This chapter discusses product and brand decisions for international markets. It covers defining a company's product offering, including core benefits, expected products, and augmented products. The chapter also discusses different types of products, branding strategies, and adapting products versus standardizing them across markets. Key aspects that can be modified for different markets include product attributes, packaging, quality, positioning, and after-sale services. The chapter provides examples of companies that use global, international, local, and private label branding approaches.
2. 10-2
Introduction: 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
4. 10-4
Basic Product Concepts
A product is a good, service, or idea
– Tangible Attributes
– Intangible Attributes
Product classification
– Consumer goods
– Industrial goods
5. 10-5
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
6. 10-6
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)
7. 10-7
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.
8. 10-8
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.
9. 10-9
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.
10. 10-10
International Product Strategies
Straight
Extension
Product Product
Adaptation Innovation
The firm adopts the
same policy used in
its home market.
The company caters
to the needs and wants
of its foreign customers.
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
11. 10-11
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
12. 10-17
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."
13. 10-18
Reasons for Product Standardization
Economies of scale : Production, R&D, Marketing
Common Consumer
needs : Drinking patterns, car sizes
Consumer Mobility : Customer retention & Loyalty
American Express, Kodak, ...
Home Country Image : US jeans, French Perfumes,...
Impact of technology : B to B Markets
16. 10-21
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)
17. 10-22
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 33%
– Colgate 22,5%
– Henkel 19%
– Smithkline B. 12%
– P&G 0%
18. 10-23
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
19. 10-24
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
23. 10-28
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
25. 10-30
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
26. 10-31
Brands
“We have to shift to high value-
added products, and to do that we
need to improve our brand.”
- Noboru Fujimoto, President Sharp Electronics
Corporation
27. 10-32
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
29. 10-34
Naming your product
Alu-Fanny: French Foil wrap
Crapsy Fruit: French cereal
Kum Onit: German pencil sharpeners
Plopp: Scandinavian chocolate
Pschitt: French lemonade
Atum Bom: Portuguese tuna
Kack: Danish sweets
Mukk: Italian yogurt
Pocari Sweat: Japanese sport drink
Poo: Argentine curry powder
30. 10-35
Naming your product
Phonetic Problems with Brand Names
- Bardok (Sounds like Brothel in Russian)
- Misair (Sounds like Misery in French)
Translations
Intent Translation
- Stepping Stone - Stumbling Block
- Car Wash - Car Enema
- Highly Rated - Over Rated
Symbols
- Owl - Bad Luck in India
Other Countries make mistakes too
- Zit (Chocolate from Germany)
- Koff (Beer)
31. 10-36
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
32. 10-37
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
34. 10-39
Private Label Branding
Large retailers are moving increasingly into
their own brand, i. e. Marks &Spencer.
They try to obtain greater control and
higher margins.
Private branding can be an effective way to
break into foreign markets.
(Asian TV manufacturers)
36. 10-41
European Households Judging
Credibility of Private Labels
Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets)
Source: Secodip International, 1998
Europe Germ. Spain France Italy UKCriteria
3
19
78
3
12
85
3
26
72
3
29
68
1
13
86
More expensive
Same
Less expensive
2
16
83
5
78
17
2
90
8
3
78
19
7
71
22
4
77
18
Higher quality
Same
Lower quality
6
73
21
6
74
21
3
84
12
4
73
23
10
66
24
5
74
21
More confidence
Same
Less confidence
7
71
22
37. 10-42
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.
38. 10-43
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
39. 10-44
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
40. 10-45
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?
41. 10-46
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
42. 10-47
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
43. 10-48
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
44. 10-49
Local versus Global Products and
Brands: A Needs-Based Approach
Physiological
Safety
Social
External/Internal
Esteem
Self-actualization
45. 10-50
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
46. 10-51
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
47. 10-52
Product Packaging and Labeling
Protection
Legal ConstraintsPromotion
Climate
Transport & Handling
Buyer's slow usage rate
Lack of storage facilites
Merchandising ( income level, shopping habits)
Minimum breakage / theft
Ease of handling
Multilingual Labels to Convey an International
Image (Zara, Hollywood Chewing Gum)
Recycling of Packaging
(Duales System, Eco-Emballage)
Regulations on consumer info.
(Origin, weight, ingredients)
49. 10-55
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
51. 10-57
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.
Labeling
53. 10-59
Aesthetics
Global marketers must understand the
importance of visual aesthetics
Aesthetic Styles (degree of complexity
found on a label) differ around the world
54. 10-60
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
55. 10-61
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
56. 10-62
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
57. 10-63
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
58. 10-64
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
A product’s tangible attributes can be assessed in physical terms such as weight, dimensions, or materials used. Consider, for example, a flat-panel TV with an LCD screen that measures 42 inches across. The unit weighs 100 pounds, is 4 inches thick, and has a tuner capable of receiving high-definition TV signals over the air. These tangible, physical features translate into benefits that enhance the enjoyment of watching prime time TV and movies on DVR’s.
Companies differ in terms of both their willingness and capability to identify and produce profitable product adaptations. Unfortunately, in companies where an ethnocentric mind-set predominates, executives and managers are oblivious to the issues presented here. One new-product expert described three stages that a company must go through, they are listed above.
This slide sums up the section regarding choosing a product-communication strategy. It is important to note that only after analysis of the product-market fit and of company capabilities and costs can executives choose the most profitable strategy.
A frequently used framework for classifying products distinguishes between consumer and industrial goods. Consumer and industrial goods, in turn, can be further classified on the basis of criteria such as buyer orientation. Buyer orientation is a composite measure of the amount of effort a customer expends, the level of risk associated with a purchase, and buyer involvement in the purchase. The buyer orientation framework includes such categories as convenience, preference, shopping, and specialty goods.
Customers integrate all their experiences of observing, using, or consuming a product with everything they hear and read about it. The essence of a brand exists in the mind; as such, brands are intangible. However, companies develop logos, distinctive packaging, and other communication devices to provide visual representations of their brands. A logo can take a variety of forms, starting with the brand name itself.
This Slide illustrates that information about products and brands comes from a variety of sources and cues, including advertising, publicity, sales personnel, and packaging. Perceptions of service after the sale, price, and distribution are also taken into account. Information about products and brands comes from a variety of sources and cues, including advertising, publicity, sales personnel, and packaging. Perceptions of service after the sale, price, and distribution are also taken into account.
Products and brands can be broken down into three different categories. These are local, international and global. The next few slides illustrate the difference between the categories.
Companies should place a priority on creating strong brands in all markets through global brand leadership.
Both this slide and the next offer 8 suggestions for managers that are seeking to develop global brand leadership.
The essence of marketing is finding needs and filling them. Maslow’s hierarchy of needs, a staple of sociology and psychology courses, provides a useful framework for understanding how and why local products and brands can be extended beyond home country borders. Maslow hypothesized that people’s desires can be arranged into a hierarchy of five needs.14 As an individual fulfills needs at each level, he or she progresses to higher levels. At the most basic level of human existence, physiological and safety needs must be met. People need food, clothing, and shelter, and a product that meets these basic needs has potential for globalization. Mid-level needs in the hierarchy include self-respect, self-esteem, and the esteem of others. These social needs, which can create a powerful internal motivation driving demand for status-oriented products, cut across the various stages of country development.
One of the facts of life in global marketing is that perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries. Such perceptions contribute to the country-of-origin effect; they become part of a brand’s image and contribute to brand equity. This is particularly true for automobiles, electronics, fashion, beer, recorded music, and certain other product categories. Perceptions and attitudes about a product’s origins can be positive or negative. On the positive side, as one marketing expert has pointed out, “‘German’ is synonymous with quality engineering, ‘Italian’ is synonymous with style, and ‘French’ is synonymous with chic.”
In many instances, packaging is an integral element of product-related decisions. Packaging is an important consideration for products that are shipped long distances to markets in all parts of the world.
One hallmark of the modern global marketplace is the abundance of multi-language labeling that appears on many products. In today’s self-service retail environments, product labels may be designed to attract attention, to support a product’s positioning, and to help persuade consumers to buy.
Aesthetic elements that are deemed appropriate, attractive, and appealing in one’s home country may be perceived differently elsewhere. In some cases, a standardized color can be used in all countries; examples include the distinctive yellow color on Caterpillar’s earth-moving equipment and its licensed outdoor gear and the red Marlboro chevron. In other instances, color choices should be changed in response to local perceptions.
The starting point for an effective worldwide new-product program is an information system that seeks new-product ideas from all potentially useful sources and channels these ideas to relevant screening and decision centers within the organization. Ideas can come from many sources, including customers, suppliers, competitors, company salespeople, distributors and agents, subsidiary executives, headquarters executives, documentary sources (e.g., information service reports and publications), and, finally, actual firsthand observation of the market environment. The diagram on this slide illustrates the continuum that new products will fall into and the amount of learning that consumers will have to go through in order to use the product.
A high volume of information flow is required to scan adequately for new-product opportunities, and considerable effort is subsequently required to screen these opportunities to identify candidates for product development. The best organizational design for addressing these requirements is a new product department. Managers in such a department engage in several activities. First, they ensure that all relevant information sources are continuously tapped for new-product ideas. Second, they screen these ideas to identify candidates for investigation. Third, they investigate and analyze selected new-product ideas. Finally, they ensure that the organization commits resources to the most likely new-product candidates and is continuously involved in an orderly program of new-product introduction and development on a worldwide basis.