Local Marketing in Mature Markets

Chap

ter

8

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Outline

Basic Marketing in Mature MarketsPan-European MarketingMarketing in JapanMarketing in Australia and New ZealandMarketing in North-AmericaTakeaways.

MATURE MARKETS

• Segmentation is vital, customers are extremely particular with well developed preferences

• Small differences in products & services make a big difference to the consumer

• Narrow niche segments continually increase

• Foreign entrant must be skilled in finding the proper niche

MARKET SEGMENTATION PRODUCT POSITIONING

• Brand image, name, are very important indicators of quality & reliability

• “Country of origin” effect may have positive/negative implications on customer perceptions

• Foreign entrants from third world countries may try to introduce low-end products to undercut other brands; such a strategy will only work in the short term

Segmentation and Positioning (MSPP)

• 3rd world countries tend to sell low-cost “me too” products; success depends on price sensitivity of the local market

• Introducing a new product has little or no competition: first mover advantage

• Brand name always matters

PRODUCT PRICING

• Target positions may be high end or low end, with temporary deals & offers to steal share & attract consumers

• Fierce competition makes discounts and other pricing scheme necessary

• Perceived status of the brand will always affect buyer behavior

• Well developed

• Hardly any problems in terms of infrastructure

• Channels are crowded & hard to get into (e.g. slotting fees)

DISTRIBUTIONPROMOTION

• Market share is the criterion of success

• All types of promotion tools are used to break habitual choices of loyal consumers

The 4Ps in Mature Markets

• Intense competition has produced a management focus on customer satisfaction

• Focusing on satisfaction ensures a steady loyal customer base

• Quality must be instilled in each level (product quality, functional performance, delivery, warranty, after sales service) in order to prevent post-purchase cognitive dissonance

• “Real” satisfaction comes from emotional factors such as personal attention, courtesy, value-added services or features, exceeding expectations

Customer Satisfaction (CS)

MATURE MARKETS

LEVEL OF SATISFACTION

EMOTIONAL QUALITY

FUNCTIONAL QUALITY

LEVEL OF QUALITY

HIGH

LOW HIGH

LOW

CS and two kinds of quality

Pan-European Marketing

MARKET BACKGROUND

• 1992 European integration stimulated many companies to analyze the potential of pan-European marketing strategies.

• EU means a changed strategic environment.• Tariff barriers and customs duties within EU scrapped.• Common external tariff. • 1989 fall of the Berlin Wall slowed down the momentum

toward EU unity.• The expansion to 25 members in 2004 resolved the issue

of what Eastern European countries would do.• The EU market is a challenge for previously primarily

national European companies.

Pan-European Marketing

The 25 EU Members in 2005

The six original: Benelux (Belgium, Netherlands, Luxembourg), France, Germany, Italy

Nine added 1973-1995: Austria, Denmark, Finland, Greece, Ireland, Portugal, Spain, Sweden, United Kingdom

Ten added 2004: Cyprus, Czech Republic, Estonia, Hungary, Malta, Latvia, Lithuania, Poland, Slovakia, Slovenia

Market size: 450 million people.

• Large European corporations start coordinating previously independent national subsidiaries.

• Costly national differences in product designs, brand names, and promotions eliminated.

• Non-European companies with high global brand name recognition well placed to take advantage of the integration.

• Threat from these foreign entrants has been met by the creation of larger & stronger firms

Pan-European Marketing: Consolidation

• EU integration has been a boon for global advertising agencies with experience of multi-cultural campaigns.

• European agencies have initiated mergers and acquisitions.

• A pan-European strategic response is not necessarily the correct approach for all companies in all industries (smaller firms can offer service to a special niche segment).

Pan-European Marketing: Consolidation

• European-wide target segments.

• Dalgic: Six basic plus four potential European segments.

• Scale advantages in clusters (Mediterranean countries, Northern Europe, etc.).

• Niche segments by ethnicity and traditional preferences.

MARKET SEGMENTATION PRODUCT POSITIONING

• Product positioning can be the same across countries, but different product lines or models target different customer segments.

• Marketing mixes have moved toward uniformity.

• Few products and brands can maintain different images in different countries of Europe.

Pan-European Marketing: MSPP

• Pan-European products and brands (Euro-branding).

• Use of leading markets for the core product.

• More "me-too" products because of competition.

• Packages in four languages (e.g. English, French, German, and Spanish.

• Gray trade problem with pan-European products.

PRODUCT PRICING

• The euro forces coordinated prices.

• Pricing corridors for limited local flexibility.

• End of protective regulations which had generated high local prices.

Pan-European Marketing: The 4Ps

• Rationalization of the manufacturers' sales network.

• Retail and wholesale middlemen shift from country-based to large integrated EU networks.

• Integrated networks help facilitate the introduction of pan-European strategies among manufacturers.

• Growth of relationship marketing.

DISTRIBUTION PROMOTION

• Pan-European TV advertising. • Satellites beaming across

previously closed borders. • Growth of commercially based

broadcast media.• In-store promotion: Still

differing regulations among countries.

Pan-European Marketing: The 4Ps

Marketing in Japan

• Japan is the size of California but has over 120 million people.

• In the 40 years up to the 1990s per capita incomes grew from poverty level to the highest in the world.

• Japan's expansion was export-led, becoming a leading example for other Asian nations.

• In 1990 the Japanese economy's speculative "bubble" in finance and real estate burst, and the economy has been slow throughout the decade and into the new millennium. Japanese firms are still doing well in overseas markets, helping to offset some of the pressure from a recessionary home market.

• The Japan market has still great potential for foreign firms in a wide variety of products and services. Even though tariffs are down, non-tariff barriers are high, making it very hard to succeed there.

Marketing in Japan: Background

• With deregulation and the economic slowdown, the Japanese are becoming more similar to Westerners.

• While Japanese customers were always demanding in terms of quality, service, and up-to-date technology and design, they are now also open to discounted prices. "Bargain" is no longer a dirty word.

• For each product category, there are now (1) upscale segments, (2) middle-of- the-roaders who buy the tried and true, and (3) those buying on price, looking for cheaper imports and private labels.

MARKET SEGMENTATION

Marketing in Japan: MSPP

PRODUCT POSITIONING

• Well-known global brand names fetched high price premiums, especially in the luxury product categories.

• Choices between close competitors could be based on design, brand image, and other "intangible" positioning criteria.

• More value-conscious, trading off features against prices. But there is no compromise on quality.

Marketing in Japan: MSPP

• Adapting products/services to Japanese customers' requirements is often necessary.

• More attention to detail• Japanese companies are producing high-quality stripped

down versions of their upscale products.

PRODUCT

Marketing in Japan: The 4Ps

PRICING

• Consumers more price-sensitive, firms respond with lower priced models

• Imports pose an increasing competitive threat to domestic companies

• Traditional retail outlets try to sustain premium brand prices while discount outlets have begun to sell brand name products at reduced prices.

Marketing in Japan: The 4Ps

TIME

MOST IMPORTANT FACTOR

PRICE QUALITY SERVICE

Servic

eQuality Pric

e

Price

Service Quality

Wheel of Retailing in Japan: Price is Coming Back

• Complex and inefficient multi-tiered distribution systems (barrier to entry)

• Contact between manufacturers and small middlemen involve smaller packages, fewer units, and faster restocking of supplies.

• Wholesalers/manufacturers have power over most retailers

• SII (Structural Impediments Initiative, in the late 1980s) involved Western pressure on Japanese authorities to open up channels, which has now partly occurred, helped by price pressure from discounters.

DISTRIBUTION

Marketing in Japan: The 4Ps

PROMOTION

• Advertising unfocused and nonsensical. Ads are seen as a kind of art form instead of a sales tool, recently shifting to an American style unique selling proposition approach

• Japanese buyers spends more time in stores • Store clerks are knowledgeable about their products.• Lack of storage limits certain promotions

Marketing in Japan: The 4Ps

Marketing in Australia and New Zealand

MARKET BACKGROUND

• Mature economies with a British heritage

• Australia, a vast country, with 18 million inhabitants

• Agriculture and raw materials, minerals in particular

• New Zealand, with four million people, basically agrarian

• Economic base in four industries: Forest products, dairy products, meat products, fruits

Marketing in Australia and New Zealand

FOREIGN TRADE AGREEMENTS

• APEC (Asia-Pacific Economic Cooperation).

• ARF (ASEAN Regional Forum) grouping.

• ANZCERTA pact (Australia New Zealand Closer Economic Relations Trade Agreement).

Marketing in Australia and New Zealand

• Segmentation criteria involve cultural roots, urban versus rural, and demographics, including age.

• Young people ready for the new global markets, older generation nostalgic for British roots.

MARKET SEGMENTATION

PRODUCT POSITIONING

• Still pro-home country bias in several product categories.

• Abroad, companies use their country-of-origin in promotions to create a unique positioning.

Marketing in Australia and New Zealand:

MSPP

• Global products and services

• only slight adaptation to appeal to customers in these markets.

PRODUCT PRICING

• Although many global products and brands are available in the region, prices in the region tend to be higher than elsewhere.

• Distribution is efficient

• Prime markets are clustered around the coast line and metropolitan areas where the distribution system is modern and up-to-date.

DISTRIBUTION

PROMOTION

• Global communications make it feasible to reach these markets with globally integrated promotional messages.

Marketing in Australia and New Zealand:The 4Ps

Marketing in North-America

MARKET BACKGROUND

• Canada & USA• One of the most competitive markets in the world• Players are many of the strongest multinationals• Low trade barriers in many industries• Diversity complicates marketing communications• Many competitors means large marketing budgets

FOREIGN TRADE AGREEMENTS

NAFTA (North America Free Trade Agreement – includes Mexico)

Marketing in North-America

• 4 market idiosyncrasies:

Ethnic diversity

Religion, and the separation of state and church

Decentralization - diffused economic activity

Local marketing regulations vary (central vs. regional governments)

Marketing in North-America

TWO DIFFERENT MODELS OF ETHNIC DIVERSITY

“Melting Pot” “Sticky” and multicultural

USA CANADA

• Market segmentation is a "must“ because of the maturity and the diversity of the markets.

• Hispanic sub-market

• African-American sub-market

• Subset of states and provinces (e.g. Coors beer, Walmart drug stores, and Kroger supermarkets)

MARKET SEGMENTATION

Marketing in North-America: MSPP

PRODUCT POSITIONING

• Basics: Individual consumers are assumed to make rational purchase decisions based on the trade-offs between various attributes or benefits.

• Clear positioning communication, targeting specific segments.

• Don't be "everything to everyone."

Marketing in North-America: MSPP

• Product proliferation.

• Ethnic variety.

• Convenience and speed.

PRODUCT PRICING

• Price-to-quality ratios are important

• No resale price maintenance

• Strong intra-brand competition

• Large price differentials between stores

• Prices are important

Marketing in North-America: The 4Ps

• Large-scale stores

• Nation-wide chains

• Efficient transportation

• Channels are powerful vis-à-vis manufacturers.

DISTRIBUTION PROMOTION

• Advertising-to-sales ratios are high, clutter is a real problem, wide media choices

• U.S.: Communicate the positioning in concrete terms.

• Canada: Cultural sensitivity, soft sell.

Marketing in North-America: The 4Ps

INTRA-BRAND COMPETITION

Same brand, different stores

Store B

(high price location)

P

QStore A

(regular price location)

Store C

(low price location)

P

Q

P

Q

Brand 1

Brand 1

Brand 1

Marketing in North-America: Price Wars

INTRA-BRAND COMPETITION

Same brand, different stores

Brand 1’s Demand Curve

P

Q

Store B

Store A

Store C

Marketing in North-America: Price Wars

INTERBRAND COMPETITION

Different brands, same store

Product Category Demand Curve (Store A)

P

Q

Brand 1

Brand 2 Brand

3

Marketing in North-America

In mature markets, the adage “the customer is King” is most apt. It is also in mature markets that the marketer must apply

the most advanced marketing tools and techniques.

Takeaway

Not all mature markets are the same from a marketing perspective, regardless of how similar

they seem on the surface.

Different geographical regions tend to foster unique types of markets, for climate, cultural, political and

other reasons.

Takeaway

In mature markets, managers must be more understanding of, and more forgiving of local marketers

who say “our market is not the same” when global strategies are imposed.

Takeaway

Trading blocs become important determinants of regional market segments, encouraging the development of pan-

regional products and programs.

A good example of this is the emergence of pan-European companies and marketing strategies.

Takeaway

The development of new trade blocs do not only benefit domestic companies but can be a boon also for multinationals based in other countries.

The key is to establish operations within the trade bloc, and operate as an insider.

Takeaway