winning hearts, minds and sales in emerging versus mature markets
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Winning Hearts, Minds and Sales in Emerging versus Mature Markets
Why Long-Term Marketing Effectiveness Differs
Koen Pauwels, Ozyegin University, IstanbulSelin Erguncu, Koc University, Istanbul
Marketing Dynamics 2011: Jaipur, India
1
Overview
• Branding and marketing effectiveness
• Customer Attitude Dynamics and Criteria
• How CAD differs in emerging vs mature markets
• Empirical comparison across 2 categories 2
Is a brand = a brand = a brand ?
“Marketing principles are universally applicable, and the marketer’s task is the same whether applied in Dimebox, Texas or Katmandu, Nepal”(Cateora and Hess 1966, p. 4)
"We have passed through the age of information and knowledge and we now live in the age of ideas. Successful brands tell stories. They are romantic and mysterious.“Roberts (2005, Lovemarks)
“In the end, it’s really the basic work, whether you have reliable quality, good service, that are the fundamental attributes of a brand.” Mr Zhou (CEIBS, 2008)
3
Do consumer behavior & marketing effects differ ?
“in India, people are even more brand-conscious than they are in the U.S., particularly for PCs. If someone buys a PC, all the neighbors come and ask not only which brand you bought, but what type of processor it has in it” (Deepak Advani, IBM, 2009)
“In emerging markets, brands are seen as an important mark of quality and status. People value the reassurance provided by a well-known brand name, and if they can, they may be willing to pay more for it. They believe it is important to get the right brand even if they have to shop around for it. In mature markets, people are more likely to assume that all brands stocked by mainstream retailers will deliver the same basic quality”
(Nigel Hollis, Millward Brown 2010)
4
Emerging Markets
• are countries that are restructuring their economies along market-oriented lines;
• offer a wealth of opportunities in trade, tech transfers, and foreign direct investment;
• are regional economic powerhouses with large populations, resource bases, and markets;
• will also become more significant buyers of goods and services than industrialized countries.
Cultural Difference
s
• Self-Construal / collectivist
• Power Δ / status seeking
• Search
Economic Difference
s
• Income• Consumer Protection• Technology,
Competition,…
Cultural & Economic Differences
7
Brazil, India, China
USA, UK, Netherlands
Individualism 35 (14,19) 87 (6,08)
Power Distance 75 (5,69) 38 (2,52)
GDP per capita (US$) 4.310 (3.636) 43.313 (6.971)
Technology Level 3,89 (0,30) 5,38 (0,75)
Trust in General Advertising
2,7 (0,12) 2,4 (0,03)
Trust in Traditional Advertising
2,8 (0,15) 2,5 (0,06)
Trust in Online Advertising
2,6 (0,10) 2,3 (0,03)
BIC versus Anglo-Saxon market descriptives (st.dev.)
8
10 30 50 70 900
5
10
15
20
25
30
35
40
45
50
Individualism
GD
P pe
r ca
pita
(U
S$)
0 20 40 60 80 1002.25
2.3
2.35
2.4
2.45
2.5
2.55
2.6
2.65
2.7
2.75
BrazilLinear (Brazil)IndiaLinear (India)ChinaLinear (China)USLinear (US)UK
Individualism
Trus
t in
gen
eral
adv
erti
sing
Customer Attitude Dynamics (Srinivasan et al. 2010)
What marketers do • Advertising• Price• Distribution
What customers think & feel Awareness Consideratio
n Liking
What customers do
Brand purchases
Marketing
builds
Attitudes
which convert
to Brand Sales
Customer Attitude Dynamics Criteria
• Hanssens, Pauwels, Srinivasan and VanHeule (MSI 2010)
• Explain marketing impact by 4 criteria of attitude dynamics– Potential: room to grow ?– Stickiness: do changes last ? – Responsiveness to Marketing– Conversion to Sales
• This paper proposes that attitude dynamics (and thus marketing effects) differ for emerging vs. mature markets
10
Our Conceptual FrameworkCultural
Differences
- Self-Construa
l- Search Economic
Differences
- Income- Consume
r Protectio
n
Attitude Dynamics:Stickiness, Conversion
- Awareness- Consideration
- Liking
Marketing Response of
each attitude to:
- Advertising- Distribution
- Price
Marketing Effectiveness
-Sales
H1: Interdependent self-construal leads to (a) higher stickiness for consideration and (b) liking, and thus a (c) lower responsiveness to advertising.
12
Connectedness
Strong relation
Comparing experiences
Communal decisions
Interdependent self-
construal
Higher stickiness for consideration and liking
Lower responsiveness to advertising
H2: Higher information search leads to (a) lower stickiness for awareness, and thus (b) higher responsiveness to advertising and (c) to distribution.
13
Status conveyed by consumption
Higher search: higher upside
benefits AND downside
costs
Lower stickiness
Higher responsiveness to advertising and distribution
Higher trust in
advertising Less blocking of advertising
Low consumer protection
Less ad-blocking
technology
H3: (a) Consideration has higher sales conversion than liking; (b) distribution not as crucial as in mature markets, but (c) high price perception helps sales
14
Lower sales conversion for liking
Higher sales converstion for consideration
Buy Known Hi-end Brands
Will “shop around” to avoid poor
quality
‘Cheapest’ goods may
be poor quality
Insufficent protection
of consumer interests
High Price- Quality
Perception
H4: High price (a) increases consideration, but reduces (b) liking and (c) sales due to low income
15
Low Income
Stronger price-quality associations
High QualityHigh PriceHigher consideration
Limited purchasing
power
Lower sales effects and lower liking
Marketing Effects Emerging versus mature markets
Awarenes
s
Considerati
on
Liking Sales
EffectsAdvertising Responsive
ness
[H2b]
) [H1c]
[H1c]
Lower ST but longer LT
DistributionResponsive
ness
[H2c]
[H3b]
[H3b]
Price Responsive
ness
[H4a]
[H3c]
Stickiness [H2a]
[H1a]
[H1b]
Conversion [H3a]
[H3a]
16
Methodology: system of univariate equations
• Potential = remaining distance to the natural ceiling – Similar to classic dynamic response models
(Vidale & Wolfe) • Stickiness = staying power without further
inducement– Measured as own lagged terms (∑AR terms
univariate model)– Range of stickiness is 0 stickiness to 1
(permanent shift)• Responsiveness=marketing’s power to move
attitude needle – Is short-term elasticity, different for each
metric and action
17
Attitude-to-Sales Conversion
• Regression of sales on attitude metrics & AR(1)
• Consumer attitude metrics Granger Cause sales: they help us predict sales beyond past sales infoMSFE( S | S(-k) ) > MSFE ( S | S(-k), A(-k) )– S = sales revenue – A = attitude metric – k>0
18
Long-Term Marketing Effectiveness
| 19
Vector-Autoregressive Model of Sales and Marketing:
› Lags J selected by Bayesian Information criterion
› Immediate impact through error covariance matrix
› Cumulative sales effect: impulse response function
11 12 13 1412
21 22 23 24
1 1 31 32 33 34
41 42 43 44
Pr j j j j t jt P Pj j j jJ
t jt D Dt j j j j
jA At t jj j j j
S St t j
Pice CDDist C
SeasCAds ACSales S
,
,
,
,
P t
D t
A t
S t
Data challenges• Control for other differences:1) Brands: same brands in emerging/mature
market2) Market (share) position: similar
positioning, market shares3) Similar potential: for attitude metrics
ideally
• Data for non-food FMCG in 2000s: marketing, attitudes
Emerging market: a BIC country (global top 10)
Mature market: a highly industrialized country (global top 10)
Same 3 global brands, similar market share position, potential
20
Attitude Stickiness in Emerging vs Mature Market
AD AWAREEmg < Mature
CONSIDEREmg > Mature
LIKINGEmg >> Mature
21
category 1 category 2 TOTAL
0.00.10.20.30.40.50.60.70.80.91.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.70.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Sales Conversion in Emerging vs Mature Market
AD AWAREInconclusive
CONSIDEREmg > Mature
LIKINGEmg << Mature
22
category 1 category 2 TOTAL
0.00
0.01
0.02
0.03
0.04
0.05
0.000.020.040.060.080.100.120.140.160.180.20
0.00
0.05
0.10
0.15
0.20
0.25
Advertising Response in Emerging vs Mature Market
AD AWAREEmg > Mature
CONSIDEREmg << Mature
LIKINGEmg << Mature
23
category 1 category 2 TOTAL
0.0000.0020.0040.0060.0080.0100.0120.0140.0160.0180.020
0.000
0.002
0.004
0.006
0.008
-0.0020.0000.002
0.0040.0060.008
0.0100.012
Distribution Response in Emerging vs Mature Market
AD AWAREEmg > Mature
CONSIDERInconclusive
LIKINGEmg < Mature
24
category 1 category 2 TOTAL
0.00.10.20.30.40.50.60.7
-0.6-0.4-0.20.00.20.40.60.8
-0.4-0.20.00.20.40.60.81.01.21.4
Price-Attitude Response in Emerging vs Mature Market
AD AWARE (-)Emg >> Mature
CONSIDEREmg > Mature
LIKINGEmg - , Mature +
25
category 1 category 2 TOTAL
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0-0.20.00.20.40.60.81.01.21.41.6
26
Long-Term Sales EffectsEmerging vs. Mature Markets
EMG
MA
TUR
E
EMG
MA
TUR
E
EMG
MA
TUR
E
Advertising Effect
Distribution Elasticity
Price Elasticity
-2.2
-1.7
-1.2
-0.7
-0.2
0.3
0.8
1.3
0.108 0.020
0.521
1.160
-2.053
-1.487
Love Marks or Safe Bets ?
27
Low sales conversion
High sales conversion
Low response to marketing , high staying power
Liking Emerging
Consideration Emerging
High response to marketing, low staying power
Consideration Mature
Liking Mature
As illustrated in US-China debates on what a brand is
• “A recent study reveals that the average Chinese consumer feels the need to wear at least three branded items to feel comfortable at work. Yet, when probed further, they were at a loss, unable to define the features of a brand. However, they had no difficulty describing the product. It seems that for them, the product is the brand. The emotional connection is simply absent” (Lindstrom 2011)
• Advani (2006) : "We are trying everyday to make Lenovo a global brand. Our goal is, not only people here but also people around the world know us. They will have an emotional connection with Lenovo. Becoming a name is one thing but having a deep emotional connection with the company is quite another. That is what our aspirations are: to become a brand that people around the world love.”
28
Romance & Reliability • Roberts (2005) identifies 3 key
elements of a Lovemark: mystery, sensuality and intimacy: "We have passed through the age of information and knowledge and we now live in the age of ideas. Successful brands tell stories. They are romantic and mysterious.“
• Mr Zhou (CEIBS, 2008) “In the end, it’s really the basic work, whether you have reliable quality, good service, that are the fundamental attributes of a brand.”
29
CONCLUSIONS
• Different long-term marketing effectiveness in emerging versus mature markets
• Can be explained by differences in stickiness, responsiveness and sales conversion of attitudes
• Emerging markets experience a higher stickiness of consideration & liking (interdependent self)
• But a higher responsiveness of ad awareness to advertising & distribution (more search)
• Consideration converts more than liking
30
Which raises further questions:
• Symbolic > Experiential brand benefits in emerging market
• Self expansion (Aron et al. 2005) is the desire to incorporate others (people or brands) into the self concept (Park et al. 2010): do mature market consumers care more about emotional connections with brands because they have fewer connections with people (eg Erdem on religion?)
• As countries transition to industrial & to service-oriented economies (Inglehart and Baker 2000), will consumers continue go for ‘safe bets’, i.e. brands with reliable quality and good service or will they go for ‘love marks’, i.e. brands that are “romantic, sensual and intimate” ?
31
Thank you !
QUESTIONS ?
32
Relative Price, Consideration and Love for 3 brands
Category 1 Category 2
33
A B C0
0.2
0.4
0.6
0.8
1
1.2
1.4
Emg Price
Mat Price
Emg Consider
Mat Consider
Emg Like
Mat Like
A B C0
0.2
0.4
0.6
0.8
1
1.2
1.4
‘Cost More’ Sales Conversion: + Emg, - Mature Market
34
category 1 category 2 TOTAL
-0.12
-0.10
-0.08
-0.06
-0.04
-0.02
0.00
0.02
0.04
1) Potential: does attitude have room to grow ?
40%95%
35
2) Stickiness: how much carries over ?
36
3) Responsiveness: can we move it?
37
4) Conversion: does it translate into sales ?
38
Customer Attitude Dynamics (Srinivasan et al. 2010)
What marketers do • Advertising• Price• Distribution
What customers think & feel
Awareness Consideration Liking
What customers do
Brand purchases
Direct Effect: Harvesting Attitudes
Indirect effect: building attitudes
and converting them to sales
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