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Lecture by Ewa Baranowska-Prokop, Ph.D.
Product decisions
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Learning objectives Discuss the influences that lead a firm to standardize or adapt its products Explore how international service strategies are developed Distinguish between the product life cycle and the international product life cycle Discuss the challenge of developing new products for foreign markets
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Learning objectives (2)
Explain and illustrate the alternatives in the product communication mix Define and explain the different branding alternatives Discuss brand piracy and the possible anti-counterfeiting strategies Explain what is meant by a ‘green’ product Discuss alternative environmental management strategies
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Figure 1 Environmental factors influencing the balance between standardization and adaptation
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Figure 2 Standardization and adaptation of the international marketing mix
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Figure 3 Analysis of a company’s standardization potential
Source: adapted from Kreutzer, Reproduced with kind permission from Emerald Group Publishing Ltd.
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Figure 14.1 The three levels of a product
Low Delivery, installation, guarantees, after-sales service, spare parts Support services Ability to standardize product elements brand, quality, design, packaging, price, country of origin, staff behaviour, size Product attributes functional features, performance, perceived value, image, technology Core product benefits High
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Figure 14.2 Scale of elemental dominance
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Characteristics of services
Intangibility Perishability Heterogeneity Fundamentally, there are four ways of using information to create business value (Marchand, 1999): 1 Managing risks. In the twentieth century the evolution of risk management stimulated the growth of functions and professions such as finance, accounting, auditing and controlling. These information-intensive functions tend to be major consumers of IT resources and people’s time. 2 Reducing costs. Here the focus is on using information as efficiently as possible to achieve the outputs required from business processes and transactions. This process view of information management is closely linked with the re-engineering and continuous improvement movements of the 1990s. The common elements are focused on eliminating unnecessary and wasteful steps and activities, especially paperwork and information movements, and then simplifying and, if possible, automating the remaining processes. 3 Offering products and services. Here the focus is on knowing one’s customers, and sharing information with partners and suppliers to enhance customer satisfaction. Many service and manufacturing companies focus on building relationships with customers and on demand management as ways of using information. Such strategies have led companies to invest in point-of-sale systems, account management, customer profiling and service management systems. 4 Inventing new products. Finally, companies can use information to innovate – to invent new products, provide different services and use emerging technologies. Companies such as Intel and Microsoft are learning to operate in ‘continuous discovery mode’, inventing new products more quickly and using market intelligence to retain a competitive edge. Here, information management is about mobilizing people and collaborative work processes to share information and promote discovery throughout the company. Inseparability
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Three categories of service
People processing Possession processing Information- based services
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Categories of supplementary service
Information Consultation/advice Order taking Hospitality Safekeeping Exceptions Billing Payment
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Differences in the B2B market (versus consumer markets)
Fewer and larger buyers Derived, fluctuating, and relatively inelastic demand Many participants in buying process Professional buyers Closer relationships Absence of intermediaries Technological links
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What is this? Product life cycle
The _____ states products or brands follow a sequence of stages including introduction, growth, maturity, and sales decline. There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Product life cycle
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Figure 14.3 The product life cycle
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Figure 14.4 Comparisons of PLCs
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International product life cycles
Describes diffusion of an innovation across national boundaries Demand grows first in innovating country and is then exported Eventually demand grows in LDCs
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Figure 14.6 IPLC curves
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Figure 14.7 PLCs of different countries for a specific product
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Japanese manufacturers compete on time to market
Early integration of customers and suppliers Multiskilled project teams Interlinking of R&D, production and marketing Total quality management Parallel planning of new products and required production facilities Outsourcing
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Figure 14.8 Compression of R&D cycles and PLCs
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Figure 14.9 Development and test periods for suppliers to the car industry
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Figure 14.10 Different degrees of product newness
New to International markets Increasing risk High Newness to International Market Low New to home country Reposition Existing products New to company Line extensions/ improvements Cost reductions Low Newness to Company High
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Figure 14.11 Product/ communication mode
Standard Adapt New Promotion Standard Straight extension Product adaptation Product invention Adapt Promotion adaptation Dual adaptation Source: Source: adapted from Keegan, 1995.
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Motorola’s promotion adaption for Korean market
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Kellogg’s dual adaption for Indian market
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What is this? Country of origin effects
Which term refers to the effect on quality perceptions caused by knowledge of the production country location for the product? There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Country of origin effects
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What is this? Brand equity
Which term refers to the premium a customer would pay for the branded product compared to an identical unbranded version of the same product? There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Brand equity
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Brand equity’s assets and liabilities
Brand loyalty Brand awareness Perceived quality Brand associations Fundamentally, there are four ways of using information to create business value (Marchand, 1999): 1 Managing risks. In the twentieth century the evolution of risk management stimulated the growth of functions and professions such as finance, accounting, auditing and controlling. These information-intensive functions tend to be major consumers of IT resources and people’s time. 2 Reducing costs. Here the focus is on using information as efficiently as possible to achieve the outputs required from business processes and transactions. This process view of information management is closely linked with the re-engineering and continuous improvement movements of the 1990s. The common elements are focused on eliminating unnecessary and wasteful steps and activities, especially paperwork and information movements, and then simplifying and, if possible, automating the remaining processes. 3 Offering products and services. Here the focus is on knowing one’s customers, and sharing information with partners and suppliers to enhance customer satisfaction. Many service and manufacturing companies focus on building relationships with customers and on demand management as ways of using information. Such strategies have led companies to invest in point-of-sale systems, account management, customer profiling and service management systems. 4 Inventing new products. Finally, companies can use information to innovate – to invent new products, provide different services and use emerging technologies. Companies such as Intel and Microsoft are learning to operate in ‘continuous discovery mode’, inventing new products more quickly and using market intelligence to retain a competitive edge. Here, information management is about mobilizing people and collaborative work processes to share information and promote discovery throughout the company. Other proprietary brand assets
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The functions of branding
To distinguish a company’s offering and differentiate one particular product from its competitors To create identification and brand awareness To guarantee a certain level of quality and satisfaction To help with promotion of the product
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Figure 14.12 Branding decisions
Source: Source: adapted from Onkvisit and Shaw, 1993, p. 534.
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Figure 14.13 Three brand options
Private branding 100% externalizing Co-branding Brand alliance Manufacturer’s brand 100% internalizing
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What is this? Private label
Which term refers to a retailer’s own brand (like Marks & Spencer’s)? There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Private label
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Perspectives on private labels
Manufacturer perspective No promotional expenses Provides access to shelf space Requires competing on price Loss of control May cannibalise other manufacturer brands Retailer perspective Better profit margins Strengthens retailer image
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What is this? Co-branding
_____ describes a form of cooperation between two or more brands, which can create synergies that are valuable for both participants, above the value they would expect to generate on their own. There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Co-branding
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Shell and Ferrari co-branding
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Requirements for ingredient suppliers
Supplier should offer a product with substantial advantages over existing products Ingredient should be critical to success of final product
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What is this? _____ branding involves sight, sound, smell, touch, and taste. There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Sensory
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What is this? Celebrity branding
When a famous person uses his or her status in society to promote a product, it is called _____. There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Celebrity branding
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Determinants of value of celebrity license
Celebrity Q score Product being promoted Quality of licensed product Amount of design control Fundamentally, there are four ways of using information to create business value (Marchand, 1999): 1 Managing risks. In the twentieth century the evolution of risk management stimulated the growth of functions and professions such as finance, accounting, auditing and controlling. These information-intensive functions tend to be major consumers of IT resources and people’s time. 2 Reducing costs. Here the focus is on using information as efficiently as possible to achieve the outputs required from business processes and transactions. This process view of information management is closely linked with the re-engineering and continuous improvement movements of the 1990s. The common elements are focused on eliminating unnecessary and wasteful steps and activities, especially paperwork and information movements, and then simplifying and, if possible, automating the remaining processes. 3 Offering products and services. Here the focus is on knowing one’s customers, and sharing information with partners and suppliers to enhance customer satisfaction. Many service and manufacturing companies focus on building relationships with customers and on demand management as ways of using information. Such strategies have led companies to invest in point-of-sale systems, account management, customer profiling and service management systems. 4 Inventing new products. Finally, companies can use information to innovate – to invent new products, provide different services and use emerging technologies. Companies such as Intel and Microsoft are learning to operate in ‘continuous discovery mode’, inventing new products more quickly and using market intelligence to retain a competitive edge. Here, information management is about mobilizing people and collaborative work processes to share information and promote discovery throughout the company.
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Steps involved with international celebrity licensing
Identify the rights involved Negotiate the terms and scope of the license Determine the payment and other terms of the license
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What is this? Green marketing
What term refers to the integration of business practices and products that are friendly to the environment while also meeting the needs of the consumers? There follows an explanation of some key terms: Coordinate its marketing activities: coordinating and integrating marketing strategies and implementing them across global markets, which involves centralization, delegation, standardization and local responsiveness. Find global customer needs: this involves carrying out international marketing research and analysing market segments, as well as seeking to understand similarities and differences in customer groups across countries. Satisfy global customers: adapting products, services and elements of the marketing mix to satisfy different customer needs across countries and regions. Being better than the competition: assessing, monitoring and responding to global competition by offering better value, low prices, high quality, superior distribution, great advertising strategies or superior brand image. Green marketing
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Figure 14.16 Types of environmental strategic posture
Value creation approach Benefit enhancement Cost reduction Change orientation Proactive Green product innovation Pollution prevention Beyond compliance Accommo- dative Green product differentiation Pollution prevention Compliance Source:Source: adapted from Starik et al., 1996, p. 17.
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Benefits of strategic alliances with environmental groups
Increased consumer confidence in green products and claims Access to environmental information Marketer access to new markets Positive publicity and reduction of criticism Education for consumers about key environmental issues
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Swiss Army: A case study (2)
Are there any problems for channels of distribution associated with the prospect of Swiss Army stores? How might Swiss Army use ‘non-traditional advertising’ to promote its brands and new products?
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For discussion (1) How would you distinguish between services and products? What are the main implications of this difference for the global marketing of services? What implications does the product life cycle theory have for international product development strategy?
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For discussion (2) To what degree should international markets be offered standardized service and warranty policies that do not differ significantly from market to market? Why is the international product policy likely to be given higher priority in most firms than other elements of the global marketing mix? Describe briefly the IPLC theory and its marketing implications.
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For discussion (3) What are the requirements that must be met so that a commodity can effectively be transformed into a branded product? Discuss the factors that need to be taken into account when making packaging decisions for international product lines. When is it appropriate to use multiple brands in (a) a single market and (b) several markets?
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For discussion (4) What is the importance of ‘country of origin’ in international product marketing? What are the distinguishing characteristics of services? Explain why these characteristics make it difficult to sell services in foreign markets. Identify the major barriers to developing international brands.
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For discussion (5) Discuss the decision to add or drop products to or from the product line in international markets. Why should customer-service levels differ internationally? Is it, for example, ethical to offer a lower customer-service level in developing countries than in industrialized countries? What are the characteristics of a good international brand name?
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Swiss Army: A case study (1)
Which factors are attributable to the strong global brand equity of Swiss Army? What are the main motives behind the product line extension from Swiss Army Knives into other product areas? Requires web access
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