Chapter Seven International Product and Brand Marketing
Learning Objectives 1. What basic product categories and product dimensions are available in domestic and international markets? 2. What types of decisions must be made with regard to a company s international product mix? 3. What types of international business products and services are available? 4. What types of patterns exist as new products move from introduction to eventual decline? 5. What role does brand development and management play in international marketing?
Learning Objective #1 1. What basic product categories and product dimensions are available in domestic and international markets?
Types of Products A product consists of a bundle of attributes that provide value for exchange partners. Products offer value in many ways. International marketers conceptualize value in terms of tangible, intangible, and symbolic elements. A product as simple as a screwdriver allows consumers to solve a tangible, basic problem (assembling a bicycle) while potentially delivering both intangible benefits (a feeling of safety) and symbolic benefits (the feelings associated with owning a nice set of tools).
Goods Versus Services A good is a physical product sold to and used by an individual, household, or business. Durable goods are items that are consumed over time. Televisions and household appliances are durable goods. Nondurable goods are consumed more quickly. Toothpaste and food items are nondurable goods. Many nondurable goods are consumed in daily life. Businesses sell consumer products to consumers either directly or through a market channel that employs intermediaries. The buyers, or end users, are individual persons or families. Business products are marketed to the other businesses, which are the end users. A service is an intangible product that generally centers on an act or performance that delivers value to individuals, households, and businesses. Services play a major role in the global economy.
Classifications of Products Convenience Products Features of Convenience Products: Inexpensive and frequently purchased Consumers do not spend much time or effort when purchasing. Marketers normally make the items widely available, using an intensive distribution strategy, because a consumer generally will not go out of his or her way to buy them. Types of Convenience Products Impulse products, or items purchased spontaneously with no preplanning for the enjoyment that the purchase provides This contrasts with unplanned purchases, which are also not planned but provide no pleasure. Staples are goods that are used regularly and tend to be replenished often, such as sugar, flour, rice, millet, salt, and soap.
Classifications of Products Shopping Products Features of Shopping Products: Consumers expend more effort when searching for and purchasing More expensive than convenience products and are purchased less frequently Consumers compare several brands and more carefully consider prices. Marketers typically employ selective distribution strategies for shopping products, which means retail outlets are chosen for each geographic region. International marketers pay close attention to cultural differences for shopping goods.
Classifications of Products Specialty Products Features of Specialty Products: Items that consumers spend much time searching for and will not accept a substitute Expensive and are marketed with a significant degree of exclusivity, meaning only select retailers offer the products Consumers generally do not consider competing brands, as they usually have chosen one particular alternative and expend effort to purchase the preferred brand. Luxuries represent a subcategory of specialty products.
Product Dimensions
Product Dimension (Cont.) The core product satisfies or remedies a basic need. Packaging includes the elements of the product that are used to communicate the brand name, logo, and trademark, as well as to protect the core product. Marketers adapt packaging and labels in response to differences in legal systems, local traditions, and cultures. The auxiliary dimensions include warranties, instructions, company contact information, as well as the image of the particular brand. Shopping products are sometimes differentiated based on auxiliary dimensions. International marketers often consider the total value concept, or the complete set of values from products that customers receive.
Learning Objective #2 2. What types of decisions must be made with regard to a company s international product mix?
International Product Mix Management Product Lines Product lines are groups of similar products within a particular category. The depth of a product line refers to the total number of products in that line. The width (sometimes called the breadth) of the product mix refers to the total number of product lines that the company offers. The product mix refers to the total number of products that a firm carries.
International Product Mix Management Packaging Packaging decisions represent a key aspect of international product marketing. When exporting or shipping goods, the product s package serves to protect the item until it safely arrives. Packaging facilitates the movement of products through the distribution channel from the factory to the consumer. Packaging can become an aspect of a brand s identity, thereby affecting the relationship between the customer and the brand. Packaging should be adapted to individual markets based on consumer tastes, preferences, and culture. Matching the package to the market can become the deciding factor in a product s success, because consumers actually make many purchase decisions at the point of purchase. A recent study of Thai consumers indicated that packaging technology (such as the convenience of the package) was the most important determinant affecting the intention to buy a product. Other package determinants include packaging shape, product information, color and graphics, and layout of product information. Many marketers view packaging as a place for innovation.
Packaging Visual Elements Elements such as shape, color, font usage, and pictorials help to communicate brand meaning to customers and differentiate the product from the competition. Much of the sensory experience of consumers comes from the visual elements, which play an important role in package design. Informational Elements The package transmits vital and legal information regarding the contents of the package and the product. Marketers should ensure that the language and metrics used on the package will be suitable for the selected target market. Protective Elements Protect the product, and some elements, such as plastic, must be carefully considered by international marketers due to regional restrictions and sustainability issues. Symbolic Elements Package shapes and features that help the consumer recognize the brand The symbolic nature of packaging not only appeals to a consumer's inner needs, but also helps to convey desired images to others.
Labeling Consumers cannot judge the attributes of many products until after the purchase, and labeling helps customers learn about various aspects of the product prior to purchase. Cultural factors affect designs of labels, including the use of art, various colors, images, and wording. Marketers respond to these variations in taste by changing labels. Aesthetics are concepts of beauty. What is considered beautiful in one country may be considered garish or unattractive in another country. Colors are important aesthetic ingredients in packaging and labeling decisions. Marketers pay close attention to the meaning of color in different cultures. Legal requirements also drive labeling. For labeling in the European Union (EU), the CE Mark signifies that a product has met EU health, environmental, and safety requirements. In the United States, companies must adhere to the Fair Packaging and Labeling Act. Labeling standards vary significantly by product type. Cigarette manufacturers in the United States must place the surgeon general s warning on each pack.
Sustainability and International Product Marketing Product design can become more sustainable by using recycled or recyclable materials, identifying areas where fewer materials can be utilized, and ensuring that production techniques are as efficient as possible. Several countries and organizations have taken steps to address sustainability issues related to packaging. In 2010, the Consumer Goods Forum released the report A Global Language for Packaging and Sustainability which describes how packaging can be designed holistically with the product to optimize overall environmental performance. In the United States, organizations such as the Sustainable Packaging Coalition work to encourage environmentally friendly packaging. The ISO 14000 family addresses various elements of environmental management and provides a general framework for product management as it pertains to sustainability. Consumer demand for environmentally friendly products remained strong even during the recent turbulent economy. One study reported that 44% of consumers stated that their green buying habits did not change despite difficult economic times.
Learning Objective #3 3. What types of international business products and services are available?
International Business Products
International Business Products Raw Materials Materials used in the manufacture of end products, and including natural resources (minerals, chemicals, and fuel) and farm products (beef, cotton, poultry, milk, and soy beans) are all raw materials. Maintenance, Repair, and Operating Supplies Maintenance, repair, and operating supplies are marketed to businesses for use in production and other operations. Component Parts Finished products that eventually become parts of other products are component parts. Accessory Equipment Products that help facilitate the production of other products but that do not become a part of the products themselves are forms of accessory equipment.
International Business Products (Cont.) Business Services Business services assist companies in normal business operations, either with the production or maintenance of goods, or with general business operations such as delivery services, telecommunication services, or logistical services. Process Materials Materials that become a part of other products in an unidentifiable way are process materials, such as food additives and resins. Installations Major capital equipment products used directly in the manufacturer of other products are installations. Heavy machinery and assembly line equipment are examples.
Bottom-of-the-Pyramid International Product Marketing A central issue will be the price-quality relationship. Traditional market logic assumes that consumers are willing, sometimes more than willing, to pay premium prices for high-quality products. Some segments will go out of their way to buy specialty and luxury items. An alternative approach is to rethink the price-quality relationship and design products that offer basic essentials at minimal prices. Marketing remanufactured products presents one opportunity. Remanufactured products, used products that have been refurbished through manufacturing processes in order to be restored to acceptable functioning, often fit with the needs of bottom-of-the-pyramid consumers. Another opportunity may be found in offering smaller package sizes and quantities.
International Product Support Services Product support services accompany a vast number of consumer and business purchases. Include installation, maintenance, servicing and repair, providing credit, answering questions by telephone or over the Internet, assisting businesses with inventory management, and more general activities such as providing market information High-quality product support generates goodwill for a variety of domestic and international companies. Product support services help build longer-term relationships with customers, making the sale of the next product easier. The term service can create confusion. Product support services are not directly sold to customers. Instead, they provide added dimensions to the sale of a product.
International Services The global economy has largely shifted toward a services base. Services are intangible products that are based around some act or performance that delivers value.
Importance of Services Globally
Tourism Tourism often plays an important part of international marketing; it exhibits a major influence on the gross domestic product (GDP) of many countries.
Product Quality Dimensions
Quality Standards Demonstrating that a product meets a quality standard can become key ingredient in international marketing success. Individual companies, countries, and regions seek to meet or exceed quality standards when marketing internationally. The International Organization for Standardization (ISO) provides standards that guide management practice as it relates to quality management and assurance (www.iso.org). The ISO organization includes more than 160 member nations. ISO standards are widely used in the European Union. The American Society for Quality (ASQ), a global community of experts in quality management, is also the sole administrator of the Malcolm Baldrige National Award (www.asq.org). The annual award is presented in manufacturing, services, small business, education, health care, and nonprofit sectors.
Learning Objective #4 4. What types of patterns exist as new products move from introduction to eventual decline?
The Product Life Cycle
Product Cycle Theory The theory explains how products and production move from developed countries to lesser-developed countries. Separates nations into lead innovation nations, developed nations, and developing nations Process follows set stages: A new product is first developed, produced, and consumed in a lead innovation nation. Over time, as the product becomes widely accepted and foreign demand for the product emerge, the manufacturer exports the product to other developed nations. Production gradually shifts to these overseas markets, and eventually the manufacturer exports the product from these markets to both the original market and to lesser-developed countries. Finally, production again shifts, this time to lesser-developed or developing nations. Then companies from the original, developed countries devote capabilities to new innovations.
Product Cycle Theory Criticisms Product cycle theory has been criticized for relying on studies of the United States as the lead innovative nation. The research appears to neglect the current trend in which many products are launched simultaneously around the world. Companies that are international in scope from their inception are born-global firms. Product cycle theory does not appear to fit products introduced by these firms. Companies often target emerging wealthy customer segments in developing markets early in the product cycle. Later, the company may begin to target other market segments, as predicted by the theory.
Market/Product Matrix
Market Penetration A firm uses a market penetration strategy when it attempts to increase sales of existing products in existing markets. Baking soda may be used in cooking, or to deodorize a refrigerator or freezer, or in toothpaste. An alternative strategy for successful market penetration, repositioning, is the process of changing perceptions of the product in the minds of consumers. Repositioning a company and its product offerings can help the firm to better connect with its customers, and may lead to higher levels of market penetration.
Product Development Product development strategies take place when the marketing team attempts to introduce new products to existing markets or to enhance existing products with new features or options. Product development strategies are highly popular in international marketing. Many firms actively engage in product development.
Diversification Firms employ a diversification strategy by marketing new products in new markets. Company leaders often choose this strategy as a response to perceived opportunities or as a way to defend against increased competition in existing markets and product lines.
Market Development A market development strategy occurs when a firm attempts to market existing products in new markets. This international marketing strategy allows a company to minimize problems with local or domestic market saturation by expanding into new countries or regions.
Learning Objective #5 5. What role does brand development and management play in international marketing?
International Brand Management A brand is the name, sign, symbol, and/or design that identifies the products of a firm and distinguishes it from competition. Key components: A brand name is the verbal part of a brand that can be spoken. A brandmark is comprised of the nonverbal elements that signify the brand. A trademark is a legally protected brand name and a servicemark is a legally protected service name.
Family and Individual Branding Family branding means a number of products in a line or mix share the same brand name worldwide. The family brand approach capitalizes on the company s reputation and its trusted, established name. An individual branding strategy involves creating distinct brand names for the individual products created by a company. An individual branding strategy works when the brands do not share common features or uses. In international marketing, distinctive brands may be developed for individual countries.
Brand and Product Line Extensions A brand extension strategy takes the brand name and adds it to a new product. A product line extension strategy means products are introduced that are in a related product category.
Cobranding Cobranding is the practice of placing two or more brand names on the same product. Cobranding strategies can follow ingredient, cooperative, or complementary approaches. Ingredient cobranding occurs when one brand becomes a part of another brand s final product. Cooperative cobranding agreements are reached when two brands receive equal attention and promotion. Complementary brands are brands that enter into agreements to be promoted in way that suggests that consumers use both brands.
Building Powerful International Brands A series of steps help lead consumers to favor a brand. 1. Brand awareness results from marketing efforts that place the brand in a consumer s mind. Instilling brand awareness begins with creating simple recognition. 2. The marketing team attempts to create the perception that the company s brand represents a product that is different from and better than what the competition offers. Brand image, or the perceptions consumers have of the brand. Brand image includes perceptions of brand quality. Brand building only results from paying consistent attention to product quality, offering excellent customer service, and exceeding the expectations of consumers. Advertising and promotional efforts can then be used to support the message.
Building Power International Brands (Cont.) When a company s product enjoys the benefits associated with brand equity, it becomes easier to move consumers to a third stage: brand loyalty. Elements of brand loyalty include brand preference and brand insistence. Brand preference, which goes beyond simple liking to a mental ranking in which the brand s attractiveness becomes foremost in the consumer s mind Brand insistence occurs when the customer accepts no substitutes for the preferred brand. Advantages of brand loyalty: Brand-loyal customers seek out a specific name and often are willing to pay a higher price for the product than what the competition charges. Brand-loyal customers are less likely to switch brands or be enticed to try other brands due to marketing tactics such as coupons, discounts, bonus packs, and other methods.
Brand Valuation Brand equity and brand loyalty become part of brand valuation, which is the process of estimating the financial value of a brand. The ISO (International Standards Organization) produced ISO Standard 10668 in 2010 that states three types of analysis are required for brand valuation: Legal analysis, including assessments of the legal protections of the brand; Behavioral analysis, including the contribution of the brand to purchase decisions as well as the attitudes of all stakeholder groups; and Financial analysis, including market values, cost, and income figures.
Top 20 Global Brands
Ethical Issues in International Product Marketing Companies are sometimes criticized for knowingly selling unsafe or even recalled products in other countries to increase international sales or to offset sagging domestic sales. The unsafe products may not be perceived as unsafe in the market where sold. If wasteful or if used to mask the contents, packaging can come under attack. The use of air to make packages seem fuller and the waste associated with plastic bottles of water Using imagery on the package that targets children when the product may not be appropriate for that age group can be another packaging issue. Treatment of animals in product testing garners much attention. The product line itself may be an ethical issue. Companies may choose not to sell the full product line in certain markets, denying those consumers access to the benefits from some products.