TRƯỜNG ĐẠI HỌC NGOẠI NGỮ- TIN HỌC THÀNH PHỐ HỒ CHÍ MINH

Ho Chi Minh City University of Foreign Languages – Information Technology

CHAPTER 13

PRODUCTS AND SERVICES

FOR CONSUMERS
P h i l i p R. Ca t e o r a - Ma r y C. Gi l l y - J o h n L . Gr a h a m

www.huflit.edu.vn
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 Discussion
• Define the country of origin effect and give examples
• The text in the book discusses stereotypes, ethnocentrism, degree
of economic development as the basis for generalizations about
country of origin effect on product perception. Explain and give an
example.
• What are the three major components of a product? Discuss their
important to product adaptation.
• How can knowledge of the diffusion of innovations help a product manager
plan international investment?
• Explain the PLC theory and how it applies to International Marketing
• “If the product sells in Dallas, it will sell in Tokyo or Berlin”. Comment
• Discuss “environmentally friendly” products and product development.
 What Should You Learn?
• 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
 Global Perspective Hong Kong –
Disney Rolls the Dice Again
• Tokyo Disneyland – successful
• EuroDisney – disaster
• Hong Kong Disneyland – open for business
• Opportunities and challenges for international
marketers of consumer goods and services are
great and diverse
• Any marketing firm’s goal should be quality products
and services that meet the needs and wants of
consumers at an affordable price
 Quality

• Shift to a customer’s market

• Increased customer knowledge
• The customer defines quality
• The cost and quality of a product
– Among the most important criteria by which purchases are made
• Quality can be defined on two dimensions
– Market-perceived quality
– Performance quality
• Most consumers expect performance quality
• In many industries quality is measured by third parties
– JD Power and Associates
 Maintaining Quality

• Damage in the distribution chain

– Russian chocolate
• Quality is essential for success in today’s
competitive global market
• The decision to standardize or adapt a product
is crucial in delivering quality
 Physical or Mandatory
Requirements and Adaptation
• Product homologation
• Product adaptation requirements
– Legal
– Economic
– Political
– Technological
– Climate
 Green Marketing
and Product Development
• Green marketing concerns the environmental
consequences of a variety of marketing activities
• 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
 Products and Culture

• A product is the sum of the physical and

psychological satisfactions it provides the user
– Primary function
– Psychological attributes
• The need for cultural adaptation is often
necessary, affected by how the product
conforms
– Norms
– Values
– Behavior patterns
 Innovative Products
and Adaptation
• Determining the degree of newness as
perceived by the intended market
• Diffusion
• 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
 Diffusion of Innovations

• Crucial elements in the diffusion of new ideas

– An innovation
– Which is communicated through certain channels
– Over time
– Among the members of a social system
• The element of time
• Variables affecting the rate of diffusion of an
object
– Degree of perceived newness
– Perceived attributes of the innovation
– Method used to communicate the idea
 Five Characteristics
of an Innovation
• Relative advantage
• Compatibility
• Complexity
• Trialability
• Observability
 Analyzing Product
Components for Adaptation
• Product is multidimensional
• Sum of its features determines the bundle of
satisfactions (utilities) received by consumer
• Three distinct components
– Core
– Packaging
– Support services
 Product Component Model

Exhibit 12.1
Product Levels: The Customer Value
Hierarchy
 Product Levels: The Customer Value
Hierarchy

• Core benefit: Service customer buys

• Turned into basic product

• Expected product - attributes expected

• Augmented product - exceeds expectations

• Potential product- all possible future

augmentations & transformations of product
 Core Components

• Product platform
• Design features
• Functional features
 Packaging Component

• Price
• Quality
• Packages
• Styling
• Trademark
• Brand name
 Support Services Component

• Deliveries
• Warranty
• Spare parts
• Repair and maintenance
• Installation
• Instructions
• Other related services
 Marketing Consumer
Services Globally
• Consumer services characteristics
– Intangibility
– Inseparability
– Heterogeneity
– Perishability
• A service can be marketed
– As an industrial (business-to-business)
– A consumer service
 Services Opportunities
in Global Markets
• Tourism
• Transportation
• Financial services
• Education
• Communications
• Entertainment
• Information
• Health care
Barriers to Entering Global Markets
for Consumer Services
• Protectionism
• Restrictions on transborder data flows
• Protection of intellectual property
• Cultural barriers and adaptation
Brands in International Markets

• A global brand is the worldwide use of a name,

term, sign, symbol, design, or combination
– Intended to identify goods or services of one seller
– To differentiate them from those of competitors
• Importance is unquestionable
• Most valuable company resource
Top Twenty Brands
Top Twenty Brands
 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
 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
 Country-of-Origin Effects
and Global Brands
• Country-of-Origin effect
– Influences that the country of manufacture, assembly, or design
► Has on a consumer’s positive or negative perception of a product

• Consumers have broad but somewhat vague

stereotypes about specific countries and specific
product categories that they judge “best”
• Ethnocentrism
 Country-of-Origin Effects
and Global Brands
• English tea
• French perfume
• Chinese silk
• Italian leather
• Japanese electronics
• Jamaican rum
 Ethnocentrism and COO

• “Buy American” concept

Animosity model of foreign product purchase

• Animosity is defined as the remnants of

antipathy related to previous or on-
going military, political, or economic
events. It will affect consumers’
purchase behavior in the international
marketplace.
Animosity model of foreign product purchase

Source: Klein, Ettenson and Morris (1998)

Findings from empirical study on 244 Chinese consumers

supported the model.
 Country-of-Origin Effects
and Global Brands
• Countries are stereotyped
– On the basis of whether they are industrialized
– In the process of industrializing
– In process of developing

• Technical products
– Perception of one manufactured in a less-developed or newly
industrializing country less positive
• Fads often surround product from particular
countries or regions
 Diffusion of Innovation

Rogers, E.M (1983)

Early
Innovators Majority Late
2.5% 34% Majority
34%
Laggards
16%
Early Adopters
13.5%
 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
• Manufacturers brands must be competitively
priced and provide real consumer value
 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
 Summary

• 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
 2. International Product
Strategies

Straight Product Product

Extension Adaptation Innovation

The firm adopts The company caters The firm designs a

the same policy to the needs and wants product from scratch
used in its home of its foreign customers. for foreign customers.
market.

Source: W.J. Keegan, Multinational Product Planning: Strategic Alternatives,

Journal of Marketing, 33, 1969, pp.58-62
 TRƯỜNG ĐẠI HỌC NGOẠI NGỮ- TIN HỌC THÀNH PHỐ HỒ CHÍ MINH
Ho Chi Minh City University of Foreign Languages – Information Technology

CHAPTER 14

PRODUCTS AND SERVICES

FOR BUSINESS
P h i l i p R. Ca t e o r a - Ma r y C. Gi l l y - J o h n L . Gr a h a m

www.huflit.edu.vn
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 What Should You Learn?

• The importance of derived demand in industrial

markets
• How demand is affected by technology
• Characteristics of an industrial product
• The importance of ISO 9000 certification
 What Do I Need to Know?

• The growth of business services and nuances

of their marketing
• The importance of trade shows in promoting
industrial goods
• The importance of relationship marketing for
industrial products and services
Global Perspective Intel, the Boom
and the Inescapable Bust
• In industrial markets, including global ones,
what goes up must come down
• Issues of standardization versus adaptation
– Less relevance to marketing industrial goods than consumer
goods
• Factors accounting for greater market similarities
in customers of industrial goods versus
consumer goods
– The inherent nature of the product
– The motive or intent for the user differs
Major Categories U.S. Exports
 Demand in Global
Business-to-Business Markets
• Demand in industrial markets is by nature more
volatile
• Stages of industrial and economic development
affect demand for industrial products
• The level of technology of products and services
make their sales more appropriate for some
countries than others
 The Volatility
of Industrial Demand
• Cyclical swings in demand
– Professional buyers tend to act in concert
– Derived demand accelerates changes in markets
• Derived demand can be defined as demand
dependent on another source
• Minor changes in consumer demand mean
major changes in related industrial demand
– Boeing
► Worldwide demand for travel services related to demand for new airplanes
► Commercial aircraft industry one of the most volatile
Derived Demand Example
Stages of Economic Development

• Stage 1 – the traditional society

• Stage 2 – preconditions for takeoff
• Stage 3 – take off
• Stage 4 – drive to maturity
• Stage 5 – the age of mass consumption
Technology and Market Demand

• Trends spurring demand for technologically

advanced products
– Expanding economic and industrial growth in Asia
– The disintegration of the Soviet empire
– The privatization of government-owned industries worldwide
• The companies with the competitive edge will be
those whose products are:
– Technologically advanced
– Of the highest quality
– Accompanied by world-class service
 Quality and Global Standards

• Perception of quality rests solely with the

customer
– Level of technology reflected in the product
– Compliance with standards that reflect customer needs
– Support services and follow-through
– Price relative to competitive products
• Quality standards vary with level of country’s
industrialization
 Quality is Defined by the Buyer

• How well a product meets the specific needs of

the buyer
• The price-quality relationship
• Product design must be viewed from all aspects
of use
– Climate
– Terrain
 Quality is Defined by the Buyer

• Total Quality Management (TQM)

• Lack of universal standards
• Country-specific standards
• The metric system
 ISO 9000 Certification –
An International Standard of Quality
• Positively affects the performance and stock
prices of firms
• Certification of the existence of a quality control
system a company has in place to ensure it can
meet published quality standards
– Describes three quality system models
– Defines quality concepts
– Gives guidelines for using international standards in quality
systems
• Generally voluntary
 ISO 9000 Certification –
An International Standard of Quality
• EU Product Liability Directive
• Now a competitive marketing tool in Europe and
around the world
• The ACSI approach
 Business Services

• For many industrial products the revenues from

associates services exceed the revenues from
the products
– Cellular phones
– Printers
• Leasing capital equipment
• Services not associated with products
– Boeing at-sea-satellite-launch services
– Ukrainian cargo company space rental on giant jets
– Professional services (advertising, banking, healthcare, etc.)
 After-Sale Services

• Installation
• Training
• Spare and replacement parts
– Delivery time
– Cost of parts
• Service personnel
• Almost always more profitable than the actual
sale of the machinery or product
• Crucial in building strong customer loyalty
 Other Business Services

• Client followers
• Mode of entry
– Licensing
– Franchising
– Direct investment
• Protectionism
• Restrictions on cross-border data flows
Expansion of U.S. Law Firms in
Selected Cities Worldwide
 Trade Shows: A Crucial Part of
Business-to-Business Marketing
• Secondary methods for marketing:
– Advertising in print media
– Catalogs
– Web sites
– Direct mail
• Trade shows have become the primary and
most important vehicle for doing business in
many foreign countries
 Trade Shows: A Crucial Part of
Business-to-Business Marketing
• Total annual media budget spent on trade
events:
– Europeans – 22 percent
– Americans – 5 percent
 Trade Shows: A Crucial Part of
Business-to-Business Marketing
• Trade shows
– Provide the facilities for a manufacturer to exhibit and
demonstrate products to potential users
– Allow manufacturers to view competitors products
– Are an opportunity to create sales and establish relationships
with agents, distributors, franchisees, and suppliers
• Online trade shows
– Become useful in difficult economic and/or political
circumstances
– Are obviously a less than adequate substitute for live trade
shows
 Relationship Marketing
in Business-to-Business Contexts
• Not a matter of selling the right product the
first time
– Instead selling a continuously changed the product to keep it
right over time
• The objective of relationship marketing
– To make the relationship an important attribute of the transaction
► Differentiating oneself from competitors

• Using the Internet to facilitate relationship

building and maintenance
– Cisco Systems
– Solar Turbines Inc.
 The Global Project Team

• Customer
• Sales engineer
• Application engineer
• Engineering and control systems
• Project manager
• Manufacturing technicians
• Customer services
• Suppliers
 Summary

• Industrial marketing requires close attention to the exact

needs of customers
• Industrial goods marketers must pay close attention
– To level of economic and technological development of each market to
determine the buyer’s assessment of quality
• The demand for products and services in business-to-
business markets is by nature more volatile than in most
consumer markets
 Summary

• Demand also varies by level of economic development

and the quality of educational systems across countries
• Product or service quality is defined by customers
• Development of ISO 9000 global quality standards
• After-sale services are an important aspect of industrial
sales
• Trade shows are an especially important promotional
medium in business-to-business marketing