Winning Hearts, Minds and Sales in Emerging versus Mature Markets

Why Long-Term Marketing Effectiveness Differs

Koen Pauwels, Ozyegin University, IstanbulSelin Erguncu, Koc University, Istanbul

Marketing Dynamics 2011: Jaipur, India

 

1

Overview

• Branding and marketing effectiveness

• Customer Attitude Dynamics and Criteria

• How CAD differs in emerging vs mature markets

• Empirical comparison across 2 categories 2

Is a brand = a brand = a brand ?

“Marketing principles are universally applicable, and the marketer’s task is the same whether applied in Dimebox, Texas or Katmandu, Nepal”(Cateora and Hess 1966, p. 4)

"We have passed through the age of information and knowledge and we now live in the age of ideas. Successful brands tell stories. They are romantic and mysterious.“Roberts (2005, Lovemarks)

“In the end, it’s really the basic work, whether you have reliable quality, good service, that are the fundamental attributes of a brand.” Mr Zhou (CEIBS, 2008)

3

Do consumer behavior & marketing effects differ ?

“in India, people are even more brand-conscious than they are in the U.S., particularly for PCs. If someone buys a PC, all the neighbors come and ask not only which brand you bought, but what type of processor it has in it” (Deepak Advani, IBM, 2009)

“In emerging markets, brands are seen as an important mark of quality and status. People value the reassurance provided by a well-known brand name, and if they can, they may be willing to pay more for it. They believe it is important to get the right brand even if they have to shop around for it. In mature markets, people are more likely to assume that all brands stocked by mainstream retailers will deliver the same basic quality”

(Nigel Hollis, Millward Brown 2010)

4

Emerging Markets

• are countries that are restructuring their economies along market-oriented lines;

• offer a wealth of opportunities in trade, tech transfers, and foreign direct investment;

• are regional economic powerhouses with large populations, resource bases, and markets;

• will also become more significant buyers of goods and services than industrialized countries.

Cultural Difference

s

• Self-Construal / collectivist

• Power Δ / status seeking

• Search

Economic Difference

s

• Income• Consumer Protection• Technology,

Competition,…

Cultural & Economic Differences

7

Brazil, India, China

USA, UK, Netherlands

Individualism 35 (14,19) 87 (6,08)

Power Distance 75 (5,69) 38 (2,52)

GDP per capita (US$) 4.310 (3.636) 43.313 (6.971)

Technology Level 3,89 (0,30) 5,38 (0,75)

Trust in General Advertising

2,7 (0,12) 2,4 (0,03)

Trust in Traditional Advertising

2,8 (0,15) 2,5 (0,06)

Trust in Online Advertising

2,6 (0,10) 2,3 (0,03)

BIC versus Anglo-Saxon market descriptives (st.dev.)

8

10 30 50 70 900

5

10

15

20

25

30

35

40

45

50

Individualism

GD

P pe

r ca

pita

(U

S$)

0 20 40 60 80 1002.25

2.3

2.35

2.4

2.45

2.5

2.55

2.6

2.65

2.7

2.75

BrazilLinear (Brazil)IndiaLinear (India)ChinaLinear (China)USLinear (US)UK

Individualism

Trus

t in

gen

eral

adv

erti

sing

Customer Attitude Dynamics (Srinivasan et al. 2010)

What marketers do • Advertising• Price• Distribution

What customers think & feel Awareness Consideratio

n Liking

What customers do

Brand purchases

Marketing

builds

Attitudes

which convert

to Brand Sales

Customer Attitude Dynamics Criteria

• Hanssens, Pauwels, Srinivasan and VanHeule (MSI 2010)

• Explain marketing impact by 4 criteria of attitude dynamics– Potential: room to grow ?– Stickiness: do changes last ? – Responsiveness to Marketing– Conversion to Sales

• This paper proposes that attitude dynamics (and thus marketing effects) differ for emerging vs. mature markets

10

Our Conceptual FrameworkCultural

Differences

- Self-Construa

l- Search Economic

Differences

- Income- Consume

r Protectio

n

Attitude Dynamics:Stickiness, Conversion

- Awareness- Consideration

- Liking

Marketing Response of

each attitude to:

- Advertising- Distribution

- Price

Marketing Effectiveness

-Sales

H1: Interdependent self-construal leads to (a) higher stickiness for consideration and (b) liking, and thus a (c) lower responsiveness to advertising.

12

Connectedness

Strong relation

Comparing experiences

Communal decisions

Interdependent self-

construal

Higher stickiness for consideration and liking

Lower responsiveness to advertising

H2: Higher information search leads to (a) lower stickiness for awareness, and thus (b) higher responsiveness to advertising and (c) to distribution.

13

Status conveyed by consumption

Higher search: higher upside

benefits AND downside

costs

Lower stickiness

Higher responsiveness to advertising and distribution

Higher trust in

advertising Less blocking of advertising

Low consumer protection

Less ad-blocking

technology

H3: (a) Consideration has higher sales conversion than liking; (b) distribution not as crucial as in mature markets, but (c) high price perception helps sales

14

Lower sales conversion for liking

Higher sales converstion for consideration

Buy Known Hi-end Brands

Will “shop around” to avoid poor

quality

‘Cheapest’ goods may

be poor quality

Insufficent protection

of consumer interests

High Price- Quality

Perception

H4: High price (a) increases consideration, but reduces (b) liking and (c) sales due to low income

15

Low Income

Stronger price-quality associations

High QualityHigh PriceHigher consideration

Limited purchasing

power

Lower sales effects and lower liking

Marketing Effects Emerging versus mature markets

Awarenes

s

Considerati

on

Liking Sales

EffectsAdvertising Responsive

ness

[H2b]

) [H1c]

[H1c]

Lower ST but longer LT

DistributionResponsive

ness

[H2c]

[H3b]

[H3b]

Price Responsive

ness

[H4a]

[H3c]

Stickiness [H2a]

[H1a]

[H1b]

Conversion [H3a]

[H3a]

16

Methodology: system of univariate equations

• Potential = remaining distance to the natural ceiling – Similar to classic dynamic response models

(Vidale & Wolfe) • Stickiness = staying power without further

inducement– Measured as own lagged terms (∑AR terms

univariate model)– Range of stickiness is 0 stickiness to 1

(permanent shift)• Responsiveness=marketing’s power to move

attitude needle – Is short-term elasticity, different for each

metric and action

17

Attitude-to-Sales Conversion

• Regression of sales on attitude metrics & AR(1)

• Consumer attitude metrics Granger Cause sales: they help us predict sales beyond past sales infoMSFE( S | S(-k) ) > MSFE ( S | S(-k), A(-k) )– S = sales revenue – A = attitude metric – k>0

18

Long-Term Marketing Effectiveness

| 19

Vector-Autoregressive Model of Sales and Marketing:

› Lags J selected by Bayesian Information criterion

› Immediate impact through error covariance matrix

› Cumulative sales effect: impulse response function

11 12 13 1412

21 22 23 24

1 1 31 32 33 34

41 42 43 44

Pr j j j j t jt P Pj j j jJ

t jt D Dt j j j j

jA At t jj j j j

S St t j

Pice CDDist C

SeasCAds ACSales S

,

,

,

,

P t

D t

A t

S t

Data challenges• Control for other differences:1) Brands: same brands in emerging/mature

market2) Market (share) position: similar

positioning, market shares3) Similar potential: for attitude metrics

ideally

• Data for non-food FMCG in 2000s: marketing, attitudes

Emerging market: a BIC country (global top 10)

Mature market: a highly industrialized country (global top 10)

Same 3 global brands, similar market share position, potential

20

Attitude Stickiness in Emerging vs Mature Market

AD AWAREEmg < Mature

CONSIDEREmg > Mature

LIKINGEmg >> Mature

21

category 1 category 2 TOTAL

0.00.10.20.30.40.50.60.70.80.91.0

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.70.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Sales Conversion in Emerging vs Mature Market

AD AWAREInconclusive

CONSIDEREmg > Mature

LIKINGEmg << Mature

22

category 1 category 2 TOTAL

0.00

0.01

0.02

0.03

0.04

0.05

0.000.020.040.060.080.100.120.140.160.180.20

0.00

0.05

0.10

0.15

0.20

0.25

Advertising Response in Emerging vs Mature Market

AD AWAREEmg > Mature

CONSIDEREmg << Mature

LIKINGEmg << Mature

23

category 1 category 2 TOTAL

0.0000.0020.0040.0060.0080.0100.0120.0140.0160.0180.020

0.000

0.002

0.004

0.006

0.008

-0.0020.0000.002

0.0040.0060.008

0.0100.012

Distribution Response in Emerging vs Mature Market

AD AWAREEmg > Mature

CONSIDERInconclusive

LIKINGEmg < Mature

24

category 1 category 2 TOTAL

0.00.10.20.30.40.50.60.7

-0.6-0.4-0.20.00.20.40.60.8

-0.4-0.20.00.20.40.60.81.01.21.4

Price-Attitude Response in Emerging vs Mature Market

AD AWARE (-)Emg >> Mature

CONSIDEREmg > Mature

LIKINGEmg - , Mature +

25

category 1 category 2 TOTAL

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0-0.20.00.20.40.60.81.01.21.41.6

26

Long-Term Sales EffectsEmerging vs. Mature Markets

EMG

MA

TUR

E

EMG

MA

TUR

E

EMG

MA

TUR

E

Advertising Effect

Distribution Elasticity

Price Elasticity

-2.2

-1.7

-1.2

-0.7

-0.2

0.3

0.8

1.3

0.108 0.020

0.521

1.160

-2.053

-1.487

Love Marks or Safe Bets ?

27

Low sales conversion

High sales conversion

Low response to marketing , high staying power

Liking Emerging

Consideration Emerging

High response to marketing, low staying power

Consideration Mature

Liking Mature

As illustrated in US-China debates on what a brand is

• “A recent study reveals that the average Chinese consumer feels the need to wear at least three branded items to feel comfortable at work. Yet, when probed further, they were at a loss, unable to define the features of a brand. However, they had no difficulty describing the product. It seems that for them, the product is the brand. The emotional connection is simply absent” (Lindstrom 2011)

• Advani (2006) : "We are trying everyday to make Lenovo a global brand. Our goal is, not only people here but also people around the world know us. They will have an emotional connection with Lenovo. Becoming a name is one thing but having a deep emotional connection with the company is quite another. That is what our aspirations are: to become a brand that people around the world love.”

28

Romance & Reliability • Roberts (2005) identifies 3 key

elements of a Lovemark: mystery, sensuality and intimacy: "We have passed through the age of information and knowledge and we now live in the age of ideas. Successful brands tell stories. They are romantic and mysterious.“

• Mr Zhou (CEIBS, 2008) “In the end, it’s really the basic work, whether you have reliable quality, good service, that are the fundamental attributes of a brand.”

29

CONCLUSIONS

• Different long-term marketing effectiveness in emerging versus mature markets

• Can be explained by differences in stickiness, responsiveness and sales conversion of attitudes

• Emerging markets experience a higher stickiness of consideration & liking (interdependent self)

• But a higher responsiveness of ad awareness to advertising & distribution (more search)

• Consideration converts more than liking

30

Which raises further questions:

• Symbolic > Experiential brand benefits in emerging market

• Self expansion (Aron et al. 2005) is the desire to incorporate others (people or brands) into the self concept (Park et al. 2010): do mature market consumers care more about emotional connections with brands because they have fewer connections with people (eg Erdem on religion?)

• As countries transition to industrial & to service-oriented economies (Inglehart and Baker 2000), will consumers continue go for ‘safe bets’, i.e. brands with reliable quality and good service or will they go for ‘love marks’, i.e. brands that are “romantic, sensual and intimate” ?

31

Thank you !

QUESTIONS ?

32

Relative Price, Consideration and Love for 3 brands

Category 1 Category 2

33

A B C0

0.2

0.4

0.6

0.8

1

1.2

1.4

Emg Price

Mat Price

Emg Consider

Mat Consider

Emg Like

Mat Like

A B C0

0.2

0.4

0.6

0.8

1

1.2

1.4

‘Cost More’ Sales Conversion: + Emg, - Mature Market

34

category 1 category 2 TOTAL

-0.12

-0.10

-0.08

-0.06

-0.04

-0.02

0.00

0.02

0.04

1) Potential: does attitude have room to grow ?

40%95%

35

2) Stickiness: how much carries over ?

36

3) Responsiveness: can we move it?

37

4) Conversion: does it translate into sales ?

38

Customer Attitude Dynamics (Srinivasan et al. 2010)

What marketers do • Advertising• Price• Distribution

What customers think & feel

Awareness Consideration Liking

What customers do

Brand purchases

Direct Effect: Harvesting Attitudes

Indirect effect: building attitudes

and converting them to sales