Chapter 10 Product and Brand Decisions

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Chapter 10 Product and Brand Decisions
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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

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The Product Offering
Potential Product
Augmented Product
Expected Product
Generic Product
Core Benefit
Source Adapted from P. Kotler, Marketing
Management, 1994
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Basic Product Concepts

• A product is a good, service, or idea
• Tangible Attributes
• Intangible Attributes
• Product classification
• Consumer goods
• Industrial goods

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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

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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)

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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.

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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.

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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.

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International Product Strategies
Straight
Product
Product
Extension
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
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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

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Global Product Planning Strategic Alternatives
Product
Communication
Same Different
Strategy 2 Product Extension Communication
Adaptation
Strategy 4 Dual Adaptation
Different Same
Strategy 3 Product Adaptation Communication Exten
sion
Strategy 1 Dual Extension
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These Three Basic Strategies Can Be Further
Broken Down Into 5 Options
Source W.J. Keegan
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How to Choose a Strategy?

• Two errors that management makes in choosing a
  strategy
• NIH (Not invented here) syndrome means managers
  ignore the advancements of subsidiaries overseas
• Managers impose policies upon subsidiaries
  because they assume what is right for customers
  in one market is right in every market

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How to Choose a Strategy?

• Cave Dweller new products launched
  internationally to dispose of excess production
• Naïve Nationalist company recognizes growth
  opportunities outside of home market
• Globally sensitive company views world as
  competitive marketplace

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How to Choose a Strategy?

• The product itself, defined in terms of the
  function or need it serves
• The market, defined in terms of the conditions
  under which the product is used, preferences of
  potential customers, and ability to buy the
  product
• Adaptation and manufacturing costs the company
  will incur

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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."

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Reasons for Product Standardization

• Economies of scale Production, RD, 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

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Convergence in Drinking Patterns
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Convergence of Car Sizes
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Reasons for Product Adaptation

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

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ExampleEuropean Toothpaste Market

• Market Size in France FF 1,8 Bill. (1996)
• Trends
• Multiple number oftoothpastes/family
• Therapeutic /sophisticated products
• Cosmetic products
• Volume
• Price

• Competitors in France
• Unilever 33
• Colgate 22,5
• Henkel 19
• Smithkline B. 12
• PG 0

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Drivers of Product AdaptationExample 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

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Drivers of Product AdaptationExample 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

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

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• 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

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Product Types

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

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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

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Brands
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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

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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

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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

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International Products and Brands

• Offered in several markets in a particular region
• Euro-brands

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Naming your product
Atum Bom Portuguese tuna Kack Danish
sweets Mukk Italian yogurt Pocari Sweat
Japanese sport drink Poo Argentine curry powder
Alu-Fanny French Foil wrap Crapsy Fruit French
cereal Kum Onit German pencil
sharpeners Plopp Scandinavian
chocolate Pschitt French lemonade
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Naming your product
? Phonetic Problems with Brand Names- Bardok
(Sounds like Brothel in Russian)- Misair
(Sounds like Misery in French) ? Translations Int
ent 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)
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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

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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

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Family Brands
USA
Europe
Mexico
"Rabbit"
"Golf"
"Caribe"
-gt lightness
-gt prestige
-gt avoid negative connotation
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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)

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European Consumer Preferences Regarding Private
Labels
Product Category
Fr.
All.
It.
Es.
GB
Edible Oils
19
20
10
11
27
Pasta
16
24
12
12
24
Yoghurt
14
14
6
6
12
Frozen Vegetables
5
11
5
6
34
Fresh Pasta
3
7
4
3
5
Breakfast Cereals
4
8
2
2
18
Instant Soups
3
9
0
2
14
Icecream
6
10
4
2
21
Whiskey
3
1
2
1
4
Smoked Salmon
3
4
1
1
2
Champagne
3
4
2
3
6
Private labels per product category ( of sales
in qunqtities in hypermarkets and
supermarkets) Source Secodip International, 1998
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European Households Judging Credibility of
Private Labels
Europe
Germ.
Spain
France
Italy
UK
Criteria
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
Private labels per product category ( of sales
in qunqtities in hypermarkets and
supermarkets) Source Secodip International, 1998
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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.

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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

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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

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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?

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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

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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

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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

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Local versus Global Products and Brands A
Needs-Based Approach
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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

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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

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Product Packaging and Labeling
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European Packaging Trends
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• POM brand Pomegranate juice used a distinctively
  shaped bottle to gain attention on the grocery
  shelf

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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

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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.
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Aesthetics

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

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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

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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

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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

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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

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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

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Looking Ahead

• Chapter 11 Pricing decisions