MKTG 406 - Midterm
International Marketing Success
-Focus on resources the company has -Be aware of global opportunities & threats Plan to expand into international market outside home country: - Identify a *new market* and enter with an *existing product* (maybe modify) - Identify a *new market* and create a *new product* or line of products for that market
Kameda Seika: Know the 4 P's for the company What was the biggest problem? (distribution, then marketing) What market research did the company do and what was the customer response?
//////
What was the business model used in Zalora? How did Zalora start? What was the initial customer targeting strategy? What were the difficulties in an EM? How did they achieve growth and solve the problems? What is the current proposed solution you recommend? McKinsey & Company (2014 Study on Global Fashion)
////// double down on mrkt place model (my recommendation)
Customization
*Adapts* each product to a specific market or customer needs in that market May need to be done to respond to *local legal requirements* (safety for cars, non-GMO ban for EU for example) Comes with *higher costs* (no economies of scale, more labor and design costs etc) May result in better products as a *response to customer needs*
What do brands mean?
*Brands add value* to the product beyond the functional aspects of the product -service combination. Anything that the *customers associate with your product*: image, logo, celebrity endorsements, attitudes, PR, marketing communications The *connection between your company and the customers* - a relationship over time, repeated interaction with your company
process for market research
*Define* a problem Decide on a *research design* that is appropriate Determine *information needs* Find the *sources of information* Find all *relevant data* (primary and secondary) *Analyze* the data, *interpret* the results and *summarize* the findings *Apply the findings* to the problem: key decision makers
The Silent Language
*Edward T Hall* - research on *implied expectations of business dealings* across cultures In addition to *spoken contracts and language*, managers operate in *cultural norms*
The World is Usually Classified
*GNI (gross national income)*: low-income, lower-middle-income countries, upper-middle-income countries, high-income countries *Development level*: Under developed (low income, civil strife, flat income, tend to be dangerous for residents), least-developed countries, industrializing or developing countries, developed countries *Poverty level* for residents (these vary!)
Government Roles
*National security* is always part of the role *Incentives and government backed programs* Example: *green cars in California* - rebates (at the state and federal level) for electric vehicles - stickers for HOV lane for hybrids or EV (in California) Example: attract foreign companies 1985 Nissan moves to created vehicles in Tennessee because of local real estate taxes and business taxes) and pushes EV and charging grid in addition to large local investments
4 P of Marketing
*Product, Price, Place, Promotion*
World Trade Organization (WTO)
*Replaced GATT* = General Agreements on Tariffs and Trade Any *reduction in tariffs* would have to be *extended to all countries* inside the organization (GATT) but did not take into account other non trade barriers (quotas, customs procedures, bureaucracy) WTO is meant to *focus on free trade* overall Problems: small countries/developing have little negotiation power, farm subsidies, non-dumping agreements can be favorable to some countries while others are pressured to open up markets, protectionism (for example, US steel industry tariffs) Can also arbitrate conflicts (long term success is an on-going problem) PTA (preferential trade agreements can exist and countries notify WTO)
Short Term Changes if Tariffs Are Uncertain
*Rerouting supply routes* - not necessarily internal Increase national demand - lead to stockouts, delivery problems, quality uncertainty and general supply chain problems Higher consumer prices Requests to reclassify items Increase in risk for companies who cannot hold inventory or hedge risk in other markets Wait-and-see attitude on investment, new products and new components (innovation)
Global brand trends
*Rise of China brands* in the global economy, with high growth rates for companies like Alibaba but newer companies as well Brand Finance claims "Since 2008, China's share of global brand value has increased from 3% to 15%, growing 888% to US $911.5 billion in 2018." *European luxury brands are becoming more adept at social media*, which is increasing their worldwide brand image
What is the value of a brand?
*What it means to the consumer* How far you can extend this brand across products or across markets Actual financial value (estimated) to be associated with your brand
Standardization
A *uniform product offering* for a region (or overall). Based on *similarity of human needs* which are the basis for all customer needs Preferred as costs can be *kept low* Prices achieved through standardization can also be lower
Antitrust Laws in the US
Affect US and foreign businesses *Sherman Antitrust Act 1890* - no secret plans to restrict trade or monopolize trade *Clayton Act 1914* - covers acts that were not included in Sherman (price discrimination, exclusive dealings, mergers and acquisitions) *Federal Trade Commission 1914* - unfair or deceptive practices (false advertising, bait-and-switch) *Robison-Patman Act 1936* - anticompetitive price (ex. unfair price discrimination - sellers have to offer the same price) Based on *maximizing consumer welfare* (and *minimizing market power* in order to increase welfare)
Governments
Affect business dealings: Directly - Changes in policies, regulations, laws Indirectly - publicity, protecting some industries over others (competition) Can be a direct business player for major contracts even in countries where traditionally governments don't participate in free markets directly Affect stability of markets - entry and exit, or investment decision are vital
Brand power
Brand power influences brand equity but is not the same concept. It has to do with *how strong the brand is perceived to be* by the customers. Brand power can be measured as the response by customers to a product that is a particular brand as compared to an unbranded product: -price premium, customer loyalty, enhanced perception of product performance, greater licensing, merchandising, brand extension opportunities etc.
Customer income
Choose a customer segment (low income, middle class, high earners for example) Target that segment Can be misleading (low income customers may buy expensive goods to signal or because these are priorities like cell phones)
International Market Research
Compare outcomes of market research projects in different countries Make decisions using information on *research that is country specific* Change product decisions to *fit customer research* in a country Identify similarities and differences between countries Identify *new markets* to enter (or decide against a launch) Get support from the local team for implementation (or identify problems before launch)
Other Uses for Market Data
Entry Decisions / Exit decisions Forecasting Demand Forecasting Seasonal Demand peaks
Antitrust Laws in the EU
Focus is on consumer welfare, but can be more strict (don't need to prove harm directly) Apply to EU members and any companies that do business in EU member states A company would have to satisfy US rules and also EU rules (to operate in both and get approval)
International Agreements and Local Legal Environment
Free trade agreements have many messy details and are usually negotiated over time Goal is to open a new market for US products (and many other products that will then be needed to support that market) *Rules of origin* - how much of a product needs to be *made locally*
Free Trade Area
High level of integration = (more so than a loosely formed regional cooperation) with the goal to reduce customs duties & non-tariff barriers It only applies to countries that are part of the free trade area It allows for goods to come in into a low tariff country then be distributed in the FTA (with no tariffs) Usually also have laws on Local Content Laws which means that a portion of the product has to be created in the FTA (for the product to not be subject to tariffs)
Brand equity
This represents the *financial value of the brand*. It determines the premium that should be placed on the company's valuation due to owning that particular brand. A key driver of brand equity is brand power.
Single Country or Multi-Country?
If planning to focus on one country only - market size and potential growth - customer characteristics and needs - competitive landscape or potential entrants - business models (can we extend home country model into new country) If planning a multi-country research - compare countries - extrapolate facts if one country is already known
Surveys
In person, mail, phone, online Choose the method based on your country and the target market US landlines tend to be fewer than cell phones, customers are wary of answering phone surveys - different types of customers will opt in Disney uses in-person customer satisfaction surveys successfully In other countries, women are wary of talking to strangers - may miss an opportunity to reach them if design the survey in person or on the phone
Government Procurement
In some countries, this is a major role for the government *Rules about how much of a product has to be local made, or price ceilings, bidding rules* Trade laws Can be tariffs Can be rules/regulation on quality Embargos/sanctions
Planning Horizon
In the *US*, several mandatory fillings: we tend to *plan for the short term* (especially for public companies or those that require investor funds) *Long term planning* - more common in *Asian countries* Just-in-Time relies on long term planning, trust, vetting of suppliers, longer-term-planning (not so much on formal contracts and achieving short term targets in themselves, though those are very important as milestones for learning)
Brand Hierarchy
Individual Branding - creating a separate brand for each product or product line Enables a company to serve difference segments with diverse products (and product categories). Each brand tends to be clearly defined more easily. However, new brands take time and money to create without an established brand name. Examples: Tide, Cheer, Bold and Era are all laundry detergents by P&G Umbrella Branding - using a single brand for all the company's products Enables a company to leverage an established brand for a new product. Quality is important! Any extension to a bad product will hurt the other products. Examples: General Electric, Heinz, Virgin, Costco Umbrella branding sometimes includes sub-brands like: Courtyard by Marriott, Residence Inn by Marriott, Fairfield Inn by Marriott, and Springfield Suites by Marriott
Hofstede's Cultural Dimensions (don't need to memorize)
Individualistic (family and own interest) Collectivistic (group will look after your interests) High power distance (accept wide differences in power, respect for authority) Low power distance (tend to seek equality, managers and bosses are approachable) High uncertainty avoidance (ambiguity is not tolerated) Low uncertainty avoidance (risk taking, tolerant of different opinions and beliefs) Achievement (acquiring money, competition is good) Nurturing (relationships are more important, helping others to succeed is important) Long-term orientation (planning for the future, persistence and saving) Short-term orientation (present is important)
Quality Controls
International Standards Organization (Geneva Switzerland) ISO 9000 -common standard of quality Voluntary, but a strong marketing tool for companies (in addition to actual usefulness) Adopted by EU *Standardized procedures* for: management responsibility, document control, design control, inspection and testing, storage, packaging, product identification and tracking etc
Branding and Marketing
International markets for local brands: *GM cars* Brand has high status in China! And very high growth for GM lately (especially compared to US market) However: Prices are higher due to tariffs Brand may suffer (or not! If consumers consider it a status good harder to attain) Exposure to other brands - opportunity for entry for other companies Uncertainty hurts the marketing efforts
Market Research Process example
LEGO not just for boys - extensive research done to appeal to girls, ended up being very popular & tripling revenue Malls closing in the US due to high volume of online ordering
Home Country - Host Country
Laws and unspoken rules in both will affect your business (as well as international laws!) Outside major conflicts, *companies adapt to host country laws* (local team) Major conflicts or the end of closed economies/countries is a big opportunity but also fraught with danger
Cultures High Low Context
Low context cultures: messages are *clear, short, explicit and rely on words* High context cultures: the *non-verbal* part of the communication has *more impact* than the verbal part High context cultures tend to rely on a person's *values, social standing and trustworthiness* (less so on contract and paper work) - Contingencies tend to not be specified (legal consequences are also not clearly defined) - *A person's word* (and reputation) will matter more than a specification sheet or resume
Emerging market
Main idea is to find a market that is developed enough to support your product and that has a large enough population to support it Or you can share a product idea (with a smaller market share target) across many similar countries in emerging markets Innovation for emerging markets can be a feature: -the belief is that similarities between similar customer trends in these markets will lead to need for similar products
internet and ecommerce can unify markets
Many brands are using online as only distribution channel (and information) Brick-and-mortar stores used online venues as platforms for communications Integrated platforms (for example smart fitting rooms)
We Live in a Connected World Economy
Many companies, products and brands exist in most of the world *Sourcing and supply chains encompass the globe* (as companies look to become and stay competitive) Consumers have a *larger set of options* to choose from (in addition to local markets)
Measuring Brand Equity
No commonly used way to do this easily. There are several alternative methods. Cost based approach: computes the costs associated if the brand needs to be built from scratch at the time of valuation Market based approach: look at the difference between cash flows generated from the branded product and an equivalent but non-branded product, adjusted for the costs of creating the brand Financial approach: uses 3 key steps 1. Estimate the company's future cash flows 2. estimate the contribution of the brand to these cash flows 3. adjust the cash flows using a risk factor to reflect the volatility of the earning associated with the brand. This is quite hard to do.
intellectual property rights
Not an international patent system Meant to give all the countries the *same right to intellectual property protection* as a country would for its own nationals Hot issues: licensing for pharmaceuticals if a country has no manufacturing capability Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.
Tariffs Can Affect Unexpected Products
On Final goods, they can *dissuade imports and encourage local production* But...if the supply chain is *already global, the effects can be unintended*
Financial and Investment Regulations
Ownership controls -some countries require joint operations with a local party Macroeconomic policies - important to get right, uncertainty can dampen investment Access to capital for businesses Tax plans that help long term planning of investment Manipulate the money supply (even print money) in some situations Fix currency exchanges rates
Product and Service Decisions
Performance- has to do with attributes, deciding what level of attributes will be optimal for target customers, the company and its collaborators. Consistency- in-kind products and services need to be identical and consistent with the specifications, particularly for services (which tend to be more variable) Reliability- probability that a product or service will operate according to its specifications and not malfunction for its projected life cycle. Durability- expected length of the life cycle. Usually it is an important consideration for consumers (but more durable goods need to be purchased less often) Compatibility- offering should be consistent to existing standards and complementary products. Even more important for products in networks (or that have network effects). Important also for multipart pricing (razor and razor blades pricing).
Positioning Products in International Markets
Positioning is used in all markets How do customers see the product? How can we communicate to the customer the need that this product satisfies or why the customer should adopt this product?
Branding in a new market
Possible strategies: One global brand (can still have different products for different markets - Coke) Many brands (umbrella branding with local brands - either acquired or created) Depends on: Consumer preferences (food, consumer packaged goods) Price levels Competitors (local mainly) Internal set-up of the parent company and its brand history
Types of Data Collection
Primary Data - collected to answer a specific problem - controlled and analyzed by the company/associated research firm Secondary Data - collected by other agencies/governments - collected historically by company (sales data, etc.) - syndicated datasets (Nielsen etc): retail or consumer panels
Testing the Market for New Products
Product idea - can use a focus group or interview Concept test - at a more advanced stage of development, use a product concept statement and a product prototype (or samples) to assess how popular the product will be Conjoint analysis - advanced technique for customer research: asks the customers to make *tradeoffs between product attributes*. Helps you asses market share for the best product. Lab marketing - experiment where customers are introduced to a new product and allowed to spend money (do they choose your product or a competitors or something else? Interview later as well) Test marketing - experiments Minimal Viable Product - create a bare bones product and learn as you launch it full scale
Tariffs and Companies
Proposed tariffs (a *tax or duty* to be paid on a particular class of *imports or exports*) are supposed to *help the national producers be more competitive* However, the economy is already global: even local producers rely on international sourcing = (a company sources materials from countries with lower labor and production costs in order to cut operating expenses.)
brand repositioning
React to the *changing needs* of target customers (even in the local market) Examples: P&G changed *Oil of Olay* to fit the needs and imagine of younger customers. *Dropped Oil out of the name* (it is now associated with grease and avoided), streamlined the logo, cleaned up the packaging design *Reach a new target market* (Pedialyte for adults) React to a *change in the competitor's positioning* Examples: the popularity of the Energizer Bunny in the US https://youtu.be/KjwcfUDnMEM forced Duracell https://youtu.be/ZysKkaGK9yo to not use its mascot in the US *Respond to Legal challenges* (story of KFC licensing dispute with the state of Kentucky) Champagne is not real champagne unless it is from Champagne! "While sparkling wines are now made worldwide, only wines from the Champagne region of France can legally be called champagne. French vintners have been jealously defending their proprietary right to the name "champagne" for over a hundred years. The exclusive use to the champagne name was included in a clause in the Treat of Madrid (1891), the Treaty of Versailles (1919), and—most recently—has been enforced by order of the European Union. Wines can sparkle, fizz, bubble, and pop, but unless they're made in Champagne, they're not champagne."
New Product Ideas
Rely on the 4 C: customers, company, competitors, collaborators Sources of ideas: R&D labs, employees, salespeople, researchers, competitors When entering into a new country: *rely on a team in that country* to develop/adapt the product for the *local market* Most established companies will set up *regional centers* for innovation of new products (may include R&D team, marketing team, advertising team etc)
Country of origin effects
Research suggests consumers have associations with entire countries - *assess quality based on country of origin* Associations can be positive or negative (and are not necessarily correlated with the country the customer comes from, though there is evidence that home countries are favored overall) *"Made in USA" has positive associations* both in the US and in abroad (Buick is the high end brand for cars for example) Associations will also depend on the products and industries They can also depend on brand history of failures or defective products (Japanese cameras, flatscreen tvs, cars)
Types of products and services
Search products and services: associated with the least amount of uncertainty and can be identified through inspection before purchase. Search attributes *tend to be common* for tangible offerings, tend to be about products. Experience products and services: *greater uncertainty* and are revealed by consuming them Credence products and services: *greatest amount of uncertainty* and quality may not be revealed even after consumption. (truthfulness, living up to claims) Credence attributes tend to be common for experiences, and for services. Example: Toothpaste Size of tube is a search attribute, taste is an experience attribute, and cavity prevention is a credence attribute. Ice cream scoops https://youtu.be/fISPQ_nCMHY
International Law
Similar to national laws, but regulate how states have to behave (and the recourse) Customs: example resources in offshore shelves belong to a nation Treaties: agreements about *how to govern a mutual relationship* between nations International court decisions: arbitration is sometimes used, court decisions also used
Test Marketing - Experiments
Small scale launch of product in some cities (areas) Isolated locations that are easy to observe and analyze (no competitive response, no backlash against brand) Representative of the larger market Can get indication of customer response, repeated purchases, experiment with different marketing like in a full scale introduction Example VIA coffee tested in Seattle, Chicago and London Problems: Expensive, difficult to execute May be hard to believe the results (but insist for the managers to believe these!) Cannot interpret competitive response
Observational Research
Sometimes called *"Ethnographic"* as you observe the customer using your product Can study everyday life by following customers around (to see customer needs) Can include recordings to be later studied. 2005 Lego "anthropologists" studied how children used the blocks around the world: Japanese children make distinction between "play time" and "learning time," while Western cultures better embrace "learning through play". 2011 introduced the Friends line: based on research (and yes, sounds stereotypical) Girls want to role-play (include names and stories with the toys), like to role play while assembling (while boys tend to play after the set is ready), look for accessories for the toys (so bigger minifigures were made, with more details, who could have purses and brushes etc). The same demographic that values "American Girl" Dolls - large market potential.
Age of customers
Sometimes it is based on generations The thought is that younger consumers are quicker to adopt products (or be more linked into the international economy or have aspirations to be part of the global community) Can be misleading, sometimes the adopters are not stratified by age, but by needs or education level, or prior purchases and experiences Global, affluent consumers may be older, more eager to adopt
Targeting in international markets
Standardized targeting - mass marketing in a particular country. Assuming that there is a large mass of similar customers in a market and selling the product to them. There is little product adaptation, little changed in terms of advertising across the market. Costs are low. Niche marketing - finding a particular segment of customers who value the product and creating a product adapted to them (also change the whole marketing mix to reach them). Examples: luxury products, beauty care products Multiple segment marketing - entering a country and targeting more segments at the same time. It implies adapting the product and the marketing mix to support it depending on the customer sengments.
Interviews, Focus Groups and The Rest
Talking to the customer is very important. Focus group - a group interview Choose an *experienced moderator*, from your local team Prepare questions, allow for room to adjust Plan to take into consideration the culture, in addition to the usual caveats about focus groups
Trade Barriers
Tariffs Customs (bureaucracy) Local cultural practices
Market Entry with Limited Data
There is no one right way to estimate - use all available methods, interpret carefully! Estimates will vary a lot. These are starting points when NO OTHER data is available. Analogy method: *pick a country similar* (stage of development) which you know something about (market size). Assume the new product and a product that is correlated will follow the same pattern. Problems: consumption patterns may vary across countries, competition is different, technology may have changed (if using different time periods) Regression Analysis: *pick a set of countries similar and a set of variables that may affect demand*. Then apply a regression and you should be able to predict demand (need to know where to estimate). Chain method: start with a rough estimate for market size, then use percentages (from research) to fine tune it. For Lego, 50% of potential market for toys is the start (girls) then fine tune.
What countries did Disney choose for international expansion? What were some mistakes in each country and what did they learn each time? How was Disneyland in Shanghai built? what was the outcome?
Tokyo, Hong Kong, Paris, Shanghai imagineering, less hotels, 6 different lands, more space
Brand extensions
Used to leverage a good brand name for a new offering. Vertical brand extensions: -usually include a *different tier of prices* for the product or brand For upscale brands, the existence of a lower prices branded product hurts the new product, so this is rarely seen. Instead, we see many downscale brand extensions (still be careful not to devalue the current offering) Horizontal brand extensions: -applying the brand to a *different category of products*. Examples: Timberland uses the brand for boots to outerwear and travel gear The downside can be dilution of the brand.
Some "Easy" Way to Segment
Using *averages* for country specific demographics Many advantages: - easy to find data on averages - find some reassurance that the decision is correct (can observe other companies making this decision) But also disadvantages: -no real information on the marginal targeted consumer (that average consumer may not even exist) - may be large diversity inside a country (rural vs urban, young vs traditional, technology adoption rates etc)
Experimental markets
Usually secret, but consumers can appreciate the novelty Some popular locations in the US: big cities (Chicago, Seattle) but also smaller (Columbus OH, other Midwestern cities) What to test: - new products (Wendy's pretzel burger reported tested in Miami) - product line additions (White Castle's veggie burger on East Coast) - new products (Mercato lunch Chicago 2010) - new layouts (Wendy's restaurants layout in Columbus OH) - services (Giant Eagle grocery store in Columbus OH - fuel and food discounts) - truly new tech (Alottazs Labs, their flagship product was Garageio, a garage-opening device that can be controlled by users' smartphones Columbus OH) -improved service tech (Dunkin' Donuts will test mobile ordering tech worth $1mil in 50 US stores)
GDP
Very attractive (and relatively easy to get) way to segment, or to decide to enter a new country Can underestimate the large disparity of incomes in the same country For entry, need to consider the size of the market: even if GDP is quite low per capital, it may be that enough customers will be able to buy Depends on the product category: low cost products may not be the clear winners (think of local cheaper substitutes, unbranded products etc)
International Marketing
Will need to understand *Competition*: -global and local Will need to consider *Consumer Needs* -global and local
Lecture 1: Introduction to International Marketing OVERVIEW
• International brands may have *different associations* abroad the home market • *International sourcing* can lead to surprising supply chains • Not all international companies can be successful everywhere • Some products have surprising international appeal, and some are meant to be local