1. 10-1 Chapter 10 Product and Brand Decisions

2. 10-2 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

3. 10-3 The Product Offering Core Benefit Generic Product Expected Product Augmented Product Potential Product Source : Adapted from: P. Kotler, Marketing Management, 1994

4. 10-4 Basic Product Concepts A product is a good, service, or idea –Tangible Attributes –Intangible Attributes Product classification –Consumer goods –Industrial goods

5. 10-5 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

6. 10-6 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)

7. 10-7 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.

8. 10-8 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.

9. 10-9 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. 10-10 International Product Strategies Straight Extension Product AdaptationInnovation 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

11. 10-11 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

12. 10-12 Global Product Planning: Strategic Alternatives Product Same Different Communication Different Same Strategy 1: Dual Extension Strategy 2: Product Extension Communication Adaptation Strategy 4: Dual Adaptation Strategy 3: Product Adaptation Communication Extension

13. 10-13 These Three Basic Strategies Can Be Further Broken Down Into 5 Options Source: W.J. Keegan

14. 10-14 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

15. 10-15 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

16. 10-16 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

17. 10-17 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."

18. 10-18 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

19. 10-19 Convergence in Drinking Patterns

20. 10-20 Convergence of Car Sizes

21. 10-21 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)

22. 10-22 Example: European Toothpaste Market Market Size in France: FF 1,8 Bill. (1996) Trends: –Multiple number of toothpastes/family –Therapeutic / sophisticated products –Cosmetic products –Volume –Price Competitors in France : –Unilever33% –Colgate22,5% – Henkel 19% –Smithkline B. 12% –P&G0%

23. 10-23 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

24. 10-24 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

25. 10-25 managing marketing from global headquarters ©2005 Dr.Gerard Ryan, Universitat Rovira i Virgili. 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

26. 10-26 managing marketing from global headquarters ©2005 Dr.Gerard Ryan, Universitat Rovira i Virgili. 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

27. 10-27 Product Types Buyer orientation –Amount of effort expended on purchase –Convenience –Preference –Shopping –Specialty

28. 10-28 Brands Bundle of images and experiences in the customer’s 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

29. 10-29 Brands

30. 10-30 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

31. 10-31 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

32. 10-32 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

33. 10-33 International Products and Brands Offered in several markets in a particular region –‘Euro-brands’

34. 10-34 Naming your product Alu-Fanny: French Foil wrap Crapsy Fruit: French cereal Kum Onit: German pencil sharpeners Plopp: Scandinavian chocolate Pschitt: French lemonade Atum Bom: Portuguese tuna Kack: Danish sweets Mukk: Italian yogurt Pocari Sweat: Japanese sport drink Poo: Argentine curry powder

35. 10-35 Naming your product Phonetic Problems with Brand Names - Bardok (Sounds like Brothel in Russian) - Misair (Sounds like Misery in French) Translations Intent 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)

36. 10-36 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

37. 10-37 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 advertising—in a different language, of course. - Alfred Zeien Former Gillette CEO

38. 10-38 Family Brands Family Brand Volkswagen USAEuropeMexico "Rabbit""Golf""Caribe" -> lightness-> prestige-> avoid negative connotation

39. 10-39 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)

40. 10-40 European Consumer Preferences Regarding Private Labels Product CategoryFr.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 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 Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998

41. 10-41 European Households Judging Credibility of Private Labels Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998 EuropeGerm.SpainFranceItalyUKCriteria 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

42. 10-42 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.

43. 10-43 Branding Strategies Combination or tiered branding: allows marketers to leverage a company’s 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

44. 10-44 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

45. 10-45 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?

46. 10-46 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

47. 10-47 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

48. 10-48 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

49. 10-49 Local versus Global Products and Brands: A Needs-Based Approach Physiological Safety Social External/Internal Esteem Self-actualization

50. 10-50 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

51. 10-51 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

52. 10-52 Product Packaging and Labeling Protection Legal ConstraintsPromotion Climate Transport & Handling Buyer's slow usage rate Lack of storage facilites Merchandising ( income level, shopping habits) Minimum breakage / theft Ease of handling Multilingual Labels to Convey an International Image (Zara, Hollywood Chewing Gum) Recycling of Packaging (Duales System, Eco-Emballage) Regulations on consumer info. (Origin, weight, ingredients)

53. 10-53 European Packaging Trends

54. 10-54 POM brand Pomegranate juice used a distinctively shaped bottle to gain attention on the grocery shelf

55. 10-55 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

56. 10-56

57. 10-57 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. Labeling

58. 10-58

59. 10-59 Aesthetics Global marketers must understand the importance of visual aesthetics Aesthetic Styles (degree of complexity found on a label) differ around the world

60. 10-60 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

61. 10-61 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

62. 10-62 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

63. 10-63 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

64. 10-64 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

65. 10-65 Looking Ahead Chapter 11 Pricing decisions