Consumers; Chapter 10 Global Market Management

Multinational companies have a potential market of 1.3 billion people in China bc Chinese consumers are willing to pay more for foreign luxury brands to show their status

"Beijing makeup artist Tina Qin once spent almost half her monthly salary on a single purchase - a Spanish designer-brand wool coat that costs 3,000 yuan (HK $2,887).

"Which of these Olympians will win over marketers?

"Olympics have always produced their fair share of marketing success stories for athletes that emerged after strong performances in the games.

PRODUCT ADAPTION? A firm has four alternatives in approaching global market; (1) selling the same product in the global marketplaces,

(2) modifying products for different countries and/or regions, (3) designing new products for foreign markets, and (4) incorporating all the differences into one product design and introducing a global product.

Currency issues are of a concern to global marketers. Price can be adjusted drastically when the product is imported into foreign territory where issues of:

(a) currency stability and (b) pricing-to-market are present.

GLOBAL PRICING STRATEGIES: In first-time pricing for new entry market, the general alternatives are:

(a) skimming, (b) following the market price, and (c) penetration pricing.

Marketers have to position their international marketing strategy into one of the following three categories:

(a) standardized, (b) differentiated, or (c) concentrated.

The process will be: (a) Defining the target consumer in global market; (b) Finding out what they need, want and like;

(c) Building a consumer personality profile; and (d) Creating the global product or brand image to match that profile.

International pricing situations are provided as pricing challenges: (a) pricing for a new market entry, (b) changing price either as an attack strategy or in response to competitive changes

(c) multiple-product coordination in cases of related demand (which are technically the same as problems encountered in domestic markets)

benefit of standardization is cost savings in production and marketing. As a response to integration efforts around the world, especially in Europe, many international marketers are indeed standardizing their marketing approaches

, such as branding and packaging, across markets.

The degree of change introduced in consumer goods depends not only on cultural differences but also on economic conditions in the target market.

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DYNAMICS OF PRICE:Global pricing is one of the most critical and complex issues in international marketing.

A company's global pricing policy may make or break its overseas expansion efforts. Price is the only element of the marketing mix that is revenue generating whereas all the other elements entail costs.

This dependence on a private label line means these retailers require a longer lead time before production is completed.

A lead time is the period between when the design for a product is completed and when production is finished.

market price: It is a reactive approach and may lead to problems if sales volumes never rise to sufficient levels to produce a satisfactory return.

Although firms typically use pricing as a differentiation tool, the international marketing manager may have no choice but to accept the prevailing world-market price.

Sidney Crosby. : Mr. Crosby has something no other Olympic athlete on this list will have--longevity. ,

Although he is Canadian, he already has name value and is well-known to American audiences as the star player for the Pittsburgh Penguins

Certain product features may be eliminated as an imperceptible value to the foreign target market, as well as the option of downsizing the products for their specific use.

American entrees are of a larger portion in relation to most other countries on the globe.Portions of food products may thus be adjusted for entrance in a European country.

The inclination to ignore local variations in customer preferences and local requirements of global marketing can easily lead to unsuccessful product positioning and inappropriate promotional appeals.

Anti-Americanism sentiments and resistance to the globalization of commerce is often the result of not recognizing the importance of the management of cultures.

Skim:For a marketer to use this approach, the product has to be unique, and some segments of the market must be willing to pay the high price.

As more segments are targeted and more of the product is made available, the price is gradually lowered.

Private label products are products made to the retailer's specifications and not sold at other retail stores.

Benetton uses a network of subcontractors to produce its product. These subcontractors use the same know-how, technology, and standards to provide a uniform product for Benetton.

The Body Shop, is a good example of a company that generally uses a global strategy but does not carry 100% private label merchandise.

Body Shop adjusts its product offerings and prices according to the location it is entering.

GLOBAL MARKETING STRATEGIES:

Businesses using one language and one cultural viewpoint will encounter many new problems when dealing with two, three, four languages and cultures. Such cultural differences influence all dimensions of international business activity.

CROSBY: whom he led to the National Hockey League's Stanley Cup last season in a thrilling seven-game series win over the Detroit Red Wings. .....

But if Mr. Crosby can lead Canada to the one gold medal the nation absolutely demands, in front of the home crowd, in a sport that Canada created, he'll be a legend in two countries.

Multinational retailers usually concentrate their expansion in a limited number of countries, attempting to gain market share.

Ex. French hypermarkets moving into Spain illustrates this approach. French hypermarkets moved into Spain in the mid to late 1970s.

Retailers of private label lines thus concentrate on products with a long life cycle, avoiding fashion-sensitive merchandise that is more risky.

Foot Locker sells national brands but negotiates for exclusive features such as colors or detailing for its stores.

Different approaches to implementing these alternatives exist.

For example, a firm may identify only target markets where products can be marketed with little or no modification, that is, standardization.

Captive Product Pricing: Where products have complements, companies will charge a premium price where the consumer is captured.

For example, a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Multiple prod. pricing:The other items in the line are then expected to make up for the lost contribution of such a "fighting brand."

For example, car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.

GLOBAL STRATEGY:

Global companies have several characteristics. They are generally vertically integrated, including backward vertical integration and forward vertical integration.

Global retailers supply stores around the world from several centralized warehouses, which they fully automate and integrate.

Global companies use centralized management to achieve this type of standardized retail operation.

Global marketing is concerned with planning and conducting transactions across national borders to satisfy the objectives of individuals and organizations.

Global marketing ranges from export-import trade to licensing and comprises' multinational activities such as joint ventures. The same experience holds true if you walk into a Body Shop throughout the world.

If the company were to acquire a textile plant, it would be moving toward the raw materials, an instance of backward vertical integration.

Global retailers sell only their private label products or products for which the manufacturers carry product risk.

Product Bundle Pricing:

Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Olympians: Think figure skaters Dorothy Hamill and Peggy Fleming, speed skaters Eric Heiden and Dan Jansen, and the U.S. gold medal-winning hockey team in 1980.

Here's a look at handicapping the potential "marketing medalists" to stand out during the Vancouver games in this year.

Another factor distinguishes the British preference for a special toilet paper roll. Go to supermarket and you will be confronted by an extraordinary choice of more than 50 colors, sizes, and brands.

Honeysuckle, warm pink, summer peach, pearl white, meadow green, breeze blue, and magnolia are just some of the shades on offer.

price change:An exporter may elect not to change price even though the result may be lower profitability.

However, if a decision is made to change prices, related changes must also be considered.

What is market price?

If similar products already exist in the target market, market pricing can be used.

To identify the best position, global product positioning basically uses the same techniques as in domestic marketing.

It is a mapping process of the visual representation of how the target consumer will views the all the brands of each category within the market.

They now have the dominant market share there.

Japanese department store moved into Hong Kong in the same way, dominating the department store market share within just a few years.

What is logistics?Logistics plays an important part in the retail strategy of global companies.

Logistics refers to the system of moving merchandise from producer to consumer. Warehouses, transportation systems, and computer information networks are part of the logistic system.

Centralized management means that policies related to the product line, merchandising, service, advertising, and prices are determined at the corporate level.

Most companies do not use a 100% global strategy.

Apolo Anton Ohno.

Mr. Ohno might be more well-known for winning ABC's "Dancing With the Stars" than for being the country's best short-track speedskater.

Multinational retailers have decentralized management to allow them to be more sensitive to cultural nuances.

Multinational retailers often use mixed management teams made up of native and expatriate executives.

The reason for this variety apparently is that the British shopper insists that toilet paper match the color scheme of the bathroom.

On the continent, consumers settle happily for white, with pink thrown in as a wild alternative.

for example, an economy version, a standard version, and the top-of-the-line version.

One of the products in the line may be priced to protest against competitors or to gain market share from existing competitors.

Whether a brand is a product or company, the company has to decide what personality traits the brand is to have. There are various ways of creating brand personality or image.

One way is match the brand personality as closely as possible to that of the consumers or to a personality that they like.

Optional Product Pricing: Companies will attempt to increase the amount customer spend once they start to buy.

Optional 'extras' increase the overall price of the product or service. ex. airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

What is price change strategy?

Price changes are called for when a new product is launched, when a change occurs in overall market conditions (such as a change in the value of the billing currency), or when there is a change in the exporter's internal situation, such as costs of production.

Ex. , if an increase in price is required, it may at least initially be accompanied by increased promotional efforts.

Price changes usually follow changes in the product's stage in the life cycle.

PRICE: It serves as a means of communication with the buyer by providing a basis for judging the attractiveness of an offer.

Price is also the major competitive tool in meeting and beating competitive offerings that are marketed as similar substitutes.

Prices, along with costs, will determine the long-term viability of the enterprise.

Price should not be determined in isolation from the other marketing mix elements.

Promotional Pricing:

Pricing to promote a product is a very common application. ex. is BOGOF (Buy One Get One Free).

Product: firm's success depends on how good its product or service is and on how well the firm is able to differentiate the product from the offering of competitors.

Product can be differentiated by their composition, by their country of origin, and by their tangible feature such as warranty.

WHAT IS PRODUCT?

Product is defined as the complex set of tangible and intangible elements that distinguishes it from the other entities in the marketplaces.

Marketing managers may have to adjust their distribution channels in order to minimize costs in order to have a flexible export pricing strategy.

Products may have to be assembled or partly manufactured in foreign markets in order to reduce its costs.

It may be a major determinant in how the product is to be distributed.

Regardless of how narrow the gap allowed by these factors, however, pricing should never be considered a static element.

MULTINATIONAL STRATEGY:

Retailers using a multinational strategy adapt their retail offerings as they enter foreign markets. They consider their retail subsidiaries as a portfolio of businesses that they must manage and adapt to each market they enter.

Vonn: She certainly has the telegenic good looks that advertisers crave, and there isn't a hotter U.S. athlete in terms of buzz right now.

She's been in SI during back-to-back weeks, first in a controversial cover shot that some feminist groups said was demeaning to women and then posing in a fur hat and skimpy bikini for the magazine's Swim Issue.

OTHER APPROACHES TO PRICING:

Skimming pricing, market pricing, penetration pricing, price changes, and multiple-product pricing are the main pricing strategies. However there are other important approaches to pricing

A large consumer products marketer's product line for any given market may include global product, regional products, as well as purely local products.

Some of these products developed for one market may later be introduced elsewhere, including the global marketers' home market.

It's not an unusual extravagance.

The 32-year-old says she spends about 40 percent of 6,500 yuan earnings on "spiritual enjoyment," meaning clothes and entertainment (Sui, 2006)."

DONT SQUEEZE THE CHARMING, MR WHIPPLE OR ORANGE THE COLOR:

The British pay twice as much as the Germans and the French, and Americans, four-roll pack of toilet paper. Why ? Is it price gouging, the impact of the euro, the relative value of the English pound, or just culture?

Product:Further, the positioning of the product in consumers' minds will add to its perceived value.

The core product may indeed be the same or highly similar to those of competitors, leaving the marketers with the other tangible and augmented features of the product to achieve differentiation.

p penetration: The basic assumption of penetration pricing is that the lower price will increase sales, which may not always be the case.

The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

PRICE:Price may be used effectively in positioning the product in the marketplace.

The feasibility range for price setting established by demand, competition, cost, and legal considerations may be narrow or wide in a given situation (for example, the pricing of a commodity versus an innovation).

What is skimming price?

The objective of skimming is to achieve the highest possible contribution in a short time period.

Standardized global marketing is the mass marketing alternative.

The same marketing mix (i.e., same product and same price) is applied for a broad market of potential buyers.

First, segmentation has emerged as a key marketing planning tool as a foundation for effective strategy formulation in American and international companies.

The segmentation is to analyze markets, find target market and capitalize on a superior competitive position.

Lindsey Vonn.

These are supposed to be the "Vonncouver Olympics" for the woman that Sports Illustrated called the best American female skier even after she won world championships in the downhill and super giant slalom last year.

Skim: success of skimming depends on the ability and speed of competitive reaction. With premium price, marketers can use a high price where there is uniqueness about the product or service.

This approach is used where a substantial competitive advantage exists. Such high prices are charged for luxuries.

price penetration:

This approach requires mass markets, price-sensitive customers, and decreasing production and marketing costs as sales volumes increase.

What is price penetration?

When penetration pricing is used, the product is offered at a low price intended to generate volume sales and achieve high market share, which would compensate for lower-per-unit return.

What is Multiple-product Pricing?

With multiple-product pricing, the various items in the line may be differentiated by pricing them appropriately to indicate,

Ansoff's product/market growth matrix suggests that:

a business's attempts to grow determine whether it markets new or existing products in new or existing markets.

Consumers' product or brand perception can be visualized by :

a positioning map, by two dimensions or multidimensional scales.

What is the Ansoff Growth Matrix?

a tool that helps businesses decide their product and market strategy.

Choosing a position for a product is mapping the product's location in the mind of the consumer. What is a "positioning map" ?

a two-dimensional rendition of this competing market segment and affords multidimensional angles in which to perform market analysis.

market price: The final customer price is determined based on competitive prices, and then production and marketing must be adjusted costs,

as well as confidence that the product life cycle is long enough to warrant entry into the market.

Standardized global marketing approach:

based upon the assumption that the market consists of consumers with homogeneous needs making it the cost effective solution, even though it may be the least effective option to gain market share.

Although product standardization is generally increasing, there are still substantial difference in :

company practices depending on the products marketed and where they are marketed.

To develop and manage global products, marketers should be involved in :

consumer segmentation, selecting target market, and product or brand positioning in global marketplace.

Positioning refers to:

consumers' perception of brand, or the company, as compared with that of competitor's brands.

Given the opportunities and challenges created by the reality of global marketplace, marketers have to:

engage in strategic planning to match market with products in order for the company to strengthen long-term competitive advantage.

The product must be managed in a way to counteract the potential effects of inflation. Marketing managers must be willing to negotiate with:

foreign government, adapt to changes in the local markets, and predict incidences that require pricing changes.

Apolo: Yet if he wins two gold medals in Vancouver, he'll surpass fellow speedskater ......

he has already done spots for McDonald's and Coca-Cola, but his chance for further endorsements will only grow with another solid performance in his third Olympiad.

GLOBAL PRODUCT POSITIONING: Product positioning?

involves using the marketing mix (the four P's) to present a product to a selected target market(s) in the most favorable way, in order to gain market share.

Geographical Pricing:

is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

The answer is rather simple: British consumers insist on a softer, more luxurious texture than their less discriminating continental and America cousins.

it is four grams heavier per square meter because it contains more fiber than European tissues. Extensive consumer testing has established that British consumers are not willing to be fobbed off with anything less.

Concentrated marketing is :

less expensive than differentiated marketing and is the appropriate choice for a new business with limited resources or a firm diversifying in a market outside of its core business.

Price change: As the product matures...

more pressure will be put on the price to keep the product competitive despite increased competition and less possibility of differentiation.

Those products are more likely to require a standardization strategy for global markets. However, consumer goods (e.g., foods, clothing) generally require :

product adaptation strategy because of their higher degree of cultural grounding.

. Such retailers uses a global strategy; that is, they:

replicate their standard format throughout the world. Other retailers change their products and strategy to adapt to other parts of the world; they use a multinational strategy.

After markets have been segmented, targeting aims at evaluating and comparing the identified segments in order to:

select one or more as prospect(s) with the highest potential.

This can be accomplished by :

selecting one or more groups of users as targets for marketing activity and developing unique marketing programs to reach these prime prospects

concentrated strategy approach:

targeting a single segment of the global market, whereas the differentiated global marketing strategy is directing the product /service towards two or more different target segments.

For instance, industrial products, such as steel, chemicals, and agricultural equipment and technology incentive products (e.g., automobile, computer, and mobile phone)

tend to be less culturally grounded and warrant less adjustment than consumer goods.

The scope of these pricing situations will vary according to:

the degree of foreign involvement and the type of market encountered.

A concentrated strategy means that:

the firm decides to serve one of several potential segments of the market.

Global product positioning is:

the location of a product in the mind of the global consumer "mental image." It is partly controlled by the marketers with marketing mix such as product attributes, price, distribution channel, and advertising for sales promotions.

Psychological Pricing: This approach is used when

the marketer wants the consumer to respond on an emotional, rather than rational basis. For example, 'price point perspective' 99 cents not one dollar.

Price escalation is:

the pricing disparity in which goods are priced higher in a foreign market than in the home market; caused by the added costs involved in exporting products from one country to another

Value Pricing: Approach is used:

used where external factors, such as recession or increased competition force companies to provide 'value' products and services to retain sales (e.g., value meals at McDonalds).