Chapter four
Product
policy decision
Product standardization and product adaptation (modification)
Product
Standardization: refers to the practice of exporting domestic products
to foreign markets with minimal or no changes from its original design.
Factors Encouraging Standardization:
1.
High Costs of Adaptation:
2.
Industrial Products:
3.
Convergence and Similar Tastes:
4.
Centralized Management and Export Operation:
Product Adaptation: Product adaptation involves
modifying a product to meet the specific requirements and preferences of
foreign markets.
Factors Encouraging Adaptation:
1.
Differences in Technical Standards:
2.
Consumer and Personal Use Products:
3.
Variation in Consumer Needs and Use Conditions:
4.
Variation in Ability to Buy (Income Levels):
5.
Impact of Cultural Differences:
6.
Environmentally Induced Adaptation:
Global product strategies
1. Product
and Communication Extension (Dual Extension):
Ø A company markets a standardized product and uses a
uniform communication strategy across all markets.
Ø Often chosen by early entrants in the global market
or small companies with limited resources.
2.
Product Extension with Communication
Adaptation:
Ø The same product is offered in foreign markets, but
the advertising and communication campaigns are customized to suit local
cultural or competitive environments.
Ø The aim is to align the product with the local
market preferences while retaining the scale economies of manufacturing.
3. Product
Adaptation with Communication Extension:
Ø Involves adapting the product to suit the local
market but using a standardized communication strategy.
Ø Product adaptation may be necessary due to local
market circumstances or as part of an expansion strategy, such as acquiring
local brands.
4. Product
and Communication Adaptation (Dual Adaptation):
Ø When there are significant differences in both the
cultural and physical environment across countries, a dual adaptation strategy
is suitable.
Ø Companies need to adapt both the product and the
communication strategy to comply with local regulations and meet consumer
preferences.
5.
Product Invention: involves
developing and launching products with a global mindset, aiming to create
products that have a global scope rather than catering to a single country.
Ø Instead of simply adapting existing products, companies
focus on identifying global market opportunities.
Developing new products
for global market
Developing
New Products for Global Markets:
The
steps for developing new products for global markets are:
1. Generating New Product Ideas:
2. Screening Ideas:
3. Business Analysis:
4. Prototype Development:
5. Market Tests:
6. Commercialization:
Timing of entry on global market
1.
Waterfall
Strategy: Phased
rollout: Launch in different markets gradually, typically,
the product is first launched in the company's home market and then introduced
in other advanced markets. Finally, the product is marketed in less advanced
countries.
Ø Pros:
·
Reduces risk by learning and adapting in
initial markets.
·
Allows for customization based on market
characteristics.
·
Spreads out investment costs.
Ø Cons:
·
Competitors
might pre-empt foreign markets.
·
Delays
potential revenue from new markets.
Ø Suitable for:
·
Products with
long lifecycles.
·
Unfavorable
foreign market conditions (small size, slow growth, high entry
costs).
·
Weak
competitive landscape in target markets.
2.
Sprinkler
Strategy: involves
a simultaneous worldwide entry of the product within a short timeframe.
Ø Pros:
·
Capitalizes on
global trends and segments.
·
Prevents competitors
from gaining a foothold.
·
Creates a
stronger global brand image.
Ø Cons:
·
Higher initial
investment and risk.
·
Less
adaptability to diverse market needs.
Ø Suitable for:
·
Products with
short lifecycles and global appeal.
·
Strong
competitive pressure in target markets.
Product identification
Brand
Ø A brand encompasses a name, term, sign, symbol,
or design (or a combination of these elements) that is intended to identify the
goods or services of a seller and differentiate them from competitors.
Ø A brand represents
a seller's commitment to consistently deliver a specific set of features,
benefits, and services to buyers.
Ø The brand name
consists of words, letters, and/or numbers that can be vocalized, while a trademark
refers to a brand that receives legal protection.
Ø Trademarks
are legally designated words, names, or symbols.
Managing Brand Name:
Ø It
is important to carefully manage a brand name to maintain or enhance its brand
equity over time.
Ø This
involves activities such as maintaining or improving brand awareness, brand
perceived quality and functionality, and fostering positive brand associations.
Ø A
strong brand name can greatly contribute to a product's success.
Choosing a Brand Name:
Ø Selecting
an appropriate brand name is a challenging task that requires consideration of
various factors.
Ø A
desirable brand name should suggest something about the product's benefits and
qualities.
Ø It
should be easy to pronounce, recognize, and remember, and also be distinctive.
Ø It
should be capable of registration and legal protection.
Protecting the Brand Name:
Ø Once
a brand name is chosen, it is crucial to protect it from unauthorized use.
Ø Companies
often aim to build a brand name that becomes synonymous with the product
category, creating strong brand recognition and association.
Branding
decision
1. Branding
vs. No Brand:
The decision to employ branding or no brand presents
a significant consideration.
·
Branding adds costs associated with
marking, labeling, packaging, and legal procedures, which may not be
justifiable in the case of commodities.
·
Commodities, which are undifferentiated
products sold by grade, may not require branding as there is no uniqueness
beyond the grade differential.
·
Branding enables premium pricing by
enhancing identification, awareness, promotion, differentiation, consumer
confidence, brand loyalty, and repeat sales.
Advantages of No Brand:
-
Lower production costs
-
Lower marketing costs
-
Lower legal costs
-
More flexibility in quality and quantity
control
-
Good for commodities or undifferentiated
items
-
Possibility of making demand more price
inelastic
Advantages of Branding:
-
Better identification
-
Better awareness
-
Better chance for product differentiation
-
Better chance for repeat sales
-
Possible premium pricing (removal from
price competition)
2. Private
Brand vs. Manufacturer's Brand:
§ The
decision of whether to use a private brand or a manufacturer's brand on a
product depends on factors such as the manufacturer's bargaining power.
ü If
the distributor is prominent and the manufacturer is relatively unknown and
eager to enter the market, the manufacturer may need to use the distributor's
brand on the product.
ü However,
if the manufacturer has a strong position and bargaining power, it can use its
own brand on the product and require the distributor to accept that brand.
3. Single
Brand vs. Multiple Brands:
§ When
a manufacturer markets a single brand, it
can receive full attention and have maximum impact.
§ However,
in a heterogeneous market, a company may choose to have multiple brands to
cater to different segments.
§ Multiple brands are useful when a company wants to
trade up or down because these moves can potentially harm the reputation or
image of the main brand.
ü If
a company is known for its high-quality products,
trading down without creating a new brand can negatively impact the
prestige of the existing brand.
ü Similarly,
if a company is known for its low-priced, mass-produced products, trading up without creating a new brand can be
hindered by the perception of the existing products.
4. Local
Brands vs. Worldwide Brands:
When a manufacturer decides to use its own brand
name, it must consider whether to use the same brand worldwide or different
brands for different markets.
§ A global or worldwide
brand is one that has
consistent characteristics and benefits across all markets where it is
marketed, such as Coca-Cola.
ü Worldwide brands have advantages such as
status, prestige, maximum market impact, reduced advertising costs, convenient
identification for international travelers, and the ability to leverage a good
reputation for quality across product lines.
§ Local brands are useful when product quality cannot
be consistently ensured across countries or when an existing brand is difficult
to pronounce and may lead to consumer avoidance.
ü Local brands are more easily understood and
meaningful to local consumers, cater to foreign tastes and preferences, avoid
negative connotations, allow for more culturally relevant names, and enable
variations in quantity and quality across markets.
-
Factors influencing the use of local
brands include legal necessity, elimination of pronunciation difficulties, more
meaningful names, avoidance of negative connotations, quick market penetration
through local brand acquisition, and flexibility in meeting varying market
demands.
Brand Characteristics:
A good brand name should possess certain
characteristics, including being
-
descriptive of product benefits,
-
memorable,
-
fitting with the company or other
product images,
-
having availability as a trademark,
-
being promotable and advertisable,
-
Being unique compared to competitors,
-
having an appropriate length,
-
being easy to pronounce,
-
having positive connotations to
potential users,
-
being suited to packaging,
-
having a modern or contemporary feel,
-
being understandable, and being
persuasive.
Branding Approaches:
§ Solo branding: Each brand stands on its own, managed by
product or brand managers.
§ Hallmark branding: One brand, typically the corporate
brand, is used for all products/services without sub-brands.
§ Family (umbrella)
branding: A hierarchy of brands
with the corporate brand as an authority symbol and sub-brands under it.
§ Extension branding: Starting with one product and extending
the brand to other categories.
A firm’s global brand structure is shaped by
1.
Firm-Based
Drivers:
§ Organizational
structure: Centralized firms are more likely to have global brands, while
decentralized companies may have a mix of local and global brands.
§ Expansion
strategy: Acquisitive growth or organic growth can influence the brand
structure.
§ Corporate
identity: The importance of maintaining a consistent corporate identity across
markets.
§ Product
diversity: The range of products offered by the company may impact the brand
structure.
2.
Product-Market
Drivers:
§ Target
market characteristics: The homogeneity of market segments and their global,
regional, or localized nature.
§ Cultural
embeddedness: Products with strong local preferences may succeed as local
brands, particularly in food and beverage sectors.
§ Competitive
market structure: The presence of local, regional, or global competitors.
3.
Market
Dynamics:
§ Economic
integration: Harmonization of regulations and reduced trade barriers can
influence brand structure.
§ Market
infrastructure: Media and distribution channels, such as retailing, impact branding
decisions.
§ Consumer
mobility: Increased mobility can benefit global brands by enhancing visibility.
Brand Strategies:
1. Line extension: involves introducing additional items in
the same product category under the same brand name, typically with new features
such as flavors, forms, colors, ingredients, package sizes, etc.
2. Brand extension: With this strategy, a company uses an
existing brand name to launch a product in a new category.
Ø The
advantage of brand extension is that the well-regarded brand name gives the new
product instant recognition and acceptance, making it easier for the company to
enter new product categories.
3. Multi brands: a company introduces additional brands
within the same product category.
Ø This
approach is often used to establish different features or appeal to different
buying motives.
Ø It
also enables the company to occupy more shelf space and protect its major brand
by creating flanker brands.
4. New brand: When a company enters a new category, it
may find that none of its current brand names are suitable.
Ø In
such cases, launching a new brand is a viable strategy.
5. Co-brands: also known as dual branding, involves
combining two or more well-known brands in an offer.
Ø Each
brand sponsor expects that the association with the other brand will strengthen
brand preference or purchase intention.
Ø Co-branding
can be seen in co-packaged products, where each brand hopes to reach a new
audience by associating with the other brand.
Advantages of Branding:
1. Enhances
order Processing and Problem Resolution:
2. Legal
Protection:
3. Attract
and create loyal customer
4. Market
Segmentation:
5. Build
strong corporate Image
Brand piracy
Brand piracy refers
to the act of naming a product in a way that is intentionally similar to a
well-known brand, with the aim of misleading consumers and gaining market
share.
§ It
commonly occurs with products that can easily be replicated.
§ In
brand piracy, the counterfeit product may have logos, designs, symbols, colors,
or fonts that resemble the genuine product, further confusing consumers.
§ An
example of brand piracy is the use of the name "Coalgate" instead of
"Colgate."
Packaging
Packaging is involves designing and
producing the container or wrapper for a product.
It serves several important purposes:
1. Protecting
the product during transportation:
2. Providing
post-purchase protection:
3. Supporting
trade marketing:
4. Supporting
consumer marketing:
Features of packaging include:
1. Product description: Packaging should not only show what the
product is but also highlight its benefits and convey promotional messages
through words or pictures.
2. Product image: The packaging material should align with
the image of the product inside.
§ Highly
prestigious products and inferior products may require different packaging
designs.
3. Product value: Packaging is often designed to create
the perception that the contents are more valuable than they actually are.
§ For
example, a small-value item may appear larger in certain packages.
4. Shelf display: Packaging should be designed to occupy
minimal space, protect the product from damage, extend its shelf life, and
prevent pilferage.
Criticism of marketing
1. Packaging
Depletes of natural resources:
2. Packaging
is too expensive:
3. Packaging
is deceptive Deception:
4. Used
and discarded packaging contributes significantly to the solid waste problem.
Labeling
Labeling is A label is a part of a product
that carries information about the product and the seller.
§ It
can be either a part of the packaging or a separate tag attached to the
product.
§ Labeling,
packaging, and branding are interconnected.
There are three primary types of labels:
1. Brand label: It simply displays the brand name applied
to the product or package.
2. Descriptive label: It provides objective information about
the product's use, construction, care, performance, ingredients, nutritional
contents, or other relevant features.
3. Grade label: It identifies the quality of the product
using a letter, number, or word. For example, canned peaches can be grade
labeled as A, B, or C, while corn and wheat may be grade labeled as 1 or 2.
v While
brand labeling is important, it may not provide sufficient information to
buyers.
v Descriptive
labels offer more detailed product information, but they may not cover all the
information needed or desired by consumers when making a purchasing decision.
Function of labeling
ü Identifying
the product or brand.
ü Providing
information about the product, such as its origin, manufacturing details,
contents, instructions for use, and safety guidelines.
ü Promoting
the product through attractive graphics, which can attract consumer attention
and create a positive image.
After sale service
After-sales service refers to the customer support
provided after the purchase of a product or service.
ü It
involves ongoing interaction between the service provider and the customer
throughout the post-purchase product life cycle.
ü This
interaction is typically formalized through a warranty or service contract
agreed upon at the time of purchase.
The objectives of after-sales service include:
-
Differentiation:
-
Branding:
-
Long-term customer relationships:
-
New product success and development:
-
Competitive advantage:
-
Customer satisfaction:
The components of after-sales service include:
§ Installation:
§ User
training:
§ Documentation:
§ Maintenance
and repair:
§ Online
support:
§ Warranties:
§ Upgrades: