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Local Marketing in Emerging Markets

Local Marketing in Emerging Markets. Chapter. 9. Outline. NDCs vs Developing Countries Local Marketing in Developing Countries Marketing in Russia Marketing in China Marketing in the Middle East. 10- 2. Two Kinds of Emerging Markets. NEWLY DEMOCRATIZED COUNTRIES VS.

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Local Marketing in Emerging Markets

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  1. Local Marketing in Emerging Markets Chapter 9

  2. Outline NDCs vs Developing Countries Local Marketing in Developing Countries Marketing in Russia Marketing in China Marketing in the Middle East 10-2

  3. Two Kinds of Emerging Markets NEWLY DEMOCRATIZED COUNTRIES VS. DEVELOPING MARKETS (B2-4B) NDC MARKETS DEVELOPING COUNTRIES Russia & the newly democratized post-communist nations, China Poor nations of Africa (Nigeria, Zambia, Tanzania), Asia (Pakistan, Bangladesh, Sri Lanka), & Central America (Nicaragua, Guatemala). Developing countries are defined by low per capita income levels & severe lack of marketing infrastructure 10-3

  4. Marketing in Emerging Markets • Emerging markets do not usually have an effective marketing infrastructure. • Uncertainty in the emerging market makes “environmental scanning” part of the job for the marketer. • Emerging markets had no access to many consumer products in the past, consumer needs are basic and easy to identify. • Distribution channels are few and show low productivity, and communication media are limited in reach and coverage. 10-4

  5. 1. Lack of cash and hard currency 2. Used to few alternatives 3. Lack of knowledge 4. Stereotypical evaluation 5. Suspicion of the trade Consumers in Emerging Markets Buyer Decision Problems in Emerging Markets 10-5

  6. Marketing in Developing Countries: MSPP MARKET SEGMENTATION • Income level represents the basic segmentation criterion • Market for upper-end status products is often lucrative due to uneven income distribution • Effective income measure is defined in terms of access to foreign or convertible currency • “where” the customers are is the second question after income has been taken care of. And the most promising market is the urban population of big cities 10-6

  7. Marketing in Developing Countries: MSPP PRODUCT POSITIONING • Customer needs are basic • Domestic alternatives are weak • Upscale positioning targeting a more status-oriented niche of the market can play an important role 10-7

  8. Marketing in Developing Countries: The 4Ps PRODUCT PRICING • Initial offerings are usually standardized simpler selections from existing lines • Limited features make it possible to sell through low-service outlets • Policies are dominated by the balance between affordability & upper end positioning • Pricing fluctuates between a skimming price and a lower penetration price • Innovative financing: communal buyers, smaller packaging that’s less expensive, store credit 10-8

  9. Marketing in Developing Countries: The 4Ps (cont’d) DISTRIBUTION PROMOTION • Most critical issue • Cheap domestic labor offers alternative routes for distribution • Weak logistics systems make it difficult for marketing organization & control. • Initially limited due to lack of broadcast media • Although limited, this means there will be less clutter • Literacy levels differ from more developed nations, promotions must be more visual versus verbal 10-9

  10. Why NDC Markets Are Different 3 SPECIAL FEATURES OF NEWLY DEMOCRATIZED COUNTRIES • BASIC NEEDS WERE SATISFIED: Poor in per capita income by Western standards, the most basic needs of the population be satisfied. • EDUCATION AND SOCIAL CONTROL: a good, solid basic education was provided, along with social control and a secure life. • NO FREE MARKET: there is a lack of understanding of the concept of a free market economy. 10-10

  11. Marketing in China MARKET BACKGROUND • China has 1.3 billion people, largest country in the world. • It has become the new economic superpower in Asia, challenging the pre-eminence of Japan. • In 2003, China overtook Japan to become 2nd largest world economy (on PPP basis) • The growth rate of the economy has been around 10% annually for the last several years. • China became a WTO member in December 2001 • The size and potential of the Chinese market, coupled with its fast-growing purchasing power, make China a very attractive market. 10-11

  12. Marketing in China ENTRY BARRIERS • Import license controls – the Ministry of Foreign Trade & Economic Cooperation (MOFTEC) is the main regulatory organization • Protective tariffs – with WTO entry, tariff reduction gradually in place • Foreign exchange control – new exchange rate system since 2006 10-12

  13. Marketing in China TRADE REGIONS • SPECIAL ECONOMIC ZONES (SEZ’s) to attract foreign investment in production for export are still the centers for foreign businesses. • These areas are Shenzen, Zhuhai, Shantou, Xiamen, Hainen, & Pudong New Area in Shanghai • Corporate tax rate in SEZs is only 15% versus 33% national rate • Some zones have additional tax exemptions • The WTO effect: china’s foreign trade system is undergoing a big reform and most of the effort is geared toward the goal of satisfying the requirements of the new WTO status. 10-13

  14. Marketing in China HONG KONG’S ROLE • Many western firms enter China through HK, where sophisticated HK trading companies are familiar with western business practices and Chinese language and culture. • With the opening of the access to China itself, Hong Kong’s role has gradually changed . • Gradually, as more experience is gained, Western companies are moving beyond Hong Kong, dealing with mainland China directly. 10-14

  15. Marketing in China: MSPP MARKET SEGMENTATION • Geographic region as a natural first segmentation criterion. • E.g. four regions: Eastern China (with Shanghai as the center), Northern China (Beijing the center), Southern China (with Guangzhou as the center) and Western China (with Chengdu as the center). • Languages & dialects, food and drink preferences, and even ethnic roots vary across the regions. • Urban/rural split as a second segmentation in the typical emerging market pattern, • weak infrastructure in rural areas. • Emerging middle class, rise in per capita income most rapid in Shanghai, Beijing, Guangzhou • Teenagers/college age people represent the Chinese version of the global youth segment. 10-15

  16. Marketing in China: MSPP (cont’d) PRODUCT POSITIONING • The Chinese market is open for global brands and standardized campaigns. • Localization is necessary for effective penetration. • Need to accommodate translation of brand names. E.g. Coca Cola had to change its original transliteration from one meaning "dry mouth full of wax" to one signifying "happiness in the mouth" when read and spoken. • Foreign competition in sales promotion, after-sale service, product delivery, and price. 10-16

  17. Marketing in China: The 4Ps PRICING PRODUCT POLICIES • Quality gap between foreign & local products is disappearing quickly • High tariffs make it hard for foreign brands to compete with lower quality domestic brands • Consumers are brand loyal, making for definite first-mover advantages. • Chinese are very price-sensitive consumers due to low per capita income • Prices still high for imported products • Low priced- products have an inherently assumed low quality 10-17

  18. Marketing in China: The 4Ps (cont’d) DISTRIBUTION PROMOTION • Advertising still strictly controlled by government • Television ad accounts for the major part of promotional expenditures. • Entering multinationals heavily on television advertising to create awareness and goodwill among consumers and the trade. • Advertised products are not considered counterfeit • Print & outdoor ads & in-store promotions play a large role • Improved infrastructure lead to the improving physical distribution system • Most channels are controlled by the government • Most department stores are state-owned • Personal contacts (guanxi) play an important role in transactions 10-18

  19. http://en.ce.cn/Business/photonews/201212/04/t20121204_23905994.shtmlhttp://en.ce.cn/Business/photonews/201212/04/t20121204_23905994.shtml Made in china http://www.slideshare.net/bowei/the-china-startup-report-a-15min-crash-course-by-bowei-gai

  20. Marketing in Russia NDC – Newly Democratized Country • Basic needs were being met by government • Solid education, strong social control and a secure life • Aversion to capitalism • No free market, lack of basic customer service training Market Environment • Under developed legal and financial systems • Uncertain political leadership

  21. Marketing in Russia Ethnic Marketing Segmentation • Subgroups or minorities • Age – teen segment moving towards western • Income – 25% very poor, 5 % very rich • Gender – male/female

  22. Marketing in Russia Positioning • Marketer should lead with low end price scale according to indicators (income, usage information & need) • Competition with the domestic competitors • First movers can offer more advanced high end products • Upscale customers will prefer the high end prducts

  23. Marketing in Russia Marketing Tactics • New products from outside are seen as superior but they support their domestic brands. • New brand can command high price than the local brand • Dysfunctional distribution system • Weak marketing structure (logistics, media & payment) • Localization needed due to this week infrastructure

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