Session Agenda. Product Anatomy. IB 3880 International Marketing /02/2011. Dr. Madhumita Banerjee. Warwick Business School

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1 Dr. Madhumita Banerjee Session Agenda Individual Assignment - Further Guidelines Seminar Schedule and Case Work Briefing Gain an introduction to the International Marketing Mix by understanding the role of Product and Brand decisions in International Marketing Learn to apply the concepts of standardization and adaptation of products and brands in the International Marketing mix Seminar Case: L Oreal Video Case: L Oreal in Thailand 2 Product Anatomy Delivery and Credit Brand Name Installation Positioning Packaging Core product Aesthetics Quality Country of origin Warranty POTENTIAL PRODUCT - What the product can/should be in the future? After Sale Service AUGUMENTED PRODUCT - Extras that increase the attractiveness of the core product INTANGIBLE PRODUCT Communicates the benefit of the core product, builds the brand TANGIBLE PRODUCT Communicates the benefit of the core product CORE PRODUCT - The heart of the product: Functional and/or psychological benefits Source: Brassington and Pettit (2003) 3 1

2 Factors influencing international product decisions Product line decisions Product life cycle Branding decisions International Product decisions Distribution systems Degree of adaptation Customer Service 4 International product life cycle International Product life cycle (IPLC) Sales Market B Market A Domestic market Market C Product life cycle (PLC) Market D Time since launch 5 Standardization and Adaptation Standardisation is an international marketing strategy for using basically the same product, advertising, distribution channels and other elements in the marketing mix in all the company s international markets Adapted marketing mix means adjusting the mix elements for international target markets 6 2

3 Product Levels and Adaptation Support services Product attributes Delivery, installation, guarantees, after-sales service, spare parts brand, quality, design, packaging, price, country of origin, staff behaviour, size Low Ability to standardize product elements Core product benefits functional features, performance, perceived value, image, technology High 7 Factors Influencing Adaptation Consumption Patterns - Patterns of purchase - Pattern of usage Psychosocial Characteristics - Attitudes towards the product or service - Attitude towards the brand Cultural Criteria - Society restriction - Stigma - Usage interferes with tradition 8 Standardization and/or Adaptation? Key issues is not whether to adapt or standardise, but how much adaptation is necessary and to what point a product can be standardised 9 3

4 What is a Brand? Perception in the mind Mark of possession -> provenance -> identity NOT just a logo, packaging, trade name, projecting an image Advantages for firms: Legally protect unique features Signal of quality, unique associations Source of competitive advantage, financial associations Advantages for customers: Identification of product source Signal of quality Reduced search cost and risk Symbolic device (products), experience (services) 10 Brand Equity Model Aaker (1992, 1991) BRAND EQUITY Brand Loyalty Brand Awareness - Reduced Marketing costs - Attracting new customers - Time to respond to competitive threats - Anchor for associations - Familiarity-linking - Signal of commitment Provides value to customers by enhancing customer s: - Processing of information - Confidence in the purchase decision - Satisfaction Perceived Quality Brand Associations - Reason to buy - Differentiate/Position - Price - Help process information - Create positive attitude - Extensions Provides value to firm by enhancing: - Brand Loyalty - Prices /Margins - Brand Extensions Competitive Advantage 11 Country of Origin Effects and Brands National image of the product National image of the manufacturer Country evoked by the brand name label Country image diffused by the made in label Fragmentation - Country of origin/ assembly / branding Stereotypes Change in image of product/brand over time 12 4

5 13 Saudi Arabia - Product Launch in Oct 87 Target Market Middle East, mainly UAE Objective to form the basis for an International brand: Danish Klassic Packaging 200 g cream cheese in brick cartons against the popular glass packaging Promotion Half of total investment of DKK30-35 million allocated to marketing TV Commercials Print Advertisements General Product Information & Product Facts 14 Oct 93 Product withdrawn from the market Danish Klassic could not meet the International Sales budget Later Re-introduced through Chesco Cheese Ltd under the brand Puck Glass packaging, 140g & 240g Result Increased market share, quite close to the market leader Kraft Food 15 5

6 Three Levels of the Product Support Services, Product Attributes, Core Product benefits MD Foods tried to standardize Product Attributes Brand name Very much Danish, Little appeal to Middle East customers Packaging Why brick carton instead of glass which is popular» Feta was in glass» Competitors use glass Design Size & Color variants Could have looked into the consumer preference for the product attributes & required degree of customization 16 Newness of the product Not to the market, but to MD Foods Thorough internal company and external environment analysis to reduce the risk Promotion Used Straight Extension strategy Failed To understand the importance and cultural sensitiveness of international promotion To address & appeal target audience in promotion Positioning No effort to establish in the consumer s perception how product differs from existing competition 17 Early 2004 New product launch 18 6

7 It started out with Muslim protests in Copenhagen: Satirical cartoons of the Prophet Muhammed (from the Danish newspaper JP in September 2005) were causing boycott of Danish products in the whole Middle East region in beginning of However in August 2007 sales were back to normal. 19 Seminar Case: L Oreal Critically comment on L Oreal s global brand management strategies. Analyze the key success factors. L Oreal maintained a large portfolio of brands and was present in all the four segments of the cosmetics market. What positioning strategy did the company follow to ensure that the image of its brands did not overlap? How and why did L Oreal encourage competition among its brands in a particular segment and at the same time prevent the brands from cannibalizing each other? With specific reference to Maybelline, critically comment on Jones s strategy of acquiring relatively unknown brands of different cultural origins, giving them a makeover and marketing them globally. What are the merits and demerits of acquiring an existing brand vis-à-vis creating a new brand? 20 Video Case: L Oreal in Thailand What challenges were faced by L Oreal in Thailand? How did the organisation meet and overcome these challenges? What lessons can we learn from L Oreal s experience in Thailand? 21 7

8 To summarise.. All elements of the marketing mix (product, price, promotion and distribution) interact with each other and therefore any international marketing strategy has to address all elements as a composite whole. The degree of standardisation or adaptation is determined by market characteristics, the cross-cultural transferability as well as the international marketing strategy pursued by the firm. 22 Suggested Readings Cavusgil, S.T., S. Zou and G.M. Naidu (1993), Product and Promotion Adaptation in Export Ventures: An Empirical Investigation, Journal of International Business Studies, Third Quarter, Peterson, R. and A. Jolibert (1996), A Meta Analysis of Country-of-Origin Effects, Journal of International Business Studies, 26 (4), Strizhakova, Y., R.A. Coulter and L.L. Price (2008), Branded Products as a Passport to Global Citizenship: Perspectives from Developed and Developing Countries, Journal of International Marketing, 16 (4), Szymanski, D., S.G. Bharadwaj and R.P. Vardarajan (1993), Standardization versus Adaptation of international Marketing Strategy: An Empirical Investigation, Journal of Marketing, October, For Next Week Read Javalgi and White (2002) Seminar groups 5 and 6 To discuss in class the key points of the Javalgi and White (2002) paper Each group has 10 minutes to make a presentation Seminar groups 7 and 8 To select an international service firm (each group selects 1 firm) and discuss in class the key internationalisation features of this firm and why has the group chosen to discuss this firm Each group has 10 minutes to make a presentation 24 8