Once a company has identified potential markets to enter, and identified a viable entry strategy to penetrate the market, it’s essential to identify the particular marketing strategy that is going to be adopted.
This calls for a reflection on the international marketing mix.
The marketing mix has been conceived initially as the famous 4 Ps, Product, Price, Place and Promotion. The issue, however, is that international markets have expanded and international customers have grown a more sophisticated taste and as a consequence we need to account for additional ‘Ps’ which will contribute to creating the value mix perceived by our customer.
- ParticipantsPeople, are the human actors playing a role in service delivery.
- Process, the process involved in providing the service.
- Physical Evidence, the physical premises which contribute to the experience of the customer. These may account for both, local and furniture just as more intangible ‘evidence’ like case studies, testimonials, reviews etc.
These additional Ps represent the tendency in the current business environment to transcend the physical nature of the product, even when the product is tangible and to focus more on the intangible aspect. This can be due to a variety of reasons:
- An experience can be priced at a much higher range of prices, as it transcends the way price is calculated (by adding costs and margins). As an example let’s think about the opera scene in Pretty Woman.
- The second factor is that in a globalised environment, an intangible experience is much easier to standardise, and therefore much cheaper to produce. This is at the heart of businesses who strive to sell global products to global consumers.
In this post, we’re going to discuss the following topics.
- The International product offer
- The International Product Life Cycle
- Concept of Product ‘Newness’
- International Branding Options
1. The International Product Offer
A product in fact in international marketing has a variety of dimensions which can be separated into three layers: support services, product attributes, core product benefits. The support service components are in this sense much more difficult to standardise as opposed to the core benefits.
So we can see how in this sense for each product, as we look through a variety of businesses, we see that only for selling raw materials we can hypothesise a product-only business, for all the rest, every other business, has to some extent both components in different percentages. So it's important to realise that even in commodities, the service component is still a strong component of the value we are offering to our customers.
Delivering services, however, is a challenge for international markets as services are hard to standardise, as they have the following characteristics:
- Intangibility (think or air travel, payment is for use not for ownership)
- Perishability (services cannot be store for further use, like seats on a missed flight)
- Heterogeneity (services require interaction and are rarely the same)
- Inseparability (the time of production is almost simultaneous to the time of consumption)
Because of this, globalising services is a very tough challenge. Services are divided into 4 macro-categories and each has its own issues :
- People Processing (transport, education, healthcare, food, lodging). This is hard to globalise because there is a high involvement of the customer in the production.
- Possession Processing (car repair, transport, laundry) A little easier to globalise, as it involves a lower degree of contact.
- Information Processing (banking, news, market analysis) Much easier to globalise.
Globalising, can in this context be considered synonym with scaling, meaning that the more interaction you have with your consumerco-producer, the more costly it is to reach economies of scale. In this sense, what is happening is that technology is trying to bridge the gap, by implementing new software solutions capable of maintaining the connection to the end-user while growing the customer base of service. An example of this, in the context of teaching, for instance, are digital courses.
2. The International Product-Life-Cycle
The product life cycle concerns the life of a product in the market with respect to businesscommercial costs and sales measures. This theoretical framework suggests that product or brands follow a sequence of stages including introduction, growth, maturity and sales decline. Considering that this model provides also a time gap into which a product’s sales are more likely to grow, the Time to Market Approach also suggests when it’s important to market a product before it becomes outdated.
TTM (Time to Market) needs to be rapid for the following reasons:
- The competitive advantage of getting to market sooner
- Premium price early in the life cycle
- Faster break even on development investment and lower financial risk
- Greater overall profits and a higher return on investments
All in all, R&D needs to have a very clear idea of what product they want to build, and this is because the R&D stage is what usually impairs companies to bring to market products which would have an early entry advantage.
However, this model is not to be taken too seriously, as it can be considered misleading in many ways, as the curve of sales may be influenced by a variety of factors, making it seem that in fact a product sales decline is not linked to the decline stage. In order to boost sales a company in fact can:
- Make product improvements
- Reposition the product
- Reach new users
- Promote more uses of the product (JTBD Theory)
We also need to consider that in a wider angle the PLC can be understood better by not focusing on the actual product but to the underlying technology. In this case we have a TLC (Technology Life Curve).
Ideally companies, - and this can be done through planned obsolescence - need to manage their product portfolio, by managing the timing of a variety of products being offered during the same year. This is something that can be understood in the context of the BCG Portfolio graph, divided into StarsQuestion MarksCash Cows and Dogs.
The product life cycle also lends itself to another international marketing application which pertains to the IPLC or the international product life cycle. This theory describes the diffusion process across national boundaries, as that the demand usually grows in innovating countries so that the initial excess in production can be exported in other advanced countries, where the demand still grows. Later, when the demand is declining the product can be exported to less developed countries. The computersoftware industry is a valid example of how this works.
There is also a time elements, considering that in a microeconomic approach as due to different economic levels, products can be at different PLC stages at the same time over different countries, so that at a certain time 't', the product can be in the decline stage in the home market and at maturity stage in its country of origin.
The PLC allows us to understand the essential importance of research and development when approaching new markets, realising, that through international export a product's life can be extended by exporting in other countries, and allowing it to reach obsolescence at a much later stage.
3. The Concept of Product Newness
The degree of the product newness needs further attention. Innovation can take place in a variety of situations whereby ‘newness’ can be considered in relation to the company’s product line, as well as to the marketinternational markets. The higher the newness level the higher the risk.
According to the degree of newness, then companies can decide how to promote the new product within the new market. A product can be extended or adapted to the new market, or adapted unless it’s a product invention in which case, everything will be new. The degree of newness is something that marketers take into very careful consideration. This is because markets need to be ready for certain innovations, and timing in entrepreneurship is something which has a tremendous impact on market performance. Also, as we consider adaptation, let’s remember that this is the typical context in which a company wants to have either cultural intelligenceawareness or previous experiences in countries with similar values, as a product may not work simply for unsuccessful communication.
Unless a product has a clear positioning into the customer’s mind, it will never be more than a simple commodity with a utility price. Premium pricing is largely dependant on the customer’s perception of the product or service on offer. This leads to analysis tools such as the perceptual mapping, in order to allow customers to place points onto a graph to indicate some of its attributes.
In the context of global marketing, one of the things which usually provides a great impact on consumer perception is the country of origin or COO. An example is like Germany and car production. Italy and Fashion. The made in [country] is one of the things that contribute to the product’s price, not because of actual material characteristics as much as for branding. And speaking of branding, this is what we are going to address next in this post, by moving into the choice of brand over international markets.
4. International Branding Options
As brands have become a part of our culture and are an essential component of international marketing.
Brand equity: a set of brand assets and liabilities that can be clustered into 5 categories (see below). Brand equity is the premium a consumer would pay for the branded product or service compared with an identical unbranded version of the same productservice.
- Brand loyalty: encourages customers to buy a particular brand time after time and remain insensitive to competitor’s offerings.
- Brand awareness: brand names attract attention and convey images of familiarity, may be seen in terms of how many customers know a brand.
- Perceived quality: perceived means that customers decide upon the level of quality, not the company.
- Brand association, the values and the personality linked to the brand
- Other assets, like trademarks, patents, marketing channel relationships etc.
What branding decisions should a company make?
- To distinguish a company’s offering and differentiate one particular product from its competitors.
- To create an identification and brand awareness
- To guarantee a certain level of quality and satisfaction
- To help with the promotion of the product.
If you think about the perspective of a manufacturer then branding is either Private Branding - Private Label (externalising), Co-Branding or Manufacturer’s brand (internalising).
- A private label is a retailer’s own brand. It has a variety of benefits and limitations. For a retailer, a private label provides better margins and strengthens the retailer’s image in relationship to the customer. For a manufacturer's a private label allows not to have any promotional expenses, also the manufacturer access retail chains. However: it loses its identity, control over promotion.
- A manufacturer’s own brand may present advantages in the context of pushpull production lines.
- Cobranding. Cobranding is a form of cooperation between two or more brands which can create synergies that create value for both participants above the value they would expect to generate on their own. (14.17) Products are often complementary in the way that both products can be used independently.
- Ingredient Branding. The ingredient supplier delivers an important key component on the final product, like in the case of Intel delivering the processor to the major PC manufacturers.
Usually, ingredient brands have the following characteristics:
- The ingredient supplier should be offering a product that has a substantial advantage over existing products.
- The ingredient should be critical to the success of the final product.
The last decision pertains to single brand vs multiple brands. Usually, companies have one product for one brand (Unilever is an example) in other cases instead if within a product there is sufficient shelf space for multiple segments, then the same manufacturer may have multiple products, despite the risk of cannibalisation (which means eating market share within the products of the same company).
Also, organisations may opt for local brands or global brands, deciding if they want to have a different brand depending on the country.
As we've seen in this post, the decision to standardise your product, or to adapt it to local markets is an important decision that should consider a variety of factors. All in all, it's important to remember that decisions regarding your marketing mix should be taken by looking at all the variables involves, to make sure that the final result is well aligned with the other Ps of marketing.