Product Strategies Chapter 9

What is a product ? a bundle of utilities or satisfaction One marketing implication that may be drawn is that a multinational marketer must look at a product as a total, complete offering. a complete product should be viewed as a satisfaction derived from the four Ps of marketing (product, place, promotion, and pricing) – and not simply the physical product characteristics.

Market Segmentation In international market , Marketers fail to realize that the purpose of segmentation is to satisfy consumer needs more precisely – not to segment the market just for the sake of the segmentation. Another mistake marketers make in foreign countries is in attempting to capture the total market at once. market segmentation (market homogeneity /heterogeneity). Mass market situations

In breaking into a foreign market, marketers should consider factors that influence product adoption. As explained by diffusion theory, at least six factors have a bearing on the adoption process: relative advantage, compatibility, trial ability/divisibility, observability, complexity, and price. These factors are all perceptual and thus subjective in nature.

Cont.. For a product to gain acceptance, it must demonstrate its relative advantage over existing alternatives. A product must also be compatible with local customs and habits. A new product has an advantage if it is capable of being divided and tested in small trial quantities to determine its suitability and benefits. Observation of a product in public tends to encourage social acceptance and reinforcement, resulting in the product’s being adopted more rapidly with less resistance. Complexity of a product or difficulty in understanding a product’s qualities tends to slow down its market acceptance. price is related negatively to product adoption.

Theory of international product life cycle (IPLC) IPLC theory has the potential to be a valuable framework for marketing planning on a multi-national basis. In this section, the IPLC is examined from the marketing perspective, and marketing implications for both innovators and initiators are discussed.

Theory of international product life cycle (IPLC) (0) – Local innovation, (1) – Overseas innovation, (2) – Maturity, (3) – Worldwide imitation, (4) - Reversal Exporting Other advanced nations LDCs 1 2 4 3 USA (initiating country) Importing Source: Sak Onkvist and John J, Shaw, “An Examination of the International Product Life Cycle and Its Application within Marketing”, Columbia Journal of World Business 18 (Fall, 1983): 74

IPLC stages and characteristics Import/ Export Target market Competitors Production costs (0) Local Innovation None USA Few: local firms Initially high (1)Overseas Increasing export USA, advanced nations Decline due to economies of scale (2)Maturity Stable Advanced nations, LDCs Advanced nations (3)Worldwide imitation Declining LDCs Increase due to lower economies of scale (4)Reversal Increasing export Advanced nations, LCDs Increase due to competitive disadvantage