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4 ps of gm

  1. 1. © 2005 Prentice Hall 10-1 Product and Brand Decisions
  2. 2. © 2005 Prentice Hall 10-2 Basic Product Concepts A product is a good, service, or idea – Tangible Attributes – Intangible Attributes Product classification – Consumer goods – Industrial goods
  3. 3. © 2005 Prentice Hall 10-3 Product Types Buyer orientation Amount of effort expended on purchase, Level of risk associated and involvement in purchase. – Convenience – Preference – Shopping – Specialty
  4. 4. © 2005 Prentice Hall 10-4 Brands The added value that accrues to a product as a result of investments in the marketing of the brand An asset that represents the value created by the relationship between the brand and customer over time Bundle of images and experiences in the customer’s mind A promise made by a particular company about a particular product A quality certification Differentiation between competing products The sum of impressions about a brand is the Brand Image
  5. 5. © 2005 Prentice Hall 10-5 Brands
  6. 6. © 2005 Prentice Hall 10-6 Local, International Products and Brands Local Brands: Brands that have achieved success in a single national market Represent the lifeblood of domestic companies Entrenched local products/brands can be a significant competitive hurdle to global companies International Brands: Offered in several markets in a particular region
  7. 7. © 2005 Prentice Hall 10-7 Global Products and Brands Global products meet the wants and needs of a global market and is offered in all world regions Global brands have the same name and similar image and positioning throughout the world
  8. 8. © 2005 Prentice Hall 10-8 Branding Strategies Combination or tiered branding: allows marketers to leverage a company’s reputation while developing a distinctive identity for a line of products – Sony Walkman Co-branding features two or more company or product brands – NutraSweet and Coca-Cola – Intel Inside
  9. 9. © 2005 Prentice Hall 10-9 Branding Strategies Brand acts as an umbrella for new products – Example: Crescent Group of Companies • Cres-Bank • Crescent Bahoman • Shakarganj Foods Ltd.
  10. 10. © 2005 Prentice Hall 10-10 Global Brand Development Create a compelling value proposition Think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization Research the alternatives of extending a national brand versus adopting a new brand identity globally Develop a company-wide communication system Develop a consistent planning process Assign specific responsibility for managing branding issues Execute brand-building strategies Harmonize, unravel confusion, and eliminate complexity
  11. 11. © 2005 Prentice Hall 10-11 Local versus Global Products and Brands: A Needs-Based Approach Physiological Safety Social External/Internal Esteem Self-actualization
  12. 12. © 2005 Prentice Hall 10-12 Country of Origin as Brand Element Perceptions about and attitudes toward particular countries often extend to products and brands known to originate in those countries – Japan – Germany – France – Italy
  13. 13. © 2005 Prentice Hall 10-13 Packaging Consumer Packaged Goods when the packaging is designed to protect or contain the product during shipping Eco-Packaging because package designers must address environmental issues Offers communication cues that provide consumers with a basis for making a purchase decision
  14. 14. © 2005 Prentice Hall 10-14 Labeling Provides consumers with various types of information Regulations differ by country regarding various products – Health warnings on tobacco products – American Automobile Labeling Act clarifies the country of origin, and final assembly point – European Union requires labels on all food products that include ingredients from genetically modified crops
  15. 15. © 2005 Prentice Hall 10-15 Aesthetics Global marketers must understand the importance of visual aesthetics Aesthetic Styles (degree of complexity found on a label) differ around the world
  16. 16. © 2005 Prentice Hall 10-16 Product Warranties Express Warranty is a written guarantee that assures the buyer is getting what they paid for or provides a remedy in case of a product failure Warranties can be used as a competitive tool
  17. 17. © 2005 Prentice Hall 10-17 Extend, Adapt, Create: Strategic Alternatives in Global Marketing Extension – offering product virtually unchanged in markets outside of home country Adaptation – changing elements of design, function, and packaging according to needs of different country markets Creation – developing new products for the world market
  18. 18. © 2005 Prentice Hall 10-18 Global Product Planning: Strategic Alternatives Product Same Different Communication Different Same Strategy 1: Dual Extension Strategy 2: Product Extension Communication Adaptation Strategy 4: Dual Adaptation Strategy 3: Product Adaptation Communication Extension
  19. 19. © 2005 Prentice Hall 10-19 How to Choose a Strategy? Two errors that management makes in choosing a strategy – NIH (Not invented here) syndrome means managers ignore the advancements of subsidiaries overseas – Managers impose policies upon subsidiaries because they assume what is right for customers in one market is right in every market Cave Dweller – new products launched internationally to dispose of excess production Naïve Nationalist – company recognizes growth opportunities outside of home market Globally sensitive – company views world as competitive marketplace
  20. 20. © 2005 Prentice Hall 10-20 How to Choose a Strategy? The product itself, defined in terms of the function or need it serves The market, defined in terms of the conditions under which the product is used, preferences of potential customers, and ability to buy the product Adaptation and manufacturing costs the company will incur
  21. 21. © 2005 Prentice Hall 10-21 New Products in Global Marketing Pursue opportunities in competitive arenas of global marketplace Focus on one or only a few businesses Active involvement from senior management Ability to recruit and retain best employees Understand the importance of speed in bringing product to market
  22. 22. © 2005 Prentice Hall 10-22 Identifying New Product Ideas What is a new Product? – New to those who use it or buy it – New to the organization – New to a market
  23. 23. © 2005 Prentice Hall 10-23 The International New Product Department How big is the market for this product at various prices? What are the likely competitive moves in response to our activity? Can we market the product through existing structure? Can we source the product at a cost that will yield an adequate profit? Does product fit our strategic development plan
  24. 24. © 2005 Prentice Hall 10-24 Testing New Products When do you test a new product? – Whenever a product interacts with human, mechanical, or chemical elements because there is the potential for a surprising and unexpected incompatibility Test could simply be observing the product being used within the market
  25. 25. © 2005 Prentice Hall 11-25 Pricing Decisions
  26. 26. © 2005 Prentice Hall 11-26 Basic Pricing Concepts The Global Manager must develop systems and policies that address – Price Floors – Price Ceilings – Optimum Prices Must be consistent with global opportunities and constraints
  27. 27. © 2005 Prentice Hall 11-27 Global Pricing Objectives and Strategies Managers must determine the objectives for the pricing objectives – Unit Sales – Market Share – Return on investment They must then develop strategies to achieve those objectives – Penetration Pricing – Market Skimming
  28. 28. © 2005 Prentice Hall 11-28 Market Skimming and Financial Objectives Market Skimming – Charging a premium price – May occur at the introduction stage of product life cycle Sony Ad. for camcorders
  29. 29. © 2005 Prentice Hall 11-29 Penetration Pricing and Non- Financial Objectives Penetration Pricing – Charging a low price in order to penetrate market quickly – Appropriate to saturate market prior to imitation by competitors 1979 Sony Walkman
  30. 30. © 2005 Prentice Hall 11-30 Companion Products Products whose sale is dependent upon the sale of primary product – Video games are dependent upon the sale of the game Console “If you make money on the blades you can give away the razors.” X-Box Game System and Sports Game
  31. 31. © 2005 Prentice Hall 11-31 Target Costing – 8 Questions 1. Does the price reflect the product’s quality? 2. Is the price competitive given local market conditions? 3. Should the firm pursue market penetration, market skimming, or some other pricing objective? 4. What type of discount (trade, cash, quantity) and allowance (advertising, trade-off) should the firm offer its international customers? 5. Should prices differ with market segment? 6. What pricing options are available if the firm’s costs increase or decrease? Is demand in the international market elastic or inelastic? 7. Are the firm’s prices likely to be viewed by the host- country government as reasonable or exploitative? 8. Do the foreign country’s dumping laws pose a problem?
  32. 32. © 2005 Prentice Hall 11-32 Target Costing Cost-Based Pricing is based on an analysis of internal and external cost Firms using western cost accounting principles use the Full absorption cost method – Per-unit product costs are the sum of all past or current direct and indirect manufacturing and overhead costs
  33. 33. © 2005 Prentice Hall 11-33 Target Costing Rigid cost-plus pricing means that companies set prices without regard to the eight foundational pricing considerations Flexible cost-plus pricing ensures that prices are competitive in the contest of the particular market environment
  34. 34. © 2005 Prentice Hall 11-34 Terms of the Sale Obtain export license if required Obtain currency permit Pack goods for export Transport goods to place of departure Prepare a land bill of lading Complete necessary customs export papers Prepare customs or consular invoices Arrange for ocean freight and preparation Obtain marine insurance and certificate of the policy
  35. 35. © 2005 Prentice Hall 11-35 Terms of the Sale Incoterms – Ex-works – seller places goods at the disposal of the buyer at the time specified in the contract; buyer takes delivery at the premises of the seller and bears all risks and expenses from that point on. – Delivery duty paid – seller agrees to deliver the goods to the buyer at the place he or she names in the country of import with all costs, including duties, paid.
  36. 36. © 2005 Prentice Hall 11-36 Environmental Influences on Pricing Decisions Currency Fluctuations Inflationary Environment Government Controls, Subsidies, Regulations Competitive Behavior Sourcing
  37. 37. © 2005 Prentice Hall 11-37 Global Pricing: Three Policy Alternatives Extension Adaptation Geocentric
  38. 38. © 2005 Prentice Hall 11-38 Gray Market Goods Trademarked products are exported from one country to another where they are sold by unauthorized persons or organizations Occurs when product is in short supply, when producers use skimming strategies in some markets, and when goods are subject to substantial mark-ups
  39. 39. © 2005 Prentice Hall 11-39 Dumping Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin. Occurs when imports sold in the US market are priced at either levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing countries To prove, both price discrimination and injury must be shown
  40. 40. © 2005 Prentice Hall 11-40 Price Fixing Representatives of two or more companies secretly set similar prices for their products – Illegal act because it is anticompetitive Horizontal price fixing occurs when competitor within an industry that make and market the same product conspire to keep prices high Vertical price fixing occurs when a manufacture conspires with wholesalers/retailers to ensure certain retail prices are maintained
  41. 41. © 2005 Prentice Hall 11-41 Transfer Pricing Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction Intra-corporate exchanges – Cost-based transfer pricing – Market-based transfer pricing – Negotiated transfer pricing
  42. 42. © 2005 Prentice Hall 11-42 Countertrade Countertrade occurs when payment is made in some form other than money Options – Barter – Counter-purchase – Offset – Compensation trading – Cooperation agreements – Switch trading
  43. 43. © 2005 Prentice Hall 11-43 Barter The least complex and oldest form of bilateral, non-monetary counter-trade A direct exchange of goods or services between two parties
  44. 44. © 2005 Prentice Hall 11-44 Incoterms FAS (free alongside ship) named port of destination – seller places goods alongside the vessel or other mode of transport and pays all charges up to that point FOB (free on board) – seller’s responsibility does not end until goods have actually been placed aboard ship CIF (cost, insurance, freight) named port of destination – risk of loss or damage of goods is transferred to buyer once goods have passed the ship’s rail CFR (cost and freight) – seller is not responsible at any point outside of factory Return
  45. 45. © 2005 Prentice Hall 11-45 Extension Ethnocentric Per-unit price of an item is the same no matter where in the world the buyer is located Importer must absorb freight and import duties Fails to respond to each national market Return
  46. 46. © 2005 Prentice Hall 11-46 Adaptation Polycentric Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances Sensitive to market conditions but creates potential for gray marketing Return
  47. 47. © 2005 Prentice Hall 11-47 Geocentric Intermediate course of action Recognizes that several factors are relevant to pricing decision – Local costs – Income levels – Competition – Local marketing strategy Return
  48. 48. © 2005 Prentice Hall 11-48 Currency Fluctuations Return
  49. 49. © 2005 Prentice Hall 11-49 Inflationary Environment Defined as a persistent upward change in price levels – Can be caused by an increase in the money supply – Can be caused by currency devaluation Essential requirement for pricing is the maintenance of operating margins Return
  50. 50. © 2005 Prentice Hall 11-50 Government Controls, Subsidies, and Regulations The types of policies and regulations that affect pricing decisions are: – Dumping legislation – Resale price maintenance legislation – Price ceilings – General reviews of price levels
  51. 51. © 2005 Prentice Hall 11-51 Competitive Behavior If competitors do not adjust their prices in response to rising costs it is difficult to adjust your pricing to maintain operating margins If competitors are manufacturing or sourcing I a lower-cost country, it may be necessary to cut prices to stay competitive Return
  52. 52. © 2005 Prentice Hall 11-52 Using Sourcing as a Strategic Pricing Tool Marketers of domestically manufactured finished products may move to offshore sourcing of certain components to keep costs down and prices competitive Return Can you stay competitive while staying local?
  53. 53. © 2005 Prentice Hall 12-53 Channels and Physical Distribution
  54. 54. © 2005 Prentice Hall 12-54 Channel Objectives Marketing channels exist to create utility for customers – Place utility - availability of a product or service in a location that is convenient to a potential customer – Time utility - availability of a product or service when desired by a customer – Form utility - availability of the product processed, prepared, in proper condition and/or ready to use – information utility - availability of answers to questions and general communication about useful product features and benefits
  55. 55. © 2005 Prentice Hall 12-55 Distribution Channels: Terminology and Structure Distribution is the physical flow of goods through channels Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service
  56. 56. © 2005 Prentice Hall 12-56 Distribution Channels: Terminology and Structure Distributor – wholesale intermediary that typically carries product lines or brands on a selective basis Agent – an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold
  57. 57. © 2005 Prentice Hall 12-57 Consumer Products
  58. 58. © 2005 Prentice Hall 12-58 Consumer Products Piggyback Marketing – channel innovation that has grown in popularity – One manufacture distributes product by utilizing another company’s distribution channel – Requires that the combined product lines be complementary and appeal to the same customer
  59. 59. © 2005 Prentice Hall 12-59 Industrial Products
  60. 60. © 2005 Prentice Hall 12-60 Establishing Channels Direct involvement – the company establishes its own sales force or operates its own retail stores Indirect involvement – the company utilizes independent agents, distributors, and/or wholesalers Channel strategy must fit the company’s competitive position and marketing objectives with in each national market
  61. 61. © 2005 Prentice Hall 12-61 Working with Channel Intermediaries Select distributors – don’t let them select you Look for distributors capable of developing markets, rather than those with a few good customer contacts Treat local distributors as long-term partners, not temporary market-entry vehicles
  62. 62. © 2005 Prentice Hall 12-62 Working with Channel Intermediaries Support market entry by committing money, managers, and proven marketing ideas From the start, maintain control over marketing strategy Make sure distributors provide you with detailed market and financial performance data Build links among national distributors at the earliest opportunity
  63. 63. © 2005 Prentice Hall 12-63 Global Retailing Department stores Specialty retailers Supermarkets Convenience stores Discount stores and warehouse clubs Hypermarkets Supercenters Category killers Outlet stores
  64. 64. © 2005 Prentice Hall 12-64 Global Retailing Top 25 Global Retailers in 2002, sales in Millions
  65. 65. © 2005 Prentice Hall 12-65 Global Retailing Environmental Factors – Saturation in the home country market – Recession or other economic factors – Strict regulation on store development – High operating costs Critical Question – What advantages do we have relative to the local competition?
  66. 66. © 2005 Prentice Hall 12-66 Classifying Global Retailers
  67. 67. © 2005 Prentice Hall 12-67 Global Retailing Strategies Organic – Company uses its own resources to open a store on a green field site or acquire one or more existing retail facilities Franchise – Appropriate strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures
  68. 68. © 2005 Prentice Hall 12-68 Global Retailing Strategies Chain Acquisition – A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country Joint Venture – This strategy is advisable when culturally distant, difficult-to-enter markets are targeted
  69. 69. © 2005 Prentice Hall 12-69 Global Retailing Strategies
  70. 70. © 2005 Prentice Hall 12-70 Innovation in Global Retailing Innovation takes place only in the most highly developed systems The ability of a system to successfully adapt innovations is directly related to its level of economic development Even when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressures The process of adaptation can be greatly accelerated by the actions of aggressive individual firms
  71. 71. © 2005 Prentice Hall 12-71 Supply Chain Definitions Supply Chain – Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products and making them available to customers Logistics – The management process that integrates the activities of all companies to ensure tan efficient flow of goods through the supply chain
  72. 72. © 2005 Prentice Hall 12-72 Physical Distribution, Supply Chains, and Logistics Management Order Processing – includes order entry in which the order is actually entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery Warehousing – Warehouses are used to store goods until they are sold – Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or customers
  73. 73. © 2005 Prentice Hall 12-73 Physical Distribution, Supply Chains, and Logistics Management Inventory Management – Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items. Transportation – the method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water
  74. 74. © 2005 Prentice Hall 12-74 Transportation Channel Strategy – analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation
  75. 75. © 2005 Prentice Hall 13-75 Communications Decisions: Advertising and Public Relations
  76. 76. © 2005 Prentice Hall 13-76 Global Marketing Communications The primary purpose of marketing communications is to tell customers abut the benefits and values that a company, product, or service offers Integrated Marketing Communications (IMC) is becoming more popular because of the challenges of communicating across national borders
  77. 77. © 2005 Prentice Hall 13-77 Global Advertising Advertising is any sponsored, paid message that is communicated in a non-personal way – Single country – Regional – Global Global advertising is the use of the same advertising appeals, messages, art, copy, photographs, stories, and video segments in multiple country markets
  78. 78. © 2005 Prentice Hall 13-78 Standardization vs. Adaptation Primary Question – Must the specific advertising message and media strategy be changed from region to region or country to country?
  79. 79. © 2005 Prentice Hall 13-79 Standardization vs. Adaptation Four difficulties that compromise an organization’s communication efforts – The message may not get through to the intended recipient. – The message may reach the target audience but may not be understood or may even be misunderstood. – The message may reach the target audience and may be understood but still may not induce the recipient to take the action desired by the sender. – The effectiveness of the message can be impaired by noise.
  80. 80. © 2005 Prentice Hall 13-80 Advertising Agencies: Organizations and Brands Understanding the term organization is key – Umbrella corporations/holding companies have one or more ‘core’ advertising agencies – Each ‘organization’ has unites specializing in direct marketing, marketing services, public relations, or research Individual agencies are considered brands – Full service brands create advertising, and provide services such as market research, media buying, and direct marketing
  81. 81. © 2005 Prentice Hall 13-81 Selecting an Advertising Agency Company organization – Companies that are decentralized ma want to leave the choice to the local subsidiary National responsiveness – Is the global agency familiar with local culture and buying habits of a particular country? Area coverage – Does the agency cover all relevant markets Buyer perception – What kind of brand awareness does the company want to project?
  82. 82. © 2005 Prentice Hall 13-82 Creating Global Advertising Creative strategy Big idea Advertising appeal – Rational approach – Emotional approach Selling proposition Creative execution – Art & Copy
  83. 83. © 2005 Prentice Hall 13-83 Art Directors and Art Direction Art Directors – Advertising professional who has the general responsibility for the overall look of an ad – Will choose graphics, pictures, type styles, and other visual elements that appear in an ad Art Direction – The visional presentation of an advertisement
  84. 84. © 2005 Prentice Hall 13-84 Cultural Considerations – Japanese and American Differences Indirect rather than direct forms of expression are preferred in the messages There is often little relationship between ad content and the advertised product Only brief dialogue or narration is used in television commercials, with minimal explanatory content Humor is used to create a bond of mutual feelings Famous celebrities appear as close acquaintances or everyday people Priority is placed on company trust rather than product quality The product name is impressed on the viewer with short, 15-second commercials
  85. 85. © 2005 Prentice Hall 13-85 Cultural Considerations
  86. 86. © 2005 Prentice Hall 13-86 Global Media Decisions Prepare new copy for foreign markets in host country’s language Translate the original copy into target language Leave some or all copy elements in home country language
  87. 87. © 2005 Prentice Hall 13-87 Media Decisions – Saudi Arabia Use of comparative advertising claims is prohibited Non-censored films cannot be advertised Women may only appear in those commercials that relate to family affairs, and their appearance must be in a decent manner that ensures feminine dignity Women must wear a long suitable dress which fully covers her body except face and palms
  88. 88. © 2005 Prentice Hall 13-88 Public Relations and Publicity Fosters goodwill and understanding Generates favorable publicity Tools – News releases – Media kits – Press conferences – Tours – Articles in trade and professional journals – TV and radio talk show appearances – Special events
  89. 89. © 2005 Prentice Hall 13-89 The Growing Role of Public Relations in Global Marketing Public Relations expenditures are growing at an average of 20% per year In India they are reported to be growing by 200% annually Reasons for the growth – Increased governmental relations between countries – Technology – Societal issues like the environment
  90. 90. © 2005 Prentice Hall 13-90 Public Relations Practices around the World Public relations practices can be affected by: – Cultural traditions – Social and political contexts – Economic environments Public relations professionals must understand these differences and tailor the message appropriately
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