2. Products and Services for Consumers
Chapter 12
Products and Services for Consumers
McGraw-Hill/Irwin
International Marketing, 13/e
© The McGraw-Hill Companies, Inc., All Rights Reserved.

3. Chapter Learning Objectives
The importance of offering a product suitable for the intended market
The relationship between product acceptance and the market into which it is introduced
The importance of quality and how quality is defined
Country-of-origin effects on product image
Physical, mandatory, and cultural requirements for product adaptation
The need to view all attributes of a product in order to overcome resistance to acceptance

4. Quality Shift to a customer’s market More choices in hand of customers
Increased customer knowledge about the best ,cheapest, quality
The customer defines quality
The cost and quality of a product are among the most important criteria by which purchases are made

5. Quality Defined Quality can be defined on two dimensions:
Market-perceived quality Safe flight &landing
Performance quality to be given to customers ,cost ,time ,seating ,boarding
Most consumers expect performance quality to be a given
In many industries quality is measured by objective third parties

6. Maintaining Quality Damage in the distribution chain
Russian chocolate because of poor quality and high quality American chocolate (Mars)
Quality is essential for success in today’s competitive global market
The decision to standardize or adapt a product is crucial in delivering quality

7. Physical or Mandatory Requirements and Adaptation
Product homologation from simple packaging to redesigned
Product adaptation dictated by the following requirements:
Legal Pepsi change name to Lehare Pepsi
Economic
Technological
Climate

8. Green Marketing and Product Development
Critical issues affecting product development:
Control of the packaging component of solid waste
Consumer demand for environmentally friendly products
European Commission guidelines for ecolabeling
Laws to control solid waste
Green marketing is a term used to define concern with the environmental consequences of a variety of marketing activities.

9. Products and Culture
A product is the sum of the physical and psychological satisfactions it provides the user.
Primary function
Psychological attributes
The need for cultural adaptation is often necessary, affected by how the product conforms with:
Norms
Values
Behavior patterns

10. Innovative Products and Adaptation
Determining the degree of newness as perceived by the intended market
Diffusion Knowledge about product diffusion
Foreign marketing goal: gaining the largest number of consumers in the market in the shortest span of time
Probable rate of acceptance

11. Diffusion of Innovations
Crucial elements in the diffusion of new ideas:
An innovation
Which is communicated through certain channels( method of communication)
Over time
Among the members of a social system
Variables affecting the rate of diffusion of an object:
The degree of perceived newness
The perceived attributes of the innovation
The method used to communicate the idea

12. Five Characteristics of an Innovation
Relative advantage
Compatibility (with behavior ,norms, Values)
Complexity
Trialability
Observability (clarity of benefits)

13. Analyzing Product Components for Adaptation
Insert Exhibit 12.1 – Product Component Model
Exhibit 12.1

14. Marketing Consumer Services Globally
Consumer services characteristics:
Intangibility Cant be touched
Inseparability Cant be separate from consumption
Heterogeneity individually produced and virtually unique
Perishability Cant be stored
A service can be marketed both as an industrial (business-to-business) or a consumer service

15. Services Opportunities in Global Markets
Tourism
Transportation
Financial services
Education
Communications
Entertainment
Information
Health care

16. Barriers to Entering Global Markets for Consumer Services
Protectionism
Restrictions on transborder data flows
Protection of intellectual property
Cultural barriers and adaptation

17. Brands in International Markets
Very important
Most valuable resource a company has
A global brand is defined as the worldwide use of a name, term, sign, symbol, design, or combination thereof intended to identify goods or services of one seller and to differentiate them from those of competitors.

18. Top Twenty Brands Rank 2005/2004 2005 Brand Value (millions)
Change (%)
Country of Ownership
1/1 Coca Cola
$67,525
$67, 394 0%
U.S.
2/2 Microsoft
59,941
61,732 -2
3/3 IBM
53,376
53, 791 -1
4/4 GE
46, 996
44,111 7
5/5 Intel
35,588
33,499 6
6/8 Nokia
26,452
24,041 10
Finland
7/6 Disney
26,441
27,113
8/7 McDonalds
26,041
25,001 4
9/9 Toyota
24,837
22,673
Japan
10/10 Marlboro
21,139
22,128 -4

19. Top Twenty Brands (continued)
Rank 2005/2004
2005 Brand Value (millions)
2004 Brand Value (millions)
Change (%)
Country of Ownership
11/11 Mercedes-Benz
$20,006
$21,331 -6
Germany
12/13 Citi
19,967
19,971
U.S.
13/12 HP
18,559
17,683 5
14/14 Am Ex
18,534
16,723
15/15 Gillette
17,534
16/17 BMW
17,126
15,886 8
17/16 Cisco
16,592
15,948 4
18/44 L Vuitton
16,077 NA
France
19/18 Honda
15,788
14,874 6
Japan
20/21 Samsung
14,956
12,553 19
S. Korea

20. Global Brands
The Internet and other technologies accelerate the pace of the globalization of brands
Ideally gives the company a uniform worldwide image
Balance the benefits of global brand against of loosing the benefits of an established brand
Ability to translate the same image for the brand in local market

21. Summary
The growing globalization of markets must be balanced with the continuing need to assess all markets for those differences that might require adaptation for successful acceptance.
In spite of the forces of homogenization, consumers also see the world of global symbols, company images, and product choice through the lens of their own local culture and its stage of development and market sophistication.
Each product must be viewed in light of how it is perceived by each culture with which it comes in contact.
Analyzing a product as an innovation and using the Product Component Model may provide the marketer with important leads for adaptation.

23. Pricing for International Markets
Chapter 18
Pricing for International Markets
McGraw-Hill/Irwin
International Marketing, 13/e
© The McGraw-Hill Companies, Inc., All Rights Reserved.

24. Chapter Learning Objectives
Components of pricing as competitive tools in international marketing
The pricing pitfalls directly related to international marketing
How to control pricing in parallel imports or gray markets
Price escalation and how to minimize its effect
Countertrading and its place in international marketing practices
The mechanics of price quotations

25. Global Perspective The Price War
Setting the right price for a product or service can be the key to success or failure
An offering’s price must reflect the quality and value the consumer perceives in the product
As the globalization of world markets continues, competition intensifies among multinational and home-based companies
The marketing manager’s responsibility is to set and control the actual price of goods in different markets in which different sets of variables are to be found

26. Pricing Policy Pricing Objectives
In general pricing viewed into two ways
Pricing as an active instrument of accomplishing marketing objectives
The company uses price to achieve a specific objective
Pricing as a static element in a business decision
Exports only excess inventory
Places a low priority on foreign business
Views its export sales as passive contributions to sales volume

27. Pricing Policy Parallel Imports/Gray Markets
Occurs whenever price differences are greater than the cost of transportation between two markets
Major problem for pharmaceutical companies
Exclusive distribution
In the US – Gray market for Cars, Watches, cameras etc. – valued at $6-10 billion.
Parallel imports develop when importers buy products from distributors in one country and sell them in another to distributors who are not part of the manufacturer’s regular distribution system.

28. Approaches to International Pricing Full-Cost versus Variable-Cost Pricing
Variable-cost pricing – the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.
Full-cost pricing – companies insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost

29. Approaches to International Pricing Skimming versus Penetration Pricing
Skimming – a company uses when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received.
Penetration pricing policy – used to stimulate market and sales growth by deliberately offering products at low prices.

30. Price Escalation (Set-Up)
Costs of exporting
Price escalation
Taxes, tariffs, and administrative costs
Tariff – fee charged when goods are brought into a country from another country
Administrative costs include export and import licenses, other documents, and the physical arrangements for getting the product from port of entry to the buyer’s location

31. Price Escalation (continued)
Inflation
In countries with rapid inflation or exchange variation, the selling price must be related to the cost of goods sold and the cost of replacing the items ,often sold below cost.
Deflation (Decrease)
In a deflationary market, it is essential for a company to keep prices low and raise brand value to win the trust of consumers
Exchange rate fluctuations
No one is quite sure of the future value of currency
Transactions are increasingly being written in terms of the vendor company’s national currency

32. Price Escalation (continued)
Varying currency values
Changing values of a country’s currency relative to other currencies
Cost-plus pricing
Middleman and transportation costs
Channel diversity
Underdeveloped marketing and distribution channel infrastructures

33. Approaches to Lessening Price Escalation
Lowering cost of goods
Lowering tariffs
Lowering distribution costs
Using foreign trade zones to lessen price escalation

34. Leasing in International Markets
Opens the door to a large segment of nominally financed foreign firms that can be sold on a lease option but might be unable to buy for cash
Can ease the problems of selling new, experimental equipment because less risk is involved for the users
Helps guarantee better maintenance and service on overseas equipment
Helps to sell other companies in that country
Revenue tends to be more stable over a period of time than direct sales would be

35. Countertrade as a Pricing Tool
Why purchasers impose countertrade:
To preserve hard currency
To improve balance of trade
To gain access to new markets
To upgrade manufacturing capabilities
To maintain prices of export goods

36. Countertrade as a Pricing Tool (continued)
Types of countertrade
Barter - Direct exchange of goods of approximately equal value. Not used very often because difficult to find goods of equal value. Assessing value and disposing of goods is also a problem.
Counterpurchase or offset trade - Seller gets paid but agrees to purchase goods worth the same amount from the buyer. More flexibility in selecting goods and in assessing value.
Compensation deals - Part payment in goods and part in cash. Some cash involved, flexibility in assessing value of goods involved.
Product buyback agreement - Seller agrees to accept as payment a portion of the output or buy it back. Technology transfer, quality assurance, and assured payment. Usually developing or newly-industrialized nations.

37. Administered Pricing Cartels Government-influenced pricing
Exists when various companies producing similar products or services work together to control markets for the types of goods and services they produce
Example: OPEC
Government-influenced pricing
Establish margins
Set prices and floors or ceilings
Restrict price changes
Compete in the market
Grant subsidies
Act as a purchasing monopoly or selling monopoly

38. Summary
Pricing is one of the most complicated decisions areas encountered by international marketers.
International marketers must take many factors into account, not only for each country, but often for each market within a country.
Market prices at the consumer level are much more difficult to control in international than in domestic marketing.
Controlling costs that lead to price escalation when exporting products from one country to another is one of the most challenging pricing tasks facing the exporter.
Countertrading is an important tool to include in pricing policy.
Pricing in the international marketplace requires a combination of intimate knowledge of market costs and regulations, an awareness of possible countertrade deals, infinite patience for detail, and a shrewd sense of market strategy.