PRODUCTS AND SERVICES
• Product functions
across culture
• Standardization vs.
customization;
adaptation as a
compromise
• Communication vs.
product adaptations
• Branding
• Services
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
1
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
2
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)
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
3
Approaches to Product Introduction
● Adaptation
● Customization
●Standardization
● Localization
Not suitable for
the Middle East!
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
4
Product Design Philosophies
ETHNOCENTRIC
STANDARDIZATION
GEOCENTRIC
ADAPTATION
POLYCENTRIC
CUSTOMIZATION
MKTG 769
PRODUCTS AND SERVICES
REGIOCENTRIC
Lars Perner, Instructor
5
Reasons for Standardization
• Avoiding high costs of
standardization, if
applicable
• Technological intensity
• Convergence of global
consumer tastes/needs
• Country of origin
positioning
– Reduced confusion
– International
compatibility among
product group
components
– Faster spread of rapid
life cycle products
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
6
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
7
Standardization--Disadvantages
• Unnecessary features
• Vulnerability to trade
barriers
• Strong local
competitors
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
8
Product Adaptations
• Mandatory
– legal requirements
– infrastructure
– physical
requirements
• “Discretionary”
– local tastes
– fit into cultural
environment
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
9
Motivations for Adaptation
• Legal
• Infrastructure
• Consumer
demographics
• Culture
– Religious impact
– Cultural context of
use
MKTG 769
PRODUCTS AND SERVICES
• Local traditions/
customs—e.g.,
– Food usage
occasions
– Aesthetic
preferences
• Local usage
conditions
• Pricing pressures/
tradeoffs
Lars Perner, Instructor
10
The Reality: Continuum of “Mandatoriness”
Legal
requirements
Completely
mandatory
Electric
Voltage
Product
labeling
MKTG 769
Manner of use
Performance
Optimization
Strong
Cultural
Conflict
PRODUCTS AND SERVICES
Economic
Suitability
Completely
“discretionary”
Taste
Optimization
Style, color
Lars Perner, Instructor
11
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
12
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
13
Physical Product vs. Communication
Adaptations
Product
adaptations not
needed
(extension)
Product
adaptations
needed
Communication
adaptations not
needed
(extension)
Some industrial
equipment; some
electrical
equipment
Gasoline; laundry
detergent
Communication
adaptations
needed
Bicycle; some fast
food; chewing gum
Greeting cards;
some fast food
Domestic
Compass-equipped prayer rug; hand
equivalent does
powered washing machine; bottled
not exist (product green tea
invention)
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
14
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
15
Entry Timing Strategy
• Waterfall
– Initial introduction
in selected
market(s) with
“trickle down” to
markets of later
entry
• Market readiness
• Concentration of
resources
MKTG 769
PRODUCTS AND SERVICES
• Sprinkler
– Immediate
entry into all
targeted
markets
– Preemption of
early entry
advantage
– Fewer
resources
available for
each market
Lars Perner, Instructor
16
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.”
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
17
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
18
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
19
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
20
N u m b e r o f n e w a d o p to r s
Adoption of Innovations Over Time
40
30
20
10
0
Innovators
-2.50
2.5%
MKTG 769
Early
-1.50
adoptors
(13.5%)
Early
-0.50
m aj
ority
34%
PRODUCTS AND SERVICES
Late
m aj ority
0.50
34%
Laggards
1.50
2.50
(13.5%)
Lars Perner, Instructor
21
P e r c e n t d iffu s io n
One Diffusion Pattern--Nicely Balanced...
The S-Shaped Diffusion Curve
1
0.8
100% adoption
or saturation
point
0.6
0.4
0.2
0
0
5
10
15
20
25
Tim e
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
22
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
23
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
24
Societal Conditions Conducive to
Diffusion
•
•
•
•
Modernity
Homophily
Physical distance
High proportion of women
in the workforce
• Opinion leadership
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
25
Developing New Global Products
IDEA
GENERATION
PRELIMINARY
SCREENING
CONCEPT
RESEARCH
FOCUS
GROUPS
SALES
FORECAST
MKTG 769
TEST
MARKETING
PRODUCTS AND SERVICES
CONCEPT
TESTING
TARGET
RESEARCH
Lars Perner, Instructor
26
Concept Research
• Focus groups: Find out
very broad background
for further research
• Concept testing
– Prototypes
– Benefit package
evaluations
CONCEPT
RESEARCH
FOCUS
GROUPS
CONCEPT
TESTING
• Target research
– Decision making strategies
– Shopping habits
– Beliefs/expectations
MKTG 769
PRODUCTS AND SERVICES
TARGET
RESEARCH
Lars Perner, Instructor
27
Branding Choices
BRANDING
NO BRAND
NATIONAL/
LOCAL
INTERNATIONAL
MANUFACTURER
PRIVATE LABEL
SINGLE
BRAND
MKTG 769
“UMBRELLA”
BRANDS
PRODUCTS AND SERVICES
MULTIPLE
BRANDS
Lars Perner, Instructor
28
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
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
29
Branding Issues
• Demand spillover
– Media coverage
– Internet exposure
• Global customers
• Scale economies
• Importance of brands within country
– Country of origin
– Expertise
– Prestige
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
30
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)
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
31
The Brand Portfolio
• Brand extensions vs.
– Creation of new brands
– Brand ownership (brand tiers)
• Brand hierarchies
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
32
Brand Globalization Potential
• Word meanings
• Word appeal
– Pleasantness of
associations
– Suitability of
associations
– Pronouncability
– Pleasantness of sound
– Writing and pictoral
appearance
MKTG 769
PRODUCTS AND SERVICES
• 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
Lars Perner, Instructor
33
Implementation
• Brand building (see promotion
material)
• Fade-in/fade-out
• “Endorsement branding”
– For implementation
– For distinction of lower tier brand
• Double branding
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
34
Positioning a Brand
• Position relative to existing brands?
– Same
– Generally better
– Foreign image
– Lower price
– Special, unique benefit
• Appeal across segments?
• Usage occasion/need
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
35
Counterfeit Products
• Impact
–
–
–
–
Loss of sales
Loss of exclusivity/price pressure
Possible lack of confidence in quality
Warranty issues
• Approaches
– Legal
– “Search and destroy”
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
36
Physical Product vs. Communication
Adaptations
Product
adaptations not
needed
(extension)
Product
adaptations
needed
Communication
adaptations not
needed
(extension)
Some industrial
equipment; some
electrical
equipment
Gasoline; laundry
detergent
Communication
adaptations
needed
Bicycle; some fast
food; chewing gum
Greeting cards;
some fast food
Domestic
Compass-equipped prayer rug; hand
equivalent does
powered washing machine; bottled
not exist (product green tea
invention)
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
37
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
• “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
• Some countries tend to
be more receptive to
innovation than others
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
38
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)
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
39
Services
• Scope
• Characteristics
–
–
–
–
Intangibility
Heterogeneity
Inseperability
Perishability
• The Service-Tangible Product
Continuum
MKTG 769
PRODUCTS AND SERVICES
Lars Perner, Instructor
40
Service Issues
• Country
expectations
–
–
–
–
Willingness to pay
Quality
Speed
Competence of
personnel
– Courtesy/deference
– Decision making
authority of
personnel
MKTG 769
PRODUCTS AND SERVICES
• Cost
• Availability of
skilled personnel
• Control over
personnel
performance
• Overhead issues
Lars Perner, Instructor
41
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Global Products and New Product Development