MKT 425 Chapter 14 The Product Decisions.pdf

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MKT 425
International
Marketing
BBA Program
BRAC Business
School
BRAC University
Chapter 14
The Product Decisions
Lecture 14
Faculty: Mohammad Mohibur Rahman
Tex
Global Marketing by Hollensen (8th Edition), Pearson
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The dimensions of the international product offer
In creating an acceptable product offer for international markets, it is necessary first to examine what
contributes to the ‘total’ product offer. In the product dimensions of Figure 14.1, we include not just
the core physical properties, but also additional elements such as packaging, branding and after-sales
service that make up the total package for the purchaser.
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Figure 14.1 The three levels of a product We can also see from Figure 14.1
that it is much easier to standardize
the core product benefits (functional
features, performance, etc.) than it is
to standardize the support services,
which often have to be tailored to
the business culture and sometimes
to individual customers.

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Developing international service strategies>>
Product Vs Service Dominance
❑ As Figure 14.2 shows, the mix of product and service elements may vary substantially. The figure
assumes that the customer is more or less passive in the buying and consuming process. That is,
of course, not always realistic. More and more, offerings cannot be represented accurately by
points on either end of a tangibility continuum. Rather, offerings are complex mixes of concrete
objects, rendered services and customer participation.
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Figure 14.2 Scale of elemental dominance

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❑ Customers do not seek products; they seek satisfaction. Products thus represent
vehicles for service, because they enable customers to pursue their individualized
satisfaction.
❑ For instance, when customers purchase new software for their computer, they may get
a tangible product (CDs) to take home and install on their computer. However, what
they are truly buying is the ability to perform a new task or an existing task in a new
way. The installation CDs are filled up with knowledge, encrypted with the capabilities
of various service providers, which then require that the customer demonstrate the
competence and willingness to liberate this stored knowledge.
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Product Vs Service Dominance

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❑ The service-dominant (S-D) logic represents a broader perspective of markets compared with
traditional perspectives of markets, that focus on the exchange of goods (referred to as goods-
dominant, or G-D, logic).
❑ According to the S-D logic, customer value is produced in a co-creation process between the
seller and the customer. In this process the customer becomes a co-producer of the service,
which is also being consumed. Consequently the consumer is also turned into a ‘prosumer’ (=
producer + consumer).
❑ The customer functions as an active participant in the creation of value. The customer becomes
primarily an operant resource (co-producer) rather than an operand resource (target) and can be
involved in the entire value chain. In the S-D logic, the firm (seller) cannot create value, but only
offer value propositions and then it is up to the customer to select the value propositions that are
necessary to ‘solve the problem’ and ultimately create customer value.
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The service-dominant logic (S-D logic)

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❑ All products, both goods and services, consist of a core element that is
surrounded by a variety of optional supplementary elements. If we look first
at the core service products, we can assign them to one of three broad
categories depending on their tangibility and the extent to which customers
need to be physically present during service production. These categories are
presented in Table 14.1:
✓ People processing
✓ Possession processing
✓ Information-based services
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Categories of Service

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Table 14.1 Three categories of service

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❑ In summary, the information-based services offer the best opportunities of
global standardization. The two other types of service (people-processing and
possession-processing) both suffer from their inability to transfer competitive
advantages across borders. For example, when Euro Disneyland in Paris
opened, Disney suffered from not being able to transfer the highly motivated
staff of its US parks to Europe.
❑ The accelerating development within information technology (the internet)
has resulted in the appearance of new types of information service (e.g.
information on international flight schedules), which offer great
opportunities for standardization.
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Categories of Service

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The product life cycle (PLC)
❑ The concept of the product life cycle (PLC) provides useful inputs into making
product decisions and formulating product strategies. Products, like
individuals, pass through a series of stages. Each stage is identified by its
sales performance and characterized by different levels of profitability,
various degrees of competition and distinctive marketing programs.
❑ The four stages of the PLC are introduction, growth, maturity and decline.
The basic model of the PLC is shown in Figure 14.3, where the stages prior to
the actual sales also are included. In total, these stages represent the so-
called time to market (TTM).
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Figure 14.3 The product life cycle and time to market

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Time to market (TTM) is the length of time it takes from a product being
conceived until it becomes available for sale. TTM is important in industries
where products become outdated quickly, for example in the IT industry.
Rapid TTM is important for the competitive success of many companies for the
following reasons:
• Competitive advantage of getting to market sooner
• Premium prices early in the life cycle
• Faster break-even on development investment and lower financial risk
• Greater overall profits and higher return on investment.
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❑ The PLC emphasizes the need to review marketing objectives and strategies as
products pass through various stages. It is helpful to think of marketing decisions
during the lifetime of a product. However, sometimes it is hard to know when a
product is leaving one stage and entering the next. The life-cycle concept helps
managers to think about their product line as a portfolio of investments.
❑ Most organizations offer more than one product or service, and many operate in
several markets. The advantage here is that the various products – the product
portfolio – can be managed so that they are not all in the same phase in their life
cycles. Having products evenly spread out across life cycles allows for the most
efficient use of both cash and human resources. Figure 14.4 shows an example of such
life-cycle management and some of the corresponding strategies that follow the
different stages of the product life cycle.
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Marketing Implications of the product life cycle

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❑ The current investment in C, which is in the growth phase, is covered by the
profits being generated by the earlier product B, which is at maturity. This
product had earlier been funded by A, the decline of which is now being
balanced by the newer products.
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Marketing Implications of the product life cycle

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❑ The PLC is a dependent variable that is determined by the marketing mix; it is not an independent
variable to which firms should adapt their marketing programmes
❑ If a product’s sale is declining, management should not conclude that the brand is in the decline
stage. If management withdraws marketing resources from the brand, it will create a self-fulfilling
prophecy and the brand’s sales will continue to decline. Instead management might increase
marketing support in order to create a recycle (see Figure 14.5)
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Limitations of product life cycle

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❑ This could be realized by the use of one or more of the following measures:
• Product improvements (e.g. new product packaging)
• Reposition perception of the product
• Reach new users of the product (via new distribution outlets)
• Promote more frequent use of the product (fulfilling same need)
• Promote new uses of the product (fulfilling new needs)
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Limitations of product life cycle

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The PLC concept can be examined at various levels, from the life cycle of a whole industry
or product form (the technological life cycle, or TLC) to the life cycle of a single model of a
specific product.
An example of different PLC levels is shown in Figure 14.6.
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Levels of Product life cycle
Figure 14.6 Comparison of product life cycles (PLCs) for product forms (TLCs – here operating
systems for smartphones) and single product models, like iPhone, Samsung Galaxy and Huawei

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When expanding the concept of the PLC to international markets, two different
approaches appear:
1. International product life cycle (IPLC) – a macroeconomic approach
2. PLCs across countries – a microeconomic approach.
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Product life cycle for different countries
Figure 14.8 International product life cycle (IPLC) curves

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International product life cycle (IPLC) – a macroeconomic approach
✓ The IPLC theory describes the diffusion process of an innovation across national
boundaries (Figure 14.8). For each curve, net export results when the curve is above the
horizontal line; if the curve is below the horizontal line, net import results for a particular
country.
✓ Typically, demand first grows in the innovating country (here the US). In the beginning
excess production in the innovating country (greater than domestic demand) will be
exported to other advanced countries where demand also grows. Only later does
demand begin in less developed countries.
✓ Production, consequently, takes place first in the innovating country. As the product
matures and technology is diffused, production occurs in other industrialized countries
and then in less developed countries.
✓ Efficiency/comparative advantages shift from developed countries to developing
countries. Finally, advanced countries, no longer cost-effective, import products from
their former customers. Examples of typical IPLCs can be found in the textile industry
and the computer/software industry. For example, many software programs today are
made in Bangalore, India.

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Figure 14.9 Product life cycles (PLCs) of different countries for a specific product
Product life cycles across countries: a microeconomic approach
In foreign markets the time span for a product to pass through a stage may vary from
market to market. In addition, due to different economic levels in different countries, a
specific product can be in different PLC stages in different countries. Figure 14.9 shows
that the product (at a certain time, t1) is in the decline stage in the home market while it
is in the maturity stage for country A and in the introduction stage for country B.

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❑ Customer needs are the starting point for product development, whether for
domestic or global markets. In addition to customer needs, conditions of use
and ability to buy the product form a framework for decisions on new
product development (NPD) for international markets.
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New products for the international market

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As a consequence of increasing international competition, time is becoming a key success
factor (KSF) for an increasing number of companies that manufacture technologically
sophisticated products. This time competition and the level of technological development
mean that product life cycles are getting shorter and shorter.
In parallel to shorter PLCs, the product development times for new products are being
greatly reduced. This applies not only to technical products in the field of office
communication equipment, but also to cars and consumer electronics. In some cases
there have been reductions in development times of more than half.
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New products for the international market>>
Developing new products/cutting the time to market

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Similarly, the time for marketing/selling,
and hence also for R&D cost to pay off,
has gone down from about four years to
only two years. This new situation is
illustrated in Figure 14.11.

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Degrees of product newness
A new product can have several
degrees of newness. It may be an
entirely new invention (new to
the world) or it may be a slight
modification of an existing
product. In Figure 14.13,
newness has two dimensions:
newness to the market
(consumers, channels and public
policy) and newness to the
company. The risk of market
failure also increases with the
newness of the product. Hence
the greater the newness of the
product, the greater the need for
a thorough internal company and
external environment analysis, in
order to reduce the risk involved.
Figure 14.13 Different degrees of product newness

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The Product Communication Mix
✓ Having decided upon the optimum standardization/adaptation
route and the newness of the product, the next most important
(and culturally sensitive) factor to be considered is that of
international promotion.
✓ Product and promotion go hand in hand in foreign markets and
together are able to create or destroy markets in very short order.
✓ As with product decisions, promotion can be either standardized or
adapted for foreign markets.

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The Product Communication Mix>> Figure 14.14 Product/communication mode
Keegan (1995) has highlighted the key aspects of
marketing strategy as a combination of standardization or
adaptation of the product and promotion of elements of
the mix, and offers five alternative and more specific
approaches to product policy. These approaches are
shown in Figure 14.14.

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The Product Communication Mix>> Straight Extension
✓ This involves introducing a standardized product with the same
promotion strategy throughout the world market (one product, one
message worldwide). By applying this strategy successfully, major
savings can be made on market research and product development.
✓ Since the 1920s, Coca-Cola has adopted a global approach, which
has allowed the company to make enormous cost savings and
benefits from continual reinforcement of the same message.

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The Product Communication Mix>> Promotion Adaptation
✓ Use of this strategy involves leaving a product unchanged but fine-
tuning promotional activity to take into account cultural differences
between markets. It is a relatively cost-effective strategy, as
changing promotion messages is not as expensive as adapting
products.
✓ An example of this strategy is illustrated by Lux.

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The Product Communication Mix>> Product Adaptation
✓ By modifying only the product, a manufacturer intends to maintain
the core product function in the different markets.
✓ For example, electrical appliances have to be modified to cope with
different electrical voltages in different countries.
✓ A product can also be adapted to function under different physical
environmental conditions. Exxon changed the chemical
composition of petrol to cope with the extremes of climate, but still
used the ‘Put a tiger in your tank’ campaign unchanged around the
world.

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The Product Communication Mix>> Product Adaptation
✓ By modifying only the product, a manufacturer intends to maintain
the core product function in the different markets.
✓ For example, electrical appliances have to be modified to cope with
different electrical voltages in different countries.
✓ A product can also be adapted to function under different physical
environmental conditions. Exxon changed the chemical
composition of petrol to cope with the extremes of climate, but still
used the ‘Put a tiger in your tank’ campaign unchanged around the
world.

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The Product Communication Mix>> Dual Adaptation
✓ By adapting both product and promotion for each market, the firm
is adopting a totally differentiated approach.
✓ This strategy is often adopted by firms when one of the previous
three strategies has failed, but particularly if the firm is not in a
leadership position and is therefore reacting to the market or
following competitors.
✓ It applies to the majority of products in the world market. The
modification of both product and promotion is an expensive but
often necessary strategy.

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The Product Communication Mix>> Product Invention
✓ Product invention is adopted by firms, usually from advanced
nations, that are supplying products to less developed countries.
✓ Products are specifically developed to meet the needs of the
individual markets.
✓ Existing products may be too technologically sophisticated to
operate in less developed countries, where power supplies may be
intermittent and local skills limited. Keegan (1995) uses a hand-
powered washing machine as a product example.

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Thank You
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For all types of technological product it holds true that the manufactured product must have as good
a quality as required by the customer (i.e. as good as necessary), but not as good as technically
feasible. Too frequently technological products are over-optimized and therefore too expensive from
the customer’s point of view.
Japanese and European suppliers to the car industry have different approaches to the product
development process. Figure 14.12 shows an example with suppliers of dashboard instruments for
cars. The two Japanese manufacturers start the engineering design phase two years later than the
European manufacturer.
This enables the Japanese to develop a product fully in a shorter time using the newest technology
and to launch it almost simultaneously with their competitors.
Figure 14.12 Development and test periods for suppliers to the car industry

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Global Mobil App Marketing
Due to the roll out of 4G and 5G mobile services across the
globe, along with the increasing penetration of smartphones
and tablets, the app industry is gaining traction and social
media offer new opportunities for the vendors. However,
privacy concerns are some of the challenges being faced by
the marketers in the app ecosystem.

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Global Mobil App Marketing
Mobile apps can be classified into mobile
commerce mobile value-added services:
Mobile commerce. Here the app mostly
has the purpose of selling a product or a
service. For example, the Domino’s Pizza
app is designed to generate sales and
promote special deals to customers.
Mobile value-added services (MVAS).
Here the app offers services that are not
directly tied to sales but are designed to
help customers solve problems or make
decisions. Such an app enriches the total
customer experience of a product/service
offering.

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Long Tail
Long tail refers to a graph showing fewer products selling in large quantities versus many
more products selling in low quantities. The low-quantity items (the very broad product
range) stretch out on the x-axis of the graph, creating a very long tail that generates more
revenue overall. Even though a smaller quantity of each item is sold, there is a much
greater variety of these items to sell, and these ‘rare’ items are very easy to find via today’s
online search tools.

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Lecture 00

MKT 425 Chapter 14 The Product Decisions.pdf

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