Chapter 10 Product and Brand Decisions

10-1

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

10-2

The Product Offering

Potential Product Augmented Product Expected Product

Generic Product
Core Benefit

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

10-3

Basic Product Concepts

A product is a good, service, or idea
Tangible Attributes Intangible Attributes

Product classification
Consumer goods Industrial goods

10-4

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
10-5

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)

10-6

Sales of Rights - Examples

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

- Other :

10-7

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.
10-8

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.

10-9

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
10-10

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

10-11

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."

10-17

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

10-18

Convergence in Drinking Patterns

10-19

Convergence of Car Sizes

10-20

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)
10-21

Example: European Toothpaste Market

Market Size in France: Competitors in France : FF 1,8 Bill. (1996) Unilever 33% Trends:
Multiple number of toothpastes/family Therapeutic / sophisticated products Cosmetic products Volume Price Colgate Henkel Smithkline B. P&G

22,5% 19% 12% 0%

10-22

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

10-23

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

10-24

managing marketing

International Marketing Mix Decisions

Strategic Alternatives in international and global marketing mix decisions. Managerial issues

What aspects of Product can be modified?

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

Positioning
2005 Dr.Gerard Ryan, Universitat Rovira i Virgili.

10-25

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
2005 Dr.Gerard Ryan, Universitat Rovira i Virgili.

10-26

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

10-27

Brands
Bundle of images and experiences in the customers 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
10-28

Brands

10-29

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

10-30

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

10-31

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

10-32

International Products and Brands

Offered in several markets in a particular region
Euro-brands

10-33

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

10-34

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)

10-35

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

10-36

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 advertisingin a different language, of course. - Alfred Zeien Former Gillette CEO
10-37

Family Brands
Family Brand Volkswagen

USA "Rabbit" -> lightness

Europe "Golf" -> prestige

Mexico "Caribe" -> avoid negative connotation 10-38

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)

10-39

European Consumer Preferences Regarding Private Labels

Product Category Fr. All. It. Es. GB

Edible Oils
Pasta Yoghurt Frozen Vegetables Fresh Pasta Breakfast Cereals Instant Soups Icecream Whiskey Smoked Salmon Champagne

19
16 14 5 3 4 3 6 3 3 3

20
24 14 11 7 8 9 10 1 4 4

10
12 6 5 4 2 0 4 2 1 2

11
12 6 6 3 2 2 2 1 1 3

27
24 12 34 5 18 14 21 4 2 6
10-40

Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998

European Households Judging Credibility of Private Labels

Criteria More expensive Same Less expensive Europe 3 19 78 Germ. 3 12 85 Spain 2 16 83 France 3 26 72 Italy 3 29 68 UK 1 13 86

Higher quality Same

Lower quality More confidence Same Less confidence

5 78
17 6 74 21

2 90
8 3 84 12

6 73
21 7 71 22

3 78
19 4 73 23

7 71
22 10 66 24

4 77
18 5 74 21

Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998

10-41

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.
10-42

Branding Strategies
Combination or tiered branding: allows marketers to leverage a companys 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

10-43

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

10-44

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?

10-45

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

10-46

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

10-47

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

10-48

Local versus Global Products and Brands: A Needs-Based Approach

Self-actualization External/Internal Esteem Social Safety Physiological
10-49

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
10-50

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

10-51

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)
10-52

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

10-54

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

10-55

10-56

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.
10-57

10-58

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

10-59

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

10-60

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
10-61

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

10-62

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

10-63

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

10-64

Looking Ahead
Chapter 11 Pricing decisions

10-65