International MarketingChapters 12 and 13

Products and Services – Consumer and Business

Introduction

• The opportunities for international marketers of consumer goods and services today have never been greater

• New consumers are springing up in many emerging markets, which promise to be huge markets in the future

• In the more mature markets consumers’ tastes become more sophisticated and complex due to increases in purchasing power

Quality

• Intense global competition is placing new emphasis on manufacturing quality products

• Quality, as a competitive tool, is the deciding factor in world markets

Quality can be defined on two dimensions: (1) market-perceived quality and(2) performance quality

• Quality is associated with customer satisfaction • Quality is also measured in many industries by objective third

parties such as JD Power and Associates • Customer satisfaction indexes developed are now being used

to measure satisfaction across a wide variety of consumer products and services

• Quality is associated with customer satisfaction • Quality is also measured in many industries by objective third

parties such as JD Power and Associates • Customer satisfaction indexes developed are now being used

to measure satisfaction across a wide variety of consumer products and services

Physical or Mandatory Requirements and Adaptation

• Legal, economic, political, technological, and climatic requirements of the local marketplace often dictate product adaptation

• Changes may also have to be made to accommodate climatic differences

• Products may have to change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple package changes to total redesign of the physical core product

• Products may have to change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple package changes to total redesign of the physical core product

Product Adaptation

• Lehar-Pepsi in India• Chevrolets in the Mid-east• Crackers shipped to humid areas• “Small sizing” products like razor blades (India)

and cheetos (China)• Electrolux cold wash only washing machines

where energy costs are high• Cake mixes in England• Selling Harry Potter in English in Japan

(unusual?)

Green Marketing and Product Development

• At the forefront of the “green movement,” with strong public opinion and specific legislation favoring environmentally friendly marketing and products

• Green marketing is a term used to identify concern with the environmental consequences of a variety of marketing activities

• The designation that a product is “environmentally friendly” is voluntary, and environmental success depends on the consumer selecting the eco-friendly product

• In some countries each level of the distribution chain is responsible for returning all packaging, packing, and other waste materials up the chain

Products and Culture

1. Facets of products include its form, taste, color, odor, and texture; how it functions in use; the package; the label; the warranty; manufacturer’s and retailer’s servicing; the confidence or prestige enjoyed by the brand; the manufacturer’s reputation;

2. The adoption of some products by consumers can be affected as much by how the product concept conforms with norms, values, and behavior patterns

3. Thus, many facets of products are influenced by culture, which marketers must pay attention to.

A product is more than a physical item: It is a bundle of satisfactions (or utilities) that the buyer receives

A product is more than a physical item: It is a bundle of satisfactions (or utilities) that the buyer receives

Diffusion of Innovation

• Product diffusion depends on:

a. Relative advantage

b. Compatibility

c. Complexity

d. Trialability

e. Observability

Analyzing Product Componentsfor Adaptation

(1) core component,

(2) packaging component, and

(3) support services component

• A product is multidimensional, and the sum of all its features determines the bundle of satisfactions (utilities) received by the consumer

• 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:

• The many dimensions of products can be divided into three distinct components:

• These components include all a product’s tangible and intangible elements and provide the bundle of utilities the market receives from use of the product

• These components include all a product’s tangible and intangible elements and provide the bundle of utilities the market receives from use of the product

The many dimensions of a product can be divided into three distinct components as illustrated in the model below:

Dimensions of a Product

Marketing Consumer Services Globally

1. intangibility,

2. inseparability,

3. heterogeneity, and

4. perishability

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:

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:

• There are several services opportunities in global markets from travel and tourism, TV, movies, to financial services

• There are several services opportunities in global markets from travel and tourism, TV, movies, to financial services

Barriers to Entering Global Markets for Consumer Services

• protectionism,

• controls on transborder data flows,

• protection of intellectual property, and

• cultural requirements for adaptation

• Most services are inseparable and require production and consumption to occur almost simultaneously; thus, exporting is not a viable entry method for them

• 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:

• Globally, consumer services marketers face the following four barriers:

Brands in International Markets

1. Global brands such as Kodak, Sony, Coca-Cola, McDonald’s, Toyota, and Marlboro play an important role in that process

2. Perceived brand “globalness” leads to increases in sales

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

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

Country-of-Origin Effect and Global Brands

• Brands are used as external cues to taste, design, performance, quality, value, and prestige

• Many factors affect brand image, but one factor of great concern is the country-of-origin effect on the market’s perception of the product

• 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

Introduction –Business-to-Business

1. Industrial products sold in business-to-business markets also constitute a large part of global marketing

2. The inherent nature of industrial goods makes marketing mix standardization more common

3. 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

4. The motive differs: Industrial consumers are seeking profit, whereas the ultimate consumer is seeking satisfaction

5. Although prevalent for industrial goods, protectionism can be much more pronounced for the service provider

Demand in Global Business-to-Business Markets

1. Demand in industrial markets is by nature more volatile

2. Stages of industrial and economic development (discussed in Chapter 9) affect demand for industrial products maybe more than for consumer products.

3. The level of technology of products and services makes their sale more appropriate for some countries than others

• Three factors seem to affect the demand in international industrial markets differently than in consumer markets

• Three factors seem to affect the demand in international industrial markets differently than in consumer markets

Derived Demand Example

Quality and Global Standards

1. Quality is important with industrial products as well2. Quality is defined by the buyer3. One important dimension of quality is how well a product meets

the specific needs of the buyer4. This price–quality relationship is an important factor in

marketing industrial products5. Total quality management must be a part of all MNCs’

management strategy 6. A lack of universal standards is another problem in international

sales of industrial products 7. Conflicting standards are encountered in test methods for

materials and equipment, quality control systems, and machine specifications

ISO 9000 Certification: An International Standard of Quality

1. ISO 9000s, a series of five international industrial standards (ISO 9000–9004) originally designed by the International Organization for Standardization in Geneva to meet the need for product quality assurances in purchasing agreements

2. ISO 9000 concerns the registration and certification of a manufacturer’s quality system

3. It is a certification of the existence of a quality control system a company has in place to ensure it can meet published quality standards

4. ISO 9000 standards do not apply to specific products

5. It is a certification of the production process only, and does not guarantee that a manufacturer produces a “quality” product or service.

6. The series describes three quality system models, defines quality concepts, and gives guidelines for using international standards in quality system

Business Services

• For many industrial products after-sales service is also important

• For many industrial products after-sales service is also important

• For many industrial products, e.g., cell phones, the revenues from associated services exceed the revenues from the products

• For many industrial products, e.g., cell phones, the revenues from associated services exceed the revenues from the products

• Customer training is rapidly becoming a major after-sales service when selling technical products in countries that demand the latest technology but do not always have trained personnel

• Customer training is rapidly becoming a major after-sales service when selling technical products in countries that demand the latest technology but do not always have trained personnel

• After-sales services are crucial in building strong customer loyalty and are also almost always more profitable than the actual sale of the machinery or product

• After-sales services are crucial in building strong customer loyalty and are also almost always more profitable than the actual sale of the machinery or product

Trade Shows: A Crucial Part of Business-to-Business Marketing

• Trade shows serve as the most important vehicles for selling products, reaching prospective customers, contacting and evaluating potential agents and distributors, and marketing in most countries

• Trade shows serve a much more important role in other countries where most prospects are found

• European trade shows attract high-level decision makers who are there to buy products

• Trade shows provide the facilities for a manufacturer to exhibit and demonstrate products to potential users and to view competitors’ products

• Trade shows create an opportunity to create sales and establish relationships with agents, distributors, franchisees, and suppliers that can lead to more-permanent distribution channels in foreign markets

Relationship Marketing in Business-to-Business Contexts

• Building long-term relationships with customers is a viable strategy for business-to-business marketing

• The objective of relationship marketing is to make the relationship an important attribute of the transaction, thus differentiating oneself from competitor

• It shifts the focus away from price to service and long-term benefits

• The reward is loyal customers that translate into substantial long-term profits

• Focusing on long-term relationship building will be especially important in most international markets where culture dictates stronger ties between people and companies