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INTERNATIONAL
MARKETING
Krista Duniach
Université d’Angers
[email protected]
BIBLIOGRAPHY
• Czinkota and Ronkainen (2002), International Marketing,
Thomson South-Western.
• De Mooij (2003), Global Marketing and Advertising,
Understanding Global Paradoxes, Sage.
• Keegan and Green (2005), Global Marketing, Prentice
Hall.
• Kotler and Armstrong (2006), Principles of Marketing,
Prentice Hall.
• Prime et Usunier (2004), Marketing international,
Développement des marchés et management interculturel,
Vuibert.
• Usunier (2000), Marketing across Cultures, Prentice Hall.
• Periodicals: MOCI, HBR, JIBS, JM, JMR…
Introduction
What is international business?
-
Wide range of activities involved in conducting business transactions across national boundaries
-
Described as being heterogeneous, universal and sequential
-
Comprehensive approach to operations of both large and small firms engaged in business abroad
-
Concerns all activities of the firm (selling, procurement, outsourcing…)
-
About seizing global opportunities (market expansion or diversification)
-
Driving forces (regional economic agreements, converging needs and wants, communication
improvements, quality, leverage…) and restraining forces (management myopia, corporate
culture, national controls, globaphobia…)
Orientations: Export, Internationalization, Globalization
Introduction
EPRG Model
• Ethnocentric: everything is centered on the
domestic market.
• Polycentric: several important foreign markets
exist.
• Regiocentric: the market is composed of several
large economic regions.
• Geocentric: the world is one large global market.
EPRG Model - Characteristics
Ethnocentric
Polycentric
Geocentric
Approach
International
operations are
secondary
Each country is
relatively
independent
The world is one
common market
Vision
Centered on the
domestic market
Each market is
unique
Global vision of
the world
Priority
Searching for
identical
segments in
foreign markets
Taking into
consideration
differences in
foreign markets
Unifying
differences in the
world market
Planning center National
headquarters
Subsidiary in
each country
World
headquarters
Structure
Division for
each zone
Matrix structure
International
division
EPRG Model - Characteristics
Ethnocentric
Polycentric
Geocentric
Staff
Citizens from the Citizens from
domestic market each market
Most qualified
Marketing
strategy
Extension
Adaptation
Extension,
Adaptation,
Creation
Management
style
Centralized
Decentralized
Integrated and
interactive
Production
Domestic
Local
Low-cost
sources of
supply
Partnerships
Agent, licensing
Joint-ventures
Strategic
alliances
Performance
measures
Domestic market Local market
share
share
World market
share
Introduction
• What is marketing?
“Marketing is a social and managerial process
by which individuals and groups obtain what
they need and want through creating, offering,
and exchanging products of value with others.”
(Kotler)
Process, exchange, value
Marketing process
Capture
value from
customers
in return
Create value for customers and
build customer relationships
Understand
the
marketplace
and customer
needs and
wants
Design a
customerdriven
marketing
strategy
Construct a
marketing
program that
delivers
superior
value
Build profitable
relationships
and create
customer
satisfaction
Capture
value from
customers to
create profits
and
customer
quality
Marketing
Global
Ethics and
technology
markets
social responsibility
Introduction
What is international marketing?
- “International marketing is the process of planning and conducting
transactions across national borders to create exchanges that satisfy
the objectives of individuals and organizations” (Czinkota and
Ronkainen)
- “International marketing focuses its resources on global market
opportunities and threats” (Keegan and Green)
- “International marketing is the motor of the internationalization
process of the firm” (Usunier)
- It is a tool used to obtain improvement of the firm’s position in the
global market
- Strategy and action, global and local
Introduction
International Marketing Decisions
Deciding whether to go abroad
Deciding which markets to enter
Deciding how to enter the market
Deciding on the marketing program
Deciding on the marketing organization
Introduction
What are the similarities and differences between
international marketing and domestic marketing?
– Similarities: basic concepts, practices and tools are
almost identical, key success factors are the same…
– Differences: more strategic, more variables, more
complex, cultural differences, legal constraints,
information sources, managing distances, entry mode
choice…
Introduction
International marketing concept
Export
marketing
Global
marketing
Inter-cultural,
multi-cultural
marketing
Course Outline
• Culture and international marketing
• International marketing research
• International marketing strategy and programs
Chapter 1
Culture and
international marketing
Culture and international marketing
• Concepts of culture
• Dimensions and models of culture
• Examples and international marketing consequences
What is culture?
• “Culture is the integrated sum total of learned behavioral
traits that are shared by members of a society” (Hoebel)
• “Culture is the entirety of societal knowledge, norms and
values” (Antonides and Van Raaij)
• “Culture is the collective mental programming of the people
in an environment. Culture is not a characteristic of
individuals; it encompasses a number of people who were
conditioned by the same education and life experience”
(Hofstede)
Culture both affects and describes human behavior,
it is essential in international marketing
Fundamentals of culture
– Culture is a total pattern of behavior that is consistent
and compatible in its components. It is not a collection
of random behaviors…
– Culture is a learned behavior. It is not biologically
transmitted. It depends on environment, not heredity.
– Culture is behavior that is shared by a group of
people, a society. It is a distinctive way of life.
Culture vs. personality
• Personality is the individual’s unique
personal set of mental programs that he/she
does not share with any other human being.
• Culture is what members of a group have in
common. “It is the glue that binds groups
together” (De Mooij)
Human nature depends on culture: ideas, values, acts, emotions… are
cultural products. Cultural patterns help people to live together in a society.
Manifestations of culture
Symbols
Heroes
Rituals
Values
and
Norms
Expressions
of culture
Symbols
• Symbols are words, gestures, pictures, or objects that
carry a particular meaning recognized only by those
who share a culture.
• This is the most superficial manifestation of culture.
• New symbols are easily developed and old ones
quickly disappear.
• Symbols from one cultural group are regularly copied
by others.
Heroes
• Heroes are people, alive or dead, real or
imaginary, who possess characteristics that
are highly prized in a society.
• They serve as role models for behavior.
• They can become globally known, but their
stories often become local.
Rituals
• Rituals are the collective activities
considered socially essential within a
culture.
• They are carried out for their own sake.
• They are easily observed, but not always
understood.
Values
• Values are at the core of culture.
• Values are stable beliefs regarding desired behavior or end
states.
• They often have a religious, ideological or humanistic
background.
• Goals are derived from values.
• Values are among the first things children learn, not
consciously but implicitly.
• Core values are resistant to globalization; they vary across
cultures and are not likely to change frequently.
Norms
• Norms and values are part of the “non-material”
culture.
• Norms are beliefs regarding how to behave and
how not to behave (do’s and don’ts).
• People differ in the extent to which they accept
and comply with norms.
• They create expectations and criteria regarding the
conduct of others.
Explicit vs. implicit culture
• Explicit culture: languages, behavior,
know-how, institutions (directly observable)
• Implicit culture: moral values, learning
process, beliefs and representations
(subconscious)
According to Hoebel…
There are 3 types of cultural norms in terms of
behavior:
• 10% of norms are technical:
– explicit, logical and transferable; written norms of a society (laws,
technical manuals, rules, etc…)
• 30% of norms are formal:
– explicit, moral and transmissible; traditions of a culture; learned
through education (manners, courtesy…)
• 60% of norms are informal:
– implicit, instinctive and imitated; sunken part of the iceberg (facial
expressions, body language, cultural perspective on time and space…)
How do these cultural norms influence
international business and marketing?
Two levels of cultural diversity
in international business
• External cultural diversity
– Cultural determinants influencing purchasing and consumption
behaviors (Who buys? What? Where? How? Why?)
– Cultural determinants influencing negotiations (relationships
with suppliers, buyers, partners)
• Internal cultural diversity
– Observed within all MNCs (identity and corporate culture)
– Cultural differences that affect the way subsidiaries work
together
Four levels of culture in marketing
DOMINANT CULTURE
Non-material
consumer culture
Material culture of
products
Non-material culture
of the firm
(market)
(corporate culture)
Transfer of culture
Two main cultural transfer processes:
• Socialization: transfer of culture to new
generations; older generation to younger
generation; education.
• Acculturation: transfer of culture to adults who
have grown up in different cultures, who have
been socialized in different cultures; ethnic
minorities; multicultural societies.
Cultural transfer and change
SOCIALIZATION
Agents
CULTURAL
TRANSFER AND
CHANGE,
DYNAMIC
PROCESS
LEARNING BY
OBSERVATION
Agents
ACCULTURATION
Agents involved in cultural transfer
Agents
Age (years)
Most important values
Parents
0
Obedience, cleanliness, honesty
Siblings
2
Responsibility, social recognition
Schools, teachers
6
Ambition, capability, logical behavior
Friends
6
Courage, social recognition
Church
6
Honesty, peace, salvation, forgiveness
Sport, clubs
12
Ambition, courage
Mass media
12
Pleasure, intellect
Processes of cultural change
• Socialization and acculturation usually imply a
gradual cultural change because transfer agents tend
to favor cultural continuity rather than jeopardize
their powerful position.
• In contrast, innovative forces are less conservative
and may challenge the status quo.
4 processes: cohort effects, age effects,
democratization and exclusivation.
Cohort effects
• Acceptance of new values and behaviors begins at a
young age.
• These values and behaviors are retained over the
years.
• They are spread in society because young people
grow older and the “old” values gradually disappear
with the extinction of the older cohorts.
• Implies a slow cultural change.
Age effect
• Certain values or behaviors are associated with a
particular age group.
• Behaviors are modified as age groups change.
• Age-bound consumer behavior.
• Possible reverse socialization.
Democratization
• Cultural “leveling” or “spreading”
• Cultural differences across social classes decrease.
• Results from an increasing level of general
welfare, the influence of mass media and the stress
on the equality ideal.
• Mechanisms of democratization: trickle-down,
trickle-up, trickle-across.
Exclusivation
• Reverse of democratization
• Occurs less frequently
• Implies limited social spreading of values, goods
and behavior.
• Cultural change is limited to a certain group
(“elite”, “leading edge”).
Dimensions of culture
• What makes one culture different from another
culture?
• How can we compare cultures or cluster cultures
according to behavioral characteristics?
• Stereotypes vs. cultural dimensions
• Different cultures have different stereotypes of other
cultures.
Ethnocentrism and SRC
Cultural dimension models
• Hall – High-context vs. low-context cultures
• Kluckhohn – Relationship to nature
• Hofstede – Five dimensions of culture
Hall’s cultural model
• Focuses on communication patterns found within
cultures
• Four essential dimensions in terms of communication
patterns:
–
–
–
–
Context
Time
Space
Information flow
High-context vs. low-context cultures
Low-context and high-context cultures
• Low-context
– Messages are explicit
– Words carry most of the information in communication (facts,
data)
– Effective verbal communication is expected to be explicit, direct,
and unambiguous
• High-context
– Less information is contained in the verbal part of the message
– Much more information resides in the context of communication
(background, associations, symbols, basic values of the
communicators)
– Verbal mode is only one part of communication, nonverbal is
often seen as having greater importance
Degree of context of cultures: comparison of law (US and France)
Time
• Different cultures have different concepts of time.
This can explain differences in behavior.
• Dimensions of time:
– Closure: a task must be completed, if not perceived as
“wasted”
– Long-term vs. short-term thinking
– Orientation toward past, present or future
– Linear or circular (tangible or intangible)
– M-time and P-time
– Cause and effect
– Time as symbol (“time is money”, efficiency, waiting,
discretionary time)
A few examples…
Factors
High-context
Low-context
Lawyers
Less important
Very important
A person’s word
To be trusted
« Get it in writing »
Responsibility for error
Taken by the highest level Pushed to the lowest level
Space
People breathe on each
other
People maintain a bubble
of private space
Time
Polychronic, circular
Monochronic, linear
Negotiations
Are lengthy
Proceed quickly
Competitive bidding
Infrequent
Common
Examples
Japan, China, Middle East US, Germany,
Switzerland
Kluckhohn’s cultural model
3 types of relationships between humanity and
nature:
– Mastery-over-nature (man is to conquer nature)
– Harmony-with-nature (man is to live in harmony with
nature)
– Subjugation-to-nature (man is dominated by nature)
Further developed with: nature of people, duty, mode of activity,
privacy of space, temporal orientation…
Humanity and Nature
Mastery-over-nature
-Humanity is separate
from nature
-Nature should be
controlled
Harmony-with-nature
-No distinction between
humanity, nature and
supernatural
-Communion, exchange,
subtle intimacy
Subjugation-to-nature
-People are dominated by
nature
-Supernatural forces play
a dominant role in
religion
-“To move a mountain”
-Identification with nature -Nothing can be done to
control nature
“Western” world,
North America
Asia, Japan
Use in international marketing?
Africa, South America
Hofstede’s cultural model
• Hofstede’s 4D or 5D model
• Quantitative and longitudinal study of cultural differences between
countries
• Why some concepts of motivation do not work in all countries in the same
way
• “Culture’s Consequences” and “Cultures and Organizations: Software of
the Mind”
• Scores for each country explain why people and organizations in various
countries differ, comparative data.
Reference in international business and international marketing
How do we measure cultural distance?
Geert Hofstede’s Cultural Index
- National character survey
- 116.000 IBM employees
- 72 countries and 20 languages
Original scores
for 56 countries,
extended to
nearly 90
Five different poles make up the cultural index:
- Power distance
- Uncertainty avoidance
- Individualism
- Masculinity
- (Long term orientation)
5D Model
PDI
100
LTO
UAI
100
100
Work-related values
to consumptionrelated values
0
100
MAS
100
IDV
Power distance (PDI)
• High PDI vs. Low PDI
• “the extent to which less powerful members of a society accept and
expect that power is distributed unequally”
• Reflected in the values of both the less powerful and more powerful
members of society
• Influences the way people accept and give authority
• Shows class or social structure
• Focuses on the degree of equality, or inequality, between people in the
country’s society
Uncertainty avoidance (UAI)
• High UAI vs. Low UAI
• “ the extent to which people feel threatened by uncertainty and
ambiguity and try to avoid these situations”
• Strong UAI = need for rules and formality to structure life, search for
truth and belief in experts
• Conflict and competition are threatening
• Higher level of anxiety, show of emotions is accepted
Individualism (IDV)
• Individualistic vs. Collectivistic
• “people looking after themselves and their immediate family only,
versus people belonging to in-groups that look after them in exchange
for loyalty”
• “I”-conscious and “we”-conscious
• Focuses on the degree the society reinforces individual or collective
achievement and interpersonal relationships
• Distinguishes between societies where the group and being a member
is important (collectiveness) and societies where the group is less
important (individualism)
Masculinity (MAS)
• Masculine vs. Feminine
• “the dominant values in a masculine society are achievement and
success; the dominant values in a feminine society are caring for
others and quality of life”
• Focuses on the degree the society reinforces, or does not reinforce,
the traditional masculine work role model of male achievement,
performance, control and power
• Shows the importance of status in societies
• Indicates the degree of gender differentiation and the importance
of masculine values (assertiveness, money, material goods,
success…)
Long-term orientation (LTO)
• Long-term vs. Short-term orientation
• Chinese value survey, “Confucian dynamism”
• “the extent to which a society exhibits a pragmatic future-oriented
perspective rather than a conventional historic or short-term point of view”
• High LTO = perseverance, ordering relationships by status, thrift, sense of
shame, family ties, long-term thinking, paternalism
• Focuses on the degree the society embraces, or does not embrace, longterm devotion to traditional, forward thinking values
• Indicates whether the country prescribes to the values of long-term
commitments and respect for tradition
Examples of Hofstede’s Dimensions
Some country examples
Country
PDI
UAI
IDV
MAS
LTO
Australia
36
51
90
61
31
Belgium
65
94
75
54
Denmark
18
23
74
16
France
68
86
71
43
Germany
35
65
67
66
31
Great Britain
35
35
89
66
25
India
77
40
48
56
61
Italy
50
75
76
70
Japan
54
92
46
95
80
Netherlands
38
53
80
14
44
Spain
57
86
51
42
USA
40
46
91
62
29
World
average
57
65
43
49
50
Comparison of cultural dimensions
More information on www.geert-hofstede.com
American culture
• Classical dimensions: M-time culture, linear timepattern, low-context, low PDI, individualistic, high
MAS, low UAI, short-term orientation
• Other dimensions: success, obsession with change
(new and better), credit card culture, education for
competitiveness, independence, ethnocentrism, strong
role differentiation, innovativeness, creativity, private
opinions expressed, education teaches students to be
critical (ask “why” not “how”), man must conquer
nature, (De Mooij)
Japanese culture
• Classical dimensions: P-time culture, circular time
concept, high-context, high PDI, collectivistic,
masculine, strong UAI, long-term orientation
• Other dimensions: pressure to behave like
neighbors, shame-based society, avoid jolting social
harmony, dependence, private opinions not expressed,
status is important (success) but avoid standing out in
a crowd, cash culture, thrift and perseverance, strong
role differentiation, education (“how” instead of
“why”), education has an intrinsic value, obsession
with cleanliness, harmony with nature… (De Mooij)
Limits to Hofstede’s model
• Generalization, reductive, simplistic (unproven and unprovable,
flawed assumptions, “storytelling”…)
• Original objective: how values in the workplace are influenced by
culture
• Three discrete cultures
– Organizational
– Occupational
– National
?
• Questionnaire – quantitative data
• Differences in location – intracultural differences, subcultures
Intracultural differences
• Few cultures are homogeneous in terms of cultural
traits and norms
• Consequence of globalization?
• Intracultural differences (nationality, religion,
race, language or geographic areas) result in the
emergence of distinct subcultures
• Existence of cross-cultural and intracultural
differences: opportunities and threats
To summarize on culture…
• Culture is complex and multi-dimensional, but classification
is important in business
• Cultural distance is essential in international marketing
• Culture influences perceptions and drives how we
communicate and what we communicate
• SRC and ethnocentrism can explain the failure of many
companies in the international arena
• Acculturation (adjusting and adapting to a specific culture
other than one’s own) is one of the keys to success in
international operations
How does culture affect
international marketing?
• Languages and the use of language in communicating,
advertising, negotiating…
• Marketing research is much more difficult to conduct from a
methodological perspective
• Buying patterns and behaviors will vary in different cultural
contexts
• Marketing mix will be perceived differently from one country
to another
• Management styles will be directly related to culture…
Marketing and cultural differences
Marketing area
Influence of cultural differences
Consumer behavior
Decision-making, cross-cultural attitudes, local vs. global
Marketing research
Cross-national equivalences
Global marketing strategy
Global strategy vs. customized strategy
Segmentation & targeting
Inter-national (regional, global) vs. intra-national
Product policy
Adapt or standardize product attributes
Brand image
Brand perception, country of origin, “made in”
Pricing policy
Price-quality ratio, influence of price in decision-making
Distribution channels
Type of channel, distributor relationships
Communication
Values, visions of the world, communication styles
Advertising
Advertising messages, symbols, adaptation of strategy
Sales
Sales force management, PR, corruption, ethics
Negotiation
Negotiation strategies, process, results, styles…
Source: Usunier
Culture’s consequences on
international marketing
• Marketing research (understanding consumers)
• Segmentation (classifying consumers)
• Product policy (satisfying consumers)
• Distribution channels (reaching consumers)
• Advertising (communicating with consumers)
Chapter 2
International Marketing
Research
International marketing research
• Review of marketing research techniques
• Specific problems in international markets
Review of marketing research techniques
• General principles of marketing research
• Qualitative research
• Quantitative research
What is marketing research?
Marketing research is the link between the marketer and
the market…
It is the starting point of marketing…
Marketing research is the systematic design, collection,
analysis, and reporting of data and findings relevant to a
specific marketing situation facing the company.
MIS: consists of people, equipment, and procedures to
gather, sort, analyze, evaluate, and distribute needed,
timely, and accurate information to marketing decision
makers.
Marketing process
Capture
value from
customers
in return
Create value for customers and
build customer relationships
Understand
the
marketplace
and customer
needs and
wants
Design a
customerdriven
marketing
strategy
Construct a
marketing
program that
delivers
superior
value
Build profitable
relationships
and create
customer
satisfaction
Capture
value from
customers to
create profits
and
customer
quality
Marketing
Global
Ethics and
technology
markets
social responsibility
Position of marketing research
ANALYSIS
MARKETING
RESEARCH
PLANNING
MARKETING
STRATEGY
IMPLEMENTATION
CONTROL
MARKETING
RESEARCH
Marketing research goals
•
•
•
•
•
•
UNDERSTAND
DESCRIBE
EXPLAIN
MEASURE
FORECAST
VERIFY
Product, consumer, distributor, competitor,
environmental analysis
Marketing research process
Define problem and
research objectives
Develop the research plan
Analyze the information
Collect the information
Present the findings
Research design
• The research design formally describes the characteristics of
the survey and the procedures used to conduct the study.
• It is the methodological framework of the research.
• Contents:
– Goals
– Information sources
– Variables
– Survey method
– Sampling method
– Data analysis
– Calendar
– Budget
Internal validity
External validity
Types of marketing research
-Documentary
EXPLORATORY
DESCRIPTIVE
CAUSAL
-Qualitative
-Documentary
-Quantitative
-Experimentation
-Observation
Research methods
• Observational research
- Audit: inventories, facing, pantry check…
- Mechanical: scanning, EDI, eye camera…
• Experimental research
- Product/concept tests: prototype, comparative or not
- Market/store tests: laboratory stores, catalog sales,
mobile stores, in-store tests, city tests…
• Ad hoc research
- Qualitative research: interviews, focus groups…
- Quantitative research: surveys, opinion polls…
Qualitative and quantitative research
• The distinction between qualitative and
quantitative research depends on the nature
of the research problem.
• If “why?” or “how?”
QUALITATIVE RESEARCH
• If “how many?” or “how much?”
QUANTITATIVE RESEARCH
Information Sources
• Secondary sources: Existing data. All forms of
documentary research.
DESK RESEARCH
• Primary sources: Data collected for a specific
situation at company’s request.
FIELD RESEARCH, AD HOC
• These sources can be internal or external.
• The choice will depend on the marketing problem,
objectives, resources…
Documentary Research
• First step to marketing research
• 4 steps
–
–
–
–
Define the topic (clear, feasible, pertinent)
Identify key words associated to the topic
Search for available sources of information
Consult, sort and summarize information
• Questions to ask
–
–
–
–
Does the data correspond to the situation?
Is there a risk of obtaining biased information?
Was the research design technically coherent?
Are the findings clear, precise…?
Research and polling institutes
• These institutes collect information for
resale.
• They can give 2 types of information:
– Standardized periodic information: panels,
longitudinal studies. Firms subscribe to this
information. This is a secondary information
source.
– On-order studies: reserved solely for one
company or omnibus studies. This is a primary
information source.
Advantages and disadvantages of
information sources
Secondary
Primary
Advantages
Low in cost
Diversity
Available
Problem definition
Familiar with market
Adapted information
Recent, up-to-date
Not available to
competitors
Disadvantages
Incomplete, outdated
Inadequate
False information
Difficult to control
Costly
Difficult to collect
Time consuming
Sequence and relationship between
different sources of information
SECONDARY SOURCES
(Desk Research)
Internal
External
PRIMARY SOURCES
(Field Research)
Qualitative
Quantitative
Qualitative marketing research
What is qualitative marketing research?
• Collecting and analyzing psycho-sociological
elements which explain facts, attitudes, opinions,
motivations and behaviors of all people involved
in a given marketing situation
• Qualitative research methods are used for in-depth
exploratory studies of the decision-making process
and psychological mechanisms that affect
individual or group behavior
Why use qualitative research?
• Qualitative research studies lead to understanding
the causes or the basis for behaviors, attitudes and
opinions.
• They are often based on analyzing how a product
or company is perceived by individuals or
consumers.
• However, results cannot be extrapolated. They
cannot be considered as being representative of
the entire population. Sample size = 10 - 70
Qualitative research is used in the following cases:
• Defining the marketing problem is difficult
(explore market)
• Finding causes, decision-making criteria of
consumer behavior
• Secondary information is insufficient
• Constructing questionnaire for a survey
• Explaining surprising results of quantitative
research
• Promoting creativity
Advantages and disadvantages of
qualitative research
Advantages
-Quick and flexible
(maximum 70 people)
-Less costly
-Allows exploration
-Attitudes, motivations,
opinions are studied
-Reveals deep feelings
and thoughts
Disadvantages
-Non-representative
sample
-Research design is
difficult to plan
-Quality of the study
depends on researcher
skills
Different types of qualitative research
• Two ways of classifying qualitative studies:
– Degree of induction (level of consciousness)
• Unstructured interview (pure exploration)
• Centered or focus interview (exploration and in-depth analysis)
• Structured interview (identification and verification)
– Number of people being interviewed
• Individual
• Group
Choosing a Type of Interview
OPINIONS
Levels of
consciousness
Structured interview
ATTITUDES
Centered or Focus
interview
MOTIVATIONS /
BELIEFS
Unstructured
interview or
centered with
projective tests
Unstructured interviews
• Conducted in a face-to-face situation
• Large, ambiguous opening
• Funnel approach
• The respondent is free to express his feelings as
wishes and for as long as he wishes
• Non-directive, but reformulation techniques
• Use in marketing
Unstructured interviewing steps
Present research
objectives
Large opening
statement or questions
Reformulation techniques
(« mirror effect »)
Researcher adopts a
non-directive attitude
Respondent goes further
in-depth
« auto-exploration »
Centered or focus interviews
• Same general structure and basic principles as the unstructured
interview
• However, an interview guide is used
• This guide is composed of topics or questions to be addressed
during the interview
• The interviewer will bring up topic if and only if respondent
does not spontaneously address issues
• This is NOT a questionnaire (no order, modifications possible,
different versions allowed)
• This is the most popular form of qualitative research
Projective techniques
• Used to avoid psychological obstacles (taboos, reluctance,
courtesy bias, subconscious…) or to go further in-depth
• Visual or written stimuli
• The respondent will overcome hesitations
• Difficult to analyze, ambiguous
• Different tests
–
–
–
–
–
–
Word association
Sentence completion
Story completion
Frustration or cartoon test
TAT (Thematic Apperception Test)
Haire test
Example – Nescafé (Haire test)
•
•
•
•
•
•
•
List 1
1 lb. of carrots
Roast beef
1 can of Delmonte corn
Heinz ketchup
Folgers ground coffee
Tide laundry detergent
3 onions
?
•
•
•
•
•
•
•
List 2
1 lb. of carrots
Roast beef
1 can of Delmonte corn
Heinz ketchup
Nescafé instant coffee
Tide laundry detergent
3 onions
?
Structured interviews
• Most directive method in qualitative marketing research
• A questionnaire is used
• However, the questionnaire is only composed of open-end
questions
• Questionnaire facilitates the research process as well as
analysis
• Confusion between qualitative and quantitative research
• It is theoretically incorrect to extrapolate or generalize the
findings
Focus groups
• Nearly always use the centered approach (interview
guide, group discussion is directed by interviewer)
• About 7 to 10 participants per group
• The role of the interviewer is very important
• Interviewer must manage the group in terms of
participation, conflict, domination, summaries, etc…
• Organization and logistical aspects
Focus group phases
• Three phases during the group interview:
– Presentation (warming up): explanations, rules of the
game, individual introductions, anonymous
responses…
– Exchange: each participant gives his or her opinions,
thoughts, group dialogue, tests…
– Summarize: verify all topics of interview guide,
repeats, star technique (circept), gift…
Comparing different types of interviews
• Unstructured : large opening statement and nondirective attitude (≈ 500 to 800 €)
• Centered : interview guide to « center » discussion
(≈ 250 to 500 €)
• Structured : qualitative questionnaire (≈ 150 to
200 €)
• Focus group : centered interview, 7 to 10
participants per group (≈ 5000 to 8000 €)
Comparing individual interviews
and focus groups
Advantages
Disadvantages
Individual -Personal, in-depth questions
interview -Lower cost per respondent
-Only solution in some cases
(B to B, competitors)
-Researcher training
-Analyzing findings
-Long to conduct
Focus
groups
-No in-depth
motivations
-Risk of conformity,
strong group influence
-Organizational and
logistic difficulties
-More information during
discussion
-Quicker to conduct
-Possible to study interactions
and influences during the
decision process
-Stimulate ideas and creativity
Qualitative sampling
• No representative sample, but variety of individuals
is important
• No important profiles should be excluded
• Sequential procedure (arborescence) is used:
–
–
–
–
–
List of criteria explaining differences of behavior
Rank criteria from most important to least important
List possibilities for each criteria
Build arborescence
Verify coherency of arborescence
Sampling in focus groups
• Same basic principles (arborescence)
• All participants must feel “equal”
• However, there are two important rules:
– Group must be heterogeneous (cover all of the
profiles of the populations)
– Group must be homogeneous (for criteria that
may lead to an unbalanced group)
Many groups may be need to be organized in order to
avoid unbalanced groups or inter-group pressure
Qualitative data analysis
Two different methods can be used:
– Summaries of interviews, “verbatims”
– Content analysis
•
•
•
•
Requires re-transcribing of all interviews
Specialized software
Quantification, scientific rigor
Time and budget
Quantitative marketing research
Differences compared to
qualitative research
•
•
•
•
•
•
•
Associated with descriptive research
Objectives are different: verify, measure, estimate...
Sampling methods are different
Large sample size (300 – 1000+)
Methods of administration change
Precision of an estimation, margin of error
Data analysis is more sophisticated
Advantages and disadvantages of
quantitative research
Advantages
-Delivers precise numerical
estimations (forecasting,
market share, intentions…)
-Extrapolation possible
-Representative sample
-Superior objectivity
-Statistical techniques
-Inter-group comparisons
-Longitudinal studies
Disadvantages
-Does not explain why or how
-Precision tool, not a
discovery tool
-Self-report data
-Broad but shallow data
-Long and costly
-Difficult in B to B
-Participation is unrewarding
(direct marketing)
Categories of quantitative research
• Census
– Collect information from each member of the
population
– Complete canvass of the population
– Depends on the size of the target population
• Survey
– Most familiar of all market research methodologies
– Collect information from a portion of the population
– Procedure in which a fixed set of questions is asked of a
sample of respondents
– On the basis of information collected on the subset, it is
possible to infer something about the larger group
– Inference depends on the sampling method
Census vs. Survey
• Census: n = N
• Survey: n/N = subset of the population,
survey rate or sampling rate
• Exhaustive or non-exhaustive survey
Generalization and extrapolation of findings
Validity of quantitative research
• Representative sample sampling method and
response rate
• Precision sample size and margin of error
• Quality of questionnaire and administration
• Researcher training and experience
• Quality of information processing
• Quality of data analysis
What is sampling?
n
N
70%
70% + e
Sampling is necessary every time the population
size is too large to be able to collect information
from all elements of the population.
Probability vs. non-probability sampling
• Probability
– Each population element has a known, non-zero chance of being
included in the sample
– Final elements are selected objectively by a specific process
– Equal probabilities are not necessary
– Allow an assessment of the amount of sampling error likely to
occur
– Requires an exhaustive sample frame
• Non-probability
– No way of estimating that probability that any population element
will be included in the sample
– Rely on personal judgment somewhere in the process
– Statistically, precision (sampling error) cannot be evaluated
Quantitative sampling methods
•
•
•
•
•
PROBABILITY
NON-PROBABILITY
SAMPLES
SAMPLES
Simple random sample
Cluster sample
Area sample
Level random sample
Stratified random
sample
• Quota sample
• Random route sample
• Judgment sample (onthe-spot sample)
• Convenience sample
Probability sampling
• SRS: each population element has a know and equal
chance of being selected; central-limit theorem (when n is
large, the sample mean will be normally distributed).
• Cluster and area: first parent population is divided into
mutually exclusive and exhaustive subsets, then a random
sample of the subset is selected.
• LRS: random sampling occurs at several different levels of
the population.
• Stratified: population is divided into strata or
subpopulations and random sampling occurs in each
stratum (proportionate and disproportionate).
Non-probability sampling
• Quotas: attempt to ensure that the sample is representative
by selecting sample elements in such a way that the
proportion of the sample elements possessing a certain
characteristic is approximately the same as the proportion
of the elements with the characteristic in the population.
• Random route: each field worker is given a random route
to follow, leading to the selection of people to interview.
• Judgment: sample elements are handpicked because it is
expected that they can serve the research purpose and it is
believed that they are representative of the population of
interest (purposive samples).
• Convenience: sometimes called accidental samples
because those composing the sample enter by accident
(volunteers, radio shows…)
Choosing a sampling method
Do we have a sample frame?
Yes
No
Do we have a frame
of clusters?
Is SRS too costly?
Yes
No
Is the population
stratified?
No
SRS
Yes
Stratified
sample
Yes
Is it too
costly?
No
Cluster or area
sample
No
Yes
Are there frames at
different levels?
Yes
Level random
sample
No
Do we know the structure of the
population for several variables that
explain differences in behavior?
Yes
No
Is the population
widely dispersed?
Quota sample
Yes
No
Are there
mandatory passage
points?
Random
route
Yes
Judgment or
on-the-spot
sample
No
Snowball or other
convenience
sample
Sample size and precision
• With probability samples, precision and minimal sample
size can be determined
• Sample size must be greater than 30
• Estimation, confidence level, confidence interval and
margin of error
• Probability sampling methods or Kish coefficient
• Precision of an estimation is not proportional to sample
size, but to the square root of the sample size. To double
precision, the sample size must be multiplied by four.
Sample size and margin of error
2
n = t pq
e
Non-exhaustive sample
2
n’ = (n x N) / (n + N)
e =  t √pq
n
n = budget – fixed costs
direct cost per unit
Exhaustive sample
Margin of error for
probability samples
Budget approach
Procedure for developing a questionnaire
• Specify what information will be collected
• Determine type of questionnaire and method of administration
• Determine content of individual questions
• Determine form of response to individual questions
• Determine wording of each question
• Determine sequence of questions
• Determine physical characteristics of questionnaire
• Reexamine and revise
• Pretest questionnaire and revise if necessary
Type of questionnaire and
method of administration
• These two decisions are interdependent
• The length of the questionnaire will influence the choice of
the method of administration
• Self-administered questionnaires (mail, Internet,
questionnaire in magazine, etc…): response rate is
generally low (< 20%)
• Questionnaires completed with researcher (direct personal
interviewing, phone): longer questionnaire and higher
response rate (50%)
Form of response
•
•
•
•
•
•
•
•
Open-ended
Dichotomous: 2 possible answers
Multiple choice: 3 or more possible answers
Likert scale: a statement with which the respondent shows the
amount of agreement or disagreement (strongly agree – strongly
disagree)
Semantic differential scale: a scale connecting two bipolar
words, respondent selects the point that represents his/her
opinion (enthusiastic – unenthusiastic)
Importance scale: rates the importance of some attribute
(extremely important – extremely unimportant)
Rating scale: rates some attribute from “poor” to “excellent”
Intention-to-buy scale: describes respondent’s intention to buy a
product or service (definitely buy – definitely not buy)
Avoid halo effect (change direction in scales to avoid repetition)
Question wording
• The phrasing of a question can directly affect the
responses.
• General rules:
–
–
–
–
–
–
Use simple words
Avoid technical vocabulary in consumer research
Avoid double negations
Avoid ambiguous words and questions
Avoid leading questions
Avoid double-barreled questions
• Examples
Question sequence
General rules:
• Questionnaire should be very logical and easy to
respond to.
• Use simple, interesting opening question.
• Use the funnel approach (start with broad questions
and progressively narrow down in scope).
• Avoid jumping around from topic to topic.
• Use transitions.
• Design branching questions with care.
• Place difficult or sensitive questions late in the
questionnaire.
• Ask for classification information last.
Question sequence
Knowledge and awareness questions
Factual behavior questions
Attitude questions
Intention questions
Classification questions
Questionnaire pretest
• Data collection should never begin without an
adequate pretest of the instrument.
• Can be used to assess both individual questions and
their sequence.
• Small sample of 10 to 30
• Questionnaire followed by interview to identify
problems and misunderstandings
• Pretest results are not included in the final results of
the survey
“The pretest is the most inexpensive insurance the
marketer can buy to ensure the success of the
questionnaire and the entire research project”
Quantitative data analysis
• Univariate analysis descriptive statistics
and graphical information
• Multivariate analysis cross-tabulations,
Chi square tests, correlation analysis,
multiple regression analysis, cluster analysis
(perceptual mapping), factor analysis….
Cost factors affecting surveys
•
•
•
•
Sample size
Accessibility
Survey length
Analysis
≈ 100 € per respondent
Specific problems in international markets
General context of international
marketing research
• Globalization, but change at different rates in different parts of
the world
• Challenge of conducting high quality research as quick as
possible in multiple diverse settings
• Research conducted simultaneously in developed and
developing world
• Unbalanced spread of marketing research expenditures
• Multi-faceted issues (where, how, who, tools, comparisons…)
• New technologies (CATI, CAPI, scanners, Internet…)
3 specific problems in international
marketing research
• Who will conduct the research?
 degree of research centralization
• Is the information comparable?
 cross-cultural research  equivalences
• What are the sources of bias?
 five bias types
Who will conduct international
marketing research?
• The firm can use internal or external research services.
• The unknown competitive situation and different cultural
backgrounds complicate the choice between internal and
external research.
• Problem: exclusive contracts with marketing research firms…
• To what degree should international marketing research be
centralized?
• Three choices: internal marketing department, domestic research
firm, foreign research firm
The degree of centralization of
international marketing research
Access to
information
Information
sources
Quality and
reliability of
information
Adaptation
to firm’s
problem
Monitoring
Cost
Internal
marketing
department
Low access.
Network
problem.
Competitive
analysis
difficult.
Limited
knowledge of
sources in
foreign
market.
Risk in terms
of analysis.
Language
problems.
Cultural bias.
Excellent.
Excellent.
Low in cost.
Travel
expenses and
use of staff.
Domestic
research
firm
Good if the
firm has an
important
local
network.
Excellent in
France.
Perhaps
limited in
foreign
market.
Risk in terms
of analysis.
Language
problems.
Depends on
the informal
network.
Very good.
Easy to
clarify if
problems.
Good. Easy to
monitor
during the
research
process.
High in cost.
Specific
project fees.
Foreign
research firm
Very good.
Low risk of
ignoring
essential
information.
Excellent in
foreign
market, but
only local.
Excellent.
Limited. The
firm may be
unknown.
Limited. Risk
of nonconformity
with initial
objectives.
Variable.
Is the information comparable?
• This question is very important in cross-cultural or
comparative studies.
• Some words, ideas, concepts, practices, etc… will have
different meanings in different cultural contexts.
• Research equivalence is necessary, but not always easy
to achieve.
• Equivalences must be verified before conducting
research on “foreign” consumer behavior.
International equivalences
• Functional equivalence: do products serve the same function?
• Conceptual equivalence: do relevant concepts have the same meaning and/or
importance?
• Category equivalence: does the product belong to the same category or
domain?
• Translation equivalence: cross-check, translation-retranslation
• Metric equivalence: scaling, odd/even, do adjectives have the same strength
and distances?
• Respondent equivalence: who should answer questions? same social role?
sampling unit…
• Sampling frame equivalence: how will sample be chosen?
Sources of bias
• Bias = distorted results, incorrect or false compared to
reality…
• Biased responses are more likely to occur in
international marketing research than in domestic
research and are harder to avoid
• Importance of control, pre-test, acculturation…
• Research plans must be adapted to reduce the risk of
biased responses
5 sources of bias
• Courtesy bias: concerns the social desirability of answers, the
respondent hopes to please the interviewer
• Subject bias: concerns the way a society perceives an issue as
being more or less sensitive
• Cultural-trait bias: a given cultural trait can alter the findings
(IDV, MAS…)
• Response style bias: some responses are more or less extreme
in some cultures (scaling, ranking), coefficients
• Non-response bias: non-response style varies according to
country, gender, race…
Practical consequences in
international marketing…
•
Qualitative research only accounts for less than 20% of research expenditures around the
world (emerging markets, innovation, brand renewal…), but this is increasing
•
Length of interview and compensation will vary from one market to the other
(monochronic and low-context = shorter interviews and larger compensation)
•
Some techniques are unknown or unfeasible (projective techniques, on-line surveys,
CAGI/CATI…)
•
Focus groups are very culture-bound (collectivistic vs. individualistic societies, social
status, disagreement…)
•
Sampling techniques are limited (reliable information is not widely available, statistics,
sampling base…)
•
Collecting information is difficult (level of economic development, illiteracy, local
authorizations…)
•
Cross-cultural research is limited (comparison is difficult, concepts/rituals…)
•
Recent developments in international marketing research
Chapter 3
International Marketing
Strategy and Programs
Expanded marketing process model
Capture value
from customers
Create value for customers and build customer relationships
Understand the
marketplace
and customer
needs and
wants
Research
consumers and
market
Manage
marketing
information and
customer data
Design a
customer-driven
marketing
strategy
Select customers
to serve:
segmentation and
targeting
Decide on a value
proposition:
differentiation and
positioning
Construct a
marketing
program that
delivers
superior value
Product and
service design:
build strong
brands
Pricing: create
real value
Distribution:
manage demand
and supply
chains
Promotion:
communicate VP
Marketing technology
Global markets
Build profitable
relationships and
create customer
satisfaction
CRM and CEM:
build strong
relationships with
chosen
customers
Partner
relationship
management:
build strong
relationships with
marketing
partners
Capture value
from
customers to
create profits
and customer
quality
Create
satisfied loyal
customers
Capture
customer
lifetime value
Increase share
of market and
share of
customer
Ethical and social responsibility
Corporate strategy vs. marketing strategy
Strategic
segmentation
SBU
SBU
Core market
Strategic positioning
Market segmentation
SBU
S1
S2
S3
Market targeting
Target segment
Consumer preferences
Competitor positioning
Firm advantages
Market positioning
Positioning
Marketing mix
-Sales objectives
-Budgets
-4 Ps
Market segmentation
• What is it?
– Identifying and profiling distinct groups of buyers who
might require separate products and/or marketing mixes
– Clustering consumers in terms of behavior, needs,
attitudes, opinions…
• Why?
– Buyers/consumers differ in many ways
– They do not respond to the same stimuli in the same way
– So, different offers for different types of buyers
• Market segmentation represents an effort to increase
a company’s targeting precision.
Levels of market segmentation
• Mass marketing
– Mass production, distribution and promotion of one product for all buyers
– Largest potential market, “one size fits all”
– Lowest costs = lower prices or higher margins
• Segment marketing
– Large identifiable group within a market
– Buyers differ in their wants, purchasing power, location, attitudes and habits…but the company
is not willing to customize its offer to each individual customer
– More appropriate products and services, distribution and communication easier, fewer
competitors
• Niche marketing
– More narrowly defined group, a small market whose needs are not being well served
– Smaller companies can become more competitive through specialization
– Better understanding of customers who willingly pay a price premium
• Individual marketing
– Segments of one, customized marketing, one-to-one marketing…
– More frequent in B to B than in B to C
– New technologies allow “mass customization” ; ability to prepare on a mass basis individually
designed products and communications to meet each customer’s requirements
Market segmentation procedure
Market segments and niches can be identified by applying
successive variables to subdivide a market. 3 steps:
• Research stage: gain insight into consumer motivations,
attitudes and behavior and collect important data (attributes and
ratings, brand awareness and rating, product-usage patterns,
attitudes toward product category, customer characteristics…).
• Analysis stage: factor analysis to remove highly correlated
variables and cluster analysis to create a specific number of
maximally different segments.
• Profiling stage: each cluster is profiled in terms of its
distinguishing attitudes, behavior, customer characteristics…
Market segmentation must be redone periodically because market
segments change over time, especially in international markets
Segmentation variables
Consumer characteristics
Geographic
-Nations
-States
-Regions
-Cities…
Demographic
-Age and life-cycle stage
- VALS or psychographics
-Gender
-Income
-Generation
-Social class…
Marketing characteristics
-Consumer responses to benefits sought, use
occasions or brands
(consumer-response segments)
-Hierarchy of attributes in choosing a brand,
shifts in consumer priorities
(market partitioning)
-Marketing mix variables: product, price,
placement, promotion
(price-quality-type dominant)
In international marketing, broader market segments compared to
domestic segments, transnational segments
Example 1: culture-based segmentation
Size
(million)
PDI
UAI
IDV
MAS
Marketing implications
Cluster 1
Austria,
Germany,
Switzerland,
Italy, GB,
Ireland
203
Small
Medium
MediumHigh
High
Preference for “high
performance” products, use
“successful-achiever” them
in advertising, desire for
novelty, variety and pleasure,
fairly risk-averse market.
Cluster 2
Belgium,
France,
Greece,
Portugal,
Spain,
Turkey
182
Medium
Strong
Varied
LowMedium
Appeal to consumer’s status
and power position, reduce
perceived risk in product
purchase and use, emphasize
product functionality.
Cluster 3
Denmark,
Sweden,
Netherlands,
Norway
37
Small
Low
High
Low
Relatively weak resistance to
new products, strong
consumer desire for novelty
and variety, high consumer
regard for “environmentally
friendly” marketers and
socially conscious firms.
Example 2 : segmentation of CEE markets
• « Marketization »:
– Countries’ exposure to global communications, increased
product availability and variety, and overall attempt to close the
living standards gap with developed countries
– Reflects a set of institutional values and cultural
requirements for the operation of effective private markets
(materialistic values as a stimulus for greater production,
competition, freedom of information…)
• « Westernization »:
– Countries’ proximity to the West
– The duration and the extent of their openness to Western
influence and culture
CEE clusters
High Marketization
Cluster 1
Low
Westernization
Cluster 3
Cluster 4
Low Marketization
Source: Lascu, Manrai and Manrai
High
Westernization
Cluster 2
Clusters are likely to have
common characteristics
and share similar
consumer needs and
purchasing behavior
Central and Eastern European clusters
• Cluster 1: High-marketization and high-westernization
(Hungary, Poland, Czech and Slovak Republics, Slovenia)
– Geographic: Central Europe, border developed countries, more urbanized
– Cultural: Slavic languages (except Hungary), primarily Catholic religion
– Economic: more developed
• Cluster 2: Low-marketization and high-westernization
(Bosnia, Serbia, Croatia, Montenegro, Macedonia)
– Geographic: Central Europe, more urbanized
– Cultural: Slavic languages, primarily Eastern Orthodox and Muslim
– Economic: more developed, but less than cluster 1
Central and Eastern European clusters
• Cluster 3: High-marketization and low-westernization
(Bulgaria and Romania)
– Geographic: Balkan peninsula, urbanized to a lesser extent than cluster 2
– Cultural: Latin and Slavic languages, Eastern Orthodox religion
– Economic: slower in the development process
• Cluster 4: Low-marketization and low-westernization
(Albania and Western countries of the former Soviet Union)
– Geographic: Less urbanized than cluster 3
– Cultural: Slavic languages (Russian is the primary commercial language), Eastern
Orthodox and Muslim
– Economic: formerly “fierce” dictatorships, slower development
Market targeting
After identifying different markets and
market segments, the firm must:
• Evaluate the various segments
• Decide how many and which ones to target
Evaluating the market segments
• Overall attractiveness of the segment
– Size, growth, profitability, scale economies, low risk…
– How easy is it to persuade buyers to shift their
purchases (consumers, relative non-consumers,
absolute non-consumers)?
– Brand loyalty vs. dissatisfied buyers
• Company’s objectives and resources
– Do segments correspond to the company’s long-term
objectives?
– Does company possess the skills and resources needed
to succeed in the segment?
– The company should only enter market segments in
which it can offer superior value
Selecting market segments
5 different target market strategies:
• Single-segment concentration
–
–
–
–
–
Concentrated marketing
Strong knowledge of segment’s needs
Strong market position in segment
Economies through specialization = high returns
Risks are higher than normal
• Selective specialization
– Several segments that are objectively attractive
– Little or no synergy among segments but each is
profitable
– Diversification of firm’s risk
Selecting market segments
• Product specialization
– Concentrate on certain product to several segments
– Strong reputation in specific product area
– Risk of technology
• Market specialization
– Concentrate on serving many needs of a particular customer group
– Strong reputation with group, channel for all new products
– Risk of decreased buying power in the group
• Full market coverage
–
–
–
–
Serve all customer groups with all products they need
Limited to very large firms
Undifferentiated: ignore segment differences, one offer for entire market
Differentiated: operate in several segments with different programs for each
Market positioning
• Market positioning: act of designing the company’s offering
and image so that they occupy a meaningful and distinctive
competitive position in the target customer’s mind; refers to
the consumer’s perception of a product or brand amongst
other brands
• Objective: attaining a prominent place for company’s brand
amongst other brands in the minds of consumers
• Positioning mainly results from marketing communication
regarding brands, social communication and personal
experience
• Categorization and positioning within category
Product differentiation, international coherency
Importance of product differentiation
Market
segmentation
Product
differentiation
Demand side
Supply side
Heterogeneous markets
are divided into
homogeneous
submarkets
Homogeneous products
can be differentiated into
products tuned to these
homogeneous market
segments
(market segmentation)
(market positioning)
Differentiation attributes
Product
Features
Performance
Conformance
Price
Quality
Durability
Reliability
Repairability
Style
Design
Services
Ordering ease
Delivery
Installation
Customer
training
Customer
consulting
Maintenance
Warranty
Personnel
Channel
Competence
Coverage
Courtesy
Expertise
Credibility
Performance
Reliability
Responsiveness
Communication
Image
Value
proposition
Emotional
power
Symbols
Media
Atmosphere
Events
Different attributes in different markets, cultural influence
Promoting the difference
• How many difference should a firm promote?
• USP: “best quality”, “best service”, “lowest price”, “best value”,
“safest”, “fastest”, “most convenient”, “most advanced technology”…
• Double-benefit positioning: if two or more firms are claiming to be
best on the same attribute, search for special niche within the target
segment, two benefits must be compatible (“safest” and “most
durable”)
• The number of differences should be limited (communication, clarity,
credibility)
• Coherency in international markets is essential, between markets and
between segments
Communicating the firm’s positioning
• Once positioning strategy chosen, the firm must
communicate the positioning effectively
• Mentally distinguish offerings, enter into the
minds of consumers
• Communication through physical signs and cues
Marketing mix is used to communicate the
company’s positioning
From marketing strategy to
marketing programs
• Marketing strategy must be implemented through
marketing programs
• Managers must decide on marketing expenditures,
marketing mix, and resource allocation
– Internal cultural diversity
– External cultural diversity
• Marketing mix allows firm to communicate and
implement its strategy, formalized in marketing plan
Marketing mix
• Marketing mix is the set of marketing tools that
the firm uses to pursue its marketing objectives in
the target market.
• 4 Ps (McCarthy):
– Product
– Price
– Promotion
– Place
4 Cs (Lauterborn)
-Customer needs and wants
-Cost to the customer
-Communication
-Convenience
The four P’s of the marketing mix
Product
Product variety, quality, design, features,
brand name, packaging, sizes, services,
warranties, returns…
Price
List price, discounts, payment period, credit
terms…
Promotion
Sales promotion, advertising, sales force,
public relations, direct marketing…
Place
Channels (direct, indirect, exclusive, selective,
intensive), coverage, assortments, locations,
inventory, logistics, transport…
Standardization vs. adaptation
• Debate in marketing since Buzzell (1968) and Levitt (1983)
• Factors encouraging standardization
–
–
–
–
–
–
Economies of scale in production
Economies in R&D
Economies in marketing
Global competition
“Shrinking” of world market
“Converging, homogeneous cultures”
• Factors encouraging adaptation
–
–
–
–
–
Differing use conditions
Government and regulatory influences
Local competition
Differing consumer behavior patterns
“True” to marketing concept
Degree of
standardization,
Degree of
adaptation,
global/local
paradox
High
Need for adaptation
Degree of
cultural
grounding
Low
Industrial/Technology intensive
Consumer
Nature of product
Source: Czinkota and Ronkainen
Factors affecting adaptation
• Consumption patterns
• Psychosocial characteristics
• Cultural criteria
Consumption patterns
• Pattern of purchase
– Is the product purchased by relatively the same consumer income group
from one country to the other?
– Do the same family members motivate the purchase or dictate brand
choice in all target countries?
– Do most consumers expect a product to have the same appearance?
– Is the purchase rate the same regardless of the country?
– Are most purchases made at the same kind of retail outlet?
– Do most consumers spend the same amount of time making the
purchase?
• Pattern of usage
–
–
–
–
Do most consumers use the product for the same purpose?
Is the product used in different amounts from one area to another?
Is the method of preparation the same in all target markets?
Is the product used along with other products?
Psychosocial characteristics
• Attitudes toward the product
– Are the basic psychological, social, and economic factors motivating
the purchase and use of the product the same for all target markets?
– Are the advantages/disadvantages of the product in the minds of
consumers basically the same from one country to another?
– Does the symbolic content of the product differ from one country to
another?
– Is the psychic cost of purchasing and using the product the same?
• Attitudes toward the brand
–
–
–
–
Is the brand name equally known and accepted in all target countries?
Are customer attitudes toward the package basically the same?
Are customer attitudes toward pricing basically the same?
Is brand loyalty the same throughout target countries for the product?
Cultural criteria
• Does society restrict the purchase and/or use of the product
to a particular group?
• Is there a stigma attached to a product?
• Does the usage of the product interfere with tradition in
one or more of the targeted markets?
• Does the message of the product correspond to core
cultural values?
• How do the different dimensions of culture influence the
purchase and use of the product?
Product
• “A product is anything that can be offered to a market to
satisfy a want or need” (Kotler)
–
–
–
–
–
–
Physical goods
Services
Persons
Places
Organizations
Ideas
Common product problems:
• Developing new products
• Managing life-cycle strategies
• Managing product lines
• Managing brands…
Product
policy,
product
mix
Product mix: product lines and brands
• Product lines
– Width: how many product lines the firm carries
– Length: how many items in each product line
– Depth: how many variants are offered of each product in
the line
– Consistency: how closely related the various product lines
are (end use, production, distribution channels, etc…)
• Branding
– Identifies the company at six different levels: attributes,
benefits, values, culture, personality and user
– Brand awareness, brand acceptability, brand preference,
brand loyalty
– Global branding and international coherency
Degree of adaptation in FMCG
Elements of a product
Installation
Tangible
product
Packaging
Brand
name
Delivery
and credit
Augmented
product
Core
product
Features
Core
benefit
or
service
Quality
Aftersale
service
Styling
Warranty
Global
variations,
adapt or
standardize?
Specific international
product policy problems
• Country of origin, made in effect
• Preference for national brands
• Global branding (mono, line, umbrella)
• Brand equity and extension
• International standards
• Product protection
• Product adaptation
International product policy
• Existence of global product? International standard?
• Three common strategies
– Straight extension
– Product invention
– Product adaptation
• Technical adaptation
• Commercial adaptation
• Consumer products vs. industrial products
Pricing
Select pricing
objective
Determine
demand
Select pricing
method
Select final
price
Estimate
costs
Analyze competitors’
costs, prices, and offers
Common pricing methods
• Mark-up pricing: add a standard mark-up to the product’s cost
• Target-return pricing: determine price that would yield its target rate of
return (ROI)
• Perceived-value pricing: buyers’ perception of value, not the seller’s cost, is
the key to pricing
• Value pricing: low price for fairly high-quality (EDLP)
• Going-rate pricing: prices are largely based on competitors’ prices, rather
than on costs or demand
• Sealed-bid pricing: competitive-based pricing based on expectations of how
competitors will price
• Yield pricing: discriminatory pricing depending on customer segment and
inventory level
International pricing policy
• International price escalation problem
• Four types of strategies
– Uniform price everywhere: different profit rates, too high in some
countries
– Market-based price: ignores costs, parallel importations
– Cost-based price: standard markup everywhere, too high in some
countries
– Identical pricing position: compare to local competition in each
market
• Transfer prices and dumping
• Gray-market problem, copies…
Promotion
• Identify target audience: research, image analysis…
• Determine communication objectives: awareness,
knowledge, liking, preference, conviction, purchase…
• Design message: content, appeals, structure, format, source…
• Select communication channels: personal, non-personal
• Promotion budget: weight of promotion in marketing mix…
• Promotion mix: allocation between advertising, sales
promotion, public relations, sales force and direct marketing…
• Measure results: research…
Promotion mix – communication platforms
Advertising
Print and
broadcast ads
Packaging
Motion
pictures
Brochures
Directories
Billboards
P-P displays
Symbols and
logos
Sales
promotion
Contests
Sampling
Gifts
Fairs and trade
shows
Demonstrations
Coupons
Rebates
Entertainment
Loyalty
programs
Tie-ins
Public
Relations
Press kits
Speeches
Annual reports
Sponsorships
Publications
Community
relations
Lobbying
Company
magazine
Special events
Sales force
Direct
marketing
Sales
presentations
Sales meetings
Incentive
programs
Samples
Fairs and trade
shows
Catalogs
Websites
Mailings
Telemarketing
On-line sales
TV shopping
International promotion policy
Three different levels of communication:
• Corporate communication: inform firm’s partners
(shareholders, administrations, suppliers, press, etc…)
• Institutional communication: communicate the firm’s
values to the public and inside the organization
• Brand or product communication: image, consumer’s
desires, technical characteristics, performance, etc…
Corporate and institutional communication are
easily standardized, but brand/product
communication is harder to standardize
Communication and advertising
• Advertising is a form of communication
• A product’s position or difference is transmitted to target
segment through communication
• Communication styles vary from country to country, they are
culture-bound
• The role and importance of advertising/media also vary from
one country to another
• Cultural factors affecting communication:
–
–
–
–
High-context vs. low-context
Explicit vs. implicit
Direct vs. indirect
Informational vs. emotional
Cultural dimensions and
advertising appeals
•
Power distance
– High: status symbols, presence and importance of elders, master-learner relationships…
– Low: independence, “empowered” consumers
•
Individualism/Collectivism
– IDV: low context, direct, explicit (you, we, I…), data, facts
– COL: high context, indirect, symbols, entertainment, groups
•
Masculinity/Femininity
– MAS: winning, success, domination, persuasion, comparative advertising, reverse sexism…
– FEM: less endorsement, caring, less role differentiation
•
Uncertainty avoidance
– High: explanations, testing, technology, design, structure, well-groomed
– Low: results are important, change, subtle
•
LTO/STO
– STO: sense of urgency, direct style
– LTO: build trust, nature, entertainment
Advertising models and culture (1/2)
• Sales-response model
– Simple stimulus-response model
– Very direct, “buy now” strategy, short term effect
– Low PDI, IDV, MAS, Low UAI (Anglo-Saxon model)
• Persuasion model
– Short term shift in attitude, buying intention, and brand preference
through providing arguments
– “Lecture” form (presenters, demonstrations, testimonials), persuasive
and direct
– US, UK, Germany, Switzerland, Austria…
• Involvement model
– Build relationships between consumers and brands by creating
emotional closeness
– Brand becomes a “personality”, indirect style
– FEM, IDV (Netherlands, Scandinavia, France…)
Advertising models and culture (2/2)
• Awareness model
– Create awareness to differentiate brands from similar brands
– Associations, metaphors, humor, build trust, indirect
– Low IDV (Spain, Asia, Latin America...)
• Emotions model
– Create positive attitude and brand loyalty
– Builds connections between brands and emotions, emotion often linked with
product category
– Low IDV, low MAS (Spain, Latin America, Africa)
• Likability model
– Liking the advertisement will lead to liking the brand
– Indirect, entertaining/story, make friends to build trust and dependence
– Japan, China
• Symbolism model
– Turn the brand into a symbol/code, cohesion to subculture
– Very culture specific (symbols of status, success, self-expression, stability…)
– High PDI, High UAI, Low-Mid IDV (Asia, France, south of Europe)
Place - Marketing Channels
• What is a marketing channel (or distribution channel)?
“Marketing channels are sets of interdependent
organizations involved in the process of making a
product or service available for use or consumption by
the consumer or business user” (Kotler)
• What about international marketing channels?
These interdependent organizations allow goods and
services to cross national boundaries.
SCM, BtoC and BtoB, IMM
International channels
Seller
Channels
between
countries
Channels
within
foreign
countries
Final
buyers
1. Channels between countries: gets the products to the borders of
the foreign market; decisions concerning types of intermediaries
(agents, trading companies, etc…), types of transport, financing and
risk management…
2. Channels within foreign countries: gets the products from entry
point to final buyers and users; decisions concerning types of
retailers (franchising, supermarkets, etc…), local channels
Channels of distribution vary considerably among countries.
Distribution, by its nature, is a marketing activity that is
performed close to the market.
Channel management
• Channel design: types of intermediaries, number of
intermediaries (exclusive, selective, intensive), contractual
arrangements…
• Managing retailing, wholesaling and market logistics…
• Selecting, motivating and evaluating channel members
(cooperation, conflict, competition)
• Channel dynamics: traditional, VMS, HMS, multi-channel
marketing systems…
• Most difficult part of the mix to standardize
Entry mode choice
• Considered by many as the most important
aspect of a firm’s internationalization
strategy
• Entry mode will determine long-term
success or withdrawal from foreign markets
• Poor decisions can be very costly for the
firm
Factors in the entry mode decision
Target country
market factors
Target country
environmental
factors
External factors
Internal factors
Company product
factors
Target country
production
factors
Home country
factors
Entry
mode
decision
Company resource
and commitment
factors
Elements of market entry strategies
Entry
operation
Choice of target
product/market
Setting objectives
and goals
Choice of
entry mode
Control systems:
monitoring operations /
Revising entry strategy
Design the
marketing plan
Target
market
Different types of entry modes
• Exporting (commercial strategy, commercial
modes)
• Foreign direct investment (industrial strategy,
integrated modes)
• Associated or contractual modes (contractual
strategy, competitive alliances)
Entry mode continuum
Exporting
Contractual modes
FDI
-
+
Commitment, risk, control, profit potential
Types of exporting
• Indirect exporting
– Distributor / export merchants
– Export agent
– EMC
• Direct exporting
– Export department
– Export sales representatives
– E-business
• Cooperative exporting
– Export groups
– Piggyback exporting
Foreign direct investment (FDI)
• The ultimate form of foreign involvement
• Direct ownership of foreign-based assembly,
manufacturing or sales facilities
• The company can buy part or full interest in a
local company (M&A) or build its own facilities
(GFI, ex nihilo)
• Considered the “preferred” mode of entry
Advantages and disadvantages of FDI
Advantages
-
Cost economies (labor, raw materials, incentives, freight savings, etc…)
Better image in host country
Deeper relationship with government, customers, local suppliers, distributors
Better adaptation
Full control of investments
Long term objectives
Disadvantages
-
High initial and operating costs
High level of risk
FDI options
• Make-or-buy decision
– Greenfield investment / Ex nihilo
– Mergers and acquisition
• Branch or subsidiary?
– Structure
– Legal status
• Analyzing FDI project
– Assessing profitability
– Discounted cash flow analysis
Associated entry modes
• Newest, most recent forms of international business
• Transfer of technology or know-how between two firms
• Shared risks
• Only option in countries where the government requires
foreign firms to use local capital
• Better access to local market knowledge
Types of associated entry modes
• Joint venture: foreign and local investors share ownership and control of
local operations
• Licensing: licensor licenses a foreign company to use a manufacturing
process, trademark, patent, trade secret or other item of value for a fee
• Management contracts: firm exports management services instead of a
product, separation between ownership and management
• International Franchising: contractual association between a franchisor
(manufacturer, wholesaler or service organization) and franchisees
(independent business people who buy the right to own and operate units in
the franchise system). Franchising is based on some unique product, service
or method of doing business.
– Industrial franchising
– Distribution franchising
B.F.F.
– Service franchising
Example of international franchising
entry modes
• Direct modes
– Direct franchising (16%)
– Subsidiary (19%)
– Area development agreements (14%)
• Indirect modes
– Joint venture (16%)
– Master franchising (34%)
International franchising comparative matrix
Strong
Distance /

Master
franchising
Adaptation
Direct franchising

Joint venture


Area
development
agreement

FDI
Direct
franchising
Weak
Weak
Commitment /
Control
Strong
Hierarchical model of entry mode choice
International franchising
Environmental
factors
Level of commitment
Equity
Environmental
factors
FDI
Organizational
factors
Non-equity
Direct or indirect mode
Joint
venture
Direct franchising
or ADA
Organizational
factors
Master
franchising
Determinants of entry mode choice in
international franchising
Environmental factors
Organizational factors
Level 1
(commitment)
Economic risk
Market size
Political risk
Competitive situation
Level of economic development
Financial and human resources
Management attitudes and
orientation
Recruiting and training franchisees
Price-bonding ratio
Level 2
(direct/indirect)
Financial situation of partners
Brand protection
Local regulations
Cultural differences
Tax System
Geographic distance
Franchisor’s national culture
Brand image
Experience
Need for control
Type of product/service
Degree of standardization
Brand recognition
Dispersion of units
Entry mode choice summary
• Entry modes vary in terms of resource or equity commitment to foreign
markets
• Low-commitment modes can allow firm to reduce risk in high-risk countries,
culturally diverse countries or limited potential markets
• Desired degree of control over international operations influences choice of
entry mode
• Loss of control yields limited returns
• No market entry strategy is appropriate in all circumstances
• Most firms will have a vast portfolio of entry modes, depending on each
specific market situation
• Comparative approach to entry mode choice (commitment, control, risk,
adaptation, contribution of know-how…)
Comparing different entry mode options
High
Franchising
FDI
Licensing
Wholly owned
subsidiary (M&A)
Management contract
Contribution
of know-how
Branch office
AD / Concessionaire
EMC
Piggy back
Agent
Minority shareholding
through partial acquisition
ITC / distributor
Low
Majority JV investment
(local partner know-how)
Foreign buying
department
Low
Level of ownership
High
Choosing the right entry mode
All entry modes
Internal factors
External factors
Comparative profit
contribution analysis
Rejected entry
modes
All feasible entry modes
Comparative
risk analysis
Comparative analysis for
nonprofit objectives
Ranking by overall
comparative assessment
The right entry mode
Target
market
Marketing channels within markets
Local marketing channels (within markets)
• What is a marketing channel or channel of distribution?
– “an organized network of agencies and institutions which, in
combination, perform all the activities required to link producers
with users to accomplish the marketing task” (AMA)
• They perform functions that add utility to a product or
service:
– Place utility: availability of a product or service in a location that
is convenient to a potential customer
– Time utility: availability when desired by a customer
– Form utility: availability of the product processed, prepared, in
proper condition and/or ready to use
– Information utility: availability of answers to questions and
general communication about useful product features and benefits
B to C vs. B to B channels
• Business-to-consumer channels
– Designed to put products in the hands of people for
their own use
– Alternatives: direct marketing, franchising, sales force,
agents/brokers, internal sales force, wholesalers,
retailers…
• Business-to-business channels
– Deliver products to manufacturers that use them as
inputs in the production process or in day-to-day
operations
– Alternatives: internal sales force, distributors,
wholesalers…
Marketing channel alternatives for
consumer goods
M
Internet, mail
order, door-todoor, house party,
etc…
M
M
M
M
M
MSF
Agents,
brokers
MSF
MSF
Companyowned,
franchising
W
W
R
R
Consumers
R
R
Problems in international
marketing channels
• Global retailing
– Case of hypermarkets
• Multi-channel strategies
– Case of franchising-Internet
• Market-specific channels
– Case of wine distribution
Global retailing
• Global retailing since 1970s, but many variations…
• Differences in the importance and types of retailing
channels: shopping malls, department stores,
discount stores, wholesale clubs, category killers,
outlet centers, hypermarkets…
• Factors affecting the success of hypermarkets:
culture, income, market fragmentation, traditional
stores, locations, demography…
• Global retailing market entry
Wal-mart case
Global retailing market entry
strategy framework
Culturally close
Organic growth
Chain acquisition
Easy to
enter
Difficult
to enter
Franchising
Joint-venture
Culturally distant
Concept of multi-channel strategies –
franchising and Internet
BRICK AND
MORTAR
CLICK AND
MORTAR
Coexistence of traditional and
virtual marketing channels
“brick and click”
Antagonostic or
complementary?
Some practical advice…
• Brand structure rather than channel structure
(reduce risk of network competition)
• Sell all products on-line
• Ensure multi-channel coherency
• Back-office motivation
• Use Internet to increase visits (locations,
maps)
• Limit use of e-mail…
• … But does this apply to franchising?
Multi-channel strategies in franchising
• Franchising firms are « plural form networks »
• Internet is another distribution channel
• Internet seems to be a priority
• Internet is « revolutionizing » franchising
…
• But, franchisors offering on-line sales are limited
– 32% in the US
– 30% in the UK
– Less than 20% in France
Opportunities and threats of multi-channel
strategies (Franchising-Internet)
Opportunities
New marketing channel
Increased sales
Network image
Positive internal effects
Threats
Cannibalism
Restriction franchisee sales
Non-conformity websites
Exclusive territories
Definition catchment area
Limits some entry modes
Coexistence of franchise system
and internet
•
•
•
•
•
Are « mixed networks » complementary?
Opportunities and threats?
Consequences?
Internet practices?
The future of franchising and Internet?
Some results…
Major
-Better communication with franchisees
consequences -Reduces distance
-Cost-effectiveness, not dissuasive
-Promotional tool for services
-Recruiting and training franchisees
Activities
-2005: 80% website, 23% on-line sales
-2010: 98% website, 54% on-line sales
Interpretations
•
•
•
•
•
•
•
•
•
Optimistic, franchise-Internet are complementary
Opportunities > Risks
B to B advantages > B to C advantages
Better franchisor-franchisee relationship
Service franchising > Distribution franchising
Communication strategy > Sales strategy
« Internal sale » of website before « external sale »
Brick to click vs. Click to brick
Internet explains evolution of entry modes…
Market-specific channels –
wine distribution
• Wine distribution varies enormously from one market
to the next, distribution must be performed “close” to
market…
• Why?...
• Tradition, Old World vs. New World
• Transportation via freight forwarder or shipping agent,
physical distribution, complex regulatory requirements,
complex choice of distributor/broker…
Wine distribution choices
• Four possibilities for exporting
–
–
–
–
Import distributor (négociant)
Broker (courtier, agent)
Export groups
Direct sales
• End of channel (off-premise, on-premise)
–
–
–
–
–
Supermarkets/Hypermarkets (FMCG)
Specialized wine shops
Duty-free
HORECA
Estate, e-commerce…
• Bottle vs. bulk
– Brand image, packaging… B to C approach
– Unbranded, supply chain … B to B approach
Wine distribution systems
• Regulatory framework, levels of marketing and
market access
• Three types of systems around the world:
– Regulated open market: normal FMCG
– Controlled markets: government intervention in
nearly all aspects of wine marketing
– Mixed systems: both open and controlled
U.S. wine distribution system
• 18th Amendment (1919 – Prohibition), 21st
Amendment (1933 - authority to states), FAA Act
• Aim: separate suppliers and retail outlets (tied-house
relationship)
• Result: three-tier system of distribution with
independent licensed wholesaler in between the retailer
and the supplier/exporter
• 31 “open” states, 19 “control” or “monopoly” states
Three-tier system
Control States
Open States
Winery, Supplier
Tier I
Winery, Supplier
Distributor /
Wholesaler
Tier II
Control States
Supermarkets, wine
shops, HORECA, bars,
transportation, etc…
Consumers
Tier III
State
controlled
retail stores
HORECA,
clubs,
etc…
Consumers
Comparing wine retail outlets
Outlet
Characteristics
Advantages to
producer
Disadvantages to
producer
Supermarket
/
Hypermarket
High volume sales, low
margins and low retail
prices, usually low level of
wine knowledge of staff
Quantity purchases,
high brand
awareness, help with
mass appeal,
convenience of
location
Lack of freedom,
low level of interest
in experimental
styles and varieties
Independent /
specialist
Tends to cater to wine
consumers with higher
level of knowledge, high
level of service, small
producers
“hand selling”,
strong service focus
and CRM, interested
in experimental
styles or uncommon
varieties
Each outlet must be
serviced and
supplied
individually, small
volumes
State
monopoly
retailer
Overall aim is to promote
healthy drinking, high
level of wine knowledge,
access to a wide range of
suppliers
High volume
purchases can be
made, national or
regional access to
market
Importance of being
stocked, if not,
excluded from
market
Hall and Mitchell, 2007
Conclusion –
7 Rules of International Distribution
• Select distributors. Don’t let them select you.
• Look for distributors capable of developing markets, rather
than those with a few good customer contacts.
• Treat local distributors as long-term partners, not temporary
market-entry vehicles.
• Support market entry by committing money, managers, and
proven marketing ideas.
• From the start, maintain control over marketing strategy.
• Make sure distributors provide you with detailed market and
financial performance data.
• Build links among national distributors at the earliest
opportunity.
Source: D. Arnold, HBR, 2005
Conclusion: SRC and cultural risk
• Cultural risk is the most subjective of international business
risks; it is the most difficult to assess
• SRC: the unconscious reference to one’s own cultural values
• SRC is the root of many international marketing problems
• Recognizing and admitting SRC is quite often difficult
Analytical approach to reduce the influence of one’s own
cultural values (A.C. Samli)
4 step process to reducing SRC
1. Define the problem or goal in terms of domestic cultural
traits, habits or norms.
2. Define the problem or goal in terms of foreign cultural
traits, habits or norms. Make no value judgments.
3. Isolate de SRC influence in the problem and examine it
carefully to see how it complicates the problem.
4. Redefine the problem without the SRC influence and solve
for the optimal goal situation.