International Product Development

By Amrendra Kumar

MKTG 769 PRODUCTS AND SERVICES Lars Perner, Instructor 2

PRODUCTS AND SERVICES• Product functions

across culture• Standardization vs.

customization; adaptation as a compromise

• Communication vs. product adaptations

• Branding• Services

Review issues

• Country economics– Demand for quality vs. low cost– Cost of labor

• Within country segment variations• Local competitive situation

– Overall competition– Competition for specific product lines– Possible competition with partners in

other countries

Product Need Satisfaction

• Products serve different purposes in different countries; e.g.,– Autos: transportation in U.S.; largely status

symbol in Japan– Toothpaste: Cavity prevention in U.S.; breath

freshener in Ireland– Tang: convenience, low cost beverage in

U.S.; pineapple flavor as special treat in Brazil (real oranges are cheap and plentiful)

Approaches to Product Introduction

Not suitable for the Middle East!

● Customization ● Localization

● Adaptation ●Standardization

Product Design Philosophies

STANDARDIZATION

ADAPTATION

CUSTOMIZATION

ETHNOCENTRIC

GEOCENTRIC

POLYCENTRIC

REGIOCENTRIC

Reasons for Standardization

• Avoiding high costs of standardization, if applicable

• Technological intensity– Reduced confusion– International

compatibility among product group components

– Faster spread of rapid life cycle products

• Convergence of global consumer tastes/needs

• Country of origin positioning

Standardization--Advantages

• Benefits– Economies of scale– More resources available for

development effort• Better quality

– Enhanced customer preference (?)

– Realistic when all cultural needs cannot be met

• Global customers• Global segments

Standardization--Disadvantages

• Unnecessary features• Vulnerability to trade

barriers• Strong local

competitors

Product Adaptations

• Mandatory– legal requirements– infrastructure– physical

requirements

• “Discretionary”– local tastes– fit into cultural

environment

Motivations for Adaptation

• Legal• Infrastructure• Consumer

demographics• Culture

– Religious impact– Cultural context of

use

• Local traditions/ customs—e.g.,– Food usage

occasions– Aesthetic

preferences

• Local usage conditions

• Pricing pressures/ tradeoffs

The Reality: Continuum of “Mandatoriness”

Completelymandatory

Completely“discretionary”

ElectricVoltage

Productlabeling

TasteOptimization

Style, color

PerformanceOptimization

StrongCulturalConflict

Legalrequirements

EconomicSuitability

Manner of use

Mandatory Adaptation Issues

• Choices in approach to mandatory conditions--examples– Power drills with noise suppression filters– Non-public ear piercing in Japan

• Distribution and promotion implications

• “Arbitrary” standards (e.g., TV, DVD players)• Conflicting rules between countries—may

not be possible to make product legal in all

Compatibility Issues

• Basic requirements– E.g., voltage, infrastructure, plugs

• Compatibility– Ability to be used within a local system

(e.g., frequencies, electronic protocols)

• Multi-system compatibility– Product can be set to operate within

several standards

Physical Product vs. Communication Adaptations

Communication adaptations not needed (extension)

Communication adaptations needed

Product adaptations not needed (extension)

Some industrial equipment; some electrical equipment

Bicycle; some fast food; chewing gum

Product adaptations needed

Gasoline; laundry detergent

Greeting cards; some fast food

Domestic equivalent does not exist (product invention)

Compass-equipped prayer rug; hand powered washing machine; bottled green tea

Global Product Lines

• Historical decisions– Very difficult to change position of a product

• Mergers and acquisitions– Trademark ownership across markets

• Preferences– For products– For manufacturers of product types

• Capacity• Product Life Cycle (PLC) and market growth• Channels

Entry Timing Strategy

• Waterfall– Initial introduction

in selected market(s) with “trickle down” to markets of later entry

• Market readiness

• Concentration of resources

• Sprinkler– Immediate

entry into all targeted markets

– Preemption of early entry advantage

– Fewer resources available for each market

Definitions

Innovation: “An idea, practice, or product perceived to be new by the relevant individual or group.”

Diffusion process: “The manner in which innovations spread through the market.”

Notes on Degrees of Innovation

• Newness must be considered in context of – Local market– Segment within market

• The less continuous an innovation (for a given region), the more marketing is needed

To Adopt or Not to Adopt: How Will Consumers Answer the Question?

• Some causes of resistance to adoption– perceived risk--financial and

social– self image– effort to implement and/or learn

to use the product– incompatibility– inertia

Types of Innovations

• Fashions—preferred styles change over time; often with repetition

• Fads—a product or practice gains large but temporary interest (can be revised)

• Trends—the prevalence of usage or acceptance of a product or practice increases or decreases consistently over time

0

10

20

30

40

Num

ber o

f new

adopto

rs

-2.50 -1.50 -0.50 0.50 1.50 2.50

Adoption of Innovations Over Time

Innovators2.5%

Laggards(13.5%)

Earlymajority34%

Earlyadoptors(13.5%)

Late majority34%

0

0.2

0.4

0.6

0.8

1

Percent diffu

sio

n

0 5 10 15 20 25 Time

The S-Shaped Diffusion Curve

100% adoptionor saturationpoint

One Diffusion Pattern--Nicely Balanced...

Influences on the Speed of Diffusion• Risk to expected benefit ratio

(relative advantage)• Observability• Product pricing• Trialability• Switching difficulties and

learning requirements/ ease of use

Pioneering Advantage

• Consumer expectations are usually shaped by the first encountered brand

• Order of entry vs. pioneering advantage

• Positioning of existing pioneer vs. strategy of first entry

Societal Conditions Conducive to Diffusion

• Modernity• Homophily• Physical distance• High proportion of women

in the workforce• Opinion leadership

Developing New Global Products

IDEA GENERATION

SALESFORECAST

TESTMARKETING

CONCEPTRESEARCH

PRELIMINARYSCREENING

FOCUS GROUPS

CONCEPTTESTING

TARGETRESEARCH

Concept Research

• Focus groups: Find out very broad background for further research

• Concept testing– Prototypes– Benefit package

evaluations• Target research

– Decision making strategies– Shopping habits– Beliefs/expectations

CONCEPTRESEARCH

FOCUS GROUPS

CONCEPTTESTING

TARGETRESEARCH

Branding Choices

BRANDING NO BRAND

NATIONAL/LOCAL

INTERNATIONAL

MANUFACTURERPRIVATE LABEL

MULTIPLE BRANDS

SINGLE BRAND

“UMBRELLA” BRANDS

Branding Choices--Notes

• Combinations are possible—e.g., – Own branding plus additional sales to

store branding– International brand (e.g., Coca Cola) plus

local brand(s), usually sold at lower prices

Branding Issues

• Demand spillover– Media coverage– Internet exposure

• Global customers• Scale economies• Importance of brands within country

– Country of origin– Expertise– Prestige

Local Market Branding Expectations• Asian consumers

typically have more concern with brands– conglomerates

have brands encompassing large range of goods (e.g., Mitsubishi food products)

The Brand Portfolio

• Brand extensions vs. – Creation of new brands– Brand ownership (brand tiers)

• Brand hierarchies

Brand Globalization Potential

• Word meanings• Word appeal

– Pleasantness of associations

– Suitability of associations

– Pronouncability– Pleasantness of sound– Writing and pictoral

appearance

• Trademark and name availability– Access to desired name– Protection against close

imitations by others (e.g., Lindows)

• Complementarity with other product line items

• Growth plans—regional vs. international

Implementation

• Brand building (see promotion material)

• Fade-in/fade-out

• “Endorsement branding”– For implementation– For distinction of lower tier brand

• Double branding

Positioning a Brand

• Position relative to existing brands?– Same– Generally better– Foreign image– Lower price– Special, unique benefit

• Appeal across segments?

• Usage occasion/need

Counterfeit Products

• Impact– Loss of sales– Loss of exclusivity/price pressure– Possible lack of confidence in quality– Warranty issues

• Approaches– Legal– “Search and destroy”

Physical Product vs. Communication Adaptations

Communication adaptations not needed (extension)

Communication adaptations needed

Product adaptations not needed (extension)

Some industrial equipment; some electrical equipment

Bicycle; some fast food; chewing gum

Product adaptations needed

Gasoline; laundry detergent

Greeting cards; some fast food

Domestic equivalent does not exist (product invention)

Compass-equipped prayer rug; hand powered washing machine; bottled green tea

The International Life Cycle

• Market for older technology tends to exist in less developed countries– Manufacturing of older

generation technology—e.g., Pentium I computers

– Resale of capital equipment—e.g., DC 8 aircraft, old three part canning machines

• Some countries tend to be more receptive to innovation than others

• “Leap frogging”– Going directly from old

technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)

• Shortening of product life cycles

Country of Origin Effects

• Perception of product– quality (e.g., Japan, Germany)– elegance and style (e.g., France, Italy)

• Historical associations• Positioning strategies

– Emphasis on origin (e.g., French wine)– De-emphasis/obfuscation of of country of

origin (e.g., French beer, American products with French language labels)

Services

• Scope• Characteristics

– Intangibility– Heterogeneity– Inseperability– Perishability

• The Service-Tangible Product Continuum

Service Issues

• Country expectations– Willingness to pay– Quality– Speed– Competence of

personnel– Courtesy/deference– Decision making

authority of personnel

• Cost• Availability of

skilled personnel• Control over

personnel performance

• Overhead issues