Product StrategiesChapter 9

What is a product ?

a bundle of utilities or satisfactionOne marketing implication that may be drawn

is that a multinational marketer must look at a product as a total, complete offering.

a complete product should be viewed as a satisfaction derived from the four Ps of marketing (product, place, promotion, and pricing) – and not simply the physical product characteristics.

Market Segmentation

• In international market , Marketers fail to realize that the purpose of segmentation is to satisfy consumer needs more precisely – not to segment the market just for the sake of the segmentation.

• Another mistake marketers make in foreign countries is in attempting to capture the total market at once.

• market segmentation (market homogeneity /heterogeneity).

• Mass market situations

• In breaking into a foreign market, marketers should consider factors that influence product adoption. As explained by diffusion theory, at least six factors have a bearing on the adoption process:

• relative advantage, • compatibility, • trial ability/divisibility, • observability, • complexity,• and price. • These factors are all perceptual and thus subjective in

nature.

Cont..• For a product to gain acceptance, it must demonstrate its

relative advantage over existing alternatives.• A product must also be compatible with local customs

and habits.• A new product has an advantage if it is capable of being

divided and tested in small trial quantities to determine its suitability and benefits.

• Observation of a product in public tends to encourage social acceptance and reinforcement, resulting in the product’s being adopted more rapidly with less resistance.

• Complexity of a product or difficulty in understanding a product’s qualities tends to slow down its market acceptance.

• price is related negatively to product adoption.

Theory of international product life cycle (IPLC)

• IPLC theory has the potential to be a valuable framework for marketing planning on a multi-national basis. In this section, the IPLC is examined from the marketing perspective, and marketing implications for both innovators and initiators are discussed.

Theory of international product life cycle (IPLC)

Exporting

Importing

USA (initiating country)

Other advanced nations

LDCs

1 2 3 40

Source: Sak Onkvist and John J, Shaw, “An Examination of the International Product Life Cycle and Its Application within Marketing”, Columbia Journal of World Business 18 (Fall, 1983): 74

(0) – Local innovation, (1) – Overseas innovation, (2) – Maturity,(3) – Worldwide imitation, (4) - Reversal

IPLC stages and characteristicsStage Import/

ExportTargetmarket

Competitors Productioncosts

(0) LocalInnovation

None USA Few: local firms Initially high

(1)OverseasInnovation

Increasing export

USA, advanced nations

Few: local firms Decline due to economies of scale

(2)Maturity Stableexport

Advanced nations, LDCs

Advanced nations

Stable

(3)Worldwideimitation

Decliningexport

LDCs Advanced nations

Increase due to lower economies of scale

(4)Reversal Increasing export

USA Advanced nations, LCDs

Increase due to competitive disadvantage