Post on 22-Jan-2015
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International Product Development
By Amrendra Kumar
MKTG 769 PRODUCTS AND SERVICES Lars Perner, Instructor 2
PRODUCTS AND SERVICES• Product functions
across culture• Standardization vs.
customization; adaptation as a compromise
• Communication vs. product adaptations
• Branding• Services
Review issues
• Country economics– Demand for quality vs. low cost– Cost of labor
• Within country segment variations• Local competitive situation
– Overall competition– Competition for specific product lines– Possible competition with partners in
other countries
Product Need Satisfaction
• Products serve different purposes in different countries; e.g.,– Autos: transportation in U.S.; largely status
symbol in Japan– Toothpaste: Cavity prevention in U.S.; breath
freshener in Ireland– Tang: convenience, low cost beverage in
U.S.; pineapple flavor as special treat in Brazil (real oranges are cheap and plentiful)
Approaches to Product Introduction
Not suitable for the Middle East!
● Customization ● Localization
● Adaptation ●Standardization
Product Design Philosophies
STANDARDIZATION
ADAPTATION
CUSTOMIZATION
ETHNOCENTRIC
GEOCENTRIC
POLYCENTRIC
REGIOCENTRIC
Reasons for Standardization
• Avoiding high costs of standardization, if applicable
• Technological intensity– Reduced confusion– International
compatibility among product group components
– Faster spread of rapid life cycle products
• Convergence of global consumer tastes/needs
• Country of origin positioning
Standardization--Advantages
• Benefits– Economies of scale– More resources available for
development effort• Better quality
– Enhanced customer preference (?)
– Realistic when all cultural needs cannot be met
• Global customers• Global segments
Standardization--Disadvantages
• Unnecessary features• Vulnerability to trade
barriers• Strong local
competitors
Product Adaptations
• Mandatory– legal requirements– infrastructure– physical
requirements
• “Discretionary”– local tastes– fit into cultural
environment
Motivations for Adaptation
• Legal• Infrastructure• Consumer
demographics• Culture
– Religious impact– Cultural context of
use
• Local traditions/ customs—e.g.,– Food usage
occasions– Aesthetic
preferences
• Local usage conditions
• Pricing pressures/ tradeoffs
The Reality: Continuum of “Mandatoriness”
Completelymandatory
Completely“discretionary”
ElectricVoltage
Productlabeling
TasteOptimization
Style, color
PerformanceOptimization
StrongCulturalConflict
Legalrequirements
EconomicSuitability
Manner of use
Mandatory Adaptation Issues
• Choices in approach to mandatory conditions--examples– Power drills with noise suppression filters– Non-public ear piercing in Japan
• Distribution and promotion implications
• “Arbitrary” standards (e.g., TV, DVD players)• Conflicting rules between countries—may
not be possible to make product legal in all
Compatibility Issues
• Basic requirements– E.g., voltage, infrastructure, plugs
• Compatibility– Ability to be used within a local system
(e.g., frequencies, electronic protocols)
• Multi-system compatibility– Product can be set to operate within
several standards
Physical Product vs. Communication Adaptations
Communication adaptations not needed (extension)
Communication adaptations needed
Product adaptations not needed (extension)
Some industrial equipment; some electrical equipment
Bicycle; some fast food; chewing gum
Product adaptations needed
Gasoline; laundry detergent
Greeting cards; some fast food
Domestic equivalent does not exist (product invention)
Compass-equipped prayer rug; hand powered washing machine; bottled green tea
Global Product Lines
• Historical decisions– Very difficult to change position of a product
• Mergers and acquisitions– Trademark ownership across markets
• Preferences– For products– For manufacturers of product types
• Capacity• Product Life Cycle (PLC) and market growth• Channels
Entry Timing Strategy
• Waterfall– Initial introduction
in selected market(s) with “trickle down” to markets of later entry
• Market readiness
• Concentration of resources
• Sprinkler– Immediate
entry into all targeted markets
– Preemption of early entry advantage
– Fewer resources available for each market
Definitions
Innovation: “An idea, practice, or product perceived to be new by the relevant individual or group.”
Diffusion process: “The manner in which innovations spread through the market.”
Notes on Degrees of Innovation
• Newness must be considered in context of – Local market– Segment within market
• The less continuous an innovation (for a given region), the more marketing is needed
To Adopt or Not to Adopt: How Will Consumers Answer the Question?
• Some causes of resistance to adoption– perceived risk--financial and
social– self image– effort to implement and/or learn
to use the product– incompatibility– inertia
Types of Innovations
• Fashions—preferred styles change over time; often with repetition
• Fads—a product or practice gains large but temporary interest (can be revised)
• Trends—the prevalence of usage or acceptance of a product or practice increases or decreases consistently over time
0
10
20
30
40
Num
ber o
f new
adopto
rs
-2.50 -1.50 -0.50 0.50 1.50 2.50
Adoption of Innovations Over Time
Innovators2.5%
Laggards(13.5%)
Earlymajority34%
Earlyadoptors(13.5%)
Late majority34%
0
0.2
0.4
0.6
0.8
1
Percent diffu
sio
n
0 5 10 15 20 25 Time
The S-Shaped Diffusion Curve
100% adoptionor saturationpoint
One Diffusion Pattern--Nicely Balanced...
Influences on the Speed of Diffusion• Risk to expected benefit ratio
(relative advantage)• Observability• Product pricing• Trialability• Switching difficulties and
learning requirements/ ease of use
Pioneering Advantage
• Consumer expectations are usually shaped by the first encountered brand
• Order of entry vs. pioneering advantage
• Positioning of existing pioneer vs. strategy of first entry
Societal Conditions Conducive to Diffusion
• Modernity• Homophily• Physical distance• High proportion of women
in the workforce• Opinion leadership
Developing New Global Products
IDEA GENERATION
SALESFORECAST
TESTMARKETING
CONCEPTRESEARCH
PRELIMINARYSCREENING
FOCUS GROUPS
CONCEPTTESTING
TARGETRESEARCH
Concept Research
• Focus groups: Find out very broad background for further research
• Concept testing– Prototypes– Benefit package
evaluations• Target research
– Decision making strategies– Shopping habits– Beliefs/expectations
CONCEPTRESEARCH
FOCUS GROUPS
CONCEPTTESTING
TARGETRESEARCH
Branding Choices
BRANDING NO BRAND
NATIONAL/LOCAL
INTERNATIONAL
MANUFACTURERPRIVATE LABEL
MULTIPLE BRANDS
SINGLE BRAND
“UMBRELLA” BRANDS
Branding Choices--Notes
• Combinations are possible—e.g., – Own branding plus additional sales to
store branding– International brand (e.g., Coca Cola) plus
local brand(s), usually sold at lower prices
Branding Issues
• Demand spillover– Media coverage– Internet exposure
• Global customers• Scale economies• Importance of brands within country
– Country of origin– Expertise– Prestige
Local Market Branding Expectations• Asian consumers
typically have more concern with brands– conglomerates
have brands encompassing large range of goods (e.g., Mitsubishi food products)
The Brand Portfolio
• Brand extensions vs. – Creation of new brands– Brand ownership (brand tiers)
• Brand hierarchies
Brand Globalization Potential
• Word meanings• Word appeal
– Pleasantness of associations
– Suitability of associations
– Pronouncability– Pleasantness of sound– Writing and pictoral
appearance
• Trademark and name availability– Access to desired name– Protection against close
imitations by others (e.g., Lindows)
• Complementarity with other product line items
• Growth plans—regional vs. international
Implementation
• Brand building (see promotion material)
• Fade-in/fade-out
• “Endorsement branding”– For implementation– For distinction of lower tier brand
• Double branding
Positioning a Brand
• Position relative to existing brands?– Same– Generally better– Foreign image– Lower price– Special, unique benefit
• Appeal across segments?
• Usage occasion/need
Counterfeit Products
• Impact– Loss of sales– Loss of exclusivity/price pressure– Possible lack of confidence in quality– Warranty issues
• Approaches– Legal– “Search and destroy”
Physical Product vs. Communication Adaptations
Communication adaptations not needed (extension)
Communication adaptations needed
Product adaptations not needed (extension)
Some industrial equipment; some electrical equipment
Bicycle; some fast food; chewing gum
Product adaptations needed
Gasoline; laundry detergent
Greeting cards; some fast food
Domestic equivalent does not exist (product invention)
Compass-equipped prayer rug; hand powered washing machine; bottled green tea
The International Life Cycle
• Market for older technology tends to exist in less developed countries– Manufacturing of older
generation technology—e.g., Pentium I computers
– Resale of capital equipment—e.g., DC 8 aircraft, old three part canning machines
• Some countries tend to be more receptive to innovation than others
• “Leap frogging”– Going directly from old
technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)
• Shortening of product life cycles
Country of Origin Effects
• Perception of product– quality (e.g., Japan, Germany)– elegance and style (e.g., France, Italy)
• Historical associations• Positioning strategies
– Emphasis on origin (e.g., French wine)– De-emphasis/obfuscation of of country of
origin (e.g., French beer, American products with French language labels)
Services
• Scope• Characteristics
– Intangibility– Heterogeneity– Inseperability– Perishability
• The Service-Tangible Product Continuum
Service Issues
• Country expectations– Willingness to pay– Quality– Speed– Competence of
personnel– Courtesy/deference– Decision making
authority of personnel
• Cost• Availability of
skilled personnel• Control over
personnel performance
• Overhead issues