Chapter 7: Marketing

04/28/2022 Chapter 7: Marketing Q: What are some words you associate with marketing? A: promotion, price, place, product, research, strategies ● Marketing - the sum of all activities involved in getting goods and services from the original producer to the ultimate customer ● ● Marketing activities include: ○ Market research ○ Product development ○ Price ○ Advertising ○ Promotion ○ Sales ○ Logistics What is the purpose of marketing? ○ To sell the output of production The Marketing Kebab ● A marketing program for a company or product is like a kebab, consisting of different food ingredients, all held together by a skewer ○ Just as there are many elements on a kebab, there are many elements of the marketing plan and all these components need to be “SKEWERED” with the same marketing strategy and focus ○ The Marketing Kebab: business card, advertising, website, social media, pricing, product, market strategy and focus 4Ps & 2Cs ● Marketers often talk about the 4Ps and 2Cs ○ The 4 Ps of Marketing Product, Place, Price, Promotion ○ The 2 Cs of Marketing Consumers & Competition Marketing Activities - Market Research ● Market Research - find or collects data to help solve marketing problems or answer questions ● Ex. Where will I sell my products? How will I tell my potential customers about what I make? Who else is making similar products? 4Ps VIDEO: ● Product - quality, design, packaging, brand ● Price - retail price, discounts, payment plans, credit terms ● Promotion - advertising, public relations, personal selling, emails ● Place - retail location, delivery, download, distribution method ● Ex. Hamburger ○ Target market (the rich) ■ Product: feature truffles ■ Price: $25 ■ Promotion: advertise in fancypants magazine ■ Place: Polo Club The 4Ps - Product ● Product - what is for sale -- will often be sold outside of Canada, which means it needs to be MODIFIED ● These modifications are made to adapt to changes in culture, language or laws and usually occur in the following areas: colour, legal, language, labelling requirements ingredients and style ● Package Weights - Canada has metric system (Gram/KILOS) ○ The USA uses an imperial system (Oz. & Pounds) ○ Any product packaged for export in USA must have imperial weights or volumes on the package ****LOOK AT A RULER -- METRIC SYSTEM IS CM AND IMPERIAL SYSTEM IS INCHES ● Packaging Colours - colours have symbolic meanings, these vary from one culture ○ White is purity in Canada but death in China ○ Yellow is courage in Japan ○ A package colour that has positive associations for Canadian consumers might elicit the opposite reaction in another country ● Legal Requirements - countries have laws the packaging of goods that are sold ○ Some countries have fee structures that can cost exporters more ○ Ex. a Canadian company who sells product to Denmark needs to be aware of extensive taxes on Disposable tableware, plastic bags and pesticides ● Language Requirements ○ Information on packaging must be translate into the language of the target country ○ Ireland, Switzerland, India and Canada have language regulations that require two or more languages to appear on packages ● Labelling Requirements ○ Marketers need to investigate labelling requirements ○ Different regulations with ingredient and food value labelling, product warnings, even picture that is used ○ In California cars must have a label that provides consumers with the vehicle’s global warming score ○ Food labels in USA must have name, manufacturer, distributor (the lettering on food labels must be 1.6 millimetres high) ● Ingredients ○ Countries have taboos both religious and cultural that prohibit certain products, particularly in food ○ Jews and Muslims do NOT eat pork ○ Islam, Hinduism and Buddhism do NOT permit the consumption of alcohol ○ Hindus do NOT eat beef ○ Ex. if a manufacturer wanted to sell snacks to a Hindu country such as India it would have to make sure the chops were not fried in beef fat ● Style ○ Style capitals such as Paris, London, and Milan are expecting cutting edge products ○ Fashion and style are difficult to export, marketers often adapt their products to conform to the style that is popular in their target market 04/29/2022 Marketing (CONT’D) Intro to International Marketing ● Video: Oreos in China ○ The American Oreo is very sweet, but they lessened the sweetness in China ○ They also lowered the price due to wages in China (from 70 US CENTS TO 35 US CENTS) ○ Altered the packaging (smaller and individual packaging) ○ The Chinese prefer wafers, so they made the cookie into a wafer ○ Offered samples and created commercials (commercials were made to show connections between everyone -- everyone loves oreos and loves dunking it in milk) (ex. of Product Adaptation Strategy in Global Marketing) The Four Ps: Place ● Place is WHERE the product is sold ● Place is dependent on the customer: B2B and B2C ● Business to Business (B2B) - strategies sell directly from producer to consumer ● Business to Consumer (B2C) - strategies sell from business to other businesses ■ ● NOTE: B2B is more common than B2C and is more critical to Canadian economy Some products have short distribution chains ○ Product is sold directly from producer to the consumer ○ Other transactions need intermediaries such as importer, wholesaler, or retailer Tradition Distribution Channel ● Producer → Importer → Wholesaler → Retailer → Consumer ● Ex. coffee, tea, toys have traditional distribution chain ○ Producer - a company that creates and supplies a good/service ○ Importer - a company that helps with entry into new countries and provides information about border crossings, cultural differences and legal requirements. It may or may not take ownership of the goods. Also referred to as a broker, agent or industrial sales representative ○ Wholesaler - a company that purchases products in bulk from a variety of sources, warehouses the goods, and then resells them to retailers or other businesses ○ Retailer - a company, larger/small, that sells directly to the consumer (ex. include department stores, big-box stores, boutiques, convenience stores, supermarkets, and open-air markets) Speciality Distribution Channels ● T.V. , catalogues, telemarketing, vending machines and trade shows, e-business ● Vending machines is one of the most successful speciality channels worldwide ○ Ex. in Japan there are 5.52 million vending machines selling: eggs, umbrellas, hamburgers and even puppies -- THESE MACHINES CAN TAKE SELFIES AND EVEN TELL YOU THE WEATHER ● Trade Shows - a collection of manufacturers and distributors who rent space, set up display booths and sell their products to registered buyers who seek products in a specific country ● Trade shows provide buyers with a large number of products sources under one roof and can save them time and money ● E-Business - a business that conducts its sales and marketing on the internet ○ E-business has revolutionized marketing ○ Small businesses (people who rent out their home on AirBNB) and global enterprises (Amazon) can be headquartered in one city and do business anywhere ○ Can be more effective than opening a retail store (AMAZON) ○ Retailers like Roots, Mountain Equipment Co-op sell to consumers around the world Q: What factors impact a company's success using an e-business strategy? THINK ABOUT: when you are shopping online, what are you looking for in a website? What makes you comfortable or what makes it easy for you to buy? ● In most cases, the domestic price of a predicate is lower than the price of the same product abroad ○ This is a MAJOR marketing consideration Q: What are the factors that result in a higher price in a foreign market than a domestic market? A: ● What are the factors that result in a higher price in a foreign market than in a domestic market? ● Shipping Costs ● Insurance ● Translations ● Tariffs ● Lawyers ● Culture Consultants ● Exchange Rates ● Travel Costs for ● Packaging Modifications Employees ● ● ● These increases in price arise because of added expenses in the following areas: ○ Shipping Cost - the cost to ship goods long distances must be factored into their price ○ Duties & Tariffs - some countries charge a tax on imports to protect local industries ○ Legal Costs - modifications to conform to standards in a foreign market can be expensive Can costs decrease when a company becomes international? ○ Yes, the price of labour in foreign countries is considerably less than in Canada ○ Canadian labour costs are among the world's highest Anyone trying to market a product in another country must consider whether the price of the product in the foreign market is competitive 1. You must see how much the foreign consumer is willing to spend on the product 2. You must see if they can afford your product ● In China, Oreos sells a smaller package - just a row of cookies- because many consumers are not willing to spend money on a larger package 05/02/2022 4Ps CONT’D → Price Pricing Strategies ● Setting the correct price is one of the most difficult marketing decisions and this is compounded in international business b/c of the additional costs and the cultural & economic conditions in the foreign country Mark Up Pricing ● One common way to determine price is MARKUP PRICING ● Markup occurs when a business adds an additional percentage to the cost to determine the price ● This percentage is the profit ● Ex. a product that costs $12.00 with a markup of 25% would sell for ($12.00 + 3) =$15.00 ● Products with consistent demand usually such as groceries have smaller markups ● Products with less consistent demand have higher markups example high fashion clothing ○ Ex. Jewellery can have a 500% markup ○ Markup pricing is used specifically by retailers (ex. Walmart) b/c it would be almost impossible to make a pricing decision for each individual product Pricing Strategies ● Penetration Pricing - entering a market with a lower price than the competition ● In an international market, this would influence buyers to TRY your product ● Once the consumers have tried and liked the product can increase the price Price Skimming ● Price Skimming - entering a market at a high price during the introductory phase ● This provides an image that the product is innovative and exclusive ● Once the early adapters have tried the product, the company then lowers the price VIDEO: ***IMPORTANT FOR CPT ● You make the most profit at the beginning ● Scarcity of Product - its hard to get and hard to come by and therefore people will be willing to pay a high price for it Premium Pricing ● Premium Pricing - setting the price higher than the competition’s price to evoke an illusion of luxury and high quality ● This is different than skimming b/c the high price is sustained ● Ex. GUCCI, ROLEX ● Ex. Tom Ford t-shirt is $440, and the H&M t-shirt is $6.99 Discount Pricing ● Discounting Pricing - a strategy often used in a B2B situation where the producer wants to sell high volumes to a wholesaler or retailer ● It rewards repeat customers and builds loyalty ○ One method is offering a cash discount, ex. 2/10 net 30. This means you would get a 2% discount if you pay your balance within 10 days, otherwise, the payment is due in 30 days ○ Another type is a quantity or volume discount, this encourages customers to buy more Psychology Pricing ● Psychology Pricing - setting a price @ $199 will sell more product than selling @ $200 ● This strategy provides an illusion of less $ b/c customers tent to concentrate on the first number rather than the whole number ● Ex. $199 vs. $200 ● Customers make an emotional decision over a logical one! ● This is important in an international setting as numbers have different meanings in different cultures Example ○ 13 is seen as an unlucky number in the USA (and Canada) ○ Indigenous people consider the number 4 as sacred ○ In China, the number 8 is lucky b/c its pronunciation is close to the word for prosperity and wealth ○ In China, the number 4 symbolizes death ■ Companies in China would be wise to include an 8 in the price and foolish to pit a product at $44 05/03/2022 The 4 Ps & Intro to the 2 Cs Promotion → Promotion VIDEO: Why Starbucks Failed In Australia Q: Why did Starbucks fail? Was it one P that made Australia fail? ● Australia is proven to be one of the hardest countries to break into ● ***THE ISSUE WAS IT RAPIDLY EXPANDED RATHER THAN ADAPTING TO THE CULTURE, no time to adjust ● For the Australians is seemed to be too available to them ● Australia’s coffee market is one of the biggest in the world, so they did not feel the impact of closing Starbucks ● Americans brought coffee as a product and commodity not a form of communication (Australians often communicated w/ their local Baristas) ● Starbucks had these flavours (sugary PRODUCTS) )Aussie’s didn’t like and also was more expensive in comparison to local cafe’s ● Gloria Jean’s Coffee is successful b/c it changed its drink and coffee list, and adapted to the Australian culture ● Starbucks said it would open in Italy and also adapt to the Italian culture with a roastery ● Starbucks is still trying to break into Australia, using the tourist market (Americans visit, having locations in the capital locations like Sydney and Brisbane would get customers) Promotion ● Promotion lets consumers know the product or service is available, its features, how it can be useful, its advantages and disadvantages and how it compares to the competition Types of Promotion ● Advertising ● Contests ● Premiums (free goods offered with ● Personal Selling ● Social Media purchase) ● ● Coupons There are 3 ways to promote and advertise products if you are planning to sell internationally ○ Use Existing Ads ■ Existing Ads - advertisements for products sold in Canada and US are often the same ads ■ This is possible b/c the accents are not very noticeable and the cultures are similar ■ The company may save money b/c it is able to meet more customers with the same message ○ Translate Ads ■ Translate Ads - print ads and commercials with voice-overs are easy to adapt to another country b/c the words can be translated easily into many languages ● It is always difficult to say the same thing in another language ● Trying to replicate an advertising campaign in a language other than the one in which it was originally written is possible, but can lead to some embarrassing mistakes ○ Ex. KFC translated “finger-licking good” but in Chinese, the slogan was “Eat Your Fingers Off” ○ Create New Ads ■ Create New Ads - if the message is better tailored to individual cultures, advertisements will be created from scratch ■ They may retain a global theme but must adapt the message to the culture ■ Ex. food products are different amongst cultures and need to be adapted to suit the customers of a specific culture ■ Many companies create websites that target consumers in specific countries Social Media ● When products are promoted by people who share characteristics with a particular culture, those products may be accepted more readily ● Some international businesses align themselves with bloggers or YouTubers who have a large following ● These influencers can help businesses research even more, consumers The 2Cs of Marketing ● Once company decided on product, price, place and promotion it needs to make sure that there is enough demand for whatever it is marketing ● Demand involves two factors: consumers and competition, often referred two C’s of marketing ○ You need to understand the needs, motivations and economic capabilities of your consumers is essential for any business ○ Need to understand competition ○ Need to understand how you can differentiate your product or service Consumers ● Countries don’t buy products or services -- people do ● International marketers must determine the composition of the consumer market (called target market) in a foreign country ● You need to look at what people in a selected country use and then establish whether or not the goods and services you provide will “fit in” ● Businesses wanting to sell abroad must be careful of ethnocentrism ● Ethnocentrism - a belief that your own culture, values and customs represent the right way of doing things ○ Just b/c we prefer certain products in Canada does not mean that the same products will be popular in other countries ○ How to avoid ethnocentrism ■ Read numerous consumer profiles available on the internet, global affairs Canada and international Trade and Investment in Canada Websites ■ Offer your products on the internet in the language of your target country to see if there is a demand ■ ○ Visit the country and see the daily customs 3 ways to distinguish consumers: studying their buying habits, studying their buying habits and establish a target market ■ Demographics These are demographics, motivation and economics ● Demographics - studied by dividing a large market into age, gender, education, marital status, lifestyle and household information ○ These demographics differ widely across countries ○ EXAMPLE ■ In Mexico, 27% of the population is under 15 years of age ■ China has 33.5 million more men than women ■ In Denmark the average age for a man to enter marriage is 35 and in India, it is 26 years for men ■ ○ A third of all adults in the Netherlands have a university degree Researching the demographics are critical for understanding how a target market can differ internationally VIDEO: Why 7-11 Failed in Indonesia? ● Indonesia’s young adult population used 7-11 as a popular hangout place, America has used it as a quick snack stop ● b/c it was a hangout spot it did not necessarily make a lot of money ● Also Alfa-Mart a competitor to 7-11 absolutely outweighed them (there were more) and when the Alcohol ban came 7-11 suffered but Alfa-Mart did well 05/04/2022 2C’s → Competition & Consumers ● Motivation - determining why people buy is critical to selling a product ○ One theory used is Maslow’s Hierarchy of Needs - human experience 5 levels of needs: physiological, safety, belonging, esteem & self-actualization ○ Start with physiological needs and move forward once a satisfied need is not a motivator ○ Emerging economies will be predominantly @ the physiological and safety levels, cultures that are polychromatic will be @ the beginning level and developed economies will be able to focus on self-esteem and self-actualization Consumers - Economic ● Can your consumer afford your product or service? ● How much disposable and discretionary income does your target market? ○ Disposable (Gross) Income - the amount of income a person has after their taxes are paid ○ Discretionary (Net) Income - the amount left after the necessities of life have been paid ● Products in underdeveloped economies will be more successful if they are a necessity ● Luxury products will succeed more in developed economies where consumers have more discretionary income 05/04/2022 2C’s → Competition Competition ● The competitive market within a target country is important to a business wanting to sell a product or service there ○ Why would a consumer in another country want to buy your product when there are several products that are as good as or better than yours ○ Competition can be direct or indirect Competition - Direct vs. Indirect Competition ● Direction Competition - a company’s direct competitors are those first that provide products or services that are almost identical to the product or service that the company provides ○ Ex. Coca-Cola sells its products to other countries it is faced with competition from Pepsi Co and other local soft drinks ● Indirection Competition - people have a certain amount of discretionary income, and any product that competes for consumers’ money is a competitor ○ Ex. Nutella and Peanut Butter, margarine and butter ○ Ex. Potato Chips and Candy are competition -- a consumer spending his or her discretionary income on candy has less money to spend on chips Competition - Competitive Advantage ● In marketing Competitive Advantage refers to the ability of one company to produce a product more cheaply than another company or when it has an edge over companies that make similar products ○ These advantages are often temporary as competition strives to make products cheaper or better or add better features ○ Typical competitive advantages in a market context: ■ Lower Costs of Production - economies of scale the more products you can make in one factory using the sam labour and other overhead costs the cheaper each unit it is to make ● Ex. Coca Cola have efficient operations turning out millions of cola every day at lower costs than their competitors ■ Lower Distribution Costs - companies that have factories within their target country have lower distribution costs ● Shipping beverages from a plan in Europe all the way to China is expensive, Coca-Cola has 35 bottling factories in China ■ Product Differentiation - a difference in flavour, quality, packaging, scent and so on that can be the difference a customer selects one product over the other ■ Brand Equity - value of a product brand name in the market or the number of consumers that can identify the brand, especially consumers who name it at the top of its category VIDEO: Unique Selling Position ● Ex. Starbuck (best coffee), FedEx Express (fastest delivery, “delivered by tomorrow”), Dominos (delivered in 30 minutes or less, free pizza if over 30 minutes), M&M (hard shell, melts in your mouth), Corona Extract (daytime beer) 05/05/2022 Market Research & Strategies Q: What should you research before expanding your Canadian product to a foreign market? Market Research ● Market Research - finds and collects information needed to successfully sell a product/service and make marketing decisions ● ● Can be used to better understand their customers and their preferences (the 4 Ps and 2Cs) ○ Identify growth and profit opportunities ○ Detect changes and trends in the market ○ Observe the competition In an international context -- involve discovering differences in culture, language, government regulations, economics and other areas Marketing Strategies ● Companies may choose to buy a company in a foreign country or launch their own product into a new country they may use an acquisition strategy, centralized marketing strategy or decentralization marketing strategy Market Research - Primary vs. Secondary ● Primary Data - observed or collected by a business and relates specifically to its needs or problems ○ ● Ex. surveys, questionnaires, observations, focus groups, interviews Secondary Data - collected by someone other than the user, for example a census (looking at Statistics Canada) and surveys ○ Ex. Global Affairs Canada, Export Development Canada, Executive Planet, Trade Organizations, Individual Country Websites Acquisition Strategy ● This is when a company purchases another company in a foreign country, often it is a competitor that would eliminate the competition in the market ○ Advantage of acquisition are that it buys the employees, management, reputation and cultural expertise ○ Fewer cultural blunders occur ○ Coca-Cola purchased Thums Up, the number one sold Cola in India -- they considered killing the competitor but decided that buying the brand would help compete against Pepsi Centralized Marketing Strategy ● This strategy uses the domestic marketing mix throughout the globe ● Starbucks predominantly uses this strategy ● It sells the same products worldwide and it is easy to recognize in any country ● Advantages: cost saving and an opportunity to build your brand ● Disadvantages: cultural mistakes are often made Decentralized Marketing Strategy ● This strategy tailors the marketing elements specifically to the country ● This may include promotional plans, distribution methods, pricing, size of products and advertising ● The parent company hires local advertising agencies, market research firms and sales representatives ● Some companies only change partially (ex. Big Mac is sold worldwide except India)