IB Chapter 14

Product Extension/Communications Adaptation-Level of economic development

-Alternative techniques: Door-to-door personal selling and regional product shows or fairs -Modern telecommunications system: TV, radio, and the World Wide Web -"Localizing Websites" common for companies to adapt their websites to each national market.

Product Invention

-Develop an entirely new product for the target market. -Many important differences exist between the home and target markets. -Local buyers cannot afford a company's current product because of low purchasing power. -Lack of adequate infrastructure needed to operate certain products.

Whether the push or pull strategy is most appropriate in a given marketing environment depends on several factors:

-Distribution System -Access to Mass Media -Type of Product

Product/Communications Adaptation (Dual Adaptation) includes

-Product is adapted to match the needs or preferences of local buyers. -Promotional message is adapted to explain how the product meets those needs and preferences. -Can be expensive -Appropriate if a sufficiently large and profitable market segment exists

What makes a worldwide pricing policy difficult to achieve in practice?

-Production costs -Cost of reaching different markets -Purchasing power of buyers in a target market -Fluctuating currency values

Cultural Differences:

Companies also adapt their products to suit local buyers' product preferences, which are rooted in culture. Not all companies need to modify their product to the culture; instead, they may need to identify a different cultural need that it satisfies.

Laws and Regulations:

Companies must often adapt their products to satisfy laws and regulations in a target market.

Distribution System

Implementing a push strategy can be difficult when distribution channel members (such as distributors) wield a great deal of power relative to that of producers. It can also be ineffective when distribution channels are lengthy.

What product characteristic is more likely than others to offend people in another culture?

brand and product names

Product Extension/Communications Adaptation:This approach helps companies contain

costs because the good itself requires no alteration.

First, production costs

differ from nation to nation and selling prices may adjust to these different costs.

A price control

is an upper or lower limit placed on the price of a product within a country. Upper-limit price controls provide price stability when inflation is driving up prices. Lower-limit price controls can be used to help local companies compete against the less expensive imports of international companies or be used to ward off price wars.

Degree of Exposure:An exclusive channel

is one in which a manufacturer grants the right to sell its product to only one or a limited number of resellers.

An arm's-length price

is the free-market price that unrelated parties charge one another. Many governments now regulate internal company pricing practices by assigning products approximate transfer prices based on their free-market price.

To apply dual pricing successfully, how must a firm treat its domestic and international buyers?

keep them separate

Third, a company may decide to

lower or raise a selling price to match the purchasing power of buyers in a target market.

The process of sending promotional messages about products to target markets is called what?

marketing communication

Dumping

occurs when the price of a good is lower in export markets than in the domestic market. Charges of dumping can arise when a foreign competitor floods a target market with inexpensive imports to undercut competitors' prices, or can arise when changes in exchange rates cause unintentional dumping.

Marketing activities that span time zones and cultures can test the most seasoned marketing managers. When a company decides to "go international," managers have many options at their disposal when it comes to

standardizing or adapting their products.

The pricing strategy

that a company adopts must match its overall international strategy

A product with a low value density tends to have a distribution system that is more what?

the distribution system is more localized

When companies extend their marketing efforts internationally, they develop communication strategies that blend product and promotional strategies. A company's communication strategy for a particular market takes into account

the nature of the product being marketed and the promotion mix to market it.

distribution channel

The physical path that a product follows on its way to customers

distribution

Planning, implementing, and controlling the physical flow of a product from its point of origin to its point of consumption

Companies develop their international distribution strategies based on two related decisions:

(1) how to get goods into a country and (2) how to distribute goods within a country.

Managers consider two overriding concerns when establishing channels of distribution:

(1) the amount of market exposure a product needs and (2) the cost of distributing a product.

Product/Communications Extension (Dual Extension) consists of:

- Can be the simplest and most profitable strategy -Will probably grow more popular -Better suited for brand-conscious teenagers, business executives, and wealthy individuals -Better suited for companies that use a global strategy with their products -Appropriate for global brands that have mass appeal and that cut across all age groups and social classes -Useful to companies that are the low-cost leaders in their industries

Product Extension/Communications Extension Includes

-Can be costly -Appropriate for differentiated product

International Advertising

-Consider Cultural Nuances -Standardizing or Adapting Advertisements -The Elusive Euro-Consumer

Special Distribution problems that can affect a company's international distribution activities:

-Lack of Market Understanding -Theft and Corruption

Developing Product Strategies

-Laws and Regulations -Cultural Differences -Brand and Product Names -National Image -Counterfeit Goods and Black Markets -Shortened Product Life Cycles

What factors influence a company's international product strategy?

-Laws and Regulations -Cultural Differences -Brand and Product Names -National Image -Counterfeit Goods and Black Markets -Shortened Product Life Cycles

Many factors have an important influence on managers' pricing decisions:

-Transfer Price -Arm's Length Price -Price Controls -Dumping

When a company develops its communication strategy for international markets, it either extends or adapts its product and its promotional strategies in five possible ways. Product/promotional methods companies use:

1-Product/ Communications Extension (Dual Extension) 2-Product Extension/Communications Adaptation 3-Product Adaptation/Communications Extension 4-Product/ Communications Adaptation (Dual Adaptation) 5-Product Invention

Theft and corruption:

A high incidence of theft and corruption can present obstacles to distribution.

Type of Product

A pull strategy is most appropriate when buyers display a great deal of brand loyalty toward one particular brand name. On the other hand, push strategies tend to be appropriate for inexpensive consumer goods characterized by buyers who are not brand loyal. A push strategy is also suited to industrial products because potential buyers usually need to be informed about a product's special features and benefits.

Product/Communications Adaptation (Dual Adaptation)

Adapt both the product and its marketing communication to suit the target market:

Product Extension/Communications Extension

Adapt the product to the requirements of the international market while retaining the product's original marketing communication -Legal requirements in the local market -Local content laws

Shortened Product Life Cycles:

Advances in telecommunications have alerted consumers around the world to the latest product introductions. Consequently, consumers in developing and emerging markets also demand the latest products and are not happy with receiving what is yesterday's fad in the highly developed nations. Also, the rapid pace with which technological innovation occurs today is shortening the life cycles of products.

Red Bull is identical in every market in which it is sold. Each slender red, blue, and silver can contains caffeine, carbohydrates, vitamins, and the amino acid taurine.

Around the world, Red Bull recruits "brand ambassadors," who hand out free samples at events, and hires "student managers," who spread the word about the beverage and drink it on campuses.Red Bull sponsors top athletes in racing and sporting events, including snowboarding, hang-gliding, skateboarding, and daredevil stunts.

The vast majority of advertising that occurs in any one nation is produced solely for that domestic audience.

But companies that advertise in multiple markets must determine the aspects of the advertising campaign that can be standardized across markets and those that cannot.

Marketing communication is typically considered a circular process

By ignoring important cultural nuances, companies can inadvertently increase the potential for noise that can cloud the audience's understanding of their promotional message.

Channel Length and Cost:

Channel length refers to the number of intermediaries between the producer and the buyer.

Lack of market understanding:

Companies can experience a great deal of frustration and financial loss simply by not fully understanding the local market in which they operate.

Counterfeit Goods and Black Markets:

Counterfeit goods can damage buyers' image of a brand when the counterfeits are of inferior quality—which is nearly always the case.

Access to Mass Media

Developing and emerging markets typically have fewer available forms of mass media for use in implementing a pull strategy. Accordingly, it is difficult to increase consumer awareness of a product and to generate product demand.

Price Escalation:

Higher selling price in the target market than in the home market

Degree of Exposure:

In promoting its product to the greatest number of potential customers, a marketer must determine the amount of exposure needed.

Dual Pricing

Policy in which a product has a different selling price (typically higher) in export markets than it has in the home market

Dual Pricing:

Policy in which a product has a different selling price (typically higher) in export markets than it has in the home market

Worldwide Pricing

Policy in which one selling price is established for all international markets

Marketing Communication:

Process of sending promotional messages about products to target markets.

Worldwide Pricing Can be difficult to implement for several reasons:

Production costs -Cost of reaching different markets -Purchasing power of buyers in a target market -Fluctuating currency values

There are two general promotional strategies that companies can use to get their marketing message across to buyers. Companies can rely completely on just one of these strategies or use them in combination

Pull and push strategy

Brand and Product Names:

Several issues related to a company's brand name are important concerns for the day-to-day activities of international managers. A brand name is the name of one or more items in a product line that identifies the source or character of the items. Brand names help consumers to select, recommend, or reject products.

But sometimes a product's export price is lower than the price in the home market. Under what circumstances does this occur?

Some companies determine that domestic market sales are intended to cover all product costs. They then require exports to cover only the additional costs associated with exporting and selling in a target market (such as tariffs). In this sense, exports are considered a sort of "bonus."

Deciding whether to keep a marketing strategy the same or to modify it abroad is also known as the what?

Standardize-versus-Adapt Decision

Case: The Elusive Euro-Consumer:

The continuing integration of nations belonging to the European Union is causing many marketers to dream of a day when they can standardize their advertising to appeal to a so-called Euro-consumer. But the Euro-consumer remains a rare, mythical creature that eludes even the world's most clever advertisers.

National Image:

The value customers obtain from a product is heavily influenced by the image of the country in which it is designed, manufactured, or assembled.

value density

The value of a product relative to its weight and volume -is an important variable in formulating distribution strategies. -As a rule, the lower a product's value density, the more localized the distribution system.

Value Density-Products with high value-density ratios include emeralds, semiconductors, and premium perfumes.

These products can be processed or made practically anywhere and then shipped to markets because their transportation costs are small relative to their end values.

Product/Communications Extension (Dual Extension)

This method extends the same home-market product and marketing promotion into target markets. Under certain conditions, it can be the simplest and most profitable strategy.

Product Extension/Communications Adaptation

Under this method, a company extends the same product into target markets but alters its promotion. -Helps companies contain costs

In terms of channel length, direct marketing is also known as a what?

a zero-level channel

Fourth, fluctuating currency values

also must be taken into account. When the value of the currency in a country where production takes place rises against a target market's currency, the product will become more expensive in the target market.

Communications require adaptation

because the product satisfies a different need, serves a different function, or appeals to a different type of buyer.

A strong brand

can become a company's most valuable asset and primary source of competitive advantage. A consistent worldwide brand image is increasingly important as more consumers and businesspeople travel internationally than ever before.

Companies along the distribution channel that work together in delivering products to customers are called

channel members or intermediaries.

Promotion mix

comprises a company's efforts to reach distribution channels and target customers through communications, such as personal selling, advertising, public relations, and direct marketing.

A promotional strategy

designed to create buyer demand that will encourage distribution channel members to stock a company's product is called a pull strategy.

International advertising

differs a great deal from advertising in domestic markets. Managers must rely on their knowledge of a market to decide whether an ad is suitable for the company's international promotional efforts.

Companies can adjust their marketing communication to

inform potential buyers that the product either satisfies their needs or serves a distinct function.

What type of channel grants the right to sell a product to many resellers?

intensive channel

Transfer price

is a product's selling price when it is sold among a company and its subsidiaries. Transfer pricing was used to manage global tax burdens by having subsidiaries in high-tax countries charge low prices for their output exported to affiliated parties.

push strategy

is a promotional strategy designed to pressure distribution channel members to carry a product and promote it to final users.

Some well-known international advertising agencies have tried a pan-European advertising approach only to fail because

of national differences.

Degree of Exposure: an intensive channel

one in which a producer grants the right to sell its product to many resellers. Preferred when producer wants its product to be made available through as many distribution outlets as possible

Second, producing in one location does not guarantee

one selling price in all target markets because the cost of reaching different markets varies.

Channel Length and Cost: A one-level channel

places only one intermediary between the producer and the buyer. Two intermediaries make up a two-level channel, and so forth. In general, the greater the number of intermediaries in a channel, the more costly it becomes.

A strategy that pressures channel members to carry and promote a product is called a what?

push strategy

Firms that standardize international advertising often control campaigns from where?

the home office.

Europe's many languages certainly create

thorny translation issues for marketers.

Parent firms and subsidiaries often transfer products among themselves at a price called what?

transfer price

Channel Length and Cost: In a zero-level channel—

which is also called direct marketing—producers sell directly to final buyers.