cereal, mineral water, wine, pasta, cookies, soft drinks (Pepsi, Coke), alcohol, cigarettes, watches, cosmetics, Hollywood movies, hotel chains. Unsuccessful cases: Campbell soup in England, Brazil, Philip Morris in Canada, Pillsbury Doughboy Comments Simplicity; low-cost; efficiency; exploit a good idea that worked well at home (Avis: We try harder); consistent image; ease of planning and administration. Unresponsive to varying customer needs and preferences. Easiest and most of the time most profitable strategy. Provides high cost savings through manufacturing economies of scale, elimination of duplicate product R&D costs
(Strategy 2: Product Extension, Communications Adaption) COMMUNICATION ADAPTATION same product strategy/modified commn strategy • If the product serves different needs in various countries, only marketing communication may have to be adapted • Adaption can happen by design or accident • Cheap implementation because product does not change • Given the same or similar use conditions, if a product fulfils different need, appeals to a different segment or serves a different function the same product & adapted MC can be used Strategy two may result in product transformation. Eg. Perrier • Relatively low cost strategy as R&D, manufacturing set up, inventory costs are avoided
Examples Garden power equipment; bicycles, motors scooters/recreation need in US vs basic transportation in Italy, outboard motors. Use of local celebrities in commercials. Positioning bowling as “white collar” recreation in China. Comments Low-cost implementation. Tailor-made positioning. Broadening appeal of product to new customer segments. Inconsistent image. Makes coordination of marketing activities more difficult.
Motorola’s promotion adaption for Korean market http: //www. motorola. com/kr/
(Strategy 3: Product Adaption, Communication Extension) PRODUCT LOCALIZATION modified product strategy/same communication strategy Product is adapted to the environment, local use conditions, the preference of the consumers in the new market but basic home market communication strategy remains unchanged
Examples Detergents, soap (to function in cold water); Gasoline (to meet weather conditions); Agr. chemicals (to meet different soil conditions); Household appliances (scaled down to meet use environments) refrigerator, freezer, etc. ; Also for voltage differences; metric, etc. ; Clothing (Levis cuts); Food, candy (Mc. Donalds, KFC, Campbell soup); Right-hand drive cars. comments Higher design, manufacturing and sourcing costs. More precise catering to needs. Consistent image. Avoid market entry barriers. Gain competitive edge.
Strategy : Product / Communication Adaption DUAL ADAPTATION different product strategy/different communication strategy • Using dual adaption the company must adapt the product or service as well as the marketing communication to the foreign market. • When consumer preferences & environmental conditions of use along with the consumer receptivity to advantage appeals change companies may choose dual adaption strategy. • Companies can use all strategies simultaneously. Eg. Heinz – dual extension in UK, product adaptation in central Europe, communication adaptation in France
Examples Greeting cards (space for sender to write own message also wrapped in cellophane for handling). Coffee. Preferences differ among countries. Little Ceasar, Hard Rock Café, etc. , not only change their menu and services, but also target a different clientele. Comments Allow creativity and redesign. Greater customer satisfaction. Attract new customer segments. Avoid market entry barriers. Higher design, manufacturing costs. Coordination across markets becomes a challenge.
Kellogg’s dual adaption for Indian market http: //www. kelloggcompany. com
Strategy 5: Product Innovation GLOBAL PRODUCT DEVELOPMENT new product strategy/new communication strategy When adaption and adjustment strategies do not give results in markets where customer cannot afford the existing or adapted product it may be necessary to plan and design for the global market. ie. invention • Product innovation strategy usually ends with high level of performance and low price-more customer value. • When value is defined in tems of customer perceptions rather than performance, global appeal and global campaign may result in creating a perception of value that might not be achieved by separate national campaigns. • Invention is an underappreciated and underutilized strategy it can be a potentially rewarding strategy in less developed markets • Product quality is essential but must be supported with imaginative, value-creating advertising and marketing communication.
Examples Benetton in S. E. Asia: shorter arms & legs, and did not use politically-charged European advertising, but simpler themes; Coca Cola developed a dietary supplement for developing countries which is a protein-fortified beverage; Manual washing machines; Bare-bones model trucks for developing countries; Ford Mondeo, Nissan Primera. Pepsi launches a new fruit juice drink “Heaven and Earth” in China when it discovers that Chinese prefer fruit juice Comments High risk. Potentially limited market. High cost. Capitalize on opportunity availed by local market share.
Development and test periods for suppliers to the car industry
New Products and Services in Global Marketing • New to consumer and company (Product and service innovation) • New to customer but not new to company (Product/service or line extension) • Not new to customer but new to company (New product or service duplication)
Different degrees of product newness Increasing risk High Reposition Existing products Newness to International Market New to home country New to International markets New to company Cost reductions Low Line extensions/ improvements Newness to Company High
New-product development process – Permanent identification of new-product ideas – Screening of these ideas and identification of candidates for further investigation – Stringent investigation and analysis of the selected newproduct ideas – Organization of sufficient resources • The international new product department • Testing new products and services in national markets
Formulating a Global Product Policy requires: The identification of product-market relationship of the product in question. Environmental and cultural sensitivity of the product must be assessed Examination of product and communication development and manufacturing costs
Global Product / Brand Launch Alternatives • Simultaneously Launch Product (Sony Walkman) • Transform a Domestic Product / Brand (Coca Cola)
Global product decisions must consider the following product characteristics: • • The primary functional purpose The secondary purpose Durability and quality Method of operation and maintenance