Chapter 10 Product and Brand Decisions

1. Chapter 10 Product and Brand Decisions

2. Introduction: What to Sell ? • The international marketer needs to determine what the market offering should be in a foreign market : • Defining the product offering • Products versus Services/Rights

3. The Product Offering Potential Product Augmented Product Expected Product Generic Product Core Benefit Source : Adapted from: P. Kotler, Marketing Management, 1994

4. Basic Product Concepts • A product is a good, service, or idea • Tangible Attributes • Intangible Attributes • Product classification • Consumer goods • Industrial goods

5. Product Warranty and Service • Product Warranty : • Should a company keep the same warranty for all markets or adapt it country by country ? • Should the firm use warranty as a competitive weapon ? • Product Service : • Service capability to accredit the firm with foreign suppliers • high investment in facilities, staffing, training, and distribution network

6. Goods versus Services/Rights • Instead of marketing a product abroad, the company may also sell rights or services in a foreign market:- rights : brand / trademark / patent- services : management skills (hotel chain)

7. Sales of Rights - Examples • Franchising business :- Coca-Cola : use of its name to licensed bottlers around the world.- Pilkington: licensing of the process of float glass.- Other : Manpower, McDonald's, etc.

8. Sales of Rights - Examples • Management Contracts :- Sheraton Hotels : • Management contract for hotels abroad • Sale of consulting and management contracts • Little equity invested : Sheraton manages almost 400 hotels worldwide but has equity in only 40 of them. • Advantages : minimum risk & strong competitive position.

9. Sales of Rights - Examples • Turn-Key operations : • The firm is selling technical and engineering skills. • The firm is training foreign nationals to run a plant. • The firm is supplying material and equipment.

10. International Product Strategies Straight Product Product Extension Adaptation Innovation The firm adopts the same policy used in its home market. The company caters to the needs and wants of its foreign customers. The firm designs a product from scratch for foreign customers. Source: W.J. Keegan, Multinational Product Planning: Strategic Alternatives, Journal of Marketing, 33, 1969, pp.58-62

11. Extend, Adapt, Create: Strategic Alternatives in Global Marketing • Extension – offering product virtually unchanged in markets outside of home country • Adaptation – changing elements of design, function, and packaging according to needs of different country markets • Creation – developing new products for the world market

12. Standardization versus Customization • Although the products sold abroad generally are not identical to their domestic counterparts, there is always a core of expertise that the firm can carry abroad. • Principle " All Business is local."

13. Reasons for Product Standardization • Economies of scale : Production, R&D, Marketing • Common Consumer needs : Drinking patterns, car sizes • Consumer Mobility : Customer retention & Loyalty American Express, Kodak, ... • Home Country Image : US jeans, French Perfumes,... • Impact of technology : B to B Markets

14. Convergence in Drinking Patterns

15. Convergence of Car Sizes

16. Reasons for Product Adaptation • Climate: US Air-conditioning equipment • Skill level of users : Computers in Africa • National consumer habits :- front-loading/top-loading washing machines- car models : four-door (F) - two-door (Germ.) • Government regulations on products, packaging, and labels. • Company history and operations (subsidiaries)

17. Market Size in France: FF 1,8 Bill. (1996) Trends: Multiple number oftoothpastes/family Therapeutic /sophisticated products Cosmetic products Volume Price Competitors in France : Unilever 33% Colgate 22,5% Henkel 19% Smithkline B. 12% P&G 0% Example:European Toothpaste Market

18. Drivers of Product AdaptationExample COLGATE Toothpaste • (1) Differences in National Regulations • Triclosan forbidden in Germany • High fluorine content in local water (UK) • Obligation to sell high fluorine content toothpaste in pharmacy (France) • Stringent clinical tests in France

19. Drivers of Product AdaptationExample COLGATE Toothpaste • Packaging: • Ecological Stand-up tubes in Germany • Failure in France (Carrefour) • Distribution: • Role of pharmacy in Italy and Spain • Role of drugstore in UK • Communication: • Medical in Italy and Spain (recommended by dentist) • Non-medical in UK

20. managing marketing International Marketing Mix Decisions Strategic Alternatives in international and global marketing mix decisions. Managerial issues What aspects of Product can be modified? from global headquarters ©2005 Dr.Gerard Ryan, Universitat Rovira i Virgili. • Attributes • Brand (Global vs. Local) • Packaging • Quality • Services (after-sale services, support) • Positioning

21. managing marketing International Marketing Mix Decisions Strategic Alternatives in international and global marketing mix decisions. Managerial issues Advantages and Disadvantages of International Brands from global headquarters ©2005 Dr.Gerard Ryan, Universitat Rovira i Virgili. • Strong customer recognition/reassurance • Economies of scale and scope • Leverages power with retailers • Consolidates efforts across countries • Potential for extension • Not locally responsive • Demotivating for country managers • Difficult to manage • Need to maintain consistency across countries and product-lines

22. Product Types • Buyer orientation • Amount of effort expended on purchase • Convenience • Preference • Shopping • Specialty

23. Brands • Bundle of images and experiences in the customer’s mind • A promise made by a particular company about a particular product • A quality certification • Differentiation between competing products • The sum of impressions about a brand is the Brand Image

24. Brands

25. Brands • The added value that accrues to a product as a result of investments in the marketing of the brand • An asset that represents the value created by the relationship between the brand and customer over time

26. Brands “We have to shift to high value-added products, and to do that we need to improve our brand.” - Noboru Fujimoto, President Sharp Electronics Corporation

27. Local Products and Brands • Brands that have achieved success in a single national market • Represent the lifeblood of domestic companies • Entrenched local products/brands can be a significant competitive hurdle to global companies

28. International Products and Brands • Offered in several markets in a particular region • ‘Euro-brands’

29. Naming your product Atum Bom: Portuguese tuna Kack: Danish sweets Mukk: Italian yogurt Pocari Sweat: Japanese sport drink Poo: Argentine curry powder Alu-Fanny: French Foil wrap Crapsy Fruit: French cereal Kum Onit: German pencil sharpeners Plopp: Scandinavian chocolate Pschitt: French lemonade

30. Naming your product  Phonetic Problems with Brand Names- Bardok (Sounds like Brothel in Russian)- Misair (Sounds like Misery in French)  Translations Intent Translation- Stepping Stone - Stumbling Block- Car Wash - Car Enema- Highly Rated - Over Rated Symbols- Owl - Bad Luck in India  Other Countries make mistakes too- Zit (Chocolate from Germany)- Koff (Beer)

31. Global Products and Brands • Global products meet the wants and needs of a global market and is offered in all world regions • Global brands have the same name and similar image and positioning throughout the world

32. Global Products and Brands A multinational has operations in different countries. A global company views the world as a single country. We know Argentina and France are different, but we treat them the same. We sell them the same products, we use the same production methods, we have the same corporate policies. We even use the same advertising—in a different language, of course. - Alfred Zeien Former Gillette CEO

33. Family Brand Volkswagen Family Brands USA Europe Mexico "Rabbit" "Golf" "Caribe" -> lightness -> prestige -> avoid negative connotation

34. Private Label Branding • Large retailers are moving increasingly into their own brand, i. e. Marks &Spencer. • They try to obtain greater control and higher margins. • Private branding can be an effective way to break into foreign markets.(Asian TV manufacturers)

35. European Consumer Preferences Regarding Private Labels Product Category Fr. All. It. Es. GB Edible Oils 19 20 10 11 27 Pasta 16 24 12 12 24 Yoghurt 14 14 6 6 12 Frozen Vegetables 5 11 5 6 34 Fresh Pasta 3 7 4 3 5 Breakfast Cereals 4 8 2 2 18 Instant Soups 3 9 0 2 14 Icecream 6 10 4 2 21 Whiskey 3 1 2 1 4 Smoked Salmon 3 4 1 1 2 Champagne 3 4 2 3 6 Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998

36. European Households Judging Credibility of Private Labels Criteria Europe Germ. Spain France Italy UK More expensive Same Less expensive 3 19 78 3 12 85 2 16 83 3 26 72 3 29 68 1 13 86 Higher quality Same Lower quality 5 78 17 2 90 8 6 73 21 3 78 19 7 71 22 4 77 18 More confidence Same Less confidence 6 74 21 3 84 12 7 71 22 4 73 23 10 66 24 5 74 21 Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998

37. Country of Origin effect • Country-of-Origin (COO) Influences on Consumers • For many products, the “made in” label matters a great deal to consumers. • Key research findings of COO effects: • COO effects are not stable • Consumers prefer domestic products over imports • Both the country of design and the country of manufacturing/assembly play a role in consumer attraction.

38. Branding Strategies • Combination or tiered branding: allows marketers to leverage a company’s reputation while developing a distinctive identity for a line of products • Sony Walkman • Co-branding features two or more company or product brands • NutraSweet and Coca-Cola • Intel Inside

39. Branding Strategies • Brand acts as an umbrella for new products • Example: The Virgin Group • Virgin Entertainment: Virgin Mega-stores and MGM Cinemas • Virgin Trading: Virgin Cola and Virgin Vodka • Virgin Radio • Virgin Media Group: Virgin Publishing, Virgin Television, Virgin Net • Virgin Hotels • Virgin Travel Group: Virgin Atlantic Airways, Virgin Holidays

40. Global Brand Development • Questions to ask when management seeks to build a global brand: • Will anticipated scale economies materialize? • How difficult will it be to develop a global brand team? • Can a single brand be imposed on all markets successfully?

41. Global Brand Development • Global Brand Leadership • Using organizational structures, processes, and cultures to allocate brand-building resources globally, to create global synergies, and to develop a global brand strategy that coordinates and leverages country brand strategies

42. Global Brand Development • Create a compelling value proposition • Think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization • Research the alternatives of extending a national brand versus adopting a new brand identity globally • Develop a company-wide communication system

43. Global Brand Development • Develop a consistent planning process • Assign specific responsibility for managing branding issues • Execute brand-building strategies • Harmonize, unravel confusion, and eliminate complexity

44. Self-actualization External/Internal Esteem Social Safety Physiological Local versus Global Products and Brands: A Needs-Based Approach

45. Country of Origin as Brand Element • Perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries • Japan • Germany • France • Italy

46. Packaging • Consumer Packaged Goods when the packaging is designed to protect or contain the product during shipping • Eco-Packaging because package designers must address environmental issues • Offers communication cues that provide consumers with a basis for making a purchase decision

47. Protection Climate Transport & Handling Buyer's slow usage rate Lack of storage facilites Promotion Legal Constraints Merchandising ( income level, shopping habits) Minimum breakage / theft Ease of handling Multilingual Labels to Convey an International Image (Zara, Hollywood Chewing Gum) Recycling of Packaging (Duales System, Eco-Emballage) Regulations on consumer info. (Origin, weight, ingredients) Product Packaging and Labeling

48. POM brand Pomegranate juice used a distinctively shaped bottle to gain attention on the grocery shelf

49. Labeling • Provides consumers with various types of information • Regulations differ by country regarding various products • Health warnings on tobacco products • American Automobile Labeling Act clarifies the country of origin, and final assembly point • European Union requires labels on all food products that include ingredients from genetically modified crops