Week 8
Product & Service Strategies
    The Marketing Mix
   After an international firm has decided to enter a
    particular foreign market, further marketing
    decisions must be made. In particular,
    international marketing managers must address
    four issues:
    •   How to develop the firm’s product(s)
    •   How to price those products
    •   How to sell those products
    •   How to distribute those products to the firm’s
Marketing Mix Management

“to standardize or not to
standardize, that is the
The Marketing Mix
 • Benefits from standardization of the
   marketing mix include
    • Lower costs.
    • Easier control and coordination from
    • Reduction of the time spent preparing the
      marketing plan.
Product Strategies
   The product is the central focus of the
    marketing mix.
   Remember that the product is what the
    customer buys, including the physical
    product, brand name, accessories, after-
    sales service, warranty, instructions for use,
    company image, and package.
Examples of ‘Standardized’
Product      Actual Adaptation

Sony TV      Voltage, broadcast standards.
McDonald’s   Menu, décor of restaurant.
Levi Jeans   Size mix, fabric, cuts.
Coca-Cola    Brand names (China), package,
Product Strategies
   Type of Product
    • Industrial Products
       • Many industrial products can be sold unchanged
         worldwide (eg: transistors).
       • If product changes are required, they may be
         cosmetic (eg: printing instructions in another
Product Strategies
   Type of Product
    • Industrial Products (cont’d)
       • Drastic modifications in the physical product
         may be necessary in developing countries
         because of
           – a tendency to overload equipment.
           – slight maintenance.
Product Strategies
   Type of Product
    • Industrial Products (cont’d)
       • Products considered obsolete in advanced
         countries are frequently what developing
         countries need.
          – Hand-operated cash registers
       • Occasionally adaptations are necessary to
         meet local legal requirements
          – Exhaust emissions
Product Strategies
   Type of Product
    • Consumer Products
       • Generally, consumer products require greater
         adaptation than do industrial products.
       • However, some can be sold unchanged to
         certain market segments.
           – Large automobiles, sporting equipment,
             and perfumes.
Product Strategies
   Type of Product
    • Services
       • The marketing of services, is similar to the
         marketing of industrial products.
          – Services are easier to market globally
            compared to consumer products.
Product Strategies
   Foreign Environmental Forces
    • Legal Forces
       • Laws concerning pollution, consumer protection,
         and operator safety are being enacted rapidly in
         many parts of the world.
           – These laws limit the marketer’s freedom to
             standardize the product mix internationally.
       • Food and pharmaceuticals are especially influenced
         by laws concerning purity and labeling.
Product and Technical Standards
   Government standards can prevent the
    introduction of global products.
   Different technical standards impede global
    markets, as well.
    • Come from idiosyncratic decisions
      made long ago.
       • Different television signal
Product Strategies
   Foreign Environmental Forces
    • Legal Forces (cont’d)
       • Legal forces may prevent a worldwide firm
         from employing its brand name in all its
         overseas markets.
       • In code law countries, a brand belongs to the
         person registering it first.
          – To avoid this predicament, the firm must register its
            brand names in every country where it wants to use
            them or where it might use them in the future.
     Economic Differences
   Consumer behavior is influenced by
    economic development.
    • Consumers in highly developed countries tend
      to have extra performance attributes in their
    • Consumers in less developed countries tend not
      to demand these extra performance attributes.
       • Cars: no air-conditioning, power steering, power
         windows, radios and cassette players.
       • Product reliability is more important.
Product Strategies
   Foreign Environmental Forces
    • Economic Forces
       • The great disparity in income throughout the world is an
         important obstacle to worldwide product standardization.
       • Many products from the industrialized countries are too
         expensive for consumers in developing countries.
       • “backward” innovation may be required if too
           – The firm must either simplify the product or produce a
             different, less costly one.
       EG: make smaller tractor for India which is smaller, less
        powerful and fewer amenities.
Product Strategies
   Foreign Environmental Forces
    • Physical Forces
       • Physical forces, such as climate and terrain,
         weigh against international product
         standardization. For example,
          – Where the heat is intense, gasoline-driven machinery
            and automobiles must be fitted with larger radiators.
          – High altitudes frequently require product alteration.
          – Mountainous terrain implies high-cost highways, and
            so in the poorer countries, quality roads are
   Repair & Installation Facilities - product
    can be redesigned for greater reliability,
    easier serviceability, simpler installations.
   Distance of Host Country from Home
   Length of Distribution Channel in Host

       Note: Last 2 determine robustness of

    Sometimes a positioning change is all that is

        EG: Diet Coke is a weight loss beverage
        in NA but a weight maintenance product
        in Japan.
Customer Preferences - largely determined by
  culture, so adaptation greatest for oldest
  product categories like staples, clothing,
  food and less for luxury items.
 Typical changes are in brand name,
  packaging, labeling, ingredients, quality,
  features, colour, size, styling, usage
  instructions, measurement units.
Product Policy
 firms often like to standardize the brand name of a
 can reduce packaging, design, and advertising
  production costs.
 development costs for products launched under the
  global brand name can be spread over large
 can capture spillovers of its advertising messages
  from one market to the next.
 various options for branding when they sell their
  goods in multiple countries.
 companies often see global (or at least regional)
  branding as a must.
   global branding has a consistent identity
    with consumers across the world.
    • global brands have much more visibility than a local
    • being global adds to the image of a brand country.
    • able to leverage the country association for the product.
    • value of a global brand (brand equity) usually varies a
      great deal from country to country.
Campbell’s International
How The Japanese Perceive Automobiles (1985)
            How They Value Attributes
                               gas mileage

                     *VW               reliability
         safety                             colour

                               *Audi             workmanship

                                     styling    handling
                                 comfort *BMW
         *Ford              horsepower
Low                                                       Hi
Foreign vs Domestic Products

   Depends on perception.
    • Hide
                         Country Influence on Purchase
    • Emphasize
                         Age        %’age Influenced
   Premium pricing      18 -30              19
    • French wines       31 - 45             35
                         46 - 60             29
                         61+                 50
Promotional Strategies
   Six commonly used promotional strategies
    • Same product--same message
       • Avon, Maidenform, and A.T. Cross follow this strategy.
    • Same product--different message
       • Honda’s campaign in America is different than in
    • Product adaptation--same message
       • In Japan, Lever Brothers puts Lux soap in fancy boxes
         because much of it is sold for gifts.
Promotional Strategies
   Six most commonly used promotional
    strategies (cont’d)
    • Product adaptation--message adaptation
       • In Latin America, Tang is especially sweetened and
         promoted as a mealtime drink, but is less sweetened
         and promoted as a breakfast drink in the U.S.
    • Different product--same message
       • Product is produced in low cost plastic squeeze bottle
         for developing countries, but advertised the same in all
    • Different product for the same use--different
       • Welding torches rather than automatic welding
         machines are sold in developing countries faced with
Procter & Gamble in Japan

    Globalization and Markets

   Procter and Gamble …still customizes the
    final product offering and market strategy to
    the conditions that pertain in individual
    national markets.” - Charles W. Hill -
The Location of R&D
      New product development is greater
       •   More money spent on R&D.
       •   Underlying demand is strong.
       •   Consumers are affluent.
       •   Competition is intense.
The Need to Integrate R&D,
Marketing and Production
   High failure rate ratio between new
    products development and profit goals.
   Reasons for failure:
    • Limited product demand.
    • Failure to adequately commercialize product.
    • Inability to manufacture product cost-
Cross-Functional Integration
   Integrating R&D, production and marketing
    • Project development is driven by customer
    • New products are designed for ease of
    • Development costs are kept in check.
    • Time to market is minimized.
   Use cross-functional development teams.
Developing New Products for Global Markets
   Identifying New Product Ideas
   New Product Development (NPD) Process
   Screening
   Concept Testing
   Test Marketing
   Timing of Entry: Waterfall versus Sprinkler
       • Waterfall Strategy: Global phased rollout where
         new products trickle down in a cascade-like
       • Sprinkler Strategy: Simultaneous worldwide
Global NPD and Culture
• The NPD process among European firms is
  much more formalized.
• European Go/No Go standards tend to be far
  stricter than American norms.
• European firms more likely to have a well-
  defined project leader and an assigned team of
  players. European teams much more
  multifunctional than American teams.
• European companies punish project leaders less
  in case of failure, reward intrapreneurs more
  generously, and offer more seed money for pet
       Global NPD and Culture

   Japanese Companies and Product Churning:

    • Japanese companies strongly believe in rushing
      new products to the markets with little or no
      market research and then gauge the market’s
    • Japanese NPD managers constantly listen to the
      “voice of the customers.”
Global Marketing of Services
 Challenges in Marketing Services
   • Protectionism
   • Immediate Face-to-Face Contacts with
     Service Transactions
   • Difficulties in Measuring Customer
     Satisfaction Overseas
 Opportunities in the Global Service Industries:
   • Deregulation of Service Industries
   • Increasing Demand for Premium Services
   • Increased Value Consciousness
how  should the firm expand
its multinational product line
over time?
   •What product lines should
   be added or dropped?
issue   of global piracy.
strategies to
             handle the
negative country-of-origin
Global Marketing of Services (contd.)
   Global Service Marketing Strategies:
    • Capitalize on Cultural Forces in the Host
    • Standardize and Customize
    • Give Information Technologies (IT) a Central
    • Add Value by Differentiation
    • Establish Global Service Networks

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