International Marketing - IB - RUG - Lecture Notes

Lecture 1

This course teaches you to become a junior marketer. This course will lead you through five parts concerning marketing. IB is much more about structure, organisations etc. Marketing is very different. Therefore we will learn how to approach things from a marketing perspective. We will not talk about marketing as a function. Marketing is also something like a philosophy.

The whole goal of this programme is that we at least should know something about marketing and international marketing, assuming that we have already read something on the basic marketing book. The article of Shah has to be read, because this builds a bridge between business and marketing. So this is a very nice addition to the international marketing book.

Monday 23^rd: Intermediate test.

We are all consumers. Marketing is part of everyday life. Marketers love to know who our consumers are. There is a kind of typical student stereotype (However, IB students from Groningen are very different from History students in Amsterdam). Yet there can be some sort of unity in diversity. Marketers try to get inside of who their consumers are and what they want. Why, why, why. Who are you as a typical consumer?

Every group of consumers belongs to a segment. The segment you are in decides on your needs. Benefits are different for everyone -> convenience & health are examples. Celebrity endorsement -> Kikker on applesauce or 15-year old girls buying Christina Aguilera perfume. McDonalds had a bad image. Therefore they teamed up with Zonnatura -> good association, healthy products. It helped McDonalds to boost their brand. They added healthy products to the Happy Meals. The children don’t even choose from these healthy options, but the fact that they can choose it, positively influences the perception of the consumer. Adding more and more salads to the menu also does the same.

The things you bring to lectures says something about you. Culture has an impact on our decision making. Culture defines the types of the solutions that the consumers are looking for when they need something. It influences how companies fill in their assortments.

Another lesson in marketing: Price is more than price -> paying for convenience, e.g. Albert Heijn online shopping.

AIOV’s are attitudes, interests, opinions and values. Marketing also counts for cities, politics, making yourself look pretty before going out -> all of these examples are considered to be marketing. Classical marketing story -> Coca Cola versus Pepsi Cola. People liked the taste of Pepsi better (blind test), therefore Coca Cola had to establish a new image. However, this new image was not accepted by the consumers. They came up with: ‘’We want our coca cola back’’. They brought the classical coke back to the market.

Where does this come from? Why if people like Pepsi better, do they become angry when coca cola changes the taste? The product is ‘’branded’’. Consumer behavior is about consumer perspective, which is very subjective. The fact that you knew it was coca cola made you choose the product. That what you taste is influenced by what you think that you taste. You experience a total concept, it’s all about perceptions.

In marketing, we’re looking at a total concept. When we’re talking about marketing, we’re also talking about value. A product is a solution for a problem. The product is just a tool to create the value. Technical quality might be perfect, but if the fulfillment of for example the website you order the product from is inefficient, the value goes down. The way people perceive a product is more than technical quality. It’s anything related to the use of the product. Benefit versus features. If you just focus on the product features, you forget why you’re creating a certain product.

Customers pay for the right benefit: e.g. simplicity. One-stop shopping dilemma. Within this course, we focus on the consumer/customers. Customers become loyal when what you receive is better than your expectations and vice versa. Changing markets due to internet. WORD OF MOUTH/electronic WORD OF MOUTH. Delight means that you’re very well satisfying customers. This could be a good strategy. Is it profitable? You’d say yes because WOD. On the other hand, If you delight consumers all the time, expectations go up. If they go up, they expect more than before. So delighting your customers is a good strategy, however there is a natural stopping point where you cannot satisfy your customers anymore. Companies therefore can lower the expected value. They say they’re busy, ‘’so we’ll try but we can’t promise anything’’. Therefore the customer expectation is lowered. You want your perceived value to be higher than the expected value. It’s important to build a relationship with your customers -> being market oriented.

Organisation versus customer. There is a shift from transactions to actual relations with the customer. Production concept is the idea that consumers will like products more if they are available and highly affordable.

Product concept is the idea that consumers will like products more if they offer high quality, performance and features. Therefore the company should devote a lot of time and energy into making continuous improvements. Price in this case does not matter.

Selling concept: consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort.

Marketing concept: In the 1980’s it became more important to get to know the customers, knowing the needs, knowing who are and are not the consumers and delivering the products better than the competitors in order to serve the needs of the customers.

Societal marketing concept: It’s a diversification of the marketing concept. The only thing that is added, is that you should not only aim at the consumers, but also looking at the long term interests of the consumers and society as a whole.  CSR, environment, greenwashing.

Is marketing a way of life? Utopia of marketing. All activities should be performed in a marketing-oriented way. Organizations should reach their objectives based on a marketing orientation. A way of life to be market-oriented. What is the benefit of the customer? You want to create moments of truth or WOW-experiences. The wow-experiences can be found throughout the value chain. Perception, satisfaction, dissatisfaction goes beyond the product.

Definition of International Marketing: The same as normal marketing definition but only they added the word international. We really have to make a marketing plan. In between the chapters are little summaries. Throughout the book they follow a whole line with the five parts that we’re going to discuss. Purpose of international marketing plan  not IB.

Lecture 2 Global Marketing

Marketing concept represents the idea that in order to achieve organizational goals, the needs and wants of the target market should be perfectly clear whilst delivering desired satisfactions. This should be done better than the competitors.

Customer centricity refers to ‘’creating value for the customer and, in the process, creating value for the firm -> dual value creation’’.

Customer perceived value = 'Get' = Product benefits + Service benefits                                                                                                                                                                                                                                 'Give'           Direct costs + Indirect costs

An IB question would be: ‘’Are we ready for internationalization?’’ Even if we are ready or not, it also depends on how ready the industry is for globalization. Depending on that, it depends on what you should do. So if you are very immature and your industry is local, stay at home. Sometimes companies really want to go abroad, but they just aren’t ready. What should you do given your own preparedness for globalization? Let’s assume we should go abroad. How can we use our competences?

Also in domestic situations you have to deal with environmental issues. But if you go abroad, there are many uncontrollable things, such as political, economic and environmental issues one cannot control. Cultural differences can also be a barrier. The name of a company may be perceived completely differently in another country. The extent to which you do research, should also be at the level of the consumer.

An example is an American bake mixes brand that introduced their products in Japan under the assumption that they have ovens in Japan too. However, at that time this was not the case, resulting in very low sales. Therefore they had to think of something completely different in order to make their products successful in Japan. All these troubles had to do with a lack of research on the level of the consumer.

Next to that , you’re competing with different brands. You might be successful in one country with a benefit, however you might not enjoy this same benefit in another country as well due to ‘local heroes’. It’s necessary to investigate the similarities and adjust to the differences.

The benefits are more on an abstract level. The question is whether you want to standardize or differentiate? The view of international market activities affects the level and base of standardization/adaption.

There are four categories:

1. Domestic marketing

2. Export marketing

3. International marketing

4. Global marketing

The structure of an international firm changes as the strategic importance and complexity of international operations become bigger. They are determined by how the firm, once again, looks upon international market activities.

We have to analyze the internal and external environment. What are the actors in my value net that I have to keep track of? In marketing, what we add to this value net are the distributors. It is also about keeping track of what is happening in the market. An example of this is showrooming.

When using SWOT we should research internally and externally. When researching the external environment, look especially into the meso-environment actors. You can’t really impact the macro-environment forces. We will focus between competition and competitors. Competition says something about the attractiveness of the market (can be measured by Porter’s five forces), whereas competitors say something about ‘’how they (the competitors) serve the market’’. The more direct the competitor is, the more similar its product will be to yours. It doesn’t say something about indirect competitors being dangerous as well.

When making an external analysis, we look at dynamics (trends, differences over time) and Status Quo (the way it is, what a market is like).

• Examples of major developments, thus dynamics, are an uncertain economy, rapid globalization, sustainability and social networks.

• Examples of demographic developments (thus dynamics) are ageing, changing family, higher education level and more one person households.

• Examples of developments on the demand side, thus dynamics, are that the consumers see no differences between products, that the consumers use simpler choice processes: they have less interest and low involved buying behavior, that individualization starts to take place and that the consumer is more rational.

• There are also many developments on the supply side (dynamics).

Status quo is the difference between markets, and it consists partially of:

1. Economic forces, for example the level of development. How many Big Macs can you buy for 100 dollars in India and how many in Switzerland.

2. Political/legal forces: such as political or social unrest and country risk. As for legal forces, intellectual property and marketing laws are very important to look at. Trademarks and copyrights can make or break your company. Products sometimes have to conform to rules regarding technical regulations, advertising, promotional restrictions and price regulations.

3. (socio)-Cultural forces: such as origins, elements of culture and the consequences. Culture influences more than you would think. It influences what product you choose as a consumer.

Characteristics of culture, it’s learned, it’s shared, and what makes it annoying is that it’s prescriptive. It causes us to have a certain perception of what is normal.

Lecture 3 - International Marketing IB

There are so many different cultures, that there might be some barriers when doing business. For example, a certain gesture might mean something in one country, but something completely different in the other.

There are many characteristics that have to be taken into account when examining cultures, eg: Food habits, family and friends, values and norms, business/work ethics and so on. There drive attitudes and behavior, which should be taken into account when implementing marketing strategy.

In High Context countries, such as Japan and Spain, people tend to be a little more implicit and they do not really say what’s on their mind. In Low Context countries however, people are more explicit, meaning that they tend to say what’s on their mind (like Dutch people do).

Hofstede’s cultural dimensions:

• Individualism

• Power distance

• Masculinity

• Uncertainty avoidance

SWOT -> IMS (international market selection), entry mode, mix.

As a marketer, we want to know who our consumers are and why they chose our products. What influences the consumer decision process? First of all, one needs to recognize his/her own need and the brand/product in order to start doing research. After that, a consumer will start to evaluate alternatives, which will finally lead to a purchase decision. Afterwards, his/her choice will influence his/her post purchase behavior. For a marketer it is very important to know about this buyer decision process because a marketer can gain information on what needs to be improved in upstream and downstream activities.

In marketing, it is impossible to please everyone. A very important marketing is thinking about your marketing strategy. Market selection depends on three things (STP strategy):

1. Segmentation

2. Targeting

3. Positioning

Hollensen divides this in International market segmentation and international market selection. Segmentation is not simply dividing the market. You want to find segments that are different from each other, and in turn react different to your marketing mix. If I can divide the market in meaningful segments, then I can choose the target segment that fits my products/capabilities best. However, I can also pick a segment that is most attractive (when there are not that many competitors) and build a product around that.

Hollensen states that if you do this well, there are four steps you can follow:

1. Selecting relevant segmentation criteria (criteria that really impact the way consumers behave).

2. Developing appropriate segments.

3. Macro segmentation

4. Micro segmentation

STP decisions: Segmentation often intertwined Targeting and Positioning

There are many characteristics for segmentation. These are the bases on which you do the segmentation and divide the group. General characteristics are very basic characteristics that can be used and applied to every country. They say more about the country than specific consumer behavior. Therefore it helps to narrow down a list of countries.

Gender as a segmentation base does not really describe who your consumer is. If you really want to describe your consumer, you will need micro characteristics.

Market segments should be measurable, accessible, substantial and actionable.

Once you have an idea of your typical consumer, you also know what type of countries might fit this consumer/have this consumer segment in it. Based on, for example, income. So first Hollensen comes up with a preliminary list (short list of countries) and later on a fine-grained list (best opportunity target countries based on competitive position and competences of the firm). If we have segmented a market, we have to find out targeting (what should I aim at), so who are the typical consumers that I want to target in which countries? Do I want to target these countries all at the same time, or shall I start with one and see that as a stepping stone to enter other markets later on. Also, am I going to diversify (shower) of specify (waterfall)?

Lecture 4 – International Marketing IB

Today we will find out what is meant with positioning, how we build it etc. Next to that, we will take a look at what entry mode fits my product best. Positioning entails how to be remembered. There are three different types of targeting marketing strategies. The positioning is translated into the marketing mix.

1. So we could make one marketing mix that fits the whole market (standardized marketing). If I’m targeting many different target segments in many countries, I can still treat them as if they are the same. Related to mass marketing, as the marketing mix will fit all the potential buyers in the market.

2. Another possibility is that you choose one or a few target segments (niche), and you are just going to be brilliant for that very specific target group (concentrated marketing).

3. A third possibility is to differentiate, meaning that you create several marketing mixes that fit the different segments you aim at.

Positioning is the key association that people have with a brand. The position of the product in the consumers mind. The way they think of it. It is very much related to perceptions, feelings, associations and impressions. Additionally, these are very different too, due to cultural differences etc. (rationality). The marketer can to some extent control the positioning.

Products can be positioned in a positioning map, showing the consumer perspectives of brands, versus competing products of competing brands. They show the perceptions of the consumers.

There are several positioning strategies, e.g. showing how your product is different in terms of its benefits, its usage occasion, users, substitutes etc. It is about showing what makes your product better than the ones of competition. What you have to do, is create a simple message that is memorable, and both shows the benefits of it and how it is different.

Rational positioning is based on the concrete benefits of a product, like safety. Emotional positioning is based on higher level emotional needs, with more emphasis on image.

Therefore if you want to promote yourself in being different from others, you should really think about the dimensions in which you distinction yourself. For example, are you distinctive, profitable, affordable, etc.

Once we know how we want to position ourselves, we have to think of how to enter the market. What entry strategy do we want to follow. This is an issue in marketing, because the choice of market entry impacts the amount of control that you as a marketer still have over your brand.

There are several grouping entry strategies, for example indirect strategies and FDI strategies. Next to that, there are:

1. export modes (low control), consisting of indirect export, direct export and cooperative export.

2. intermediate modes (shared risk), consisting of contract manufacturing, licensing/franchising and SA/JV.

3. hierarchical modes (low flexibility), consisting of domestic-based sales representatives, resident sales representatives, sales and production subsidiaries, region centers and transnational organizations.

All in all, it is very important to make an extensive analysis of entry strategies, in order to find out what works best.

Lecture 5 – International Marketing IB

Until now we have talked about SWOT, positioning etc. Today we will discuss the P of product (from the marketing mix) in relation to branding (based on total product offering). There are always associations with brands, that makes us distinguish them from others.

In this lecture will be discussed:

• What is branding?

• What are the elements within the P of product that as a marketer you have to decide upon?

When we talk about branding it is always about the total product and consumer perception. The total product, or consumer’s view, is based on a bundle of utilities or satisfaction which fulfills a need. The design as part of product adds value, e.g. benefit = convenience. Brand positioning/image is the result from all marketing mix elements.

In a marketers view, the P of product is divided by the core product benefits (Except for image), translated in the product attributes (except for price and staff behavior) and the support services. Hollensen divides this into core product benefits, product attributes and support services.

There are several elements that relate to the P of product:

• Quality level

• Product attributes

• Brand name

• Packaging and Label

• Assortment

• Design

• Service and guarantee

How do you build your brand? It is about building brand equity, which is the premium that a customer or consumer would be willing to pay for the branded product or service, in comparison to an identical unbranded version of the same product or service.

The brand name is any word/symbol/device that is used by a producer or merchant to identify this goods and distinguish them from those sold by competitors. Therefore it can be concluded that brand equity are the strong, relevant and unique associations that customers have with a brand.

Branding also has a very big impact on the buyer decision process. When a brand is so strong, and people are brand loyal, buyers will skip information search and evaluation of alternatives, because they will only consider that one brand that they are simply so happy about.

A brand also has several functions, including distinguishing a company’s products from that of competitors, creating identification and brand awareness, guaranteeing a certain level of quality, and helping with promotion.

There are three brand options:

• Private branding,

• Co-branding/ingredient branding

• Manufacturer’s branding

Single brands differ from multiple brands. For example, single brands pay full attention for maximum impact and are based on the assumption of market homogeneity, whereas multiple brands are based on the assumption of market heterogeneity and market segmentation.

Worldwide brands are based on the following:

• Based on the assumption of market homogeneity

• Uniform brand image

• Convenient identification

• Status and prestige

• Maximum market impact

• Lower production costs

• Lower advertising costs -> economies of scale

Therefore a global brand can be marketed with the same strategic principles in every market, even though the marketing mix might be differentiated a little.

Local brands are based on the following:

• Assumption of market heterogeneity

• Allowing quality variations

• Local competitive position

• Easier pronunciation by local consumers

• Avoiding negative connotation

• Avoiding legal complications

• Circumventing price control

• Discouraging gray marketing.

Large brands are often a mix of global and local brands, such as Heineken. This also relates to the topic of product mix strategies and standardization/adaption. When taking a look at international product strategies, we can differentiate between standardized products (no or minor modification) and localized products (adaptation to foreign markets).

There are several mandatory product modifications, based on different government regulations, electrical current standards, measurement systems and operating systems. There are also optional product modifications, due to user’s habits, environmental characteristics, space constraints, price differences across countries, limiting product movement across national borders and historical preference/local customs and culture.

The country of origin effect is the effect on quality perceptions that is caused by the knowledge of the production country location for the product.

All in all a marketer wants to build a strong brand, therefore having to take into consideration branding versus brand name, the CoO effect, PLCs and standardization versus adaption.

Lecture 6 - Marketing

Today’s lecture will discuss the element price from the marketing mix. It is a very difficult to make a decision on price, because customers are also not really rational at times. E.g., they associate higher price with higher quality.

Therefore price is the amount of money, the monetary price, but also the non-monetary price, the effort you have to put into it. The indirect costs you have to make to acquire this product. So if we talk about the decisions we have to make in pricing, some of them are regular. First, you have to talk about your price level (high-end or low-end article?). Second, a strategy has to be made on pricing with regards to the product life cycle. Third, decisions have to be made on pricing across products. Fourth, decisions have to be made on pricing across countries.

1. Price level: Your choices are either market skimming prices or market penetration prices. The first means that first a high price is set for a new product in order to skim maximum revenues one by one from segments that are willing to pay this higher price. The second means setting a low price for a new product, with the aim of attracting a larger number of buyers and a large market share.

2. Price changes over PLC: We have to keep in mind that the rest of the marketing mix also changes during the PLC. Next to that, trends also have to be taken into account, as a hype has a shorter life cycle than ‘normal products’. When a product enters a market, first you have the introduction phase, where you know that your aim should be to get primary demands. Then, when sales start to get off, and profit comes in, more and more competitors will enter the market and suddenly in the maturity stage, sales will still grow, but at some point people are not interested in the product anymore as they already have this product, meaning that sales will drop. Different types of consumers also influence the PLC. For example, in the early stage of the plc it will mostly be the innovators and the early adopters that buy the product. After the so-called ‘’chasm’’, the early majority and late majority will buy the product, and at this point the PLC reaches its highest point.

3. Pricing across products: This very much depend on the product line or assortments. A very important questions that has to be asked is: ‘’Do we want to stick within one price range or cover several price ranges?’’.

   Psychological pricing also has to be taken into account, as something that ‘’only’’ costs €19.99 will seem cheaper than €20.00

4. Pricing across countries: Choosing proper prices is a critical issue in global marketing, and things such as market conditions, competitors, cost factors and government regulations have to be taken into account. Also, we have to figure out whether to standardize or differentiate. There are several issues with international pricing decisions:

   1. Transfer pricing: These are pricing transactions between buyers and sellers that belong to the same firm. Firms sometimes use this to shift profits from high-tax to low-tax countries, to create and maintain barriers to entry and to manage levels of market involvement.

   2. Price escalation: This refers to the extra costs that are incurred as a result of exporting products from one country to another.

   3. Parallel importing or Grey Market: This means that the same customer is targeted by multiple channels with genuine profit, at different (pricing) conditions. There are a couple of negative effects related to grey markets, including eroding brand equity, complicated global marketing strategies and strain relationships with authorized channel members. A few things can be done to prevent parallel importing, including controlling ‘’leaks’’, creating differences in products, and using protection through EU branding laws.

Lecture 7 – International Marketing

When talking about the p in place, this is not meant in the ‘physical way’. It has to do with how you make your product available to the consumer, to the public. Because there are so many customers and producers nowadays, it is very smart to make use of distributors. Therefore we say that channel members add value. However, it decisions have to be made on using intermediaries, e.g., how many will we use? Yet, it still makes an important part of the marketing mix.

The strategic decisions have to do with the structural parts of the channel, where subdecisions include e.g. decisions on the types of intermediary, the coverage, the length, the control resources or the degree of integration. Decisions also have to be made on managing and controlling distribution channels, where subdecisions include e.g., decisions on screening and selecting intermediaries, contracting, motivating, controlling and termination. Lastly decisions have to be made on managing logistics, where subdecisions include e.g. order handling, transportation, inventory and storage/warehousing.

There are three market coverage strategies, that are related to the type of product:

1. Intensive distribution (for convenience, so supermarkets)

2. Selective distribution (for regular shopping)

3. Exclusive distribution (for specialty products)

There several levels in the distribution channel:

• Direct channels

• Indirect channels

• Several considerations linked to this:

  • Price escalation

  • Less control and greater channel complexity as the channel gets longer

For multi-channeling you have to think of whether I want to use different channels and what I am going to use them for.

There are several issues related to multi-channeling:

• Goal of the different channels for consumers

• Cannibalization/ overlap different channels

• Consistency channels

In having all these different channels, how should be dealt with different distributors? There are several criteria related to this:

• Financial and company strength

• Product factors

• Marketing skills

• Commitment

• Facilitating factors

Promotion in marketing is about communication. Therefore attention has to be paid to developing effective communication and promotion.

As for setting objectives, there are several buyer-readiness tages:

1. Awareness

2. Knowledge

3. Liking

4. Preference

5. Conviction

6. Purchase

Hollensen said that attention should be paid to new or existing customers, which are the communication target group.

As for setting budgets, percentage of sales, the competitive parity approach and the objective and task approach can be distinguished between.

In designing an effective message, it is very important to think of the following:

• The objective and the AIDA framework (Awareness, Interest, Desire, Action)

• Message content

• Message structure

• Message format

Note: the P of promotion is NOT just sales promotion!!

Next to this, there is also the difference between standardization and differentiation. There are various drivers and constraints related to this, which will help deciding on whether to standardize or differentiate. Yet there are still benefits and constraints related to both of these options.