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Chapter 8
Decisions regarding the product, price, promotion and distribution channels are decisions
on the elements of the "marketing mix". It can be argued that product decisions are
probably the most crucial as the product is the very epitome of marketing planning.
Errors in product decisions are legion. These can include the imposition of a global
standardised product where it is inapplicable, for example large horsepower tractors may
be totally unsuitable for areas where small scale farming exists and where incomes are
low; devolving decisions to affiliated countries which may let quality slip; and the
attempt to sell products into a country without cognisance of cultural adaptation needs.
The decision whether to sell globally standardised or adapted products is too simplistic
for today's market place. Many product decisions lie between these two extremes.
Cognisance has also to be taken of the stage in the international life cycle, the
organisation's own product portfolio, its strengths and weaknesses and its global
objectives. Unfortunately, most developing countries are in no position to compete on the
world stage with many manufactured value-added products. Quality, or lack of it, is often
the major letdown. As indicated earlier, most developing countries are likely to be
exporting raw materials or basic and high value agricultural produce for some time to
come.
Chapter Objectives
The objectives of this chapter are
· To examine the basic concepts of "the product" and the importance of this concept in
marketing
· To give an understanding of the features of product design and the factors which shape
the "standardisation" versus "adaptation" decisions
· To describe the production process and how value can be added in the process
· To describe the major product strategies.
Structure Of The Chapter
The chapter starts by examining the basic concepts of the "product" including its physical
(or objective) features and its image (or subjective) features. Once the product is put into
the design stage based on consumer research, then a decision has to be made on its form either globally standardised or adapted to local conditions. Of course, with many
agricultural cash and food crops its form may stay the same (standard), for example an
orange, or it may be adapted (frozen orange juice) to meet different market needs and
conditions. The chapter concludes by looking at the different types of product strategies,
varying from a global approach to a micro-marketing approach at national level.
Basic concepts
A product can be defined as a collection of physical, service and symbolic attributes
which yield satisfaction or benefits to a user or buyer. A product is a combination of
physical attributes say, size and shape; and subjective attributes say image or "quality". A
customer purchases on both dimensions. As cited earlier, an avocado pear is similar the
world over in terms of physical characteristics, but once the label CARMEL, for
example, is put on it, the product's physical properties are enhanced by the image
CARMEL creates. In "postmodernisation" it is increasingly important that the product
fulfills the image which the producer is wishing to project. This may involve
organisations producing symbolic offerings represented by meaning laden products that
chase stimulation-loving consumers who seek experience - producing situations. So, for
example, selling mineral water may not be enough. It may have to be "Antarctic" in
source, and flavoured. This opens up a wealth of new marketing opportunities for
producers.
A product's physical properties are characterized the same the world over. They can be
convenience or shopping goods or durables and nondurables; however, one can classify
products according to their degree of potential for global marketing:
i) local products - seen as only suitable in one single market.
ii) international products - seen as having extension potential into other markets.
iii) multinational products - products adapted to the perceived unique characteristics of
national markets.
iv) global products - products designed to meet global segments.
Quality, method of operation or use and maintenance (if necessary) are catchwords in
international marketing. A failure to maintain these will lead to consumer dissatisfaction.
This is typified by agricultural machinery where the lack of spares and/or foreign
exchange can lead to lengthy downtimes. It is becoming increasingly important to
maintain quality products based on the ISO 9000 standard, as a prerequisite to export
marketing.
Consumer beliefs or perceptions also affect the "world brand" concept. World brands are
based on the same strategic principles, same positioning and same marketing mix but
there may be changes in message or other image. World brands in agriculture are legion.
In fertilizers, brands like Norsk Hydro are universal; in tractors, Massey Ferguson; in
soups, Heinz; in tobacco, BAT; in chemicals, Bayer. These world brand names have been
built up over the years with great investments in marketing and production. Few world
brands, however, have originated from developing countries. This is hardly surprising
given the lack of resources. In some markets product saturation has been reached, yet
surprisingly the same product may not have reached saturation in other similar markets.
Whilst France has long been saturated by avocadoes, the UK market is not yet, hence
raising the opportunity to enter deeper into this market.
Product design
Changes in design are largely dictated by whether they would improve the prospects of
greater sales, and this, over the accompanying costs. Changes in design are also subject to
cultural pressures. The more culture-bound the product is, for example food, the more
adaptation is necessary. Most products fall in between the spectrum of "standardisation"
to "adaptation" extremes. The application the product is put to also affects the design. In
the UK, railway engines were designed from the outset to be sophisticated because of the
degree of competition, but in the US this was not the case. In order to burn the abundant
wood and move the prairie debris, large smoke stacks and cowcatchers were necessary.
In agricultural implements a mechanised cultivator may be a convenience item in a UK
garden, but in India and Africa it may be essential equipment. As stated earlier
"perceptions" of the product's benefits may also dictate the design. A refrigerator in
Africa is a very necessary and functional item, kept in the kitchen or the bar. In Mexico,
the same item is a status symbol and, therefore, kept in the living room.
Factors encouraging standardisation are:
i) economies of scale in production and marketing
ii) consumer mobility - the more consumers travel the more is the demand
iii) technology
iv) image, for example "Japanese", "made in".
The latter can be a factor both to aid or to hinder global marketing development.
Nagashima1 (1977) found the "made in USA" image has lost ground to the "made in
Japan" image. In some cases "foreign made" gives advantage over domestic products. In
Zimbabwe one sees many advertisements for "imported", which gives the product
advertised a perceived advantage over domestic products. Often a price premium is
charged to reinforce the "imported means quality" image. If the foreign source is negative
in effect, attempts are made to disguise or hide the fact through, say, packaging or
labelling. Mexicans are loathe to take products from Brazil. By putting a "made in
elsewhere" label on the product this can be overcome, provided the products are
manufactured elsewhere even though its company maybe Brazilian.
Factors encouraging adaptation are:
i) Differing usage conditions. These may be due to climate, skills, level of literacy,
culture or physical conditions. Maize, for example, would never sell in Europe rolled and
milled as in Africa. It is only eaten whole, on or off the cob. In Zimbabwe, kapenta fish
can be used as a relish, but wilt always be eaten as a "starter" to a meal in the developed
countries.
ii) General market factors - incomes, tastes etc. Canned asparagus may be very affordable
in the developed world, but may not sell well in the developing world.
iii) Government - taxation, import quotas, non tariff barriers, labelling, health
requirements. Non tariff barriers are an attempt, despite their supposed impartiality, at
restricting or eliminating competition. A good example of this is the Florida tomato
growers, cited earlier, who successfully got the US Department of Agriculture to issue
regulations establishing a minimum size of tomatoes marketed in the United States. The
effect of this was to eliminate the Mexican tomato industry which grew a tomato that fell
under the minimum size specified. Some non-tariff barriers may be legitimate attempts to
protect the consumer, for example the ever stricter restrictions on horticultural produce
insecticides and pesticides use may cause African growers a headache, but they are
deemed to be for the public good.
iv) History. Sometimes, as a result of colonialism, production facilities have been
established overseas. Eastern and Southern Africa is littered with examples. In Kenya, the
tea industry is a colonial legacy, as is the sugar industry of Zimbabwe and the coffee
industry of Malawi. These facilities have long been adapted to local conditions.
v) Financial considerations. In order to maximise sales or profits the organisation may
have no choice but to adapt its products to local conditions.
vi) Pressure. Sometimes, as in the case of the EU, suppliers are forced to adapt to the
rules and regulations imposed on them if they wish to enter into the market.
Production decisions
In decisions on producing or providing products and services in the international market
it is essential that the production of the product or service is well planned and
coordinated, both within and with other functional area of the firm, particularly
marketing. For example, in horticulture, it is essential that any supplier or any of his
"outgrower" (sub-contractor) can supply what he says he can. This is especially vital
when contracts for supply are finalised, as failure to supply could incur large penalties.
The main elements to consider are the production process itself, specifications, culture,
the physical product, packaging, labelling, branding, warranty and service.
Service
In agricultural machinery, processing equipment and other items which are of
substantial value and technology, service is a prerequisite. In selling to many
developing countries, manufacturers have found their negotiations at stake due to
the poor back-up service. Often, this is no fault of the agent, distributor or dealer in
the foreign country, but due to exchange regulations, which make obtaining spare
parts difficult. Many organisations attempt to get around this by insisting that a Third
World buyer purchases a percentage of parts on order with the original items. Allied
to this problem is the poor quality of service due to insufficient training. Good original
equipment manufacturers will insist on training and updating as part of the agency
agreement. In order to illustrate the above points, cotton can be used as an
example. Cotton is a major foreign exchange earner for Zimbabwe. In 1990/91,
52,000 tonnes were sold overseas at a value of Zim$ 238 million. As the spinners,
particularly those in the export market, are in a highly competitive industry, it is
essential that the raw material is as clean as possible. Also today's spinning
equipment is highly technical and the spinner wishes to avoid costly breakdowns by
all means.
Product strategies
There are five major product strategies in international marketing.
Product communications extension
This strategy is very low cost and merely takes the same product and
communication strategy into other markets. However it can be risky if misjudgments
are made. For example CPC International believed the US consumer would take to
dry soups, which dominate the European market. It did not work.
Extended product - communications adaptation
If the product basically fits the different needs or segments of a market it may need
an adjustment in marketing communications only. Again this is a low cost strategy,
but different product functions have to be identified and a suitable communications
mix developed.
Product adaptation - communications extension
The product is adapted to fit usage conditions but the communication stays the
same. The assumption is that the product will serve the same function in foreign
markets under different usage conditions.
Product adaptation - communications adaptation
Both product and communication strategies need attention to fit the peculiar need of
the market.
Product invention
This needs a totally new idea to fit the exclusive conditions of the market. This is
very much a strategy which could be ideal in a Third World situation. The
development costs may be high, but the advantages are also very high.