Month: November 2021

Price may be defined as the exchange of goods or services in terms of money. Without price there is no marketing, in the society. To a manufacturer, price represents quantity of money (or goods and services in a barter trade) received by the firm or seller. To a customer, it represents sacrifice and hence his perception of the value of the product. Conceptually, it is:

Price = Quantity of money received by the seller/Quantity of goods and services rendered received by the buyer

The term ‘price’ needs not be confused with the term ‘pricing’. Pricing is the art of translating into quantitative terms (rupees and paise) the value of the product or a unit of a service to customers at a point in time.

According to Prof. K.C. Kite, “Pricing is a managerial task that involves establishing pricing objectives, identifying the factors governing the price, ascertaining their relevance and significance, determining the product value in monetary terms and formulation of price policies and the strategies, implementing them and controlling them for the best results”.

Pricing refers to the value determination process for a good or service, and encompasses the determination of interest rates for loans, charges for rentals, fees for services, and prices for goods. Pricing decisions are difficult to make even when a company operates only in a domestic market, and the difficulty is still greater in international markets. Multiple currencies, trade barriers, additional cost considerations, and longer distribution channels make price determination more complex in international markets.

Globalisation of business has put increased pressure on the pricing systems of companies which enter international markets. These companies have to adapt their pricing structures as they graduate from being purely domestic players to exporters, and then to overseas manufacturers.

The earlier pricing structures used by them may no longer be appropriate in the complex international environment characterized by high competition, more global players, rapid changes in the technology, and high-speed communication between markets.

Companies operating in international markets have to identify:

1) The best approach for setting prices worldwide.

2) The variables those are important in determining prices in international markets.

3) The level of importance that needs to be given to each variable.

4) The variance in prices across markets.

5) The variance in prices across customer types.

6) The factors to be considered while determining transfer prices,

Pricing decisions cannot be made in isolation because pricing affects other marketing decision variables and determines:

1) The customer’s perception of value.

2) The level of motivation of intermediaries.

3) Promotional spending and strategy.

Pricing, an important decision in any business, be it domestic or international, directly affects revenue and thus profitability. Further, appropriate pricing aids proper growth, as development of a mass market depends to a large extent on price. For businesses dependent on acquiring business contracts through competitive bidding, such as the construction and mining industries and drilling companies, a poor pricing decision threatens survival. Too high a price may mean no business, while a lower price may lead to a unprofitable operation. In many cases, the price indicates a product’s quality. If the Mercedes car, e.g., were priced in the same range as the Oldsmobile, the Mercedes would lose some of its quality image. Finally, price affects the extent of promotional support to be allocated to a product.

The selection of a brand name that does neither lose its meaning nor image when translated into diverse languages poses a serious challenge. Although the establishment of international brand names facilitates the marketing of products globally, it also raises issues of brand piracy, imitation and fake brands. It may also be worth noting here that the world bodies are currently pushing hard for greater protection of intellectual property rights on a global basis.

Notwithstanding the above, brand and trademark decisions are affected by the company’s product policy on standardisation vs. adaptation, and the legal requirement of the host country.

Hons, Pecotich and Schultz observed that with regards to foreign brands in East and South East Asia markets there are five strategic options for Western companies:

1. Entering the market with the original Western brand name. This strategy may provide a strong image of an imported product, taking advantage of the Western “Halo” effect.
2. Entering the market with a phonetically translated brand name i.e. resulting in the same sound but perhaps different meaning in the local language. The pronunciation of the original brand name is retained while local connotations are attained.
3. Entering the market with a directly translated brand name i.e. resulting in different sounding but same meaning in the local languages. Direct translation is the option of choice if the original brand name has a certain specific meaning attached.
4. Entering the market with a combination of the original brand name and phonetically translated name. This enables localization while retaining the image of the original.
5. Entering the market with a combination of the original brand name and the directly translated name. A strong local identity is provided while the image of a Western or imported brand is maintained.

The merging of the following components form a company’s corporate symbol or name:

Trade Name: It promotes and advertises an enterprise or a division or a specific corporation through a corporate brand name. For example, Dell, Nike, Google, and many more.

Brand Name: It can be a single word, a combination of words, letters, or digits to highlight a product or service. For example, Pepsi, Lakme, Baggit, etc.

Brand Mark: It is a distinct symbol, colouring, lettering, or other design component. Mostly, it is recognizable and need not be pronounced on spelled. For example, Apple’s apple, or Coca-Cola’s cursive typeface, Nike correct symbol.

Trade Characters: These characters include animals, people, animated characters, cartoons, objects that are used to promote a product or service, that is related with that product or service. For example, Godrej almirah and lockers.

Trade Mark: It is a word, name, letter, digit, symbol, or merging of these components. Trade mark is legally secured and owned by the government. For example, NBC owns colourful peacock as its trade mark, or McDonald’s golden arches. No other enterprise can use these symbols.

The first decision regarding branding is whether to brand or not. The trend towards non-branding products is increasing world-wide. In fact, the scales of non-branded products are increasing particularly in retail stores. The increase in demand for non-brand products is due to the availability of these products at fewer prices. In addition, non-brand products are available – In a number of sizes and models.

• Branded Products:

Most of the global companies go for branding. The customers of different countries find it easy to identify the branded products and they are aware of the ingredients and utility of the branded products. For example” the customers throughout the world are aware of the products of Colgate-Palmolive, Pepsi or Coke etc. The global company can get better price and profits through branded products.

• Private Brand:

Most of the exporting companies go for dealer’s brand or private brand. The advantages of private branding include: easy in giving dealer’s acceptance, possibility of getting larger market share, less promotional expenses etc. Private branding is more appropriate for the small companies who export to various foreign countries.

Manufacturer’s Brand: The manufacturer sells the products in his own brand. The advantages of manufacturer’s brand include: better control of products and features, better price due to more price in electricity, retention of brand loyalty and better bargaining power.

• Single Brand:

The global company go for a single brand for all its exports to the same country (or Single Brand): The advantages of single brand in single market include: better impact on marketing, permit more focused marketing; brand receives full attention, reduction in cost of promotion etc.

• Multiple Brands:

The marketing conditions and the features of the customers vary widely from one region to the other, in the same country. Therefore, the exporter uses multiple branding decisions in such cases. Multiple branding enables the exporter to meet the needs of all segments. The other advantages of multiple branding include: creation of excitement among employees, gaining of more shelf space, avoidance of negative connotation of existing brand etc.

• Local Brands:

Global companies have started widely using the local brands in order to give the impression of cultural compatibility of the local market. The advantages of local branding include: elimination of difficulty in pronunciation, elimination of negative connotation, avoidance of taxation on international brand etc.

• Global brands or World Wide Brand:

Exporters normally go for global brand. The advantages of global brand include: reduction of advertising costs, elimination of brand confusion, better marketing impact and focus, status for prestigious brands and for well-known designs etc.

Strategies for Branding Decisions

(1) If the product has production consistency and salient attributes which can be differentiated, then it would be better for the manufacturer to go for branding otherwise better to sell the product without any brand.

(2) If the manufacturer is least dependent person, it would be feasible to go for the manufacturer’s own brand otherwise; it would be feasible to go for a private brand.

(3) If there are intermarket differences like demographic and psychological, it would be feasible for having a local brand. Otherwise, it would be better to go for global brand.

(4) If there are intermarket differences like demographic and psychological, it would be feasible for multiband. Otherwise, it would be feasible to go for single brand.

Few companies have either the resources or the will to operate in all or even most of the countries in the globe. Although some large companies such as coca cola or Sony sell products in 200 countries, most international firms focus on a smaller set.

Global market segmentation can be viewed as the process of identifying segments whether they are country groups or individual buyer groups of potential customers with homogeneous attributes who are likely to exhibit similar buying behavior patterns.

There is consensus among practitioners and academics that the time and expense of conducting segmentation studies and implementing international segmentation systems is justified by the contribution of segmentation to effective brand positioning and performance. However, there has been limited attention given in the literature to identify the dimensions used to form international market segments.

Complicating the segmentation issues in world markets is the need for companies to make strategic positioning decisions on leveraging brand equity and achieving economies of scale.

Operating in many countries presents new challenges. Because of differences in cultural, economic and political environment among various countries, international markets tend to be more heterogeneous than domestic markets.

Companies can segment international markets using one or a combination of several variables. They can segment by geographic location, by regions such as Western Europe, the Middle East, Africa or the Pacific Rim. Geographic segmentation assumes that nations close to one another will have many common traits and behaviors. Although this is often the case, there are many exceptions. For example, although the United States and Canada have much in common, both differ culturally and economically from neighboring Mexico.

World markets can also be segmented on the basis of economic factors. For example, countries might be grouped by their level of economic development and by population income levels. A country’s economic structure shapes its population’s product needs and therefore, the marketing opportunities it offers.

Countries can be segmented by political and legal factors such as the type and stability of government, its receptivity of foreign firms, monetary regulations, and the complexity of bureaucracy. Such factors play a crucial role in a company’s choice of which countries to enter and how. Cultural factors can also be used i.e. grouping markets according to common language, religions, values and attitudes.

Segmenting international markets on the bases of the aforementioned factors assumes that segments should consist of clusters of countries. However, many companies use a different approach called inter-market segmentation. Using this approach, they form segments of consumers who have similar needs and buying behavior even though they are located in different countries. For example, Mercedes Benz targets the world’s well-to-do groups regardless of their country.

MTV targets the world’s teenagers. They share more in common. One expert says ‘in their buying behavior, it is difficult to find anything different other than language among teenagers in Japan, in UK and in China”.

Depending on the number of countries involved, a firm operating in the international arena may find a segmentation strategy more appropriate than a firm that operates in a domestic market.

A primary difference between calling a firm international or global involves the scope and bases of segmentation. An international firm is one with a scope of segmentation based on few national markets. A global firm is one that views the globe broadly as part of its total market and develops segmentation strategies based on receptive segments of the markets, wherever they are in the world.

Despite the growing homogeneity of needs among consumers on a worldwide basis, some authors focus on the adaptation of products and marketing efforts on a country-by-country basis, as opposed to the standardization of products and marketing efforts on a global basis.

In domestic markets, customer characteristics such as age, sex, social class, personality, brand loyalty, product usage and attitudes toward the given brand are often used as bases for segmentation. In international markets, on the other hand a further dimension has to be considered, namely that of country characteristics. International markets can therefore be segmented in a two-step process.

First the macro segment composed of individual or groups of countries can be identified based on national market characteristics. Then, within each macro-segment, the market can be further sub-divided based on customer characterization.

The operational distinction between country characteristics and customer characteristics is that country characteristics are common to all customers of the given country such as national character or dominant cultural patterns. Customer characteristics on the other hand are those characteristics which enable a distinction among various customers within a country such as social classes, age, sex, etc.

The predetermined country characteristics of cultural, economic, geographic, technological, etc. are inadequate for segmentation when considered without behavioral bases like buyers’ responsiveness to the global marketing program.

Kale and Sudharshan (1987) propose a three-step analysis. First, select the appropriate countries to enter based on factors such as political climate and communications infrastructure. Second, identify specific customer segments to serve within each country based on product and marketing mix factors. Finally, select customer segments across a range of countries that may be served with a common marketing mix without regard to geographic boundaries.

This inter-market segmentation approach refers to “ways of describing and reaching market segments that transcend national boundaries or that cut across geographically defined markets”

This approach emphasizes that inter-market segments are based on variables other than national boundaries. A hybrid approach that considers both macro bases, as well as micro bases, is found to be more realistic.

• Evaluating and selecting market segments

In evaluating different segments, a firm must look at the segment’s current size and growth, overall attractiveness and the firm’s resources and objectives.

Some attractive segments may not mesh with the firm’s long-run objectives or the firm may lack one or more necessary competencies to offer superior value.

After evaluating different segments, the firm can consider five patterns of target market selection.

• Single segment concentration

Through concentrated marketing, the firm gains a strong knowledge of the segment’s needs and achieves a strong market presence. Furthermore, the firm enjoys operating economies through specializing its production, distribution and promotion.

However, the risk of segment’s taste change/sour and competitors’ invasion of the segment may be high. For example, when digital camera technology took off, Polaroid’s earnings fell sharply. For these reasons, many companies prefer to operate in more than one segment. If selecting more than one segment to serve, a firm should pay close attention to segment interrelationships on the cost, performance and technology side. Companies can try to operate in super segments rather than in isolated segments. A super segment is set of segments sharing some exploitable similarity.

Selective specialization: A firm selects a number of segments each objectively attractive and appropriate. There may be little or no synergy among segments but each promising to be a money maker. This multi-segment strategy ensures the firm’s risk diversification tendency.

The best way to manage multiple segments is to appoint segment managers with sufficient authority and responsibility for building the segment’s business.

• Product specialization

The firm makes a certain product that it sells to several different market segments. An example would be a microscope manufacturer that sells to university, government agencies and commercial laboratories. The firm makes different microscopes for the different customer groups and builds a strong reputation in the specific product area.

• Market specialization

A firm concentrates on serving many needs of a particular customer group. For example, a firm that sells an assortment of products only to university laboratories represents market specialization. The firm gains a strong reputation in serving this customer group and becomes a channel for additional products the customer group can use. The downside risk is that the customer group may suffer budget cuts or shrink in size.

• Full market coverage

A firm attempts to serve all customer groups with all the products they might need. Large firms can cover a whole market in two broad ways: through undifferentiated marketing (shotgun approach) or differentiated marketing (rifle approach).

• Costs of segmented marketing

Differentiated marketing typically creates more total sales than undifferentiated marketing. However, it increases the costs of doing business as follows:

Product modification costs: modifying a product to meet different market segment requirements usually involves R & D costs.

Manufacturing costs: it is usually more expensive to produce 10 units of 10 different products than 100 units of one product. The longer the production setup time and the smaller the sales volume of each product, the more expensive the product becomes. However, if each model is sold in sufficiently large volume, the higher setup costs may be quite small per unit.

Administrative costs: the company has to develop separate marketing plans for each market segment. this requires extra marketing research, forecasting, sales analysis and channel management

Inventory costs: it is more costly to manage inventories containing many products

Promotion costs: the company has to reach different market segments with different promotional programs. The result is increased promotion planning costs and media costs.

 Segmented marketing gains

• The firm gains more knowledge about customers’ needs, more sales
• More customer satisfaction and loyalty (brand bonding)
• Efficient resource allocation

Positioning for Competitive Advantages

Beyond deciding which segments of the market it will target, the company must decide what positions it wants to occupy in those segments. A products position is the place the product occupies in consumers’ mind relative to competing brands. It is the way the product is defined by consumers on important attributes. Positioning involves implanting the brand’s unique benefits and differentiation in customers’ mind.

Customers are overloaded with information about products. They cannot revaluate products every time they make a buying decision. To simplify the buying process, customers organize products and companies into categories and position them in their mind. So, a product’s position is the complex set of perceptions, impression and feelings that customers have for the product compared with competing brands.

Customers position products with or without the help of marketers. But marketers do not want to leave their product’s position to chance. They must plan positions that will give the products the greatest advantage in selected target markets and they must design marketing mixes to create these planned positions. Imitable

• Choosing positioning strategies

The goal of positioning is to locate the brand in the minds of consumers to maximize the potential benefit to the firm. The result of positioning is the successful creation of a customer-focused value proposition.

Some firms find it easy to choose their positioning strategy. For example, a firm that will be known for quality in certain segments will go for this position in a new segment if there are enough buyers seeking quality. Each firm must differentiate its offer by building a unique bundle of benefits that appeal a substantial group within the segment.

The positioning task consists of the following steps: identifying a set of possible competitive advantages up on which to build a position, choosing the right competitive advantages, selecting an overall positioning strategy and effectively communicate and deliver the chosen position to the market.

• Identifying Possible Competitive Advantages

The key to win and keep the target customers is to understand their needs than competitors do and to deliver more value. To the extent that a company can position itself as providing superior value, it gains competitive advantage. But solid positions cannot be built on empty promises. If the company positions its product as offering the best quality, it must then deliver the promised quality. Thus, positioning begins with actually differentiating the company’s marketing offer so that it will give consumers more value than competitors’ offers do.

Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices.

To find points of differentiation, marketers must think through the customers’ entire experience with the company’s product. An alert company can find ways to differentiate itself at every point where it comes into contact with customers. A company’s marketing offer can be differentiated along the line of product, services, channel, people or image.

Product differentiation takes place along a continuum. At one extreme, we find products that allow little variation like steel, aspirin. On the other extreme, there are products that can be highly differentiated such as automobile, clothing, furniture. Such products can be differentiated on features, performance, or style and design. Companies can also differentiate their products on such attributes as consistency, durability, reliability or reparability.  Beyond differentiating its physical product, a firm can also differentiate the service that accompanies the product. Some companies gain service differentiation through speedy, convenient and careful delivery. Installation can also differentiate one company from another. Some companies differentiate their offers by providing customer training service or consulting service, information system that buyers need. Firms that employ channel differentiation (coverage, expertise and performance), gain competitive advantage through the way they design their channels coverage, expertise and performance.

Companies can gain a strong advantage through people differentiation-hiring and training better people than competitors.

Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. A company or brand image should convey the products’ distinctive benefits. Developing a strong and distinctive image calls for creativity and hard work. A company cannot plant an image in the public’s mind overnight using only a few advertisements.

Cultural symbol positioning involves an item or brand achieving unique status within a culture or region. Cultural symbols reflect a characteristic of a nation or region and may evolve from popular culture, religion, or other factors that make an area distinct.

Choosing the right Competitive Advantages

Suppose a company is fortunate enough to discover several potential competitive advantages. It now must choose the one on which it will build its positioning strategy. It must decide how many differences to promote and which ones.

• How many points of difference to promote?

Many marketers think that companies should aggressively promote only one benefit to the target market. Other marketers think that companies should position themselves on more than one points of difference. This may be necessary if two or more companies are claiming to be best on the same product attribute. Today, it is a time where mass market is fragmented into many small segments. Companies are trying to broaden their positioning strategies to appeal to more segments.

• Which difference to promote?

Not all differences are meaningful or worthwhile; not every difference makes a good differentiator. Each difference has the potential to create company costs as well as customer benefits. Therefore, the company must carefully select the ways in which it will distinguish itself from competitors. A difference is worth establishing to the extent that it satisfies the following criteria:

Important: The difference delivers a highly valued benefit to target buyers.

Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.

Superior: The difference is superior to other ways whereby customers might obtain the same benefit.

Communicable: The difference is communicable and visible to buyers.

Preemptive: Competitors cannot easily copy the difference.

Affordable: Buyers can afford to pay for the difference.

Profitable: The company can introduce the difference profitably.

Brand’s points of parity:

Category points of parity are associations to the brand which consumers view as essential to be a legitimate and credible offering within a certain product category. In other words they represent necessary but not necessarily sufficient conditions for brand choice. For example travelers might not consider a travel agency truly a travel agency unless it is able to make air and hotel reservations, provide advice about leisure packages, and offer various ticket payment and delivery options.

On the other hand, competitive points of parity are associations designed to negate competitors’ points of difference. If, in the eyes of consumers the brand association designed to be the competitors’ point of difference is as strong for a brand as for competitors and the brand is able to establish another association as strong, favorable, and unique as part of its point of difference, then the brand should be in a superior competitive position. In other words if a brand can break-even in those areas where competitors are trying to find an advantage and can achieve an advantage in other areas the brand should be in a strong and perhaps unbeatable competitive position.

• Selecting an overall positioning strategy

Consumers typically choose products that give them the greatest value. Thus, marketers need to position their brands on the key benefits that they offer relative to competing brands. The full positioning of the brand is called the brand’s value proposition-the full mix of benefits upon which the brand is positioned. It is the answer to the customers’ question “why should I buy your brand”. The following are some of winning value propositions upon which companies can position their products:

More for more: This positioning strategy involves providing the most upscale product and charging a higher price to cover the higher costs.

More for the same: Companies can attack competitors’ having more for more positioning by introducing a brand offering comparable quality but at a lower price than the former.

The same for less: Can be a powerful value proposition everyone likes. Companies following this positioning do not claim to offer different or better products; instead they offer many of the same brands at deep discounts based on superior purchasing power and low cost.

Less for much less: A market always exists for products that offer less and therefore costs less. Few people need, want or can afford “the very best” in everything they buy. In many cases, consumers will gladly settle for less than optimal performance.

More for less: of course, the winning value proposition would be to offer more for less.

• Communicating and delivering the chosen position

Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target customers. All the company’s marketing mix efforts must support the positioning strategy. Positioning the company calls for concrete action not just talk. If the company decides to build a position on better quality and service, it must first deliver that position. Designing the marketing mix-product, price, place and promotion involves working out the tactical details of the positioning strategy. Thus, a firm that seizes on a more-for-more position knows that it must produce high quality products, charges a high price, distribute through high quality dealers and advertise in high quality media. It must hire and train more service people, find retailers who have a good reputation for service and develop sales and advertising messages that broad cast its superior service. This is the only way to build a consistent and believable more-for-more position.

Companies often find it easier to come up with a good positioning strategy than to implement it. Establishing a position or changing usually takes a long time. In contrast, positions that have taken years to build can quickly be lost. Once the company has built the desired position, it must closely monitor and adapt the position over time in order to match changes in customers’ needs and competitors’ strategies. However, the company should avoid abrupt changes that might confuse consumers. Instead a product’s position should evolve gradually as it adapts to the ever changing marketing environment.

Market Selection

After the decision has been made to expand the business internally, a preliminary examination and analysis of the firm is done. The first question to be answered is how to select the market or markets in which to begin the transactions or functions and where should an entrepreneur’s marketing efforts be focused on.

Proper selection of the markets after completely examining the platform where we want to export our product and services is one of the most important aspects towards the achievement of the internationalization process and in some cases one can choose the future viability of the expansion strategy.

This is a basic but major decision because of the impact on resources and effort included, mainly in the case of small and medium-sized enterprises.

For a company to expand its business into every country in the world, it is suggested that the global market should be analyzed properly. The initial selection for analyzing the global market can be conducted with the help of the following criteria:

Environment and market analysis

It is an essential step in understanding the external, local, national or international forces that might affect your small business. This also ensures concentration on the target countries.

Analysis of the competition

It is very important to identify the main competitors and their description. How the competitors economically evolved over the past few years should also be analyzed. The price structure of their products, their networks, market maturity, financial position, plans and expansion strategies and development potential should also be analyzed.

Distribution channels

The entrepreneur should gain complete information regarding the supply chain of the product. From the beginning to the end, consumer should be clear about who the intermediate operators are and the rates they are charging.

Therefore, the existing sales structure in the country should be analyzed in order to select the type of distribution that best adapts to the characteristics of your product or service and the market. The choice of distribution channel will determine the expansion of the company in the market.

Demand analysis

The entrepreneur should perform an examination of the present and potential demand regarding the product and service would have in source markets. Its profile and its expected evolution, among other aspects should also be examined.

All this data should be utilized to assure that the pre-selection process was successful. The market or markets selected are suitable for launching the products and/or services of business.

The uniqueness of product in the marketing mix is that all the other elements of the marketing mix, viz., price promotion and place are designed to achieve successful exchange of the product for consumer satisfaction and income. If the product fails to satisfy the consumer, any amount of effort to boost the sales will not long-term success. It also turns that, however good a product may be, it may not succeed if the other ingredients of the marketing mix are not appropriate. There is, however, no denying the fact that the success of marketing depends amongst others on the success of the product in satisfying the consumers.

Although the terms product strategy, product planning and product management are often used interchangeably, they are not really one and the same.

The firm has to carry out preliminary screening, that is, identification of markets and products by conducting market research. A poorly conceived product often leads to marketing failures. It was not a smooth sailing in the Indian market for a number of transnational food companies after the initial short-lived euphoria among Indian consumers.

Product Strategy involves the managerial decisions about the product mix and the positioning and communication.

Product Planning, used in a broad sense, involves not only the product strategy described above but also the product development measures. Some people confine the use of the term product planning to the different aspects and functions of product development and exclude the product strategy.

Product management refers to the managerial decisions pertaining to product development and the product strategies through the different stages of the product life cycles.

As our discussion of the product is related to international marketing, it would be more appropriate to use the term product decisions which is more comprehensive to involve all the above.

Product Decisions:

Important product decisions in international marketing management are:

1. Market segment decision
2. Product mix decisions
3. Product specifications
4. Positioning and communication decisions.

Market Segment Decision:

The first product decision to be made is the market segment decision because all other decisions product mix decision, product specifications, and positioning and communications decisions depend upon the target market.

Product Mix Decision:

Product mix decision pertains to the type of products and product variants to be offered to the target market.

Product Specifications:

This involves specification of the details of each product items in the product mix. This includes factors like styling, shape, size and other attributes and factors like packaging and labelling.

Positioning and Communications Decisions:

Positioning is the image projected for the product. For example, toilet soap may be positioned as baby soap, beauty soap, a deodorant soap, freshness soap or skin care soap. Communication refers to the promotional message designed for the product. Obviously, both positioning and marketing communication are very much interrelated. For the same product, sometimes the positioning and communication strategies differ between markets. For example, Beefeater is a low priced gin in the UK (its home market); but when the company wanted to introduce it in the US it found that there was no room in the minds of the consumers for another low priced gin. So in the US the Beefeater was positioned as a high priced gin became very successful.

A product is defined as anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need includes physical objects, services, person, places organizations and ideas.

The above definition is very broad indeed. As our major concern is with goods, the following two definitions will be more suitable for our purpose

International product life cycle discusses the consumption pattern of the product in many countries. This concept explains that the products pass through several stages of the product life cycle. The, product is innovated in country, usually a developed country, to satisfy the needs of the consumers. The innovator country wants to exploit the technological breakthrough and start marketing the products in foreign country.

Gradually foreign country also starts production and becomes efficient in producing those commodities. As a result, the innovator country starts losing its export market and finds the import of that product advantageous. In this way, the innovator country becomes the importer of the products. Terpstra and Sarathy have identified four phases in. the international product life cycle.

Export strength is evident by innovator country: Products are normally innovated in the developed countries because they possess the resources to do so. The firms have the technological know-how and sufficient capital to invest on the research and development activities. The need of adaptation and modification also forces the production activities to be located near the market to respond quickly to the changes. The customers are affluent in the developed countries who may prefer to buy the new products. Thus, the manufactures are attracted to produce the goods in the developed country. The goods are marketed in the home country. After meeting the demand of the home country, the manufacturers start exploring foreign markets and exporting goods to them. This phase exhibits the introduction and growth stage of the product life cycle.

Foreign production starts: The importing firms in the middle-income country realise the demand potential of the product in the home market. The manufacturers also become familiar in producing the goods. The growing demand of the products attracts the attention of many firms. They are tempted to start production in their country and gradually start exporting to the low-income countries. The large production in the middle-income country reduces the export from the innovating country. This shows the maturity stage of product life cycle where the production activities’ start shifting from innovating country to other countries.

Foreign production becomes competitive in export market: The firms in low-income country also realise the demand potential in the domestic market. They start producing the products in their home country by exploiting cheap labour. They gain expertise in manufacturing the commodity. They become more efficient in producing the goods due to low cost of production. Gradually they start exporting the goods to other countries. The export from this country replaces the export base of innovating country, whose export has been already declining. This exhibits the, declining stage of product life cycle for the innovator country. In this stage, the product gets widely disseminated and other countries start imitating the product. This is the third phase of product life cycle where the products start becoming standardized.

Import Competition begins: The producers in the low-income importing country gain sufficient experience in producing and marketing the products. They attain the economies of scale and gradually become more efficient than the innovator country. At this stage, the innovator country finds the import from this country advantageous. Hence, the innovator country finally becomes the importer of that product. In this fourth stage of product life cycle the product becomes completely standardized.

In simple words, the theory of IPLC brings out that advanced (initiating) countries play the innovative role in new product development. Later for reasons of comparative advantage or factor endowments and costs, such a product moves over to other developed countries or middle. Income countries and ultimately gets produced and exported by less developed countries. Not surprisingly, therefore, that countries such as Taiwan, Hong Kong, Korea, Singapore and India have emerged as major exporters of growing range. of products to USA and Western Europe during the last decade and a half. The general pattern of a typical IPLC has been shown.

Innovative Country Stage	Other Developed Countries or Middle-income Countries	Less Developed Countries
Production	Early Imports	Late Imports
Exports	Production	Production
Imports	Exports (Large volume Declining to small volume)	Exports (Small volume rising to large volume)

The IPLC theory ‘presents the following implications for international product planner:

• The marketers whose products face declining sale in one foreign market may find another foreign market with encouraging demand for his product.
• Innovative products improve the staying power of the international firm.
• Innovative products carry significant export potential.

Over time, every company wants to expand its product range. Some companies try to develop new products to its portfolio, while others develop the extension or remake of the existing products. A group of related products constitutes a product line, and the combination of different product lines makes the product mix, which is owned by the parent brand.

For example, PepsiCo has hundreds of foods, snacks, and beverage brands. Its product category includes Pepsi, Diet Pepsi, Mountain Dew, Marinda, 7Up, Tropicana, Aquafina, Quaker, Lay’s, Ruffles, Fritos, Cheetos, and many more.

According to Philip Kotler, a product line can be defined as “a group of products that are closely related because they function in a similar manner, and sold to the same customer groups, are marketed through these same types of outlets, fall within given price range.”

In the above definition, Philip Kotler emphasizes a few points, which I want to discuss below:

Same Customer Groups. Every product category targets the same customer group. For instance, 7 UP, Pepsi, Marinda, Mountain Dew target young people, while Gatorade is a PepsiCo brand that targets athletes. Similarly, Quaker Oat is another Pepsi brand that focuses on health-conscious people.

Closely Related Products. In any product line, the products are closely related. For example, Pepsi has a Beverages product category which includes Pepsi, Dew, Aquafina, Brisk, and many more. These products are related and target a specific group of people and preferences.

Changes in Promotion

Before a company decides to become global, it must consider a multitude of factors unique to the international marketing environment. These factors are social, cultural, political, legal, competitive, economic, and even technological in nature. Ultimately, at the global marketing level, a company trying to speak with one voice is faced with many challenges when creating a worldwide marketing plan. Unless a company holds the same position against its competition in all markets (market leader, low cost, etc.), it is impossible to launch identical marketing plans worldwide. Thus, global companies must be nimble enough to adapt to changing local market trends, tastes, and needs.

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For global advertisers, there are four potentially competing business objectives that must be balanced when developing worldwide advertising: building a brand while speaking with one voice, developing economies of scale in the creative process, maximizing local effectiveness of advertisements, and increasing the company’s speed of implementation. Global marketers can use the following approaches when executing global promotional programs: exporting executions, producing local executions, and importing ideas that travel.

Factors in Global Promotion

To successfully implement these approaches, brands must ensure their promotional campaigns take into how consumer behavior is shaped by internal conditions (e.g., demographics, knowledge, attitude, beliefs) and external influences (e.g., culture, ethnicity, family, lifestyle) in local markets.

Language: The importance of language differences is extremely crucial in global marketing, as there are almost 3,000 languages in the world. Language differences have caused many problems for marketers in designing advertising campaigns and product labels. Language becomes even more significant if a country’s population speaks several languages.

Colours: Colors also have different meanings in different cultures. For example, in Egypt, the country’s national color of green is considered unacceptable for packaging because religious leaders once wore it. In Japan, black and white are colors of mourning and should not be used on a product’s package. Similarly, purple is unacceptable in Hispanic nations because it is associated with death.

Values: An individual’s values arise from his or her moral or religious beliefs and are learned through experiences. For example, Americans place a very high value on material well-being and are much more likely to purchase status symbols than people in India. In India, the Hindu religion forbids the consumption of beef.

Business norms: The norms of conducting business also vary from one country to the next. In France, wholesalers do not like to promote products. They are mainly interested in supplying retailers with the products they need.

Religious beliefs: A person’s religious beliefs can affect shopping patterns and products purchased in addition to his or her values. In the United States and other Christian nations, Christmas time is a major sales period. But for other religions, religious holidays do not serve as popular times for purchasing products.

There are many other factors, including a country’s political or legal environment, monetary circumstances, and technological environment that can impact a brand’s promotional mix. Companies have to be ready to quickly respond and adapt to these challenges as they evolve and fluctuate in the market of each country.

Changing the Global Promotional Mix

When launching global advertising, public relations or sales campaigns, global companies test promotional ideas using marketing research systems that provide results comparable across countries. The ability to identify the elements or moments of an advertisement that contribute to the success of a product launch or expansion is how economies of scale are maximized in marketing communications. Market research measures such as flow of attention, flow of emotion, and branding moments provide insight into what is working in an advertisement in one or many countries. These measures can be particularly helpful for marketers since they are based on visual, not verbal, elements of the promotion.

Considering these measures along with conducting extensive market research is essential to determining the success of promotional tactics in any country or region. Once brands discover what works (and what does not) in their promotional mix, those ideas can be imported by any other market. Likewise, companies can use this intelligence to modify various elements in their promotional mix that are receiving minimal or unfavourable response from global audiences.

Changes in Placement

Successfully positioning products on a global scale requires marketers to determine the target market’s preferred combination of attributes.

Changes in Placement

The global marketing mix comprises four main elements: product, price, placement and promotion. Although product development, promotional tactics and pricing mechanisms are the most visible during the marketing process, placement is just as important in determining how the product is distributed. Placement determines the various channels used to distribute a product across different countries, taking in factors such as competition and how similar brands are being offered to the target market.

Cases of products on the lower shelf in a grocery store.

Product Placement: Global brands attempt to place products in locations where consumers will be most receptive to the messaging.

Global marketing presents more challenges compared to domestic or local marketing. Consequently, brands competing in the global marketplace often conduct extensive research to accurately define the market, as well as the attributes that define the product’s potential environment. Successfully positioning products on a global scale also requires marketers to determine each product’s current location in the product space, as well as the target market’s preferred combination of attributes. These attributes span the range of the marketing mix, including price, promotion, distribution, packaging and competition.

Regardless of its size or visibility, a global brand must adjust its country strategies to take into account placement and distribution in the marketing mix. For example, not all cultures use or have access to vending machines. In the United States, beverages are sold by the pallet via warehouse stores. However, in India, this is not an option.

Moreover, placement decisions must also consider the product’s positioning in the marketplace. A global luxury brand would not want to be distributed via a “dollar store” in the United States. Conversely, low-end shoemakers would likely be ignored by shoppers browsing in an Italian boutique store.

Changes in Pricing

Price in global marketing strategies can be influenced by distribution channels, promotional tactics, and the quality of the product.

Pricing is the process of determining what a company will receive in exchange for its products. In the global marketing mix, pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. As one of the four “Ps” in the marketing mix, pricing is the only revenue generating element.

General Factors Affecting Price

Like national marketing, pricing in global marketing is affected by the other variables of the marketing mix. Price in global marketing strategies can be influenced by distribution channels, promotional tactics, and the quality of the product. For instance, if distribution is exclusive, then prices are likely to be higher. High prices will also be needed to cover high costs of manufacturing, or extensive advertising and promotional campaigns. If manufacturing costs go up due to the rise in price of some raw material, then prices will need to rise as well.

The Role of Price in Global Marketing

Price will always vary from market to market. However, global marketers must be prepared to deal with not only cultural expectations of pricing, but also external variables including trade tariffs, political and economic fluctuations, and the administrative or legal criteria of specific jurisdictions. Pricing can also be affected by the cost of production (locally or internationally), natural resources (product ingredients or components), and the cost of delivery (e.g., the availability of fuel). For instance, if a country imposes a minimum wage law that forces the company to pay more to its workers, the price of the product is likely to raise to cover some of that cost. Natural resources, such as oil, may also fluctuate in price, changing the price of the final good.

Most product decisions fall in between the spectrum of “Standardization” to “Adaptation” extremes. Changes in design are subject to cultural pressures. The more culture-bound the product is, for example food, the more adaptation is necessary.

They both represent a way of selling products overseas. As pointed out, adaptation involves modifying a product so as to meet the local requirements and customs.

In India for example the multinationals like PizzaHut and Mcdonalds catering to Indian tastebuds have launched Masala Tikka Burgers and Paneer Pizzas. Similarly, when Indian companies cater to the foreign markets, they launch foods which are bland. However, the advantages of economies of scale in production and marketing; savings on common costs of R&D, product and package design; consumer mobility; and universal image make a strong case for product standardization across different export markets. The reality of the export markets is, however, not so easy to harness. Factors such as the following and their implications influence the exporting firm’s decision in favour of product adaptations and in extreme cases even for new product development.

Establishing Product Adaptation

In order to drive a successful product adaptation, there are steps to be followed. The first and obvious one is for companies to research the new market and determine how different it is from the current market. This involves learning the needs, attitudes, cultural believes, and desires of the consumers in the new market. It is also of great need that a company determines the marketing strategies that would work on the new crowd as strategies don’t work the same for all markets.

A company is then faced with the task of determining the required type of product modification. There are a few that are available for such companies, and they include:

• Tangible adaptation: This involves changing a product’s physical aspects such as size and packaging
• Intangible adaptation: Here, a company will modify intangible elements such as positioning and brand name
• Promotional adaptation: This involves changing methods and types of advertising as well as the media of choice.
• Price adaptation: A company adopting this type of adaptation has to change size or quantity of their product so as to account for the changed This is because a new market may not be willing or able to spend as much money on a certain product as others.

The main differences between adaptation and standardisation of the marketing strategies are summarised in table below.

	Adaptation	Standardisation
Application in Marketing Means	It is supported by strong market variety especially by market individualism and market uniqueness.	Companies should apply the four basic marketing instruments (4P) in the same way world wide and ignore national specialties in individuals markets.
Reason for Application	Almost every international company takes into account (in higher or lower level), regional or local conditions which are typical to the differentiation.	MNC should think globally and apply integration access world wide.
Product Offered	Altering relevant feature of the product in significant ways for each and every individual geographical market in the product is sold.	Complete standardization would involve designing a product that is identical in every relevant way for geographical market in which the product will be sold.
Characteristics	A product is differential from competitor’s product and further the products produced by particular company.	A standard product does not need to have all the characteristics of the other products buyer requires.
Approach	Adaptation is an approach of detailing the differentiation that exists between products and services.	Standardization of product is the approach for increasing commonality of product in the supply chain management.
Economics of Scale	Unique aspects in product result in different in quality thus increasing cost of production and lower economies of scale.	Commonality in products results in higher productivity due to higher demand, having an impact on economies of scales which lowers the total cost.
Need	Satisfy a particular need of buyer.	Satisfy the heterogeneous needs of the buyer.
End Result	Show sense of value to the buyer but they have to pay more for such product.	Benefits buyer by lowering price.