MKTG Study Guide
• How to estimate brand equity
cost based approach - market based approach - financial approach
• brand extensions
• Used to leverage a good brand name for a new offering.
Concept test
• at a more advanced stage of development, use a product concept statement and a product prototype (or samples) to estimate how popular the product will be
What is international marketing:
- Focus on resources company has - Be aware of global opportunities and threats - Plan to expand into international market outside of home country
• common traits of EM
- low per capital income but high economic delveopment growth- middle class is most valuable - high income inequalities: large disparities between the lowest income parts of society and the middle class and high earners - Shortage of resources: depending on the country, the shortage may be of raw materials, or of skilled labor or of infrastructure - Large market diversity: • may be the large difference between rural and urban (which could look more like a developed economy) or the difference between generations. Different marketing approaches will be needed to adapt to even more localized markets. -Unreliable infrastructure: the unseen part that we tend to take for granted in developed countries can vary in EM. Water supply, electricity, transportation can affect both the distribution and the way local customers consume products - Unbranded local competition: traditional products in local markets may be unbranded, but with high customer loyalty, which can affect how customers perceive new products but also how customers embrace new brands or products. - Technology is developing: There is an opportunity to invest in the latest with no corporate rigidity in EM - Lack of distribution channels or media infrastructure: • foreign companies have an opportunity to invest in learning the local market but this is costly to set up - Informal relationships matter: despite laws and rules that should govern the business world, emerging markets often rely and function based on informal agreements and relationships.
mediums?
Ads on TV or print may not be appropriate. May need to adapt to the market (high tech in urban areas in China, but quite low tech in other parts of the same country)
high power distance vs low power distance
High power distance (accept wide differences in power, respect for authority) - Low power(u.s.) distance (tend to seek equality, managers and bosses are approachable
Entering a new market you usually...
Identify a new market and enter with an existing product Identify a new market and create a new product for that market
branding in a new market depends on?
• Consumer preferences (food, consumer packaged goods) • Price levels • Competitors (local mainly) • Internal set-up of the parent company and its brand history
Product idea
can use a focus group or interview
Transition economies
changing from centrally planned to free economy
Cost based approach:
computes the costs associated if the brand needs to be build from scratch at the time of valuation
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)
Rules of origin
how much of a product needs to be made locally
Consistency
in-kind products and services need to be identical and consistent with the specifications, particularly for services (which tend to be more variable)
GNI (gross national income) classification
low-income, lower-middle-income countries, upper-middle-income countries, high-income countries
Degree of customization
mass production (offering the same products and services to all customers) vs one-to-one customization (for each customer a different product). Another option is to have segment based customization
• Low context cultures:
messages are clear, short, explicit and rely on words
Why can International sourcing can lead to surprising supply chains?
o Price fluctuations locally, currency, big volume, part makers tend to cluster around the assembly factories to reduce shipping costs (and the assembly lines are close to where the customers are)
ethnographic
observe customer using your product
Reliability
probability that a product or service will operate according to its specifications and not malfunction for its projected life cycle
• Testing the market for new products
product idea - concept test - conjoint analysis - lab marketing - test marketing - minimal viable product
market experiments
test marketing • 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
Form:
usually has to do with design of the product (but can also be about the packaging)
• Secondary Data
• - collected by other agencies/governments • - collected historically by the company (sales data etc) • - syndicated datasets (Nielsen etc): retail or consumer panels • easy and quick to obtain • - cheap (free if government is the source), relatively cheap even for entire industries (Nielsen) • However: • - not specific to your problem • - not customized for a customer segment, local market, or a product (usually) • - accuracy can be questionable (if reported by industry then aggregated, even government) • - may be outdated or overly broad (NAICS codes) • - may not be reliable over time (different meanings of what's included) • - comparability across countries (product function may be different, conceptual equivalence)
• Primary Data
• - collected to answer a specific problem • - controlled and analyzed by the company/associated research firm • Many ways to collect primary data • We will focus on some examples based on international differences • Can be performed by the company in-house • Should use a local team for better results Can also be performed by a market research/consulting company (choose wisely
multi-country market research
• - compare countries - extrapolate if one is already known
• Using averages for segmentation- pros and cons
• - 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)
single country market research
• - 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)
• 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)
• Silent language of business (Edward T Hall)
• - research on implied expectations of business dealings across cultures • In addition to spoken contracts and language, managers operate in cultural norms • (for example, in the US written contracts are binding and followed as a rule) • Cultural norms differ in various countries and thus the implications vary
• Pricing depends on
• - the product category and branding strategy • - purchasing power of the customer (smaller per unit prices or smaller quantities in a pack) • - price may be irrelevant if the quality is high or the product is well advertised
Financial approach:
• 1. Estimate the company's future cash flows, 2. estimate the contribution of the brand to these cash flows, and 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.
• 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
achievement vs nuturing
• Achievement u.s. (acquiring money, competition is good) - Nurturing (relationships are more important, helping others to succeed is important)
customization for new products
• 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
Antitrust laws: US
• Affect US and foreign businesses, in US and foreign territories • no conspiracy to restrict trade or monopolize trade • (price discrimination, exclusive dealings, mergers and acquisitions) • unfair or deceptive practices (false advertising, bait-and-switch) • 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) - have laws to protect consumers, can't monopolize trade or keep prices too high, protect from deceptive advertising, -difference with us and eu is how they are applied, eu has some leeway and interpretation is relaxed, they worry about competitors not consumer harm
• 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.
What is a brand?
• 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
• brand dynamics
• Brands evolve over time. • We'll focus on: • Brand Repositioning • Brand Extensions •
how do you choose the best market research technique?
• Choose the method based on your country and the target market
branding depends on
• Competition with local brands can be fierce. • Local customers may be loyal to even unbranded products they have known for all their life, especially in some product categories (food, medicine, consumer packaged goods etc) • Brands can be very lucrative especially for luxury items. EM consumers may value foreign brands more for luxury items (more signaling power)
based on customer characteristics
• 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) • 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 • Gender: Used extensively, easy to consider • Successful companies will adapt products (and marketing mix) to both genders Some products tend to be purchased and used by one gender only
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
directly vs indirectly affects for business dealings
• Directly - Changes in policies, regulations, laws Indirectly - publicity, protecting some industries over others (competition
How to reach customers?
• Directly through communications or indirectly through trade promotions (partners can help reach customers easier and may have a more authentic relationship with the customers)
problems with test marketing
• Expensive, difficult to execute • May be hard to believe the results (but insist for the managers to believe these!) • Cannot interpret competitive response
antitrust laws: EU
• Focus is on consumer welfare, but can be more stringent (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)
high uncertainty avoidance vs low uncertainty avoidance
• High uncertainty avoidance (ambiguity is not tolerated) - Low uncertainty avoidance (risk taking, tolerant of different opinions and beliefs) u.s.
• Quality Controls
• 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
• Are local competitors weak or just local?
• In many EM markets, the local firms are completely adapted to the market and as the market becomes more developed, can easily try to apply their expertise in outside markets. • Local, small companies can leverage their know-how in other markets and become global competitors themselves.
• 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, - the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. • Trade laws • Can be tariffs • Can be rules/regulation on quality (for cars for example these differ widely across countries) • Embargos/sanctions (example: Cuba travel and economic sanctions) • Direct role, buying supplies like covid tests to distribute to population example, security is another example, bidding rules, trade laws,
• Entering into emerging markets (ways to create new products for these markets)
• Products may be the core offerings in home market and introduced "as is" in the new market but targeted at high earners (products are costly to change, research is expensive, success is hard to measure, long term planning is difficult etc) • Adapting products to new market: better chance of long term success • - stripped down product: enough to be valuable but not too expensive • - frugal innovation: finding new solutions with restrictions on resources • Sometimes innovative products can be used in the home country as well, and can be introduced into other similar EM markets. •
Repositioning brands: reasons
• React to the changing needs of target customers (even in the local market) • Reach a new target market (Pedialyte for adults) • React to a change in the competitor's positioning Respond to Legal challenges
Local competitors
• In-depth knowledge of consumers: can leverage local knowledge much easier than foreigners • Business models already take into account the obstacles: no need to adapt! First mover advantage can mean a lot, especially in economies based on social norms and relationships • Use of latest technologies: leapfrogging over costly but outdated technologies, more nimble at adopting new tech (M-Pesa in Kenya for virtual currency payments using cell phones) • Expert labor recruiting: cheap labor but also experience at recruiting and training local talent • Aggressive growth: known locally, they are ready to grow rather than worry about entry and adapting to local tastes (also can grow by buying smaller rivals or entering new markets) • than just cheap materials or labor. Innovation, R&D can be particularly rewarding in EM! • EM economies have particular needs but the products can be suited for developed countries as well. Learning can also be transferred. • Branding can be difficult but local teams and competitors are well versed: opportunity to learn. • Collaborate with the local companies: they already have a lot of resources! • Growing middle or lower income investment: it is not only the high end or middle class that has promising economic growth. Large numbers of growing income households can be powerful.
individual vs collective
• Individualistic u.s. (family and own interest) - Collectivistic (group will look after your interests)
long term orientation vs short term
• Long-term orientation (planning for the future, persistence and saving) - Short term orientation (present is important)
emerging market segmentation
• 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
based on customer needs
• Mobile technology • Spontaneous shopping • Social shopping • Ultraconvenience (grocery, one click, shipping fast) International needs "to impress your family
• Government roles
• National security is always part of the role - many decisions can affect this (any recent news?) • Incentives and government backed programs
• Trade Related Aspects of Intellectual Property Rights (TRIPS)
• 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
positioning
• 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? • Use an attribute or benefit (taste for flavors for yogurt) https://youtu.be/3qw7Gigsctk • Use quality or price to communicate your brand image • Associate the product with the target user (endorsers, celebrities) • Contrast with your competition (either to claim superiority or to say "just the same" perhaps with a price advantage) • Associate the product with an international market of young adopters (think of aspirational products that appeal to young generations internationally rather than to each customers tastes)
• Brands and marketing in the presence of trade barriers
• 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 Can rebrand due to tariffs or can faced increased competition
Technological Design
• Product innovation (substantive functional changes) vs product variation (minor variations in functionality such as colors, flavors, tastes, packaging variations)
• 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)
• International Laws
• 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
targeting
• 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).
Who are the customers?
• Target users (small but growing) or future users (large potential market, if able to convert)
trade barriers
• Tariffs are usually most salient but not the only trade barriers • Customs (bureaucracy) Local cultural practices
market forecasting: estimates
• 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
• 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
Development level classification
• Under developed (low income, civil strife, flat income, tend to be dangerous for residents),least-developed countries, industrializing or developing countries, developed countries
• 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)
GDP for segmentations
• 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)
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 •
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.
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. • Horizontal brand extensions used most often
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.
Minimal Viable Product
• create a bare bones product and learn as you launch it full scale
Individual Branding
• creating a separate brand for each product or product line • Enables a company to serve different 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
Grassroots marketing,
• education campaigns or marketing campaigns than rely on local business partners (or local government and non-profits) can be valuable in the long-run for brand building and creating buzz.
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 segments.
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)
• What is an emerging market,
• generally, an economy or country that is between developing and developed • Most of the countries known as EM will have high economic growth (though this can change at times)
Ease of use
• greater number of features doesn't always lead to better customer satisfaction.
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. • Credence attributes tend to be common for experiences, and for services. Most uncertainity is credence products
Performance
• has to do with attributes, deciding what level of attributes will be optimal for target customers, the company and its collaborators.
style
• important for goods that reflect hedonic or self-expression functions (luxury cars, designer goods etc)
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
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).
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).
Controls
• set of standards for manufacturing, can put stamp/certification on product to show it passes quality control. ISO certified, track where ecoli outbreak is, EU likes to be certified, become more global get more certifications to become more competitive
Problems with WTO
• 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)
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.
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)
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 (will come back to this) • Umbrella branding sometimes includes sub-brands like: Courtyard by Marriott, Residence Inn by Marriott, Fairfield Inn by Marriott, and Springfield Suites by Marriott
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)