1. Products and Services for Consumers
Week 10

2. Marketing Mix Implications
In the past:
Companies charged different prices in different countries
Non-tariff barriers between member countries supported such price differentials
Companies are adjusting their marketing mix strategies to reflect anticipated market changes in the single European market.
Price standardization due to parallel importation
Fairer competition due to single currency (EU)
Reduced number of brands due to standardization
Increased competition among retailers

3. International Consumer Product Trends: Opportunities and Challenges
New consumers are springing up in many emerging markets
In the more mature markets consumers’ tastes are more sophisticated and complex due to increases in purchasing power
The trend for larger firms is toward becoming global in orientation and strategy
New consumers are springing up in emerging markets in eastern Europe, the Commonwealth of Independent States, China and
other Asian countries, India, Latin America, the markets discussed in detail in Chapters Although currently not economically strong markets, some of these countries and regions have great potential to become huge markets in the future. The Disney strategy in the opening vignette is an example of how a multinational company takes advantage of global opportunities.

4. Product Adaptation
Product adaptation is important for both small and larger global companies
As competition for world markets intensifies selling what is produced for the domestic market is less effective
Some products cannot be sold at all in foreign markets without modification
Others may be sold as is, but their acceptance is greatly enhanced when tailored specifically to market needs
Product adaptation is more the norm because customers are becoming more particular and picky. Globalization and standardization works to a certain extent but consumers expect companies to pay unique attention to countries and markets.

5. Quality
Intense global competition is placing new emphasis on manufacturing quality products
Product life cycles are becoming shorter focusing on:
Quality products
Competitive prices and
Innovative products
The power is shifting from seller to the buyer
Customers have more choices with more companies competing for their attention
More competition and more choices means more power in the hands of the customer, driving the need for quality
Customers worldwide are more savvy and are knowledgeable about products and services. They are demanding better and high quality products. They are also looking for innovative products to fit their changing lifestyles.

6. Quality Defined
Quality, as a competitive tool, is the deciding factor in world markets
Quality can be defined on two dimensions:
market-perceived quality and
performance quality
The relationship of quality and price to customer satisfaction is similar to an airline’s delivery of quality. If viewed internally from the firm’s perspective (performance quality), an airline has achieved quality conformance with a safe flight and landing. But because the consumer expects performance quality to be a given, quality to the consumer is more than compliance (a safe flight and landing). Cost, timely service, frequency of flights, comfortable seating, and performance of airline personnel from check-in to baggage claim are all part of the customer’s experience that is perceived as being of good or poor quality. Such market-perceived quality attributes are embedded in the total product. Two prominent, negative examples effectively support the notion that customers define quality.
Kodak failed to understand that quality to consumers meant the convenience of digital technologies. Nokia clung to the idea that mobile handsets were mainly for calling people. Performance quality is a given for consumers, it is the most basic expectation that the product has to perform as specified. In India refrigerators are smaller than those in the U.S. and come in a variety of colors because people typically place their refrigerators in their living rooms.

7. Innovative Products and Adaptation
An important first step product adaptation is to determine the degree of newness as perceived by the intended market
Any idea perceived as new by a group of people is an innovation
Products new to a social system are innovations, and knowledge about the diffusion (i.e., the process by which innovation spreads) of innovation is helpful in developing a successful product strategy
The goal of a foreign marketer is to gain product acceptance by the largest number of consumers in the market in the shortest span of time. Although they may ultimately be accepted, the time needed for a culture to learn new ways, to learn to accept a new product, is of critical importance to the marketer because planning reflects a time frame for investment and profitability. The rate of acceptance of a new product in different cultures can be explained by the law diffusion—the way an innovation spreads.

8. Diffusion of Innovations
Everett Rogers noted that crucial elements in the diffusion of new ideas are:
an innovation
which is communicated through certain channels
over time,
among the members of a social system
Patterns of diffusion also vary substantially
At least three extraneous variables affect the rate of diffusion of an object:
the degree of perceived newness
the perceived attributes of the innovation and
the method used to communicate the idea
The more innovative a product is perceived to be, the more difficult it is to gain market acceptance.

9. Diffusion of Innovations
The five characteristics of an innovation can assist in determining the rate of acceptance or resistance of the market to a product.
Generally, the rate of diffusion is positively related to relative advantage, compatibility, trialability and observability and negatively related to complexity (the more complex the product, the longer it takes to be accepted). The more technical or complicated the product is, it is more difficult to move it through the product life cycle.

10. Five Characteristics of an Innovation
the perceived marginal value of the new product relative to the old
Relative Advantage
its compatibility with acceptable behavior, norms, values, and so forth
Compatibility
the degree of complexity associated with product use
Complexity
the degree of economic and/or social risk associated with product use
Trialability
the ease with which the product benefits can be communicated
Observability

11. Analyzing Product Components for Adaptation
A product is multidimensional, and the sum of all its features determines the bundle of satisfactions (utilities) received by the consumer
The many dimensions of products can be divided into three distinct components:
core component
packaging component and
support services component
The core component consists of the physical product—the platform that contains the essential technology—and all its design and functional features.
The packaging component includes style features, packaging, labeling, trademarks, brand name, quality, price, and all other aspects of a product’s package.
The support services component includes repair and maintenance, instructions, installation, warranties, deliveries, and the availability of spare parts.
For example in a car, the Chasis and the engine may constitute the core component, but the exterior, power steering, power windows, number of doors may constitute the packaging component and the after sales service and warranties constitute the support services component.

12. Exhibit 13.2 product Component Model
13-12

13. Marketing Consumer Services Globally
Advice regarding adapting products for international consumer markets also applies to adapting services or intangible products
However, many consumer services are distinguished by four unique characteristics:
Intangibility
Inseparability
Heterogeneity and
Perishability
Physical products are tangible, while services are intangible, one can’t touch, feel or store them. Inseparability refers to the fact that for services, production and consumption are inseparable, meaning it is consumed at the same time as it is produced (doctor’s visit, legal services). It is heterogeneous in that it is individually produced and is thus unique. It is perishable in that once created it cannot be stored but must be consumed simultaneously with its creation.

14. Service Opportunities Globally
Tourism
Transportation
Financial Services
Education
Telecommunications
Entertainment
Information
Health Care
The opportunities globally for services are primarily in the sectors listed above and in that order listed.

15. Barriers to Entering Global Markets for Consumer Services
Most services are inseparable and require production and consumption to occur almost simultaneously; thus, exporting is not a viable entry method for them
Globally, consumer services marketers face the following four barriers:
protectionism
controls on transborder data flows
protection of intellectual property
cultural requirements for adaptation
The European Union has protectionist attitudes for many service sectors, especially the U.S. Film industry. The European commission has also expressed concern about how data is transferred between borders, examples are income or health records with little concern for privacy of citizens. Protection of intellectual property is particularly difficult for services, copying music or films is easier than copying a technical product. Because trade in services frequently involves people-to-people contact, culture plays a much bigger role in services than in merchandise trade.

16. Brands in International Markets
A global brand is defined as the worldwide use of a name, term, sign, symbol (visual and/or auditory), design, or combination thereof intended to identify goods or services of one seller and to differentiate them from those of competitors
A successful brand is the most valuable resource of a company
Brand image is at the very core of business identity and strategy
Global brands such as Kodak, Sony, Coca-Cola, McDonald’s, Toyota, and Marlboro play an important role in that process
Perceived brand “globalness” leads to increases in sales
Research shows that the importance and impact of brands (and the success of their extensions) vary with cultural values around the world. Thus, customers everywhere respond to images, myths, and metaphors that help them define their personal and national identities within a global context of world culture and product benefits. Global brands play an important role in that process.

17. Global Brands or National Brands?
Economies of scale
Development costs
Promotion of a single brand product
Building brand awareness
Extensive media overlap
Prestige image of the brand
Ideally a global brand gives a company uniformly positive worldwide brand associations that enhance efficiency and cost savings when introducing other products with the brand name, but not all companies believe a single global approach is the best. Companies that already have successful country-specific brand names must balance the benefits of a global brand against the risk of losing the benefits of an established brand. And some brand names simply do not translate.

18. Country-of-Origin Effect and Global Brands
Country-of-origin effect (COE) can be defined as any influence that the country of manufacture, assembly, or design has on a consumer’s positive or negative perception of a product
When the customer becomes aware of the country of origin, there is the possibility that the place of manufacture will affect product or brand image
The country, the type of product, and the image of the company and its brands all influence whether the country of origin will engender a positive or negative reaction
When the customer becomes aware of the country of origin, there is the possibility that the place of manufacture will affect product or brand images. Consumers have broad but somewhat vague stereotypes about specific countries and specific product categories that they judge “best”: English tea, French perfume, Chinese silk, Italian leather, Japanese electronics, Jamaican rum, and so on. Stereotyping of this nature is typically product specific and may not extend to other categories of products from these countries. Ethnocentrism can also have country-of-origin effects; feelings of national pride—the “buy local” effect, for example—can influence attitudes toward foreign products. For example, when consumers in Brazil found out that the BMWs sold in Brazil were manufactured in Brazil, the sales dropped as the perception of a BMW made in Germany had a more positive connotation that a BMW made in Brazil. Similarly, when Taiwanese consumers were told that most Philips (Dutch brand) products were manufactured in Taiwan, their perception of the quality of the brand. was lowered.

19. Country-of-Origin Effect and Global Brands
Place of manufacture is more critical
Unfamiliarity with the brand name
COO effects and the product category
Industrialized and LDC countries are preferred
Fads-Americanization of brands
COO can affect brand image
For evaluation of the country of origin, place of manufacture is more critical. When consumers are unfamiliar with a brand name, they use COO as a cue for quality. COO effects vary by product category, if the product is more expensive, durable or involves risk of some type (health, social), COO becomes more important. The preferred countries of manufacture are industrialized or LDCs in that order. In some countries such as in Japan, there is a fad of American brands and therefore, the use of “American” imagery helps sales. The country of origin can certainly impact the image of the brand.

20. Private Brands
Private brands owned by retailers are growing as challengers to manufacturers’ brands
Store brands are particularly important in Europe compared with the United States
Private brands have captured nearly 30 percent of the British and Swiss markets and more than 20 percent of the French and German markets.

21. Private Brands
Private labels are formidable competitors, particularly during economic difficulties in the target markets when buyers prefer to buy less expensive, “more local” private brands
It also allows retailers to outsource production while still appreciating the advantages of a local brand
Private brands provide the retailer with high margins
They receive preferential shelf space and strong in-store promotions
To maintain market share, global brands will have to be priced competitively and provide real consumer value

22. B2B Products in International Markets
Industrial products (business-to-business) constitute a large part of global marketing
The issues of standardization versus adaptation have less relevance to marketing industrial goods than consumer goods because there are more similarities in marketing products and services to businesses across country markets than there are differences.
The motives and behaviors among businesses as customers are different from B2C consumers
Along with industrial goods, business services are a highly competitive growth market seeking quality and value
Examples are heavy machinery or photocopiers. Two factors account for greater market similarities among industrial goods customers. First is the inherent nature of the product: industrial products and services are used in the process of creating other goods and services; consumer goods are in their final form and are consumed by individuals. Second, the motive or intent of the users differ: industrial consumers are seeking profit, whereas the ultimate consumer is seeking satisfaction.
For custom products (specialized steel, customized machine tools), adaptation takes place for domestic as well as foreign markets

23. Demand in Global B2B Markets
Three factors seem to affect the demand in international industrial markets differently than in consumer markets.
demand in industrial markets is by nature more volatile
stages of industrial and economic development affect demand for industrial products
the level of technology of products and services makes their sale more appropriate for some countries than others

24. The Volatility of Industrial Demand
Firms producing products and services for industrial markets have an additional crucial reason for venturing abroad: lessening the natural volatility of industrial markets
Industrial products inherently experience cyclical swings in demand
Two factors exacerbate both the ups and downs in industrial demand:
Professional buyers tend to act in concert and
Derived demand accelerates changes in markets.
Purchasing agents add to the complexity and volatility of demand for industrial products, as the manufacturer may not sell directly to the end user and therefore it is difficult to predict quantities sold. In addition, demand for industrial products are derived, that is, the demand for cocoa is dependent on the consumption/demand for end products like chocolate or chocolate mixes in which cocoa is used as a raw material.

25. Technology and Market Demand
An important approach to grouping countries is on the basis of their ability to benefit from and use technology, particularly as economic leverage to leap several stages of economic development
The best indicator of this dimension of development is the quality of the educational system.
Despite relatively low levels of per capita GDP, many countries (e.g., China, the Czech Republic, Russia) place great emphasis on education, which affords them the potential to leverage technology transfers
Not only is technology the key to economic growth, it is also the competitive edge in today’s global markets.
The ability to develop and benefit from the latest information technology is a critical factor in international competitiveness