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Products and Services

for Consumers
Chapter Learning Objectives
• The importance of offering a product suitable for the intended
market
• The relationship between product acceptance and the market into
which it is introduced
• The importance of quality and how quality is defined
• Country-of-origin effects on product image
• Physical, mandatory, and cultural requirements for product
adaptation
• The need to view all attributes of a product in order to overcome
resistance to acceptance

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Global Perspective
Hong Kong – Disney Rolls the Dice Again
• Tokyo Disneyland – successful
• EuroDisney – disaster
• Hong Kong Disneyland – open for business
• The opportunities and challenges for international marketers of
consumer goods and services today is great and diverse.
- Market offerings
- Business-to-consumer marketing
• Quality products and services that meet the needs and wants of
consumers at an affordable price should be the goal of any
marketing firm.

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Quality
• Intense global competition is placing new emphasis on
manufacturing quality products.
• Shift to a customer’s market.
• Increased customer knowledge.
• The customer defines quality.
• The cost and quality of a product are among the most
important criteria by which purchases are made.
• Quality, as a competitive tool, is the deciding factor in
world markets.

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Quality Defined
• Intense global competition is placing new emphasis on
manufacturing quality products
• Quality, as a competitive tool, is the deciding factor in world
markets.
• Quality can be defined on two dimensions:
(1) Market-perceived quality
(2) Performance quality
• Most consumers expect performance quality to be a given
• Quality is associated with customer satisfaction
• Quality is also measured in many industries by objective third
parties such as JD Power and Associates
• Customer satisfaction indexes developed are now being used to
measure satisfaction across a wide variety of consumer products
and services
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Maintaining Quality
• Damage in the distribution chain.
- Russian chocolate
• Market- Perceived quality was also an issue.
- Russian chocolate had a different taste because of its formulation,
more cocoa and chocolate liqueur are used than in western brands,
which makes it grittier.
• Quality is essential for success in today’s competitive global
market.
• The decision to standardize or adapt a product is crucial in
delivering quality.

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Physical or Mandatory Requirements and
Adaptation
• Products may have to change in a number of ways to meet the
physical or mandatory requirements of a new market, ranging
from simple package changes to total redesign of the physical core
product.
• Product homologation is used to describe the changes mandated
by local product and service standards.
• Legal, economic, political, technological, and climatic
requirements of the local marketplace often dictate product
adaptation.
• Changes may also have to be made to accommodate climatic
differences.

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Green Marketing and Product Development

• At the forefront of the “green movement,” with strong public


opinion and specific legislation favoring environmentally friendly
marketing and products.
• Critical issues affecting product development:
- Control of the packaging component of solid waste
- Consumer demand for environmentally friendly products.
• European Commission guidelines for Ecolabeling
• Laws to control solid waste.
Green marketing is a term used to define concern
with the environmental consequences of a variety of
marketing activities.
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Products and Culture
• A product is the sum of the physical and psychological
satisfactions it provides the user.
- Primary function
- Psychological attributes
1. Facets of products include its form, taste, color, odor, and texture;
how it functions in use; the package; the label; the warranty;
manufacturer’s and retailer’s servicing; the confidence or prestige
enjoyed by the brand; the manufacturer’s reputation;
2. The adoption of some products by consumers can be affected as
much by how the product concept conforms with norms, values,
and behavior patterns.
3. Thus, many facets of products are influenced by culture, which
markets must pay attention to.

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Innovative Products and Adaptation

• Determining the degree of newness as perceived by the


intended market
• Diffusion (The process by which innovation spreads).
• Established patterns of consumption and behavior
• Foreign marketing goal: gaining the largest number of
consumers in the market in the shortest span of time
- Probable rate of acceptance

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Diffusion of Innovations
• Crucial elements in the diffusion of new ideas:
(1) An innovation
(2) Which is communicated through certain channels
(3) Over time
(4) Among the members of a social system
• The element of time
• Variables affecting the rate of diffusion of an object:
- The degree of perceived newness
- The perceived attributes of the innovation
- The method used to communicate the idea

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Five Characteristics of an Innovation

1. Relative advantage (The perceived marginal value of the new


product relative to the old).
2. Compatibility (Its compatibility with acceptable behavior, norms,
values, and so forth).
3. Complexity (The degree of complexity associated with the product
use).
4. Trialability (The degree of economic and/or social risk associated
with product use).
5. Observability (The ease with which the product benefits can be
communicated)

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Production of Innovations
• Inventiveness of companies and countries
• Expenditures
• Japanese solutions
- American-style education programs
- American design centers
• New ideas come from a growing variety of sources, countries,
acquisitions, and even global collaborations.

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Analyzing Product Components
For Adaptation

• A product is multidimensional, and the sum of all its features


determines the bundle of satisfactions (utilities) received by the
consumer
• The many dimensions of products can be divided into three
distinct components:
(1) Core component,
(2) Packaging component, and
(3) Support services component

• These components include all a product’s tangible and intangible


elements and provide the bundle of utilities the market receives
from use of the product.

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Analyzing Product Components for
Adaptation

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Marketing Consumer Services Globally

• Consumer services characteristics:


- Intangibility
- Inseparability
- Heterogeneity
- Perish ability
• A service can be marketed both as an industrial (business-to-
business) or a consumer service.
• There are several services opportunities in global markets from
travel and tourism, TV, movies, to financial services

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Services Opportunities in Global Markets
• Tourism
• Transportation
• Financial services
• Education
• Communications
• Entertainment
• Information
• Health care

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Barriers to Entering Global Markets for
Consumer Services
• Most services are inseparable and require production and
consumption to occur almost simultaneously; thus, exporting is not
a viable entry method for them.

• Globally, Consumer services marketers face the following four


barriers:
- Protectionism
- Restrictions on transborder data flows
- Protection of intellectual property
- Cultural barriers and adaptation

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Brands in International Markets

• A global brand is defined as the worldwide use of a


name, term, sign, symbol (visual and/or auditory),
design, or combination thereof intended to identify
goods or services of one seller and to differentiate them
from those of competitors
• A successful brand is the most valuable resource of a
company
• Brand image is at the very core of business identity and
strategy.
1. Global brands such as Kodak, Sony, Coca-Cola, McDonald’s,
Toyota, and Marlboro play an important role in that process
2. Perceived brand “globalness” leads to increases in sales

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Copying is the highest form of flattery? Not so in the car business. The new QQ model
From Chinese company Chery (Left) resembles the Matiz or Spark from GM’s Daewoo (Right)
perhaps a bit too much.
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Top Twenty Brands (continued)
Rank 2005/2004 2005 Brand Value 2004 Brand Value Change Country of
(millions) (millions) (%) Ownership
11/11 Mercedes- $20,006 $21,331 -6 Germany
Benz
12/13 Citi 19,967 19,971 0 U.S.

13/12 HP 18,559 17,683 5 U.S.

14/14 Am Ex 18,534 16,723 5 U.S.

15/15 Gillette 17,534 16,723 5 U.S.

16/17 BMW 17,126 15,886 8 Germany

17/16 Cisco 16,592 15,948 4 U.S.

18/44 L Vuitton 16,077 NA NA France

19/18 Honda 15,788 14,874 6 Japan

20/21 Samsung 14,956 12,553 19 S. Korea

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Top Twenty Brands
Rank 2005/2004 2005 Brand Value 2004 Brand Value Change Country of
(millions) (millions) (%) Ownership
1/1 Coca Cola $67,525 $67, 394 0% U.S.

2/2 Microsoft 59,941 61,732 -2 U.S.

3/3 IBM 53,376 53, 791 -1 U.S.

4/4 GE 46, 996 44,111 7 U.S.

5/5 Intel 35,588 33,499 6 U.S.

6/8 Nokia 26,452 24,041 10 Finland

7/6 Disney 26,441 27,113 -2 U.S.

8/7 McDonalds 26,041 25,001 4 U.S.

9/9 Toyota 24,837 22,673 10 Japan

10/10 Marlboro 21,139 22,128 -4 U.S.


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Global Brands

• The Internet and other technologies accelerate the pace of


the globalization of brands
• Ideally gives the company a uniform worldwide image
• Balance
• Ability to translate

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National Brands

• Acquiring national brand names


• Using global brand names
• Nationalistic pride impact on brands
• Use global brands where possible and national brands
where necessary

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Country-of-Origin Effect and Global Brands

• Consumers have broad but somewhat vague stereotypes about specific


countries and specific product categories that they judge “best.”
• Ethnocentrism
• Countries stereotyped on the basis of whether they are industrialized, in
the process of industrializing, or developing
• The more technical the product, the less positive is the perception of one
manufactured in a less-developed or newly industrializing country
• Fads often surround product from particular countries or regions

Country-of-origin effect (COE) can be defined as any


influence that the country of manufacture, assembly, or
design has on a consumer’s positive or negative perception
of a product.

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Private Brands

• Growing as challengers to manufacturers’ brands


• Private labels:
- Provide the retailer with high margins
- Receive preferential shelf space and in-store promotion
- Are quality products at low prices
• Must be competitively priced and provide real consumer
value

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Summary
• The growing globalization of markets must be balanced with the
continuing need to assess all markets for those differences that
might require adaptation for successful acceptance.
• In spite of the forces of homogenization, consumers also see the
world of global symbols, company images, and product choice
through the lens of their own local culture and its stage of
development and market sophistication.
• Each product must be viewed in light of how it is perceived by
each culture with which it comes in contact.
• Analyzing a product as an innovation and using the Product
Component Model may provide the marketer with important leads
for adaptation.

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