Local Marketing in Mature

Markets

Chapter EightChapter Eight

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Slide 8 - 2

Three Marketing Environments

Three Marketing Environments

Feature Emerging New growth Mature

Life cycle stage Intro Growth Mature

Tariff barriers High Medium Low

Nontariff barriers High High Medium

Domestic competition Weak Getting stronger Strong

Foreign competitors Weak Strong Strong

Financial institutions Weak Strong Strong

Consumer markets Embryonic Strong Saturated

Industrial markets Getting stronger Strong Strong

Political risk High Medium Low

Distribution Weak Getting stronger Strong

Media advertising Weak Strong In-storepromotion

Product/Market situation

Exhibit 8.1

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Slide 8 - 3

Dominant Marketing Dimensions

Dominant Marketing Dimensions

Task Emerging New growth Mature

Marketing analysis:

Research focus Feasibility Economics Segmentation

Primary data sources Visits Middlemen Respondents

Customer analysis Needs Aspirations Satisfaction

Segmentation base Income Demographics Life style

Product/Market Situation

Exhibit 8.2

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Slide 8 - 4

Dominant Marketing Dimensions

Dominant Marketing Dimensions

Marketing strategy:

Strategic focus Marketdevelopment

Participationin growth

Compete for share

Competitive Focus Lead/follow Domestic/foreign Strengths/weaknesses

Product line Low end Limited Wide

Product design Basic Advanced Adapted

New product intro Rare Selective Fast

Pricing Affordable Status Value

Advertising Awareness Image Value-added

Distribution Build-up Penetrate Convenience

Promotion Awareness Trial Value

Service Extra Desired Required

Exhibit 8.2cont.

MatureTask Emerging New Growth

Product/Market Situation

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CLOSE-UP: Pan European Marketing

CLOSE-UP: Pan European Marketing

The 1992 European integration stimulated many companies to analyze the potential of pan-European marketing strategies. Although pan-European marketing is not truly "global” or “local” the efforts of companies to integrate their marketing strategies are likely to produce a more homogeneous European market.

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Slide 8 - 6

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BACKGROUND

EU means a changed strategic environment.

Tariff barriers and customs duties within EU scrapped.

Common external tariff.

The 1989 fall of the Berlin Wall slowed down the momentum toward EU unity.

Challenge for previously national European companies.

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COMPETITIVE RESPONSES

Large European corporations start coordinating previously independent national subsidiaries.

Costly national differences in product designs, brand names, and promotions eliminated.

Non-European companies with high global brand name recognition well placed to take advantage of the integration.

The threat from these foreign entrants has been met by the creation of larger and stronger companies.

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Slide 8 - 9

COMPETITIVE RESPONSES

(Cont’d.)

A boon for global advertising agencies with experience with multi-cultural campaigns.

European agencies initiated mergers and acquisitions.

A pan-European strategic response is not necessarily the correct approach for all companies in all industries (smaller firms can offer service to a special niche segment).

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MARKET SEGMENTATION

Europeanwide target segments.

Dalgic: Six basic plus four potential European segments.

Scale advantages in clusters (Mediterranean countries, Northern Europe, etc.).

Niche segments by ethnicity and traditional preferences.

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PRODUCT POSITIONING

Product positioning can be the same across countries, but different product lines or models target different customer segments.

Marketing mixes have moved toward uniformity.

Few products and brands can maintain different images in different countries of Europe.

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Slide 8 - 12

PRODUCT POLICIES

Pan-European products and brands (Euro-branding).

Use of leading markets for the core product.

More "me-too" products because of competition.

Packages in four languages (e.g. English, French, German, and Spanish.

Gray trade problem with pan-European products.

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PRICING

The euro forces coordinated prices.

Pricing corridors for limited local flexibility.

End of protective regulations which had generated high local prices.

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DISTRIBUTION

Rationalization of the manufacturers' sales network.

Retail and wholesale middlemen shift from country-based to large integrated EU networks.

Integrated networks help facilitate the introduction of pan-European strategies among manufacturers.

Growth of relationship marketing.

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PROMOTION

Pan-European TV advertising.

Satellites beaming across previously closed borders.

Growth of commercially based broadcast media.

In-store promotion: Still differing regulations among countries.

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Three Strategic OptionsThree Strategic Options11-4

Exhibit 8.4

Options Strategies Remarks

1. Market retreat • Sell out to pan-Europeanplayer

• Seek a different, lesscompetitive market

• May be preferable to astruck-in-the-middleposition

2. Pan-Europeancompetition

• Identify true pan-Europeanmarket segments

• Organic penetration fromexisting national markets

• Aggressive policy ofacquisitions to completeEuropean portfolio

• May be few true segments

• Excessive time required

• Few winners

• Complex and risky butincreasingly important in"post-1992" Europe

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Slide 8 - 17

Three Strategic Options (Con’t.)

Three Strategic Options (Con’t.)

Options Strategies Remarks2. Pan-European

competition

(continued)

• Cooperation with other nationalplayers to form pan-Europeanorganizations or alliances

3. Niche position • Consolidate national positionthrough realignment, merger, oracquisition

• Identify new Euro-regions

• Identify segments across limitednumber of countries

• Seek economies at componentlevel while retaining nichebrands

• Become an OEM supplier topan-European companies

• Vulnerable to standardizedEuro-products if nationaldifferences are marginal

• Information access

• Need to accumulate scalebenefits

• Organizational complexity

• Vulnerable to pan-European EOM suppliers

Exhibit 8.4 cont.

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CLOSE-UP: Marketing in Japan

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BACKGROUND

Japan is the size of California but has 120 million people.

In the 40 years up to the 1990s per capita incomes grew from poverty level to the highest in the world.

Japan's expansion was export-led, becoming a leading example for other Asian nations.

In 1990 the Japanese economy's speculative "bubble" in finance and real estate burst, and the economy has been slow throughout the decade. Japanese firms are still doing well in overseas markets, helping to offset some of the pressure from a recessionary home market.

The Japan market has still great potential for foreign firms in a wide variety of products and services. Even though tariffs are down, non-tariff barriers are high, making it very hard to succeed there.

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FOREIGN TRADE AGREEMENTS

Although a member of the WTO, Japan is an outsider in the sense that the country is not a member of any trading bloc of significance.

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COMPETITION

Partly inspired by the bushido or "warrior" tradition in medieval Japan and its samurais, competition between brands from different manufacturers ("inter-brand" competition) has been absolutely fierce.

The Ministry of International Trade and Industry (MITI) is involved in the protection of smaller domestic firms. For example, prices have long been "coordinated" by directives from government bureaucrats, who fear the ill effects on small and medium sized businesses from cut-throat competition.

"Intra-brand" price competition was long suppressed, meaning that a particular brand and model tended to cost the same in all stores in Japan.

Recent deregulation has allowed discount stores and "category killers" to enter in suburban locations.

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MARKET SEGMENTATION

Traditionally, the demanding Japanese customer was a hard nut to crack for the newly arrived local marketer. But with deregulation and the economic slowdown, the Japanese are becoming more similar to Westerners.

While Japanese customers were always demanding in terms of quality, service, and up-to-date technology and design, they are now also open to discounted prices. "Bargain" is no longer a dirty word.

For each product category, there are now (1) upscale segments, (2) middle of the roaders who buy the tried and true, and (3) those buying on price, looking for cheaper imports and private labels.

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PRODUCT POSITIONING

When the Japanese consumers' disposable incomes were growing, well-known global brand names fetched high price premiums, especially in the luxury product categories.

In Japan functionality, reliability and features could be taken for granted. Choices between close competitors could be based on design, brand image, and other "intangible" positioning criteria.

Less secure financially, consumers have become more value-conscious, trading off features against prices. But there is no compromise on quality.

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Slide 8 - 24

PRODUCT POLICIES

Adapting products and services to the Japanese customers' requirements is often necessary. For example, apparel manufacturers often have to re-sew the clothes in Japan because of differing body proportions.

Because of the Japanese attention to detail, Western quality levels are still a concern to the Japanese consumer. A Benetton garment sewn in Japan has better stitching than one sewn in the West.

Japanese companies are producing high-quality stripped down versions of their upscale products.

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Slide 8 - 25

PRICING

With the economic downturn in the 1990s, Japanese consumers are becoming more price sensitive. Companies have responded with lower priced models. Panasonic simplest video-camcorders and Toyota's smallest pickup are priced 25-35% lower than their regular models.

As the distribution system opens up and deregulation proceeds, imports pose an increasing competitive threat to domestic companies in Japan.

While traditional retail outlets try to sustain premium brand prices, discount outlets have begun to sell brand name products at reduced prices.

Some of the brand name products are direct imports from overseas. In addition, there are direct imports as private label brands of retailers.

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DISTRIBUTION

The complex and inefficient multi-tiered distribution system has long been a cornerstone in Japan's defense against newcomers from abroad.

Contacts between manufacturers and small middlemen involve smaller packages, fewer units, and faster restocking of supplies. This also creates a preference for dealing with the same people.

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Slide 8 - 27

DISTRIBUTION (Cont’d.)

A retailer can still be threatened with a cutoff of supplies from a domestic manufacturer or wholesaler if a competing product is added to the shelf.

The relatively successful SII (Structural Impediments Initiative, in the late 1980s) involved Western pressure on Japanese authorities to open up channels, including an easing of the limits on the number of large stores.

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PROMOTION

Polite indirectness has made their advertising singularly unfocused and "nonsensical." Advertising is traditionally seen as a kind of art form, rather than a functional sales tool.

Recently, the advertising has shifted to more of an American style "unique selling proposition" approach to give specific reasons for buying a more expensive branded product.

The typical Japanese buyer spends more time in stores contemplating purchases than most customers in the West. Fewer housewives are working outside of the home. In-store factors are important.

Store clerks are knowledgeable about their products.

The lack of store space affects promotional efforts directly. Point-of-purchase promotions and dealer rebates might not work when stores can't stock up (as P&G discovered with Cheer).

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Slide 8 - 29

CLOSE-UP: Marketing in Australia and New Zealand

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Slide 8 - 30

BACKGROUND

Mature economies with a British heritage.

Australia, a vast country, with 18 million inhabitants.

Agriculture and raw materials, in particular minerals.

New Zealand, with four million people, basically agrarian. Economic base in four industries: Forest products, dairy products, meat products, and fruits.

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REGIONAL TRADEAGREEMENTS

APEC (Asia-Pacific Economic Cooperation).

ARF (ASEAN Regional Forum) grouping.

ANZCERTA pact (Australia New Zealand Closer Economic Relations Trade Agreement).

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COMPETITION

Competition is not as intense as in other mature markets. As trade barriers come down, import competition will increase.

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MARKET SEGMENTATION

Segmentation criteria involve cultural roots, urban versus rural, and demographics, including age.

Young people ready for the new global markets, older generation nostalgic for British roots.

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PRODUCT POSITIONING

Still pro-home country bias in several product categories. Abroad, companies use their country-of-origin in promotions to create a unique positioning.

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PRODUCT POLICIES

Global products and services, only slight adaptation to appeal to customers in these markets.

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PRICING

Although many global products and brands are available in the region, prices in the region tend to be higher than elsewhere.

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DISTRIBUTION

Distribution is efficient, because prime markets are clustered around the coast line and metropolitan areas where the distribution system is modern and up-to-date.

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Slide 8 - 38

PROMOTION

Global communications make it feasible to reach these markets with globally integrated promotional messages.

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Slide 8 - 39

CLOSE-UP: Marketing in North America

(United States & Canada)

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Slide 8 - 40

BACKGROUND

Ethnic diversity;

religion, and the separation of state and church;

diffused economic activity;

local marketing regulations.

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REGIONAL TRADE AGREEMENTS

NAFTA (North America Free Trade Area).

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Slide 8 - 42

COMPETITION

Intensely competitive markets.

Players are many of the strongest multinationals.

Low trade barriers in many industries.

Diversity complicates marketing communications.

Many competitors means large marketing budgets.

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Foreign Successes and Failures

Mercedes and BMW compared to Peugeot and Rover.

Sony, Honda and Toyota consistently strong, compared to Mitsubishi, Nissan, and Mazda.

adidas and Puma tough going and Reebok's early success not sustained.

The Bodyshop and Benetton have had trouble.

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Slide 8 - 44

MARKET SEGMENTATION

A "must."

Hispanics.

African-American.

Subset of states and provinces. Coors beer, Walmart drug stores, and Kroger supermarkets.

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Slide 8 - 45

PRODUCT POSITIONING

Basics: Individual consumers are assumed to make rational purchase decisions based on the trade-offs between various attributes or benefits.

Clear positioning communication, targeting specific segments. Don't be "everything to everyone."

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Slide 8 - 46

PRODUCT POLICIES

Product proliferation.

Ethnic variety.

Convenience and speed.

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Slide 8 - 47

PRICING

Price-to-quality ratios are important.

No resale price maintenance.

Strong intrabrand competition.

Large price differentials between stores.

Prices are important.

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Slide 8 - 48

DISTRIBUTION

Large-scale stores.

Nation-wide chains.

Efficient transportation.

Channels are powerful vis-a-vis manufacturers.

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Slide 8 - 49

PROMOTION

Advertising-to-sales ratios are high.

Clutter is a real problem.

Wide media choices.

U.S.: Communicate the positioning in concrete terms.

Canada: Cultural sensitivity -- and more softsell.