Chapter 11: Product Management & Global Brands
Overview: The product is the most important element of a company’s marketing program. This chapter examines how global marketers face the challenge of formulating coherent product and brand strategies on a worldwide basis.
Definition of a product:
A product can viewed as a collection of tangible and intangible attributes that collectively provide benefits to a buyer or user. A brand is a complex bundle of images and experiences in the mind of the customer. In most countries, local brands compete with international brands and global brands. A local product is available in a single country; a global product meets the wants and needs of a global market.
The core of a firm’s international operations is a product or service. This product or service can be defined as the complex combination of tangible and intangible elements that distinguishes it from the other entities in the marketplace.
Below is an image that displays the three levels: The actual physical product, the core benefit, and the augmented product (often related to some services).
One of the most fruitful exercises is to focus on determining the core benefit. You will come to understand that customers have a problem to solve…be it a need for transportation or a need for deck chair. Getting to the core benefit will support developing a marketing strategy based on value.
Standardization versus customized products:
Straight Product Extension (referred often as standardization)
Companies deciding to market their products in different countries typically have a choice of three common strategies to pursue.
Nuances of Product Extension, Adaptation, and Invention:
The product-adaptation strategy is easier for firms to execute than product invention. Nonetheless, even product adaptation requires understanding the local market well.
Consider Ford Motor Company’s missteps in adapting its mid-priced car model to the Indian market. Ford realized that it needed to lower the cost of its car to make it more affordable to Indian consumers. Ford brought a team of designers together in Detroit and tasked them with figuring out how to reduce the cost of the car. The designers looked at removing nonessential elements.
The first feature to go was air conditioning. Next, the team decided to remove power windows in the back, keeping them only in the front. These and other such tweaks brought the total cost of the car down from $20,000 to $15,000. Reducing the cost by 25 percent is notable, but unfortunately the design team lacked vital local knowledge about India. First, even though the price of the car was lower, the $15,000 price point in India is still way above what the middle class can afford. The Indians who can afford a $15,000 car are the very rich. Second, the very rich in India who can afford to pay $15,000 for a car can also afford (and will have) a chauffeur.
Remember the clever idea of removing the air conditioning and the power windows in the back? The consequence is that the chauffeur is the only one who gets a breeze. Given the sweltering summer temperatures and traffic congestion in Indian cities, you can guess that the Ford car didn’t sell well.
In deciding the form in which the product is to be marketed abroad, the firm should consider three sets of factors:
The Market Environment
Government regulations often present the most stringent requirements. They are probably the single most important factor contributing to product adaptation and, because of bureaucratic red tape, often the most cumbersome and frustrating factor to deal with. In some cases, government regulations have been passed and are enforced to protect local industry from competition from abroad.
Non-tariff barriers include product standards, testing or approval procedures, subsidies for local products, and bureaucratic red tape. The non-tariff barriers affecting product adjustments usually concern elements outside the core product.
The characteristics and behavior of intended customer groups are an important factor influencing the product adaptation decision. Product decisions of consumer-product marketers are especially affected by local behavior, tastes, attitudes, and traditions.
Three groups of factors determine cultural and psychological specificity in relation to products and services:
In the textbook, Exhibit 11.4 provides a set of questions useful for gauging the effect of cultural and psychological factors on the product adaptation decision.
Climate and geography will usually have an effect on the total product offering. Many products must be adapted to local geographic and climatic conditions.
The inherent characteristics of products and the benefits they provide to consumers in the various markets make certain products good candidates for standardization, others not.
The international marketer must make sure products do not contain ingredients that might be in violation of legal requirements or religious or social customs.
Weighing Product Adaptation Decisions:
Value proposition adaptation deals with a whole range of issues, ranging from the quality and appearance of products to materials, processing, production equipment, packaging, and style. A product may have to be adapted to meet the physical, social, or mandatory requirements of a new market. It may have to be modified to conform to government regulations or to operate effectively in country-specific geographic and climatic conditions. Or it may be redesigned or repackaged to meet the diverse buyer preferences or standard-of-living conditions. A product’s size and packaging may also have to be modified to facilitate shipment or to conform to possible differences in engineering or design standards in a country or in regional markets. Other dimensions of value proposition adaptation include changes in brand name, color, size, taste, design, style, features, materials, warranties, after-sale service, technological sophistication, and performance.
Brand names convey the image of the product or service. Brands are one of the most easily standardized items in the product offering. The brand name is the vocalizable part of the brand, the brand mark the non-vocalizable part. The term trademark refers to the legally protected part of the brand, indicated by the symbol ®.
A global or regional brand may well have local features, or a highly standardized product may have local brand names. Standardizing names to reap promotional benefits can run into problems if not done properly. To avoid such problems, NameLab, a California-based laboratory for name development and testing.
Here’s a link for NameLab…to their naming process. Click here (Links to an external site.).
Packaging: As a general rule, packaging design should be based on customer needs.
Three major functions – protection, promotion, and user convenience –
Private Brand Policies:
The emergence of strong intermediaries has led to the significant increase in private-brand goods, that is, the intermediaries’ own branded products or “store brands.” Two general approaches have been used:
While private-brand success has been shown to be affected strongly by economic conditions and the self-interest of retailers who want to improve their bottom lines through the contribution of private-label goods, new factors have emerged to make the phenomenon more long-lived and significant in changing product choices worldwide. These factors include the improved quality of private-brand products, the development of segmented private-brand products, and change in consumer mindsets.
Beyond just offering products, many retailers are focusing on a broader approach. Some are focusing on the design of their private-brand products to provide a uniform image, while others are providing premium private-brand products.
With the increasing opportunities in the private-brand categories, the marketing manager will have to make critical strategic choices, which are summarized in Exhibit 11.9. In heavily branded markets, companies that own brands with high distinctiveness and technological advantage may decide not to participate in the private-brand category. Reasons for participation may include capacity filling, economies of scale, improved relationships with trade, and valuable information about consumer behavior and costs.
Definition: Any goods bearing an unauthorized representation of a trademark, patented invention, or copyrighted work that is legally protected in the country where it is marketed. The practice of product counterfeiting has spread to high-technology products and services from the traditionally counterfeited products: high-visibility, strong-brand-name consumer goods.
The first task in fighting intellectual property violation is to use patent applications or registration of trademarks or mask works (for semiconductors). However, rights granted by a patent, trademark, copyright, or mask work registration in the United States confer no protection in a foreign country.
After securing valuable intellectual property rights, the international marketer must act to enforce, and have enforced, these rights. Four types of action against counterfeiting are legislative action, bilateral and multilateral negotiations, joint private-sector action, and measures taken by individual companies.
The U.S. government is seeking to limit counterfeiting practices through bilateral and multilateral negotiations as well as education. A number of private-sector joint efforts have also emerged in the battle against counterfeit goods. Many companies maintain close contact with the government and the various agencies charged with helping them.