Products and services for consumersThe opportunities and challenges for international marketers of consumer goods and

services have never been greater than today. New consumers are springing up in emerging markets in Eastern Europe, China, India, Latin America and other countries. Today some of emerging markets have little purchasing power, but they promise to be huge markets in the future. More mature markets have also a lot of opportunities and challenges because consumers` tastes become more sophisticated and complex, their purchasing power increases and this provides new demands.

The example of this can be Disneyland. As all we know, Disney is the American exporter for global consumer markets. The distinction between products and services in this company means little: videotapes are products and cinema performances of the movies are services. Consumers pay a lot of money (around 60 euro) to get in the gate, but they also spend a lot of money on hats, T-shirts and pop corn while being there. This lack of distinction between products and services led to the invention of new terms encompassing both products and services, such as market offerings and business-to-consumer marketing. But we should know that there are three major categories: durable goods (cars, computers), nondurable goods (food) and services (tourism).

Market offering (also called as business-to- business marketing (B2B)) is the product or service that is sold into the marketplace. While business-to-business commerce refers to business transactions between companies, business-to-consumer models (B2C) are those that sell products or services directly to personal-use customers. Business-to-consumer companies connect, communicate and conduct business transactions with consumers most often via the Internet. B2C is larger than just online retailing; it includes online banking, travel services, online auctions, and health and real estate sites.

The question “Which products/services should we sell?” is very critical today. The company with a domestic market extension orientation should sell products that are good sold at home. The company with a multidomestic market orientation develops different products and services to fit the uniqueness of each country market. The global company ignores frontiers and responds with global market offerings.

The trend for larger firms is toward becoming global in orientation and strategy. Product adaptation is as important task in a smaller firm`s marketing effort as it is for global companies. Some products cannot be sold at all in foreign markets without modification, others may be sold as is, but their acceptance is greatly enhanced when tailored specifically to market needs. And in today`s world, in it`s competitive struggle, quality products and services that meet the needs and wants of consumers at an affordable price should be the goal of any marketing firm.

1. Quality. The power in the marketplace is shifting from a seller`s market to customers, who have more choices because there are more companies competing for their attention. It puts more power in the hands of the customer and that drives the need for quality. Today the customer knows what is best, cheapest and highest quality. Today customers define quality in terms of their needs and resources. In most global markets the cost and quality of a product are among the most important criteria by which purchases are made.

Quality defined. Quality can be defined on two dimensions: market-perceived quality and performance quality. Both are important, but consumer perception of a quality product often has more to do with market-perceived quality. For example, from the firm`s perspective (performance quality), an airline has achieved quality conformance with a safe flight and landing. But consumers doesn`t think so. They expect performance quality to be a given. Rather cost, timely service, frequency of flights, comfortable seating and performance of airline personnel are all part of the of the customer`s experience that is perceived as being of good or poor quality.

In a competitive marketplace where the market has choices, most consumers expect performance quality to be a given. And if the product does not perform up to standards it will be rejected. When there are alternative products, all of which meet performance quality standards, the product chosen is the one that meets market-perceived quality attributes.

Maintaining quality. Maintaining performance quality is critical, but frequently a product that leaves the factory at performance quality is damaged as it passes through the distribution chain. This is a special problem for many global brands for which production is distant from the market.

Physical or mandatory requirements and adaptation. A product may have to change in a number of ways to meet the physical or mandatory requirements of a new market, ranging from simple package changes to total redesign of the physical core product. Product homologation – is a term, used to describe the changes mandated by local product and service standards. Mandatory adaptations are more frequently the reason for product adaptation than adapting for cultural reasons.

Legal, economic, political, technological and climatic requirements of the local marketplace often dictate product adaptation. Changes may also have to be made to accommodate climatic differences.

The less economically developed a market is, the greater degree of change a product may need for acceptance. One study found that only one in ten products could be marketed in developing countries without modification of some sort. Because most products sold abroad by international companies originate in home markets and most require some form of modification, companies need a systematic process to identify products that need adaptation.

Green marketing and product development. A quality issue of growing importance the world over, especially in Europe and the US, is a green marketing. Green marketing is a term used to identify concern with the environmental consequences of a variety of marketing activities.

The European Commission has passed legislation to control all kinds of packaging waste through the EC. Two critical issues that affect product development are the control of the packaging component of solid waste and consumer demand for environmentally friendly

products. The European Commission issued guidelines for eco-labeling. Under the directive, a product is evaluated on all significant environmental effects through its life cycle, from manufacturing to disposal – a cradle-to-grave approach. Two critical issues that affect product development are the control of the packaging component of solid waste and consumer demand for environmentally friendly products. The designation that a product is “environmentally friendly” is voluntary, and environmental success depends on the consumer selecting the eco-friendly product.

2. Products and culture. It is very important to understand how to cultural influences are interwoven with the perceived value and importance a market places on a product. A product is more than a physical item: it is a bundle of satisfactions (or utilities) that the buyer receives.

A product is the sum of the physical and psychological satisfactions it provides the user. A product's physical attributes generally are required to create its primary function.

For example, if we take an automobile, its` primary function is to move passengers from one place to another. This ability requires motor and other physical features. The physical features or primary function of an automobile is in demand in all cultures. But an automobile has a lot of psychological features that are also important. They are color, size, design, brand name and price. These features have little to do with its primary function, but they add value to the satisfaction received.

The meaning and value imputed to the psychological attributes (color, size, design, and so on) of a product can vary among cultures and are perceived as negative or positive. To maximize the bundle of satisfactions received, adaptation of the nonphysical features of a product may be necessary.

Adaptation may require changes of any one or all of the psychological aspects of a product. The adoption of some products by consumers can be affected as much by how the product concept conforms with norms, values, and behavior patterns as by its physical or mechanical attributes.

When analyzing a product for a second market, the extent of adaptation required depends on cultural differences in product use. The greater these differences are, the greater extent of adaptation is necessary.

Innovative products and adaptation. An important first step in adapting a product to a foreign market is to determine the degree of newness as perceived by the intended market. We should understand that many products that are successful in one country may be absolutely new for another.

Products new to a social system are innovations, and knowledge about the product diffusion (the process by which innovation spreads) of innovation is helpful in developing a successful product strategy.

A critical factor in the newness of a product is its effect on established patterns of consumption and behavior.

The goal of a foreign marketer is to gain product acceptance by the largest number of consumers in the market in the shortest span of time.

The question comes to mind of whether the probable rate of acceptance can be predicted before committing resources and, more critically, if the probable rate of acceptance is too slow, whether it can be accelerated.

Diffusion of innovations.

There are five characteristics of an innovation that can assist in determining the rate of acceptance or resistance of the market to a product. They are:

• relative advantage – the perceived marginal value of the new product relative to the

old;• compatibility – its compatibility with acceptable behavior, norms, values;

• complexity – the degree of complexity associated with the product use;

• trialability – the degree of economic and/or social risk associated with product use;

• observability – the case with which the product benefits can be communicated.

The rate of diffusion is positively related to relative advantage, compatibility, complexity, trialability, observability. But it is important to remember that it is the perception of product characteristics by the potential adopter, not the marketer, that is crucial to the evaluation. A market analyst`s self-reference criterion (SRC) may cause a perceptual bias when interpreting the characteristics of a product. Thus the marketer might analyze them from his or her frame of reference, leading to a misinterpretation of the product`s cultural importance.

3. Analyzing product components for adaptation. A product is multidimensional and the sum of all its features determines the bundle of satisfactions (utilities) received by the consumer. To identify all the possible ways a product may be adapted to a new market, it helps to separate its many dimensions into three distinct components as we can see on the picture named Product Component Model. These components include all a product`s tangible and intangible elements and provide the bundle of utilities the market receives from use of the product.

The core component consists of the physical product and all its design and functional features. On the product platform product variations can be added or deleted to satisfy local differences. Major adjustments in the platform aspect may be costly. Alterations in design, functional features, color and other aspects can be made to adapt the product to cultural variations.

The packaging component includes style features, packaging, labeling, trademarks, brand name, quality, price and other aspects of a product`s package. Packaging components require both discretionary and mandatory changes. For example, some countries require labels to be printed in more than one language, while others forbid the use of any foreign language. Package size and price have an important relationship in poor countries. Companies package their products in small units to bring the price in line with spending norms. In some countries laws stipulate specific bottle, package sizes and measurement units. Labeling laws also vary from country to country and do not seem to follow any predictable pattern.

The support services component includes repair and maintenance, instructions, installation, warranties, deliveries and the availability of spare parts. Many successful marketing programs failed because little attention was given to this product component. Repair and maintenance are especially difficult problems in developing countries. For example, consumers in a developing country and in many developed countries don`t have as much possibilities for repair as consumers in the United States have. Literacy rates and educational levels may require a firm to change a product`s instructions. A simple term in one country may be incomprehensible in another.

So, to sum up, the Product Component Model can be a useful guide in examining adaptation requirements of products destined for foreign markets.

4. Marketing consumer services globally. Much of the advice regarding adapting products for international consumer markets also applies to adapting services. However, many consumer services are distinguished by four unique characteristics. They are:• intangibility. Automobiles, computers have a physical presence, they are tangible.

Insurance, dry cleaning are intangible and have intrinsic value resulting from a process, performance or an occurrence that only exists while it is being created;

• inseparability – its creation can not be separated from its consumption;

• heterogeneity – the service is individually produced and is virtually unique;

• perishability – once created it can not be stored but must be consumed simultaneously with

its creation.

A service can be marketed both as an industrial (business-to-business) or a consumer service, depending on the motive of the purchaser. The unique characteristics of services result in differences in the marketing of services and the marketing of consumer products.

Barriers to entering global markets for consumer services. A lot of services (entertainment, hotels and tourism) require production and consumption to occur almost simultaneously. That`s why exporting is not a viable entry method for them. The vast majority of services (85%) enter foreign markets by licensing, franchising or direct investment. There are 4 kinds of barriers that face consumer services marketers in the global marketplace:• protectionism. The European Union is making modest progress toward establishing a single

market for services. However, it is not clear exactly how foreign service providers will be treated as unification proceeds. Reciprocity and harmonization possibly will be used to curtail the entrance of some service industries into Europe;

• restrictions on transborder data flows. There is intense concern about how to deal with the

relatively new “problem” of transborder data transfers. The European Commission is concerned that data on individuals (income, debt repayment) are being collected, manipulated and transferred between companies with little regard to the privacy of the affected individuals. A proposed directive would require the consent of the individual before data are collected or processed;

• protection of intellectual property. An important form of competition that is difficult to

combat arises from pirated trademarks, processes, copyrights and patents. Computer design and software, trademarks, brand names and other intellectual properties are easy to duplicate and difficult to protect. The protection of intellectual property rights is a major problem in the services industries. Countries seldom have adequate, if any, legislation, and any laws they do have are extremely difficult to enforce. The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property regulation as applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. The TRIPs obligates all members to provide strong protection for copyright and related rights, patents, trademarks and other intellectual property. The TRIPs agreement is helpful, but the key issue is that enforcement is very difficult without the full cooperation of host countries;

• cultural barriers and adaptation. Because trade in services more frequently involves people-

to-people contact, culture plays a much bigger role in services than in merchandise trade.To sum up, opportunities for the marketing of consumer services will continue to grow in

the twenty-first century. International marketers will have to be quite creative in responding to the legal and cultural challenges of delivering high-quality services in foreign markets and to foreign customers at domestic locales.

5. Brands in international markets. Hand in hand with global products and services are global brands. A global brand is defined as the worldwide use of a name, term,

sign, symbol, design, or combination thereof intended to identify goods or services of one seller and to differentiate them from those of competitors.

A successful brand is the most valuable resource a company has. The brand name encompasses the years of advertising, good will, quality evaluation, product experience, and other beneficial attributes the market associates with product. Brand image is at the very core of business identity and strategy. Customers everywhere respond to images, myths, and metaphors that help them define their personal and national identities within a global context of world culture and product benefits. Global brands play the important role in the process. The value of Kodak, Coca-Cola, McDonald’s, Toyota, and Marlboro is indisputable.

Global Brands. Naturally, companies with such strong brands strive to use those bands globally. In fact, it appears that even perceived “globalness” leads to increases in sales. The Internet and other technologies are accelerating the pace of the globalization of brands. Even for products that must be adapted to local market conditions, a global brand can be successfully used with careful consideration. Ideally a global brand gives a company a uniform worldwide image that enhances efficiency and cost saving then introducing other products associated with the brand name, but not all companies believe a single global approach is the best. For example, despite BMW`s wotldwide success, only recently did the company create its first global brands position. Companies with successful country-specific brand names must balance the benefits of a global brand against the risk of losing the benefits of an established brand.

National Brands. A different strategy is followed by the Nestle Company, which has a stable of global and country-specific national brands in its product line. The Nestle name itself is promoted globally, but its global brand expansion strategy is two-pronged. In some markets it acquires well-established national brands when it can and build on their strengths—there are 7000 local brands in its family of brands. In other markets where there are no strong brands to be local, people, to be regional, and technology to be global. It does, however, own some of the world`s largest global brands, for example, Nescafe is one of them.

The answer to the question of when to go global with a brand is: “It depends – the market dictates”. Use global brands where possible and national brands where necessary.

Country-of-Origin Effect and Global Brands. Brands are used as external cues to taste, design, performance, quality, value, prestige. But many factors affect brand image. One factor that is of great concern to multinational companies that manufacture worldwide is the country-of-origin effect on the market`s perception of the product.

Country-of-Origin effect (COE) can be defined as any influence that the country of manufacture, assembly, or design has on a consumer’s positive or negative perception of a product. A company competing in global marketers today manufactures products worldwide, when the customer becomes aware of the country of origin, there is the possibility that the place of manufacture will affect or brand image.

The country, the type of product, and the image of the company and its brands all influence whether the country of origin will engender a positive or negative reaction. A variety of generalizations can e made about country-of-Origin effects on products and brands. Consumers tend to have stereotypes about products and countries that are formed by

experience, hearsay, and myth. Following are some of the more frequently cited generalizations.

Consumers have stereotypes about specific countries and products that they judge “best”: English tea, French perfume. But these stereotypes may not extend to other categories of products from these countries. Ethnocentrism can also have country-of-origin effects: feelings of national pride – the “buy Ukrainian” effect, for example – can influence attitudes toward foreign products.

Private Brands. Private brands owned by retailer are growing as challenges to manufacturers’ brands, whether global or country specific. As it stands now, private labels are formidable competitors. They provide the retailer with high margins, they receive preferential shelf space and strong in-store promotion, and perhaps most important for consumer appeal, they are quality product at low prices. Contrast that with manufacturers brands, which traditionally are premium priced and offer the retailer lower margins than they get from private labels.

To maintain market share, global brands need to be priced competitively and provide real consumer value. Global marketers must examine the adequacy of their brand strategies in light of such competition. This may make the cost and efficiency benefits of global brands even more appealing.

And now, let`s look at this list of top 20 global brands in 2012Top 20 global brands, 2012

RankBrand Value

(USD $ Millions)

2012 2011 Logo Name Country 2012 2011

1 8 Apple The USA 70,605 29,543

2 1 Google The USA 47,463 44,294

3 2 Microsoft The USA 45,812 42,805

4 4 IBM The USA 39,135 36,157

5 3 Walmart The USA 38,320 36,220

6 18 Samsung South Korea 38,197 21,511

7 7 GE The USA 33,214 30,504

8 16 Coca-Cola The USA 31,082 25,807

9 5 Vodafone The United Kingdom 30,044 30,674

10 32 Amazon.com The USA 28,665 17,780

11 10 AT&T The USA 28,379 28,884

12 12 Verizon The USA 27,616 27,293

13 11 HSBC The United Kingdom 27,597 27,632

14 13 NTT Group Japan 26,324 26,927

15 14 Toyota Japan 24,461 26,152

16 9 Wells Fargo The USA 23,229 28,944

17 6 Bank of America The USA 19,537 30,619

18 17 McDonald's The USA 22,230 21,842

19 30 Shell Netherlands 22,021 18,605

20 27 Intel The USA 21,908 19,078

http://brandirectory.com/league_tables/table/global-500-2012

And, to sum up, as David Haigh said, “Brands are the most valuable assets in business today.They drive demand, motivate staff, secure business partners and reassure financial markets.Leading edge organizations recognise the need to understand brand equity and brand value when making strategic decisions.”