Chapter
8
Local Marketing
in Mature Markets
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Outline
 Basic Marketing in Mature Markets
 Pan-European Marketing
 Marketing in Japan
 Marketing in Australia and New Zealand
 Marketing in North-America
 Takeaways.
Segmentation and Positioning (MSPP)
MATURE MARKETS
MARKET SEGMENTATION
PRODUCT POSITIONING
•
Segmentation is vital, customers
are extremely particular with well
developed preferences
•
Brand image, name, are very
important indicators of quality &
reliability
•
Small differences in products &
services make a big difference to
the consumer
•
•
Narrow niche segments
continually increase
“Country of origin” effect may
have positive/negative
implications on customer
perceptions
•
Foreign entrants from third world
countries may try to introduce
low-end products to undercut
other brands; such a strategy will
only work in the short term
•
Foreign entrant must be skilled in
finding the proper niche
The 4Ps in Mature Markets
PRODUCT
PRICING
•
3rd world countries tend to sell
low-cost “me too” products;
success depends on price
sensitivity of the local market
•
Target positions may be high end
or low end, with temporary deals
& offers to steal share & attract
consumers
•
Introducing a new product has
little or no competition: first
mover advantage
•
Fierce competition makes
discounts and other pricing
scheme necessary
•
Brand name always matters
•
Perceived status of the brand will
always affect buyer behavior
DISTRIBUTION
PROMOTION
•
Well developed
•
Hardly any problems in terms of
infrastructure
•
Channels are crowded & hard to
get into (e.g. slotting fees)
•
Market share is the criterion of
success
•
All types of promotion tools are
used to break habitual choices of
loyal consumers
Customer Satisfaction (CS)
MATURE MARKETS
•
Intense competition has produced a management
focus on customer satisfaction
•
Focusing on satisfaction ensures a steady loyal
customer base
•
Quality must be instilled in each level (product quality,
functional performance, delivery, warranty, after sales
service) in order to prevent post-purchase cognitive
dissonance
•
“Real” satisfaction comes from emotional factors such
as personal attention, courtesy, value-added services
or features, exceeding expectations
CS and two kinds of quality
HIGH
LEVEL OF
SATISFACTION
EMOTIONAL
QUALITY
FUNCTIONAL QUALITY
LOW
LEVEL OF QUALITY
LOW
HIGH
Pan-European Marketing
Pan-European Marketing
MARKET BACKGROUND
•
•
•
•
•
•
•
1992 European integration stimulated many companies to
analyze the potential of pan-European marketing
strategies.
EU means a changed strategic environment.
Tariff barriers and customs duties within EU scrapped.
Common external tariff.
1989 fall of the Berlin Wall slowed down the momentum
toward EU unity.
The expansion to 25 members in 2004 resolved the issue
of what Eastern European countries would do.
The EU market is a challenge for previously primarily
national European companies.
The 25 EU Members in 2005
 The six original: Benelux (Belgium, Netherlands,
Luxembourg), France, Germany, Italy
 Nine added 1973-1995: Austria, Denmark, Finland,
Greece, Ireland, Portugal, Spain, Sweden, United
Kingdom
 Ten added 2004: Cyprus, Czech Republic, Estonia,
Hungary, Malta, Latvia, Lithuania, Poland, Slovakia,
Slovenia
 Market size: 450 million people.
Pan-European Marketing: Consolidation
Large European corporations start coordinating previously
independent national subsidiaries.
•
•
Costly national differences in product designs, brand names, and
promotions eliminated.
•
•
Non-European companies with high global brand name
recognition well placed to take advantage of the integration.
Threat from these foreign entrants has been met by the creation
of larger & stronger firms
Pan-European Marketing: Consolidation
• EU integration has been a boon for global
advertising agencies with experience of multicultural campaigns.
• European agencies have initiated mergers and
acquisitions.
• A pan-European strategic response is not
necessarily the correct approach for all companies
in all industries (smaller firms can offer service to
a special niche segment).
Pan-European Marketing: MSPP
MARKET SEGMENTATION
•
European-wide target
segments.
•
Dalgic: Six basic plus four
potential European segments.
•
Scale advantages in clusters
(Mediterranean countries,
Northern Europe, etc.).
•
Niche segments by ethnicity
and traditional preferences.
PRODUCT POSITIONING
•
Product positioning can be
the same across countries,
but different product lines or
models target different
customer segments.
•
Marketing mixes have
moved toward uniformity.
•
Few products and brands
can maintain different
images in different countries
of Europe.
Pan-European Marketing: The 4Ps
PRODUCT
•
•
•
•
•
Pan-European products and brands
(Euro-branding).
Use of leading markets for the core
product.
More "me-too" products because of
competition.
Packages in four languages (e.g.
English, French, German, and
Spanish.
Gray trade problem with panEuropean products.
PRICING
•
•
•
The euro forces coordinated
prices.
Pricing corridors for limited
local flexibility.
End of protective regulations
which had generated high local
prices.
Pan-European Marketing: The 4Ps
DISTRIBUTION
•
•
•
•
Rationalization of the
manufacturers' sales network.
Retail and wholesale middlemen
shift from country-based to large
integrated EU networks.
Integrated networks help facilitate
the introduction of pan-European
strategies among manufacturers.
Growth of relationship marketing.
PROMOTION
•
•
•
•
Pan-European TV advertising.
Satellites beaming across
previously closed borders.
Growth of commercially based
broadcast media.
In-store promotion: Still
differing regulations among
countries.
Marketing in Japan
Marketing in Japan: Background
•
Japan is the size of California but has over 120 million people.
•
In the 40 years up to the 1990s per capita incomes grew from poverty
level to the highest in the world.
•
Japan's expansion was export-led, becoming a leading example for
other Asian nations.
•
In 1990 the Japanese economy's speculative "bubble" in finance and
real estate burst, and the economy has been slow throughout the
decade and into the new millennium. Japanese firms are still doing
well in overseas markets, helping to offset some of the pressure from a
recessionary home market.
•
The Japan market has still great potential for foreign firms in a wide
variety of products and services. Even though tariffs are down, nontariff barriers are high, making it very hard to succeed there.
Marketing in Japan: MSPP
MARKET SEGMENTATION
•
With deregulation and the economic slowdown, the Japanese
are becoming more similar to Westerners.
•
While Japanese customers were always demanding in terms
of quality, service, and up-to-date technology and design, they
are now also open to discounted prices. "Bargain" is no
longer a dirty word.
•
For each product category, there are now (1) upscale
segments, (2) middle-of- the-roaders who buy the tried and
true, and (3) those buying on price, looking for cheaper
imports and private labels.
Marketing in Japan: MSPP
PRODUCT POSITIONING
•
Well-known global brand names fetched high
price premiums, especially in the luxury product
categories.
•
Choices between close competitors could be
based on design, brand image, and other
"intangible" positioning criteria.
•
More value-conscious, trading off features against
prices. But there is no compromise on quality.
Marketing in Japan: The 4Ps
PRODUCT
•
•
•
Adapting products/services to Japanese customers'
requirements is often necessary.
More attention to detail
Japanese companies are producing high-quality stripped
down versions of their upscale products.
Marketing in Japan: The 4Ps
PRICING
•
•
•
Consumers more price-sensitive, firms respond with
lower priced models
Imports pose an increasing competitive threat to
domestic companies
Traditional retail outlets try to sustain premium brand
prices while discount outlets have begun to sell brand
name products at reduced prices.
Wheel of Retailing in Japan:
Price is Coming Back
MOST
IMPORTANT
FACTOR
PRICE
QUALITY
SERVICE
TIME
Marketing in Japan: The 4Ps
DISTRIBUTION
•
•
•
•
Complex and inefficient multi-tiered distribution systems
(barrier to entry)
Contact between manufacturers and small middlemen
involve smaller packages, fewer units, and faster
restocking of supplies.
Wholesalers/manufacturers have power over most
retailers
SII (Structural Impediments Initiative, in the late 1980s)
involved Western pressure on Japanese authorities to
open up channels, which has now partly occurred, helped
by price pressure from discounters.
Marketing in Japan: The 4Ps
PROMOTION
•
•
•
•
Advertising unfocused and nonsensical. Ads are seen as
a kind of art form instead of a sales tool, recently shifting
to an American style unique selling proposition approach
Japanese buyers spends more time in stores
Store clerks are knowledgeable about their products.
Lack of storage limits certain promotions
Marketing in Australia and New Zealand
Marketing in Australia and New Zealand
MARKET BACKGROUND
•
Mature economies with a British heritage
•
Australia, a vast country, with 18 million inhabitants
•
Agriculture and raw materials, minerals in particular
•
New Zealand, with four million people, basically agrarian
•
Economic base in four industries: Forest products, dairy
products, meat products, fruits
Marketing in Australia and New Zealand
FOREIGN TRADE AGREEMENTS
• APEC (Asia-Pacific Economic Cooperation).
• ARF (ASEAN Regional Forum) grouping.
• ANZCERTA pact (Australia New Zealand Closer Economic Relations
Trade Agreement).
Marketing in Australia and New Zealand:
MSPP
MARKET SEGMENTATION
Segmentation criteria involve cultural roots, urban
versus rural, and demographics, including age.
•
•
Young people ready for the new global markets,
older generation nostalgic for British roots.
PRODUCT POSITIONING
• Still
pro-home country bias in several product
categories.
• Abroad, companies use their country-of-origin in
promotions to create a unique positioning.
Marketing in Australia and New Zealand:
The 4Ps
PRODUCT
•
•
Global products and
services
only slight adaptation to
appeal to customers in
these markets.
PRICING
•
Although many global
products and brands are
available in the region,
prices in the region tend to
be higher than elsewhere.
DISTRIBUTION
•
•
Distribution is efficient
Prime markets are clustered
around the coast line and
metropolitan areas where
the distribution system is
modern and up-to-date.
PROMOTION
•
Global communications
make it feasible to reach
these markets with globally
integrated promotional
messages.
Marketing in North-America
Marketing in North-America
MARKET BACKGROUND
•
•
•
•
•
•
Canada & USA
One of the most competitive markets in the world
Players are many of the strongest multinationals
Low trade barriers in many industries
Diversity complicates marketing communications
Many competitors means large marketing budgets
FOREIGN TRADE AGREEMENTS
NAFTA (North America Free Trade Agreement –
includes Mexico)
Marketing in North-America
• 4 market idiosyncrasies:
Ethnic diversity
Religion, and the separation of
state and church
Decentralization - diffused
economic activity
Local marketing regulations vary
(central vs. regional governments)
TWO DIFFERENT MODELS OF ETHNIC DIVERSITY
“Melting Pot”
USA
“Sticky” and
multicultural
CANADA
Marketing in North-America: MSPP
MARKET SEGMENTATION
•
Market segmentation is a "must“ because of the
maturity and the diversity of the markets.
•
Hispanic sub-market
•
African-American sub-market
•
Subset of states and provinces (e.g. Coors beer,
Walmart drug stores, and Kroger supermarkets)
Marketing in North-America: MSPP
PRODUCT POSITIONING
• Basics:
Individual consumers are assumed to make
rational purchase decisions based on the trade-offs
between various attributes or benefits.
• Clear positioning communication, targeting specific
segments.
• Don't be "everything to everyone."
Marketing in North-America: The 4Ps
PRICING
PRODUCT
•
Product proliferation.
•
Ethnic variety.
•
•
Price-to-quality ratios are
important
•
No resale price
maintenance
•
Strong intra-brand
competition
•
Large price differentials
between stores
•
Prices are important
Convenience and speed.
Marketing in North-America: The 4Ps
DISTRIBUTION
•
Large-scale stores
•
Nation-wide chains
•
Efficient transportation
•
PROMOTION
•
Advertising-to-sales ratios
are high, clutter is a real
problem, wide media
choices
•
U.S.: Communicate the
positioning in concrete
terms.
•
Canada: Cultural
sensitivity, soft sell.
Channels are powerful visà-vis manufacturers.
Marketing in North-America: Price Wars
INTRA-BRAND COMPETITION
Same brand, different stores
P
P
P
Brand
1
Brand
1
Store A
(regular price
location)
Q
Brand
1
Store B
(high price
location)
Q
Store C
(low price
location)
Q
Marketing in North-America: Price Wars
INTRA-BRAND COMPETITION
Same brand, different stores
P
Brand 1’s
Demand Curve
Store
B
Store
A
Store
C
Q
Marketing in North-America
INTERBRAND COMPETITION
Different brands, same store
P
Brand
1
Brand
2
Product Category
Demand Curve (Store A)
Brand
3
Q
Takeaway
In mature markets, the adage “the customer is King” is most
apt. It is also in mature markets that the marketer must apply
the most advanced marketing tools and techniques.
Takeaway
Not all mature markets are the same from a
marketing perspective, regardless of how similar
they seem on the surface.
Different geographical regions tend to foster unique
types of markets, for climate, cultural, political and
other reasons.
Takeaway
In mature markets, managers must be more
understanding of, and more forgiving of local marketers
who say “our market is not the same” when global
strategies are imposed.
Takeaway
Trading blocs become important determinants of regional
market segments, encouraging the development of panregional products and programs.
A good example of this is the emergence of pan-European
companies and marketing strategies.
Takeaway
The development of new trade blocs do not only
benefit domestic companies but can be a boon
also for multinationals based in other countries.
The key is to establish operations within the trade
bloc, and operate as an insider.