Imm unit-05 (product planning & development)

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Global Marketing Management Product Planning & Development

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Some product can not be sold at all in a foreign markets without modification; others

may be sold as is, but their acceptance is greatly enhanced when tailored specifically to

market needs.

In a competitive struggle, quality products and services that meets the needs and wants of the

consumers at an affordable price should be the goal of any marketing firm.

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Contents

• Components of a Product• Product Adaptation Vs Product Standardization

• Approaches to New Product launch Waterfall Approach Sprinkler Approach

• Case: Delving Deep into Users Mind in Indian Market

• Case of Chevrolet Spark: Adaptation for Indian Market

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Components of a Product

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Developing Products for the International markets

Whether a single standardized product can be offered worldwide or a customized product needs to be

developed for each market is the most significant product decision that a firm has to make while

operating in international markets.

Generally, industrial products and services are insensitive to cross-country preferences and may be marketed as standardized products, whereas foods, fads, fashions and styles are highly sensitive, such

require a much higher level of customization.

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McDonald’s Customized Product in International Markets

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Maharaja Mac- India Hamburger- US McAloo Tikki- India

Bulgogi Burger- Korea Kahuna Burger- AustraliaChicken- Japan

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Product Standardization

It refers to the process of marketing a product in overseas markets with little change except for

some domestic changes, such as modified packaging and labeling.

The benefits associated with using standardized products:1. Cost Saving in terms of economies of scale 2. Catering to customer globally3. Designing and monitoring components of

marketing-mix economically4. Development of a product as a global brand

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Major Factors favor Product Standardization

Major factors that favor product standardization forinternational markets include:

1. High level of technology intensity2. Formidable adaptation costs3. Convergence of customer needs worldwide4. The country of origin impact

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High level of technology intensity

• Product with high technology content are marketed as standardized products to maintain uniform international standards and reduce confusion across international markets.

For instance, computer servers, micro and macro processor, VAN etc are marketed worldwide as

standard products.

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Formidable adaptation costs

• Nature of product and market size determines the cost of adaptation, which may be too high to recover.

A number of foreign books and motion pictures are sold as standardized products world-wide. Only a few

books written in a foreign context are adapted, whose costs are difficult to recover.

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Convergence of customer needs worldwide

• Customers in diverse country markets increasingly exhibit convergence of their needs and preferences resulting in growing psychographic market segments across the borders.

• It has resulted in an increase in demand for similar goods across the border.

Levi’s jeans, MTV, McDonald’s have gained popularity among international consumers due to growing

convergence of customer needs world-wide.

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The country of origin impact

• Customer’s perception of products differs on the basis of his/her country of origin.

For instance, the consumer electronics from Japan, fashion design from Italy, fragrances from France, Instruments

from Germany, computer software from India and herbal products from China and India are considered superior in

quality and fetch a premium price and demand in international markets.

• Hence, the firms attempt to retain the image of the product as in the country of origin and market with little customization.

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Product Adaptation or Customization

Making changes in the product in response to the needs of the target market. A thorough market

research needs to be conducted so as to identify the customers’ requirements in the target market.

The benefits associated with using customizing products:1. It enables a firm to tap markets, which are not

accessible due to mandatory requirements.2. It fulfils the needs and expectations of customers in

varies cultures and environments.3. It helps in gaining market share.4. It increases sales leading to economies of scale.

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Mandatory Factors Influencing Product Customization / Adaptation

A firm has to carry out modification in internationalmarkets not as a matter of choice but as a compulsion.

Major factors that favor product customization forinternational markets include:

1. Government Regulations2. Standards for electric current3. Operating systems4. Measurement systems5. Packaging and labeling regulations

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Government Regulation:

• Different quality norms and marketers are required to follow them, like approval by FDA is needed for marketing a food or pharmaceutical products in the US.

• It is mandatory for a marketer to follow the codex standards for marketing such products in the EU.

The ban on the use of azo dyes in Europe requires the use of natural dyes in all the

products for such market.

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Government Regulation:• Product standards in the target markets have caused

Indian exporters to modify their production process to meet regulatory requirements.

A ban on PCP, a fungicide used by the leather industry that was initiated by Germany, resulted in a short-term

setback for India lather exports. The Indian leather industry had to go through dramatic alternations in its changeover to substitute chemicals, and these PCP

substitutes were roughly 10 times costlier.

India’s tea exports have been affected by concerns from importing countries regarding the pesticide residue

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Standards for electric systems:

• The electrical current standards also vary from country to country.

• In India, electric current of 220volts at a frequency of 50 Hz is used, while in the US it is 110-120 volts at a frequency of 60 Hz. Therefore, electric equipment should be modified for use in the target market depending on the country’s electricity standards.

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Operating systems:

• Differences in operating systems affect product design.• In India, China, UK, Singapore and UAE, TV operates on

phone alternating lines (PAL) while in US, Japan and Korea they work on national television system committee (NTSC).

• Therefore, a TV operating on PAL in India is unsuitable for countries with different operating system.

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Measurement Regulation:

• Different systems of measurement also affect product design.

India follows the metric system with kilograms, meter and liter as measurement units.US follows the imperial system using pound, feet and gallon.

• Therefore, the packaging size, weights and measures of products need to be modified depending upon the measurement system followed in the target market.

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Packaging and labeling regulations:

• Most countries in the middle East emphasize the use of Arabic.

• Due to the sensitive vegetarianism issue, regulation in India require food packages to exhibit a mark, i.e. veg or non-veg.

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Voluntary Factors Influencing Product Customization / Adaptation

Such modifications are not compulsory and are basedon the international marketer’s own decision to meetmarketing challenges competitively. These factors are:

1. Consumer Demographics2. Culture3. Local Customs and Traditions4. Condition of Use5. Price

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Voluntary Factors Influencing Product Customization / Adaptation

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Consumer Demographics:

• The physical attributes of the consumers also require product modification.

• The Chinese and most East Asians are smaller in size while European and Germans are generally taller. The features and attributes of the consumer products such as readymade garments, beds & bed-sheets differ.

• Mattel has adapted its Barbie dolls for 45 different nationalities.

Moving from International to Global Strategy: A Case of

“US customers preferred large furniture kits and household items. For example, Swedish beds were five inches narrower than those US customers were used to, IKEA’s kitchen cup boards were too narrow for the large dinner plates typically used in the US, IKEA glasses were too small for US customers who typically add ice to their drink and hence require large glasses- it is said that US customers bought flower vases thinking they were drinking glasses- and bedroom chests of drawers were too shallow for US consumers, who tend to store sweaters in them. ”.

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Moving from International to Global Strategy: A Case of

“In addition, IKEA Swedish-sized curtains did not fit American windows, a mistake about which a senior IKEA manager jokes, Americans just wouldn’t lower their ceilings to fit our curtains.”

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Approaches to New Product Launch

Depending upon the market and the product attributes,a firm may adopt one of following strategies for launching its products in international markets:

1. Waterfall Approach2. Sprinkler Approach

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Waterfall Approach: New Product Launch

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Time

Mar

ket

Country A

Country B

Country C

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Waterfall Approach: New Product Launch

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This strategy had long been followed in internationalmarketing. It took a long time for a number of firms,which are now global, to launch their products ininternational markets.

For instances, it took about 22 years for McDonald’s to market outside US whereas Coca Cola took about 20 years and Marlboro about 35 years to

market overseas.

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Sprinkler Approach: New Product Launch

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New Product

Country A Country B Country C

Under this, a product is simultaneously launched in various country.

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Sprinkler Approach: New Product Launch

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This strategy is preferred under following circumstances:

• If the competitive intensity of the market is very high with strong and fierce competitors

• If the life cycle of the product is relatively short• If the markets have high potential, such as

Large market size Rapid growth Cost of entry is relatively less

• If a firm has large resources to manage simultaneous product launches in multiple markets

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Gillette: Product Life Cycle

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Product Year Introduced

Original Gillette blade 1903

Blue blade 1932

Thin blade 1938

Super blue blade 1960

Stainless steel blade 1963

Platinum-plus blade 1969

TRAC-II 1971

ATRA 1977

Good News Pivot 1983

ATRA Plus 1985

Sensor 1990

Sensor Excel 1994

Match3 1998

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Gillette: Product Life Cycle

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• A closer look at the new product launch by Gillette revels that the life cycles of its products have become increasingly shorter.

• The original Gillette blade introduced in 1903 survived for about 30 years.

• In 1990, Gillette launched Sensor, the razor with new suspension system, to provide a cleaner, smoother and safer shave.

• In 1998, Mach3 was introduced as a more

advanced shaving system.

Documents

Imm unit-05 (product planning & development)