4 ps of gm

© 2005 Prentice Hall 10-1

Product and Brand Decisions


Basic Product Concepts

A product is a good, service, or idea– Tangible Attributes– Intangible Attributes

Product classification– Consumer goods– Industrial goods


Product Types

Buyer orientationAmount of effort expended on purchase, Level of

risk associated and involvement in purchase.– Convenience– Preference– Shopping– Specialty


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 timeBundle of images and experiences in the customer’s mindA promise made by a particular company about a particular productA quality certificationDifferentiation between competing productsThe sum of impressions about a brand is the Brand Image


Brands


Local, International Products and BrandsLocal 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

International Brands:Offered in several markets in a particular region


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


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


Branding Strategies

Brand acts as an umbrella for new products– Example: Crescent Group of Companies

• Cres-Bank• Crescent Bahoman• Shakarganj Foods Ltd.


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

Develop a consistent planning process

Assign specific responsibility for managing branding issues

Execute brand-building strategies

Harmonize, unravel confusion, and eliminate complexity


Local versus Global Products and Brands: A Needs-Based Approach

Physiological

Safety

Social

External/Internal Esteem

Self-actualization


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


Packaging

Consumer Packaged Goods when the packaging is designed to protect or contain the product during shippingEco-Packaging because package designers must address environmental issuesOffers communication cues that provide consumers with a basis for making a purchase decision


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


Aesthetics

Global marketers must understand the importance of visual aesthetics

Aesthetic Styles (degree of complexity found on a label) differ around the world


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


Extend, Adapt, Create: Strategic Alternatives in Global Marketing

Extension – offering product virtually unchanged in markets outside of home countryAdaptation – changing elements of design, function, and packaging according to needs of different country marketsCreation – developing new products for the world market


Global Product Planning: Strategic Alternatives

ProductSame Different

Communication

Different

SameStrategy 1:

Dual Extension

Strategy 2:Product ExtensionCommunication

Adaptation

Strategy 4:Dual Adaptation

Strategy 3:Product Adaptation

CommunicationExtension


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

Cave Dweller – new products launched internationally to dispose of excess productionNaïve Nationalist – company recognizes growth opportunities outside of home marketGlobally sensitive – company views world as competitive marketplace


How to Choose a Strategy?

The product itself, defined in terms of the function or need it servesThe market, defined in terms of the conditions under which the product is used, preferences of potential customers, and ability to buy the productAdaptation and manufacturing costs the company will incur


New Products in Global Marketing

Pursue opportunities in competitive arenas of global marketplaceFocus on one or only a few businessesActive involvement from senior managementAbility to recruit and retain best employeesUnderstand the importance of speed in bringing product to market


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


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


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


Pricing Decisions


Basic Pricing Concepts

The Global Manager must develop systems and policies that address– Price Floors– Price Ceilings– Optimum Prices

Must be consistent with global opportunities and constraints


Global Pricing Objectives and Strategies

Managers must determine the objectives for the pricing objectives– Unit Sales– Market Share– Return on investment

They must then develop strategies to achieve those objectives– Penetration Pricing– Market Skimming


Market Skimming and Financial Objectives

Market Skimming– Charging a premium

price– May occur at the

introduction stage of product life cycle

Sony Ad. for camcorders


Penetration Pricing and Non-Financial Objectives

Penetration Pricing– Charging a low price in

order to penetrate market quickly

– Appropriate to saturate market prior to imitation by competitors

1979 Sony Walkman


Companion Products

Products whose sale is dependent upon the sale of primary product– Video games are dependent

upon the sale of the game Console

“If you make money on the blades you can give away the razors.”

X-Box Game System and Sports Game


Target Costing – 8 Questions1. Does the price reflect the product’s quality?2. Is the price competitive given local market conditions?3. Should the firm pursue market penetration, market

skimming, or some other pricing objective?4. What type of discount (trade, cash, quantity) and

allowance (advertising, trade-off) should the firm offer its international customers?

5. Should prices differ with market segment?6. What pricing options are available if the firm’s costs

increase or decrease? Is demand in the international market elastic or inelastic?

7. Are the firm’s prices likely to be viewed by the host-country government as reasonable or exploitative?

8. Do the foreign country’s dumping laws pose a problem?


Target Costing

Cost-Based Pricing is based on an analysis of internal and external cost

Firms using western cost accounting principles use the Full absorption cost method– Per-unit product costs are the sum of all past or

current direct and indirect manufacturing and overhead costs


Target Costing

Rigid cost-plus pricing means that companies set prices without regard to the eight foundational pricing considerations

Flexible cost-plus pricing ensures that prices are competitive in the contest of the particular market environment


Terms of the Sale

Obtain export license if required

Obtain currency permit

Pack goods for export

Transport goods to place of departure

Prepare a land bill of lading

Complete necessary customs export papers

Prepare customs or consular invoices

Arrange for ocean freight and preparation

Obtain marine insurance and certificate of the policy


Terms of the Sale

Incoterms– Ex-works – seller places goods at the disposal of the

buyer at the time specified in the contract; buyer takes delivery at the premises of the seller and bears all risks and expenses from that point on.

– Delivery duty paid – seller agrees to deliver the goods to the buyer at the place he or she names in the country of import with all costs, including duties, paid.


Environmental Influences on Pricing Decisions

Currency Fluctuations

Inflationary Environment

Government Controls, Subsidies, Regulations

Competitive Behavior

Sourcing


Global Pricing: Three Policy Alternatives

Extension

Adaptation

Geocentric


Gray Market Goods

Trademarked products are exported from one country to another where they are sold by unauthorized persons or organizations

Occurs when product is in short supply, when producers use skimming strategies in some markets, and when goods are subject to substantial mark-ups


Dumping

Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin.Occurs when imports sold in the US market are priced at either levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing countriesTo prove, both price discrimination and injury must be shown


Price Fixing

Representatives of two or more companies secretly set similar prices for their products– Illegal act because it is anticompetitive

Horizontal price fixing occurs when competitor within an industry that make and market the same product conspire to keep prices highVertical price fixing occurs when a manufacture conspires with wholesalers/retailers to ensure certain retail prices are maintained


Transfer Pricing

Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdictionIntra-corporate exchanges– Cost-based transfer pricing– Market-based transfer pricing– Negotiated transfer pricing


Countertrade

Countertrade occurs when payment is made in some form other than money

Options– Barter– Counter-purchase– Offset– Compensation trading– Cooperation agreements– Switch trading


Barter

The least complex and oldest form of bilateral, non-monetary counter-trade

A direct exchange of goods or services between two parties


Incoterms

FAS (free alongside ship) named port of destination – seller places goods alongside the vessel or other mode of transport and pays all charges up to that point

FOB (free on board) – seller’s responsibility does not end until goods have actually been placed aboard ship

CIF (cost, insurance, freight) named port of destination – risk of loss or damage of goods is transferred to buyer once goods have passed the ship’s rail

CFR (cost and freight) – seller is not responsible at any point outside of factory

Return


Extension

Ethnocentric

Per-unit price of an item is the same no matter where in the world the buyer is located

Importer must absorb freight and import duties

Fails to respond to each national market

Return


Adaptation

Polycentric

Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances

Sensitive to market conditions but creates potential for gray marketing

Return


Geocentric

Intermediate course of action

Recognizes that several factors are relevant to pricing decision– Local costs– Income levels– Competition– Local marketing strategy

Return


Currency Fluctuations

Return


Inflationary Environment

Defined as a persistent upward change in price levels– Can be caused by an increase in the money

supply– Can be caused by currency devaluation

Essential requirement for pricing is the maintenance of operating margins

Return


Government Controls, Subsidies, and Regulations

The types of policies and regulations that affect pricing decisions are:– Dumping legislation– Resale price maintenance legislation– Price ceilings– General reviews of price levels


Competitive Behavior

If competitors do not adjust their prices in response to rising costs it is difficult to adjust your pricing to maintain operating margins

If competitors are manufacturing or sourcing I a lower-cost country, it may be necessary to cut prices to stay competitive

Return


Using Sourcing as a Strategic Pricing Tool

Marketers of domestically manufactured finished products may move to offshore sourcing of certain components to keep costs down and prices competitive

Return

Can you stay competitive while staying local?


Channels and Physical Distribution


Channel Objectives

Marketing channels exist to create utility for customers– Place utility - availability of a product or service in a

location that is convenient to a potential customer – Time utility - availability of a product or service when

desired by a customer – Form utility - availability of the product processed,

prepared, in proper condition and/or ready to use– information utility - availability of answers to

questions and general communication about useful product features and benefits


Distribution Channels: Terminology and Structure

Distribution is the physical flow of goods through channels

Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service


Distribution Channels: Terminology and Structure

Distributor – wholesale intermediary that typically carries product lines or brands on a selective basis

Agent – an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold


Consumer Products


Consumer Products

Piggyback Marketing – channel innovation that has grown in popularity– One manufacture distributes product by

utilizing another company’s distribution channel

– Requires that the combined product lines be complementary and appeal to the same customer


Industrial Products


Establishing Channels

Direct involvement – the company establishes its own sales force or operates its own retail stores

Indirect involvement – the company utilizes independent agents, distributors, and/or wholesalers

Channel strategy must fit the company’s competitive position and marketing objectives with in each national market


Working with Channel Intermediaries

Select distributors – don’t let them select youLook for distributors capable of developing markets, rather than those with a few good customer contactsTreat local distributors as long-term partners, not temporary market-entry vehicles


Working with Channel Intermediaries

Support market entry by committing money, managers, and proven marketing ideas

From the start, maintain control over marketing strategy

Make sure distributors provide you with detailed market and financial performance data

Build links among national distributors at the earliest opportunity


Global Retailing

Department stores

Specialty retailers

Supermarkets

Convenience stores

Discount stores and warehouse clubs

Hypermarkets

Supercenters

Category killers

Outlet stores


Global Retailing

Top 25 Global Retailers in

2002, sales in Millions


Global Retailing

Environmental Factors – Saturation in the home country market– Recession or other economic factors– Strict regulation on store development– High operating costs

Critical Question– What advantages do we have relative to the

local competition?


Classifying Global Retailers


Global Retailing Strategies

Organic– Company uses its own resources to open a store

on a green field site or acquire one or more existing retail facilities

Franchise– Appropriate strategy when barriers to entry are

low yet the market is culturally distant in terms of consumer behavior or retailing structures



Chain Acquisition– A market entry strategy that entails purchasing

a company with multiple existing outlets in a foreign country

Joint Venture– This strategy is advisable when culturally

distant, difficult-to-enter markets are targeted


Innovation in Global Retailing

Innovation takes place only in the most highly developed systemsThe ability of a system to successfully adapt innovations is directly related to its level of economic developmentEven when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressuresThe process of adaptation can be greatly accelerated by the actions of aggressive individual firms


Supply Chain Definitions

Supply Chain – Includes all the firms that perform support activities by

generating raw materials, converting them into components or finished products and making them available to customers

Logistics– The management process that integrates the activities

of all companies to ensure tan efficient flow of goods through the supply chain


Physical Distribution, Supply Chains, and Logistics Management

Order Processing– includes order entry in which the order is actually

entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery

Warehousing– Warehouses are used to store goods until they are sold– Distribution centers are designed to efficiently receive

goods from suppliers and then fill orders for individual stores or customers


Physical Distribution, Supply Chains, and Logistics Management

Inventory Management– Ensures that a company neither runs out of

manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items.

Transportation– the method or mode a company should utilize when

moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water


Transportation

Channel Strategy – analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation


Communications Decisions: Advertising and Public Relations


Global Marketing Communications

The primary purpose of marketing communications is to tell customers abut the benefits and values that a company, product, or service offers

Integrated Marketing Communications (IMC) is becoming more popular because of the challenges of communicating across national borders


Global Advertising

Advertising is any sponsored, paid message that is communicated in a non-personal way– Single country– Regional– Global

Global advertising is the use of the same advertising appeals, messages, art, copy, photographs, stories, and video segments in multiple country markets


Standardization vs. Adaptation

Primary Question–Must the specific advertising message

and media strategy be changed from region to region or country to country?


Standardization vs. Adaptation

Four difficulties that compromise an organization’s communication efforts– The message may not get through to the intended

recipient. – The message may reach the target audience but may not

be understood or may even be misunderstood. – The message may reach the target audience and may be

understood but still may not induce the recipient to take the action desired by the sender.

– The effectiveness of the message can be impaired by noise.


Advertising Agencies: Organizations and Brands

Understanding the term organization is key– Umbrella corporations/holding companies have one or

more ‘core’ advertising agencies– Each ‘organization’ has unites specializing in direct

marketing, marketing services, public relations, or research

Individual agencies are considered brands– Full service brands create advertising, and provide

services such as market research, media buying, and direct marketing


Selecting an Advertising Agency

Company organization– Companies that are decentralized ma want to leave the

choice to the local subsidiaryNational responsiveness– Is the global agency familiar with local culture and

buying habits of a particular country?Area coverage– Does the agency cover all relevant markets

Buyer perception– What kind of brand awareness does the company want

to project?


Creating Global Advertising

Creative strategyBig ideaAdvertising appeal– Rational approach– Emotional approach

Selling propositionCreative execution– Art & Copy


Art Directors and Art Direction

Art Directors– Advertising professional who has the general

responsibility for the overall look of an ad– Will choose graphics, pictures, type styles, and

other visual elements that appear in an ad

Art Direction– The visional presentation of an advertisement


Cultural Considerations – Japanese and American Differences

Indirect rather than direct forms of expression are preferred in the messagesThere is often little relationship between ad content and the advertised productOnly brief dialogue or narration is used in television commercials, with minimal explanatory contentHumor is used to create a bond of mutual feelingsFamous celebrities appear as close acquaintances or everyday peoplePriority is placed on company trust rather than product qualityThe product name is impressed on the viewer with short, 15-second commercials


Cultural Considerations


Global Media Decisions

Prepare new copy for foreign markets in host country’s language

Translate the original copy into target language

Leave some or all copy elements in home country language


Media Decisions – Saudi Arabia

Use of comparative advertising claims is prohibitedNon-censored films cannot be advertisedWomen may only appear in those commercials that relate to family affairs, and their appearance must be in a decent manner that ensures feminine dignityWomen must wear a long suitable dress which fully covers her body except face and palms


Public Relations and Publicity

Fosters goodwill and understanding

Generates favorable publicity

Tools– News releases– Media kits– Press conferences– Tours– Articles in trade and professional journals– TV and radio talk show appearances– Special events


The Growing Role of Public Relations in Global Marketing

Public Relations expenditures are growing at an average of 20% per year

In India they are reported to be growing by 200% annually

Reasons for the growth– Increased governmental relations between countries– Technology– Societal issues like the environment


Public Relations Practices around the World

Public relations practices can be affected by:– Cultural traditions– Social and political contexts– Economic environments

Public relations professionals must understand these differences and tailor the message appropriately

4 ps of gm

Education

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