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Products and services for consumers


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Products and services for consumers

  1. 1. Products and services for consumers The opportunities and challenges for international marketers of consumer goods andservices have never been greater than today. New consumers are springing up in emergingmarkets in Eastern Europe, China, India, Latin America and other countries. Today some ofemerging markets have little purchasing power, but they promise to be huge markets in thefuture. More mature markets have also a lot of opportunities and challenges becauseconsumers` tastes become more sophisticated and complex, their purchasing power increasesand this provides new demands. The example of this can be Disneyland. As all we know, Disney is the American exporterfor global consumer markets. The distinction between products and services in this companymeans little: videotapes are products and cinema performances of the movies are services.Consumers pay a lot of money (around 60 euro) to get in the gate, but they also spend a lot ofmoney on hats, T-shirts and pop corn while being there. This lack of distinction betweenproducts and services led to the invention of new terms encompassing both products andservices, such as market offerings and business-to-consumer marketing. But we should knowthat there are three major categories: durable goods (cars, computers), nondurable goods (food)and services (tourism). Market offering (also called as business-to- business marketing (B2B)) is the product orservice that is sold into the marketplace. While business-to-business commerce refers tobusiness transactions between companies, business-to-consumer models (B2C) are those thatsell products or services directly to personal-use customers. Business-to-consumer companiesconnect, communicate and conduct business transactions with consumers most often via theInternet. B2C is larger than just online retailing; it includes online banking, travel services,online auctions, and health and real estate sites. The question ―Which products/services should we sell?‖ is very critical today. Thecompany with a domestic market extension orientation should sell products that are good soldat home. The company with a multidomestic market orientation develops different products andservices to fit the uniqueness of each country market. The global company ignores frontiers andresponds with global market offerings. The trend for larger firms is toward becoming global in orientation and strategy. Productadaptation is as important task in a smaller firm`s marketing effort as it is for global companies.Some products cannot be sold at all in foreign markets without modification, others may besold as is, but their acceptance is greatly enhanced when tailored specifically to market needs.And in today`s world, in it`s competitive struggle, quality products and services that meet theneeds and wants of consumers at an affordable price should be the goal of any marketing firm. 1. Quality. The power in the marketplace is shifting from a seller`s market tocustomers, who have more choices because there are more companies competing for theirattention. It puts more power in the hands of the customer and that drives the need for quality.Today the customer knows what is best, cheapest and highest quality. Today customers definequality in terms of their needs and resources. In most global markets the cost and quality of aproduct are among the most important criteria by which purchases are made.
  2. 2. Quality defined. Quality can be defined on two dimensions: market-perceived qualityand performance quality. Both are important, but consumer perception of a quality productoften has more to do with market-perceived quality. For example, from the firm`s perspective(performance quality), an airline has achieved quality conformance with a safe flight andlanding. But consumers doesn`t think so. They expect performance quality to be a given. Rathercost, timely service, frequency of flights, comfortable seating and performance of airlinepersonnel are all part of the of the customer`s experience that is perceived as being of good orpoor quality. In a competitive marketplace where the market has choices, most consumers expectperformance quality to be a given. And if the product does not perform up to standards it willbe rejected. When there are alternative products, all of which meet performance qualitystandards, the product chosen is the one that meets market-perceived quality attributes. Maintaining quality. Maintaining performance quality is critical, but frequently aproduct that leaves the factory at performance quality is damaged as it passes through thedistribution chain. This is a special problem for many global brands for which production isdistant from the market. Physical or mandatory requirements and adaptation. A product may have to change ina number of ways to meet the physical or mandatory requirements of a new market, rangingfrom simple package changes to total redesign of the physical core product. Producthomologation – is a term, used to describe the changes mandated by local product and servicestandards. Mandatory adaptations are more frequently the reason for product adaptation thanadapting for cultural reasons. Legal, economic, political, technological and climatic requirements of the localmarketplace often dictate product adaptation. Changes may also have to be made toaccommodate climatic differences. The less economically developed a market is, the greater degree of change a product mayneed for acceptance. One study found that only one in ten products could be marketed indeveloping countries without modification of some sort. Because most products sold abroad byinternational companies originate in home markets and most require some form ofmodification, companies need a systematic process to identify products that need adaptation. Green marketing and product development. A quality issue of growing importance theworld over, especially in Europe and the US, is a green marketing. Green marketing is a termused to identify concern with the environmental consequences of a variety of marketingactivities. The European Commission has passed legislation to control all kinds of packaging wastethrough the EC. Two critical issues that affect product development are the control of thepackaging component of solid waste and consumer demand for environmentally friendly
  3. 3. products. The European Commission issued guidelines for eco-labeling. Under the directive, aproduct is evaluated on all significant environmental effects through its life cycle, frommanufacturing to disposal – a cradle-to-grave approach. Two critical issues that affect productdevelopment are the control of the packaging component of solid waste and consumer demandfor environmentally friendly products. The designation that a product is ―environmentallyfriendly‖ is voluntary, and environmental success depends on the consumer selecting the eco-friendly product. 2. Products and culture. It is very important to understand how to culturalinfluences are interwoven with the perceived value and importance a market places on aproduct. A product is more than a physical item: it is a bundle of satisfactions (or utilities) thatthe buyer receives. A product is the sum of the physical and psychological satisfactions it provides the user.A products physical attributes generally are required to create its primary function. For example, if we take an automobile, its` primary function is to move passengers fromone place to another. This ability requires motor and other physical features. The physicalfeatures or primary function of an automobile is in demand in all cultures. But an automobilehas a lot of psychological features that are also important. They are color, size, design, brandname and price. These features have little to do with its primary function, but they add value tothe satisfaction received. The meaning and value imputed to the psychological attributes (color, size, design, andso on) of a product can vary among cultures and are perceived as negative or positive. Tomaximize the bundle of satisfactions received, adaptation of the nonphysical features of aproduct may be necessary. Adaptation may require changes of any one or all of the psychological aspects of aproduct. The adoption of some products by consumers can be affected as much by how theproduct concept conforms with norms, values, and behavior patterns as by its physical ormechanical attributes. When analyzing a product for a second market, the extent of adaptation required dependson cultural differences in product use. The greater these differences are, the greater extent ofadaptation is necessary. Innovative products and adaptation. An important first step in adapting a product to aforeign market is to determine the degree of newness as perceived by the intended market. Weshould understand that many products that are successful in one country may be absolutely newfor another. Products new to a social system are innovations, and knowledge about the productdiffusion (the process by which innovation spreads) of innovation is helpful in developing asuccessful product strategy. A critical factor in the newness of a product is its effect on established patterns ofconsumption and behavior. The goal of a foreign marketer is to gain product acceptance by the largest number ofconsumers in the market in the shortest span of time.
  4. 4. The question comes to mind of whether the probable rate of acceptance can be predictedbefore committing resources and, more critically, if the probable rate of acceptance is too slow,whether it can be accelerated. Diffusion of innovations. There are five characteristics of an innovation that can assist in determining the rate ofacceptance or resistance of the market to a product. They are: • relative advantage – the perceived marginal value of the new product relative to the old; • compatibility – its compatibility with acceptable behavior, norms, values; • complexity – the degree of complexity associated with the product use; • trialability – the degree of economic and/or social risk associated with product use; • observability – the case with which the product benefits can be communicated. The rate of diffusion is positively related to relative advantage, compatibility,complexity, trialability, observability. But it is important to remember that it is the perceptionof product characteristics by the potential adopter, not the marketer, that is crucial to theevaluation. A market analyst`s self-reference criterion (SRC) may cause a perceptual bias wheninterpreting the characteristics of a product. Thus the marketer might analyze them from his orher frame of reference, leading to a misinterpretation of the product`s cultural importance. 3. Analyzing product components for adaptation. A product ismultidimensional and the sum of all its features determines the bundle of satisfactions (utilities)received by the consumer. To identify all the possible ways a product may be adapted to a newmarket, it helps to separate its many dimensions into three distinct components as we can see onthe picture named Product Component Model. These components include all a product`stangible and intangible elements and provide the bundle of utilities the market receives fromuse of the product.
  5. 5. The core component consists of the physical product and all its design and functionalfeatures. On the product platform product variations can be added or deleted to satisfy localdifferences. Major adjustments in the platform aspect may be costly. Alterations in design,functional features, color and other aspects can be made to adapt the product to culturalvariations. The packaging component includes style features, packaging, labeling, trademarks,brand name, quality, price and other aspects of a product`s package. Packaging componentsrequire both discretionary and mandatory changes. For example, some countries require labelsto be printed in more than one language, while others forbid the use of any foreign language.Package size and price have an important relationship in poor countries. Companies packagetheir products in small units to bring the price in line with spending norms. In some countrieslaws stipulate specific bottle, package sizes and measurement units. Labeling laws also varyfrom country to country and do not seem to follow any predictable pattern. The support services component includes repair and maintenance, instructions,installation, warranties, deliveries and the availability of spare parts. Many successfulmarketing programs failed because little attention was given to this product component. Repairand maintenance are especially difficult problems in developing countries. For example,consumers in a developing country and in many developed countries don`t have as muchpossibilities for repair as consumers in the United States have. Literacy rates and educationallevels may require a firm to change a product`s instructions. A simple term in one country maybe incomprehensible in another. So, to sum up, the Product Component Model can be a useful guide in examiningadaptation requirements of products destined for foreign markets. 4. Marketing consumer services globally. Much of the advice regarding adaptingproducts for international consumer markets also applies to adapting services. However, manyconsumer services are distinguished by four unique characteristics. They are:• intangibility. Automobiles, computers have a physical presence, they are tangible. Insurance, dry cleaning are intangible and have intrinsic value resulting from a process, performance or an occurrence that only exists while it is being created;• inseparability – its creation can not be separated from its consumption;• heterogeneity – the service is individually produced and is virtually unique;• perishability – once created it can not be stored but must be consumed simultaneously with its creation.
  6. 6. A service can be marketed both as an industrial (business-to-business) or a consumerservice, depending on the motive of the purchaser. The unique characteristics of services resultin differences in the marketing of services and the marketing of consumer products. Barriers to entering global markets for consumer services. A lot of services(entertainment, hotels and tourism) require production and consumption to occur almostsimultaneously. That`s why exporting is not a viable entry method for them. The vast majorityof services (85%) enter foreign markets by licensing, franchising or direct investment. Thereare 4 kinds of barriers that face consumer services marketers in the global marketplace:• protectionism. The European Union is making modest progress toward establishing a single market for services. However, it is not clear exactly how foreign service providers will be treated as unification proceeds. Reciprocity and harmonization possibly will be used to curtail the entrance of some service industries into Europe;• restrictions on transborder data flows. There is intense concern about how to deal with the relatively new ―problem‖ of transborder data transfers. The European Commission is concerned that data on individuals (income, debt repayment) are being collected, manipulated and transferred between companies with little regard to the privacy of the affected individuals. A proposed directive would require the consent of the individual before data are collected or processed;• protection of intellectual property. An important form of competition that is difficult to combat arises from pirated trademarks, processes, copyrights and patents. Computer design and software, trademarks, brand names and other intellectual properties are easy to duplicate and difficult to protect. The protection of intellectual property rights is a major problem in the services industries. Countries seldom have adequate, if any, legislation, and any laws they do have are extremely difficult to enforce. The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property regulation as applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. The TRIPs obligates all members to provide strong protection for copyright and related rights, patents, trademarks and other intellectual property. The TRIPs agreement is helpful, but the key issue is that enforcement is very difficult without the full cooperation of host countries;• cultural barriers and adaptation. Because trade in services more frequently involves people- to-people contact, culture plays a much bigger role in services than in merchandise trade. To sum up, opportunities for the marketing of consumer services will continue to grow inthe twenty-first century. International marketers will have to be quite creative in responding tothe legal and cultural challenges of delivering high-quality services in foreign markets and toforeign customers at domestic locales. 5. Brands in international markets. Hand in hand with global products andservices are global brands. A global brand is defined as the worldwide use of a name, term,
  7. 7. sign, symbol, design, or combination thereof intended to identify goods or services of one sellerand to differentiate them from those of competitors. A successful brand is the most valuable resource a company has. The brand nameencompasses the years of advertising, good will, quality evaluation, product experience, andother beneficial attributes the market associates with product. Brand image is at the very core ofbusiness identity and strategy. Customers everywhere respond to images, myths, and metaphorsthat help them define their personal and national identities within a global context of worldculture and product benefits. Global brands play the important role in the process. The value ofKodak, Coca-Cola, McDonald’s, Toyota, and Marlboro is indisputable. Global Brands. Naturally, companies with such strong brands strive to use those bandsglobally. In fact, it appears that even perceived ―globalness‖ leads to increases in sales. TheInternet and other technologies are accelerating the pace of the globalization of brands. Evenfor products that must be adapted to local market conditions, a global brand can be successfullyused with careful consideration. Ideally a global brand gives a company a uniform worldwideimage that enhances efficiency and cost saving then introducing other products associated withthe brand name, but not all companies believe a single global approach is the best. For example,despite BMW`s wotldwide success, only recently did the company create its first global brandsposition. Companies with successful country-specific brand names must balance the benefits ofa global brand against the risk of losing the benefits of an established brand. National Brands. A different strategy is followed by the Nestle Company, which has astable of global and country-specific national brands in its product line. The Nestle name itselfis promoted globally, but its global brand expansion strategy is two-pronged. In some markets itacquires well-established national brands when it can and build on their strengths—there are7000 local brands in its family of brands. In other markets where there are no strong brands tobe local, people, to be regional, and technology to be global. It does, however, own some of theworld`s largest global brands, for example, Nescafe is one of them. The answer to the question of when to go global with a brand is: ―It depends – themarket dictates‖. Use global brands where possible and national brands where necessary. Country-of-Origin Effect and Global Brands. Brands are used as external cues to taste,design, performance, quality, value, prestige. But many factors affect brand image. One factorthat is of great concern to multinational companies that manufacture worldwide is the country-of-origin effect on the market`s perception of the product. Country-of-Origin effect (COE) can be defined as any influence that the country ofmanufacture, assembly, or design has on a consumer’s positive or negative perception of aproduct. A company competing in global marketers today manufactures products worldwide,when the customer becomes aware of the country of origin, there is the possibility that the placeof manufacture will affect or brand image. The country, the type of product, and the image of the company and its brands allinfluence whether the country of origin will engender a positive or negative reaction. A varietyof generalizations can e made about country-of-Origin effects on products and brands.Consumers tend to have stereotypes about products and countries that are formed by
  8. 8. experience, hearsay, and myth. Following are some of the more frequently citedgeneralizations. Consumers have stereotypes about specific countries and products that they judge ―best‖:English tea, French perfume. But these stereotypes may not extend to other categories ofproducts from these countries. Ethnocentrism can also have country-of-origin effects: feelingsof national pride – the ―buy Ukrainian‖ effect, for example – can influence attitudes towardforeign products. Private Brands. Private brands owned by retailer are growing as challenges to manufacturers’ brands, whetherglobal or country specific. As it stands now, private labels are formidable competitors. They provide the retailer with highmargins, they receive preferential shelf space and strong in-store promotion, and perhaps most important for consumerappeal, they are quality product at low prices. Contrast that with manufacturers brands, which traditionally are premiumpriced and offer the retailer lower margins than they get from private labels. To maintain market share, global brands need to be priced competitively and provide real consumer value. Globalmarketers must examine the adequacy of their brand strategies in light of such competition. This may make the cost andefficiency benefits of global brands even more appealing. And now, let`s look at this list of top 20 global brands in 2012 Top 20 global brands, 2012 Brand Value Rank (USD $ Millions)2012 2011 Logo Name Country 2012 20111 8 Apple The USA 70,605 29,5432 1 Google The USA 47,463 44,2943 2 Microsoft The USA 45,812 42,8054 4 IBM The USA 39,135 36,1575 3 Walmart The USA 38,320 36,2206 18 Samsung South Korea 38,197 21,5117 7 GE The USA 33,214 30,5048 16 Coca-Cola The USA 31,082 25,8079 5 Vodafone The United Kingdom 30,044 30,67410 32 The USA 28,665 17,78011 10 AT&T The USA 28,379 28,88412 12 Verizon The USA 27,616 27,29313 11 HSBC The United Kingdom 27,597 27,63214 13 NTT Group Japan 26,324 26,92715 14 Toyota Japan 24,461 26,15216 9 Wells Fargo The USA 23,229 28,94417 6 Bank of America The USA 19,537 30,61918 17 McDonalds The USA 22,230 21,84219 30 Shell Netherlands 22,021 18,60520 27 Intel The USA 21,908 19,078, to sum up, as David Haigh said, ―Brands are the most valuable assets in business today.They drive demand, motivate staff, secure business partners and reassure financial markets.Leading edge organizations recognise the need to understand brand equity and brand value when making strategicdecisions.‖