Journal of Marketing. Vol. 33 (January.
1969), pp. 68-62.
I NADEQUATE product planning is a major factor inhibiting growth and profitability in international business operations today. The purpose of this article is to identify five strategic alternatives available to international marketers, and to identify the factors which determine the strategy which a company should use.
Table 1 summarizes the proposed strategic alternatives.
Strategy One: One Product, One Message, Worldwide
When PepsiCo extends its operations internationally, it employs the easiest and in many cases the most profitable marketing strategy
—that of product extension. In every country in which it operates,
PepsiCo sells exactly the same product, and does it with the same advertising and promotional themes and appeals that it uses in the
United States. PepsiCo's outstanding international performance is perhaps the most eloquent and persuasive justification of this practice.
Unfortunately, PepsiCo's approach does not work for all products.
When Campbell soup tried to sell its U.S. tomato soup formulation to the British, it discovered, after considerable losses, that the English prefer a more bitter taste. Another U.S. company spent several million dollars in an unsuccessful effort to capture the British cake mix market with U.S.-style fancy frosting and cake mixes only to discover that Britcns consume their cake at tea time, and that the cake they prefer is dry, spongy, and suitable to being picked up with the left hand while the right manages a cup of tea. Another U.S.
company that asked a panel of British housewives to bake their favorite cakes discovered this important fact and has since acquired a major share of the British cake mix market with a dry, spongy cake mix.
Closer to home, Philip Morris attempted to take advantage of
U. S. television advertising campaigns which have a sizable Canadian audience in border areas. The Canadian cigarette market is a
Virginia or straight tobacco market in contrast to the U.S. market.
which is a blended tobacco market. Philip Morris officials decided to ignore market research evidence which indicated that Canadians
W( uld not accept a blended cigarette, and went ahead with programs which achieved retail distribution of U.S.-blended brands in the
Canadian border areas served by U.S. television. Unfortunately, the
Canadian preference for the straight cigarette remained unchanged.
American-style cigarettes sold right up to the border but no further.
Philip Morris had to withdraw its U.S. brands.
The unfortunate experience of discovering consumer preferences that do not favor a product is not confined to U.S. products in foreign markets. Corn Products Company discovered this in an
58

Multinational Product Planning: Strategic Alternatires
Strategy
1
2
3
4
5
TABLE 1
MULTINATIONAL PRODUCT-COMMUNICATIONS MIX: STRATEGIC ALTERNATIVES
Product
Function or Need
Satisfied
Conditions of
Product
Use
Same
Different
Same.
Same
Same
Different Different
Same
Different
Ability to Buy
Prodtict
Yes
Yes
Recommended
Product
Strategy
Extension
Extension
Yes
Yes
No
Adaptation
Adaptation
Invention
Recommended
Communications
Strategy
Relative
Cost of
Adjustments
Extension
Adaptation
1
2
Extension
Adaptation
Develop New
Communications
3
4
5
Product
Examples
Soft drinks
Bicycles,
Motorscooters
Gasoline,
Detergents
Clothing,
Greeting
Cards
Handpowered
Washing
Machine abortive attempt to popularize Knorr dry soups in the United States. Dry soups dominate the soup market in Europe, and Com Products tried to transfer some of this success to the United States. Corn
Products based its decision to push ahead with Knorr on reports of taste panel comparisons of Knorr dry soups with popular liquid soups. The results of these panel tests strongly favored the Knorr product.
Unfortunately these taste panel tests did not simulate the actual market environment for soup which includes not only eating but also preparation. Dry soups require 15 to 20 minutes cooking, whereas liquid soups are ready to serve as soon as heated.
This difference is apparently a critical factor in the
8oup buyer's choice, and it was the reason for another failure of the extension strategy.
The product-communications extension strategy has an enormous appeal to most multinational companies because of the cost savings associated with this approach. Two sources of savings, manufacturing economies of scale and elimination of product R and D costs, are well known and understood. Less well known, but still important, are the substantial economies associated with the standardization of marketing communications. For a company with worldwide operations, the cost of preparing separate print and TV-cinema films for each market would be enormous. PepsiCo international marketers have estimated, for example, that production costs for specially prepared advertising for foreign markets would cost them $8 million per annum, which is considerably more than the amounts now spent by
PepsiCo International for advertising production in these markets. Although these cost savings are important, they should not distract executives from the more important objective of maximum profit performance, which may require the use of an adjustment or invention strategy. As shown above, product extension in spite of its immediate cost savings may in fact prove to be a financially disastrous undertaking.
• ABOUT THE AUTHOR. Warren J.
Keegan is Assistant Professor oi Business Administration of the Columbia
University Graduate School of Business.
He received his Master's and Doctorate in Business Administration from Harvard University. Dr. Keegan is currently engaged in research on opportunities and issues in marketing facing headquarters' managers of multinational companies
59
Strategy' Two: Product Extension—
Communications Adaptation
When a product fills a difTerent need or serves a difTerent function under use conditions identical or similar to those in the domestic market, the only adjustment required is in marketing communications.
Bicycles and motorscooters are illustrations of products in this category. They satisfy needs mainly for recreation in the United States but provide basic transportation in many foreign countries. Outboard motors are sold primarily to a recreation market in the United States, while the same motors in many foreign countries are sold mainly to fishing and transportation fleets.
In effect, when this approach is pursued (or, as is often the case, when it is stumbled upon quite by accident), a product transformation occurs. The same physicial product ends up serving a difTerent function or use than that for which it was originally designed. An actual example of a very successful transformation is provided by a U.S. farm machinery company which decided to market its U.S.
line of suburban lawn and garden power equipment as agricultural implements in less-developed countries. The company's line of garden equipment was ideally suited to the farming task in many lessdeveloped countries, and, most importantly, it was priced at almost a third less than competing equipment especially designed for small acreage farming offered by various foreign manufacturers.

60
There are many examples of food product transformation. Many dry soup powders, for example, are sold mainly as soups in Europe but as sauces or cocktail dips in the United States. The products are identical; the only change is in marketing communications. In this case, the main communications adjustment is in the labeling of the powder. In
Europe, the label illustrates and describes how to make soup out of the powder. In the United States, the label illustrates and describes how to make sauce and dip as well as soup.
The appeal of the product extension communication.s adaptation strateg>' is its relatively low cost of implementation. Since the product in this strategy is unchanged, R and D, tooling, manufacturing setup, and inventory costs associated with additions to the product line are avoided. The only costs of this approach are in identifying different product functions and reformulating marketing communications
(advertising, sales promotion, point-of-.sale material, and so on» around the newly identified function.
Strategy Three: Product Adaptation—
Communications Extension
A third approach to international product planning is to extend without change the basic communications strategy developed for the U.S. or home market, but to adapt the U.S. or home product to local use conditions. The product adaptation-communications extension strategy assumes that the product will serve the same function in foreign markets under different use conditions.
Esso followed this approach when it adapted its gasoline formulations to meet the weather conditions prevailing in foreign market areas, but employed without change its basic communications appeal,
"Put a Tiger in Your Tank." There are many other examples of products that have been adjusted to perform the same function internationally under different environmental conditions. International soap and detergent manufacturers have adjusted their product formulations to meet local water conditions and the characteristics of washing equipment with no change in their basic communications approach. Agricultural chemicals have been adjusted to meet different soil conditions as well as different types and levels of insect resistance. Household appliances have been scaled to sizes appropriate to different use environments, and clothing has been adapted to meet fashion criteria.
Strategy Four: Dual Adaptation
Market conditions indicate a strategy of adaptation of both the product and communications when differences exist in environmental conditions of use and in the function which a product serves. In essence, this is a combination of the market conditions of strategies two and three. U.S. greeting card manufacturers have faced these circumstances in
Journal of Marketing, January, 1969
Europe where the conditions under which greeting cards are purchased are different than in the United
States. In Europe, the function of a greeting card is to provide a space for the sender to write his own message in contrast to the U.S. card which contains a prepared message or what is known in the greeting card industry as "sentiment." European greeting cards are cellophane wrapped, necessitating a product alteration by American greeting card manufacturers selling in the European market. American manufacturers pursuing an adjustment strategy have changed both their product and their marketing communications in response to this set of environmental differences.
Strategy Five: Product Invention
The adaptation and adjustment strategies are effective approaches to international marketing when potential customers have the ability, or purchasing power, to buy the product. When potential customers cannot afford a product, the strategy indicated is invention or the development of an entirely new product designed to satisfy the identified need or function at a price within reach of the potential customer. This is a demanding but, if product development costs are not excessive, a potentially rewarding product strategy for the mass markets in the middle and less-developed countries of the world.
Although potential opportunities for the utilization of the invention strategy in international marketing are legion, the number of instances where companies have responded is disappointingly small.
For example, there are an estimated 600 million women in the world who still scrub their clothes by hand. These women have been served by multinational soap and detergent companies for decades, yet until this year not one of these companies had attempted to develop an inexpensive manual washing device.
Robert Young, Vice President of Marketing-
Worldwide of Colgate-Palmolive, has shown what can be done when product development efforts are focused upon market needs. He asked the leading inventor of modern mechanical washing processes to consider "inventing backwards"—to apply his knowledge not to a better mechanical washing device, but to a much better manual device. The device developed by the inventor is an inexpensive (under
$10), all-plastic, hand-powered washer that has the tumbling action of a modem automatic machine. The response to this washer in a Mexican test market is reported to be enthusiastic.
How to Choose a Strategy
The best product strategy is one which optimizes company profits over the long term, or, stated more precisely, it is one which maximizes the present value of cash flows associated with business operations.
Which strategy for international markets best

Multinational Product Planning: Strategic Alternatires achieves this goal? There is, unfortunately, no general answer to this question. Rather, the answer depends upon the specific product-market-company mix.
Some -products demand adaptation, others lend themselves to adaptation, and others are best left unchanged. The same is true of markets. Some are so similar to the U. S. markets as to require little adaptation. No country's markets, however, are exactly like the U.S., Canada's included. Indeed, even within the United States, for some products regional and ethnic differences are sufficiently important to require product adaptation. Other markets are moderately difTerent and lend themselves to adaptation, and still others are so difTerent as to require adaptation of the majority of products. Finally, companies differ not only in their manufacturing costs, but also in their capability to identify and produce profitable product adaptations.
61 tively wealthy consumers rather than in the mass market. An extreme case of this occurs when the product for the foreign market is exported from the
United States and undergoes the often substantial price escalation that occurs when products are sold via multi-layer export channels and exposed to import duties. When price constraints are considered in international marketing, the result can range from margin reduction and feature elimination to the "inventing backwards" approach used by
Colgate.
Company Analysis
Even if product-market analysis indicates an adaptation opportunity, each company must examine its own product communication development and manufacturing costs. Clearly, any product or communication adaptation strategj' must survive the test of profit effectiveness. The often-repeated exhortation that in international marketing a company should always adapt its products' advertising and promotion is clearly superficial, for it does not take into account the cost of adjusting or adapting products and communications programs.
Product-Market Analysis
The first step in formulating international product policy is to apply the systems analysis technique to each product in question. How is the product used?
Does it require power sources, linkage to other systems, maintenance, preparation, style matching, and so on? Examples of almost mandatory adaptation situations are products designed for 60-cycle power going into 50-cycle markets, products calibrated in inches going to metric markets, products which require maintenance going into markets where maintenance standards and practices differ from the original design market, and products which might be used under different conditions than those for which they were originally designed. Renault discovered this latter factor too late with the ill-fated Dauphine which acquired a notorious reputation for breakdown frequency in the United States. Renault executives attribute the frequent mechanical failure of the
Dauphine in the United States to the high-speed turnpike driving and relatively infrequent U. S.
maintenance. These turned out to be critical differences for the product, which was designed for the roads of France and the almost daily maintenance which a Frenchman lavishes upon his car.
Even more difficult are the product adaptations which are clearly not mandatory, but which are of critical importance in determining whether the product will appeal to a narrow market segment rather than a broad mass market. The most frequent offender in this category is price. Too often.
U. S. companies believe they have adequately adapted their intemational product offering by making adaptations to the physical features of products (for example, converting 120 volts to 220 volts) but they extend U. S. prices. The effect of such practice in most markets of the world where average incomes are lower than those in the United States is to put the U. S. product in a specialty market for the rela-
What Are Adaptation Costs?
They fall under two broad categories—development and production. Development costs will vary depending on the cost effectiveness of product communications development groups within the company. The range in costs from company to company and product to product is great. Often, the company with international product development facilities has a strategic cost advantage. The vice-president of a leading
U.S. machinery company told recently of an example of this kind of advantage:
We have a machinery development group both here in the States and also in Europe. I tried to get our U.S. group to develop a machine for making the elliptical cigars that dominate the
European market. At first they said "who would want an elliptical cigar machine?" Then they gradually admitted that they could produce such a machine for $500,000. I went to our Italian product development group with the same proposal, and they developed the machine I wanted for $50,000. The differences were partly relative wage costs but very importantly they were psychological. The Europeans see elliptical cigars every day, and they do not find the elliptical cigar unusual. Our American engineers were negative on elliptical cigars at the outset and I think this affected their overall response.
Analysis of a company's manufacturing costs is essentially a matter of identifying potential opportunity losses. If a company is reaping economies of scale from large-scale production of a single product, then any shift to variations of the single product

62 will raise manufacturing costs. In general, the more decentralized a company's manufacturing setup, the smaller the manufacturing cost of producing different versions of the basic product. Indeed, in the company with local manufacturing facilities for each international market, the additional manufacturing cost of producing an adapted product for each market is zero.
A more fundamental form of company analysis occurs when a firm is considering in general whether or not to pursue explicitly a strategy of product adaptation. At this level, analysis must focus not only on the manufacturing cost structure of the firm, but also on the basic capability of the firm to identify product adaptation opportunities and to convert these perceptions into profitable products. The ability to identify preferences will depend to an important degree on the creativity of people in the organization and the effectiveness of information systems in this organization. The latter capability is as important as the former. For example, the existence of salesmen who are creative in identifying profitable product adaptation opportunities is no assurance that their ideas will be translated into reality by the organization. Information, in the form of their
Journal of Marketing, January, 1969 ideas and perceptions, must move through the organization to those who are involved in the product development decision-making process; and this movement, as any student of information systems in organizations will attest, is not automatic. Companies which lack perceptual and information system capabilities are not well equipped to pursue a product adaptation strategy, and should either concentrate on products which can be extended or should develop these capabilities before turning to a product adaptation strategy.
Summary
The choice of product and communications strategy in international marketing is a function of three key factors: (1) the product itself defined in terms of the function or need it serves; (2) the market defined in terms of the conditions under which the product is used, including the preferences of potential customers and the ability to buy the products in question; and (3) the costs of adaptation and manufacture to the company considering these product-communications approaches. Only after analysis of the product-market fit and of company capabilities and costs can executives choose the most profitable international strategy.
Technology has brought unparalleled abundance and opportunity to the consumer.
It has also exposed him to new complexities and hazards. It has made his choices more difficult. He cannot be chemist, mechanic, electrician, nutritionist, and a walking computer (very necessary when shopping for fractionated-ounce food packages) !
Faced with almost infinite product differentiation (plus contrived product virtues that are purely semantic), considerable price differentiation, the added complexities of trading stamps, the subtleties of cents-off deals, and other complications, the shopper is expected to choose wisely under circumstances that bafifle professional buyers. His job is not made easier by the fact that prices tend not to be uniform in different stores even of the same food chain, and may vary daily. Moreover, if he is like most of us, he has to decide in a hurry.
—E. B. Weiss, "Marketers Fiddle While
Consumers Burn." Harvard Business
Review, Vol. 46 I July-August, 1968), pages 45-53, at page 48.