BRAND MANAGEMENT AND NEW
PRODUCT DEVELOPMENT
SECTION 16
The Launch
Alan L. Whitebread
TEST MARKET LAUNCH
• Test all aspects of the product
– Functionality
–
–
– Clarity of instructions
– …
• Discover problems / improvements
–
• Test acceptance rate and forecast assumptions
TEST MARKET LAUNCH
Coca-Cola Offers Money-Back Guarantee on New Product Launch
Sep 15, 2005 6:04 AM
PROMO Xtra
Coca-Cola is offering the ultimate marketing tool to launch its new sports drink: the
money-back guarantee.
Coca-Cola offers guarantee on POWERade
POWERade OPTION, a low-calorie, low-carbohydrate sports drink is now on store
shelves nationwide featuring a "Great Taste" money-back guarantee that gives
consumers who don't like the taste a full refund.
The company decided to make the offer based on overwhelming positive feedback
on the produce and strong sales, said Mary Herrera, director of marketing for
sports & energy drinks, Coca-Cola North America, in a statement.
"Combine this initial feedback with the results from the taste test against Propel,
and it was an easy decision to initiate the 'Great Taste' money-back guarantee," she
said. Propel is made by The Gatorade Co., a division of PepsiCo.
Sampling is getting underway at special events in key markets across the country.
POWERade OPTION comes in strawberry, black cherry and lemon flavors and is
sold in 32-ounce bottles, 20-ounce single bottles and six-packs.
Print ads, in-store merchandising and promotions as well as public relations and
online sponsorship programs support.
THE LAUNCH
• The largest expenditure of management
time, money, and corporate resources
used at any time in the NPD process.
THE LAUNCH: GOALS
• Seamless to the customer
– Timing, coordination
• Integration of
–
–
–
–
Operations ramp
Sales training
Customer service[s]
Maximizing IMC Impact
• The communication plan
– TOTAL toothpaste example
» http://www.bizjournals.com/louisville/stories/1998/12/21/story8.html
» http://findarticles.com/p/articles/mi_m0BDW/is_38_41/ai_66189159/pg_1
» http://www.slideshare.net/Stefano/colgate-palmolive-toothbrush-precision/
THE LAUNCH: ROLL-OUT
STRATEGY
•
– Multiple simultaneous markets or segments
•
– A series of launches across markets or
segments [or countries if international]
THE LAUNCH: BACKGROUND
• High risk compared to a product [line]
extension or improvement
• Many potential pitfalls
– What can go wrong?
• Very high expenditures
THE LAUNCH: POTENTIAL PITFALLS
• The forecast
• Supply chain issues
–
– Logistical coordination
– Out-of-stocks
•
– Manufacturing / vendor flexibility
– IMC:
•
LEAN LAUNCH METHOD
• Flexible supply chain
– Quickly respond to demand
– Reduce lead times to improve response
– Postponement
• Time: Forward inventory placements
• Form: assembly, packaging, labeling-especially for
multiple products
– Computers [WIP]
– Neutral base for house paints
– International [labels and languages]
IMC AND THE LAUNCH
•
•
•
•
•
•
•
•
Consumer promotion
Direct marketing
Internet activities
Print advertising
Public relations
Radio advertising
Reseller education
Reseller support
materials [collateral,
POS, …]
•
•
•
•
•
•
Sales force promotion
Sales force training
Trade promotion
Trade shows
TV advertising
…
MONITORING THE LAUNCH
• POS sales information
• EDI or its equivalent
• Regional roll-outs
UNDERSTANDING SUCCESS AND
FAILURE
•
A General Electric study found the three
largest new product failure factors are
1. market changes that could not be predicted
2. substitute new products by the competition;
and,
3. poor timing caused by excessive time in the
commercialization process.
NEW PRODUCT STRATEGIES
PRODUCT CATEGORY CYCLE
Introduction
Growth
Maturity
Decline
SALES
Increasing competition
TIME
INNOVATIVE NEW PRODUCT
STRATEGY
•
•
•
•
•
Technology-driven
Completely new products
Probably a new brand
Broad initial product assortment is desired
May have new channel members or a new
channel
• Skimming price strategy
• Capitalize on first-mover advantage
INNOVATIVE NEW PRODUCT
STRATEGY
• Continually reinforce that yours is the
original.
– Coke “the real thing”
– Kentucky Fried Chicken …
OFFENSIVE ADDITION STRATEGY
• Innovative, improved products
• Create barriers for competitors
• Expand product assortment
•
DEFENSIVE ADDITION STRATEGY:
You are not the market leader
• Less innovative, market-driven product
line additions
• Late growth and early maturity stages of
the PLC
• Maximize presence in existing market
[segments]
• Possible brand extensions
• Market penetration strategies
• Heavy sales promotion at all levels
WHY DO NEW PRODUCTS
SUCCEED?
•
•
•
•
•
Defined NPD process
Written documentation
Excellent research and development
Outstanding implementation
Well defined product concept prior to
development
• Technological/marketing fit
• Unique, superior product
• Feedback loops for rapid response to varying
conditions
WHY DO NEW PRODUCTS FAIL?
•
•
•
•
Overestimation of market size
No major points of difference
Insufficient quality
Insufficient access to market segment[s] /
poor fit with the firm
• Poor execution of product mix
• Insufficient funding or ROI
• Competitive actions / reactions
BRAND MANAGEMENT AND NEW
PRODUCT DEVELOPMENT
SECTION 17
Building Successful Brands: The Marketing Plan II
Alan L. Whitebread
NEW PRODUCT GROUP
INTRODUCTION STAGE OF THE PLC
Sales
Low but accelerating; growth based on market acceptance
rates
Costs
High initial marginal cost per unit then declining
Profits
A function of the cost system; could be negative to low
Marketing
objectives
Create awareness and stimulate initial purchases
Product
A basic product set-possibly different sizes, colors, flavors, …
Price
Usually skimming; do not use cost-plus
Distribution
High cost; especially if you are adding new members or a
new channel
IMC
Strong across all channel members to build awareness and
stimulate initial purchases
GROWTH STAGE OF THE PLC
Sales
Increase at an increasing rate then at a decreasing rate
Costs
Costs continue to fall; begin to approach a minimum cost of
production per unit
Profits
Marginal and total profits are increasing
Marketing
objectives
Build and solidify market share; strengthen the position in the
marketplace
Product
Rapidly expand product offering to include sizes, styles,
accessories, warranty, …
Price
Likely switch to very competitive based on the desired
position
Distribution
Increase the number of outlets, shelf space, etc. without
corrupting the channel[s]
IMC
Continue to increase awareness, build interest, and repeat
purchase / use
MATURITY STAGE CHALLENGES
• EXPAND THE MARKET SEGMENT[S]
– Increase consumption frequency and amount
•
•
• MODIFY THE PRODUCT
– Expand variety especially quality, features, styles, colors,
…Continually improve the product to push it back toward
the growth stage
•
MATURITY STAGE CHALLENGES
• MODIFY THE MARKETING MIX
– Continually change the marketing mix to maximize
sales
– Find additional applications
•
•
MATURITY STAGE OF THE PLC
Sales
Reach a maximum
Costs
Lowest marginal cost of production
Profits
Good but declining marginal profitability; excellent cash cow
Marketing
objectives
Defend/increase market share while seeking to maintain
profitability
Product
Some additional product line expansion possible – especially
early in the maturity stage
Price
Maximum competition and very competitive pricing; AUP is
likely to decrease over time
Distribution
Expand distribution as much as possible without corrupting
channels
IMC
Stress differentiation and value; possible heavy promotion
DECLINE STAGE OF THE PLC
Sales
Declining then declining at an increasing rate
Costs
Low, but can start increasing either in production or inventory
storage
Profits
Declining
Marketing
objectives
Minimize expenditures; seek to improve position
Product
Pare product line; eventually divest or discontinue and
redeploy assets to a better opportunity
Price
Falling
Distribution
Shrinking; eliminate poor performing entities
IMC
Minimize to retain only loyal customers
NEW PRODUCTS AND BRANDS
•
Three choices for a new product
1.
2.
3.
–
–
Create an entirely new brand name
Somehow place it with an existing brand name
[brand extension]
Combine an existing brand with a new name
[brand extension or sub-brand]
Parent brand is the existing one in 2 and 3 above.
If the parent brand has multiple extensions it is a
family brand.
MASTER BRANDS
• Sub-branding
– Adds a new element below the brand hierarchy
•
• Super-branding
– Adds a new element above the brand hierarchy
•
• Brand building
– Also called cross branding or brand bundling
• Citibank AAdvantage Visa Card
• Brand bridging
– Use a master brand to introduce a new brand
• Neutrogena … T-Gel therapeutic shampoo
ANSOFF’S PRODUCT / MARKET
EXPANSION GRID
Existing
products
Existing
markets
1. Market
penetration /
saturation
New
markets
3. Market
development
New
products
2. Product
development
4. Product
diversification
ANSOFF’S PRODUCT / MARKET
EXPANSION GRID
Existing
products
1. Market
penetration /
saturation
Existing
markets
MAXIMIZE
New
markets •
•
New
products
ANSOFF’S PRODUCT / MARKET
EXPANSION GRID
Existing
products
New
products
2. Product
development
Existing
markets
EXPAND
New
markets
•
• market share
•
ANSOFF’S PRODUCT / MARKET
EXPANSION GRID
Existing
products
DEVELOP
Existing • line extension[s]
markets •
•
New
markets
3. Market
development
New
products
ANSOFF’S PRODUCT / MARKET
EXPANSION GRID
Existing
products
Existing
markets
New
markets
New
products
VERY HIGH RISK
• category extension
•
4. Product
diversification
TAUBER’S GENERAL BRAND
EXTENSION CATEGORIES
1.
Same product, change of form
•
Jell-O Pudding Pops
Contain brand’s distinctive taste, ingredient, or
component
2.
•
3.
Haagen-Dazs cream liqueur
Companion products
•
•
4.
Coleman camping equipment
Duracell Durabeam flashlights
Products relevant to the franchise of the brand
•
TAUBER’S GENERAL BRAND
EXTENSION CATEGORIES
5. Capitalize on firm’s expertise
•
Canon cameras lead to
–
–
Photocopiers
and ???
TAUBER’S GENERAL BRAND
EXTENSION CATEGORIES
6. Reflect the brand’s distinctive benefit,
attribute, or feature
•
7. Capitalize on the image or prestige of the
brand
•
•
Calvin Klein clothes / accessories
Porsche sunglasses
ADVANTAGES OF BRAND
EXTENSIONS
• Improve and expand the brand image
•
• Channels are more willing to accept brand
extensions
•
• Lower product introduction costs
DISADVANTAGES OF BRAND
EXTENSIONS
•
• Extension success comes with too much
cannibalization of the parent brand
• May shift perception away from other
family members
•
PRODUCT LINE CHALLENGES
PRODUCT LINE SALES HISTORY
100
90
80
70
60
50
40
30
20
10
0
1
2
3
5
4
A
6
B
7
C
9
8
D
10
E
11
PL
12
13
14
THE PRODUCT LIFE CYCLE OVERVIEW
[Countries or products in boxes]
Delete
products
H
G
I
E
J
E
K
SALES
D
A
B
Introduction
C
Growth
Maturity
TIME
Decline
ITEMS TO EVALUATE
• Category extensions
– Colgate toothbrushes
– Mars ice cream bars
• Related categories for Vaseline Intensive
Care
– Clorox laundry detergent
– LifeSavers Chewing Gum
GUIDELINES FOR LINE
EXTENSIONS
• Outstanding market segmentation and
sub-segments
• Thoroughly understand consumer needs
and desires
• Line extensions provide price breadth and
channel flexibility
•
•
GUIDELINES FOR LINE
EXTENSIONS
•
• Build trade [reseller] pressure through the
breadth of the offering “one-stop shop”
concept
BRAND MANAGEMENT AND NEW
PRODUCT DEVELOPMENT
SECTION 18
Building Successful Brands: Years 2 and beyond
Alan L. Whitebread
PORTFOLIO PLANNING &
MANAGEMENT
Strategic Planning
Technology
Scanning
Portfolio Planning
Portfolio Assessment
-Capability development
-Resource management
-Portfolio review
Opportunity
Scanning
PORTFOLIO PLANNING &
MANAGEMENT
Strategic Planning
Core competencies
SWOT analysis
Planning models
Organizational structure
Key success factors
Competitive analysis &
competitive advantage
Gap analysis
PORTFOLIO PLANNING &
MANAGEMENT
Technology advancement
Technology
Scanning
New technologies
Use a Technology Roadmap to
increase capabilities
-Develop internally
-Acquire
-Both
TECHNOLOGY ROADMAP
Technology
area
Last
year
This
year
+1
year
+2
years
Weight/size
16-bit chip
Micro
controller
Integrated
unit
Single chip Soft radio
Ease of use
4 line
screen
10 line
screen
VGA
Touch
screen
Longevity
Audio quality
Video quality
Vision
Voice
interface
PORTFOLIO PLANNING &
MANAGEMENT
Market research
Competitive research
Close to the market
Close to the customer
-General needs
-Joint development
Opportunity
Scanning
PORTFOLIO PLANNING &
MANAGEMENT
Portfolio Planning
Portfolio planning and analysis
Product Generation Map
PRODUCT GENERATION MAP: HP
DeskJet
560C
DeskJet
300
DeskJet
550C
DeskJet
500C
DeskJet
Plus
DeskJet
One color and
one black
cartridge
Swap color and
black cartridges
1. Cost reduction
2. Quality
improvement
TIME
Portable with
small footprint
Cost reduction
PORTFOLIO PLANNING &
MANAGEMENT
Gap analysis
Life-cycle analysis
Brand / line extensions
Metrics
Portfolio Assessment
-Capability development & NPD
-Resource management
-Portfolio review
MARKET METRICS
• Its all about measurement
– Continuous customer feedback
– Many topics
•
•
•
•
Current products
Emerging needs
Future products
Trends
– In-class exercise: What trends do you expect in the
communications field in the next 10 years?
THE PRODUCT LIFE CYCLE OVERVIEW
[Countries or products in boxes]
Most developed
nations – stream
of new product
introductions
H
G
-I
E
-J
E
-K
SALES
D
A
B
Introduction
C
Growth
Maturity
TIME
Decline
ADVANCED BRAND MANAGEMENT
TOPICS
• Measuring brand equity
• Building a strong brand and increasing
brand equity
–
– Full range of brand elements
– Strong and consistent IMC program
– Continual innovation and NPD
• Pharmaceutical example [Merck 12/2005]
ADVANCED BRAND MANAGEMENT
TOPICS
• Challenging larger brands / fighting a challenge
• Scale generally slows development and/or
implementation
–
– Focus efforts and concentrate resources
–
•
•
BRAND MANAGEMENT AND NEW
PRODUCT DEVELOPMENT
SECTION 19A
B2B Brands and Issues
Alan L. Whitebread
CHARACTERISTICS OF BUSINESS
MARKETS
BUSINESS MARKETS
CONSUMER MARKETS
Market
Structure
Geographically concentrated
Many types of markets [segments]
Fewer very-high volume buyers
Fluctuating, derived demand
Geographically dispersed
Mass markets
Small volumes
Primary demand
Products
Standard / complex / custom
Service etc. are critical
Business applications
Engineering / Quality / Testing
involvement
Standard
Service etc. of some note
Personal use
No formal evaluation
Buyer
Behavior
Professionally trained
Multiple levels involved
Performance hurdles
Individuals purchasing
Some family influence
Social / psychological drives
Buyer-Seller
Relationships
Technical expertise
Amateur
Close interpersonal relationships
Impersonal
Long-term focus
Immediate / Short-term
May be very dependent on each other
CHARACTERISTICS OF BUSINESS
MARKETS
BUSINESS MARKETS
CONSUMER MARKETS
Supply Chains
/ Channels of
distribution
Predominant
Often shorter [more direct]
Not seen by consumer
Usually indirect
Promotion
Often technical
Personal selling
Often involves resellers
Simple
Advertising
Price
Professional negotiating / purchasing
Volume sensitive
Complex formalized process
Competitive bid / Many strategies
Individuals limited purchasing skill
Little, if any, leverage
Simple process
N/A
Demand
Derived
Inelastic in the short-run
Volatile and discontinuous
Direct
Elastic
Limited volatility
B2B COMPETITION:
Sources of Information
•
•
•
•
Industry reports
Government reports
Industry consultants/experts
Brokerage reports / various filings
– SEC, UCC, state and local, …
• Data bases
• Supplier/customer network
B2B COMPETITION:
Analytical Techniques
•
•
•
•
•
•
•
•
Benchmarking
5 forces [Porter]
Patent analysis
Trend analysis
Cost analysis
Risk analysis
Regression analysis
Scenario building
B2B COMPETITION:
•
•
•
•
•
Review uncertainties/risks
Analyze threats
Anticipate competitive moves
Understand strategic/tactical alternatives
Scenario implementation
B2B SEGMENTATION BASES:
• Buying organization characteristics
– Size, location, usage rate, …
• Product/Service/Application set
– NAICS [or old SIC] category, end market
served, value of use [compared to
competitors or substitutes]
• Purchasing Characteristics
– Type of buying, stage of the purchase
decision
B2B SEGMENTATION BASES:
• Key buying criteria
– Total system cost, compatible systems,
flexibility, supplier capabilities, …
• Importance of purchase
– Strategic, high to low, …
• Customer Organization Characteristics
– Innovator or follower
– Technology level
– Sophistication
B2B SEGMENTATION BASES
•
•
•
•
•
•
•
Product line
Geographic region
Customer industry
Customer size [company, purchases]
Customer buying behavior
Customer technology
Process and supply chain requirements
B2B SEGMENTATION CRITERIA
1. Measurable
– The degree to which you can measure buyer
characteristics
2. Accessible
– The ability to focus on target market
segments
3. Substantial
– The degree to which target market segments
are large enough and potentially profitable
enough to pursue
B2B SEGMENTATION
4.
-The extent to which marketing and business
strengths compare to current and expected
competitive and technology states
5.
-The extent to which target market segments
respond to elements of the marketing mix
B2B SEGMENTATION:
Implementing your segmentation
• Sales force [organization, training, …]
• Requirements [technical, customer
service, …]
• If services are needed, how will
assistance options be provided on a realtime continuous basis?
• If it will be international, is the flexibility
built into the design to allow adaptations
to be made easily?
B2B SEGMENTATION:
Understanding product market dimensions
• Customer function
–
[meaningful functions [most value], …]
• Technology
–
[alternative ways to provide the customer function,
…]
• Customer segment
–
Groups served [sales reps, customer service reps,
product managers, …
• Value-added system
–
Related products and services [potential alliances
and/or threats]
B2B SEGMENTATION
Sources of Competition
• Direct competition
•
•
•
• Substitute products/services/materials
• Severed relationships [alliances, joint
ventures, etc. that dissolved]
B2B SEGMENTATION
Attractiveness of segments
• Size, growth rate, potential market share
• Ability to reach effectively
– distribution & communication channels
•
•
•
•
•
Competitive intensity
Value
Strengths match market needs
Differentiability and positioning
Strategic fit with the organization
B2B MAKE OR BUY DECISIONS
If any of the following are answered yes, make the
product.
• Is it part of a core competence?
• Does it involve a core technology?
• Must or do we want to protect it?
If any of the above were answered no, then
consider making or buying the product.
• Is it sufficiently important for us to make it?
• Are the any unacceptable risks to buying the product?
IMC: Collateral
•
•
•
•
•
•
•
•
Copies of ads
Sales literature
Catalogs
Product brochures
Data sheets
Capabilities brochures
Technical bulletins/specifications
Application sheets
IMC—THE PROMOTIONAL MIX
LO3
AND THE PRODUCT LIFE CYCLE:
Purina Dog Chow Example
18-75
B2B IMC
Advertising evaluation
•
•
•
•
•
Target market coverage
Key buying motives
Effectiveness of messages
Media effectiveness
Overall results
THE ROLE OF DIRECT MARKETING
MARKETS OR
INDUSTRIES
NATIONAL ACCOUNT,
OEM, DIRECT & FIELD
SALES FORCES
LARGER
ACCOUNTS
SMALLER
ACCOUNTS
RESELLER ACCOUNTS
OTHER ACCOUNTS
HOW DO WE COST-EFFECTIVELY REACH TARGET MARKETS OF SMALL ACCOUNTS?
B2B SALES MANAGEMENT
Traditional Accounts vs. Key Accounts
TRADITIONAL SELLING
KEY ACCOUNT SELLING
Small to medium
Large, frequently across multiple
SBUs
Regular products and services [core]
Core plus customized products,
applications, and services
Product/service sales
Not just products and services but the
long-term strategic fit and associated
benefits to both organizations
Sales person is the key link to the
Buyer
Multiple relationships across many
levels managed by the Key Account
Manager
Sales person with limited skill set
Experienced pro that is as comfortable
on the factory floor as they are in the
boardroom. Highly skilled.
B2B SALES MANAGEMENT
Role of a B2B Sales Professional
• Build the relationship and trust throughout
the Buyer’s organization.
• Lead the communications process
between Buyer and Seller.
• Manage the exchange of information.
• Provide problem-solving solutions.
• Effectively negotiate.
• Manage the relationship.
B2B SALES MANAGEMENT
Key Account Customer Analysis
•
•
•
•
•
•
•
•
Technologies and processes
Businesses and product lines
Markets and customer types
Their competitors
Channels of distribution
Channels of communication
Preferred relationships
Culture
B2B SALES MANAGEMENT
Potential – Forecast - Actual
• Potential
– The total potential sales to the market
[segment]
• Forecast
– Sales estimate of sales to each market
[segment] by customer, product, and territory
• Actual
– Net sales and net units
BRAND MANAGEMENT AND NEW
PRODUCT DEVELOPMENT
SECTION 19B
B2B Brands and Issues:
OEM / Private Label Strategies and the Importance
of Services
Alan L. Whitebread
THE B2B MARKETPLACE
• Business marketers often have large customers
wielding tremendous
• Customers want solutions and long-term
relationships, not just features. Share common
goals, objectives, and team solutions.
• Competitive advantage requires a firm to offer
the customer a solution set –
THE B2B MARKETPLACE
• The internet has driven the cost of acquiring
supplier and product specification information to
almost zero.
• Buyers must evaluate the value of services
before they are provided. The service provider’s
track record, reputation, image, and other
inferences are used to make the buying
decision.
THE B2B MARKETPLACE
• A service enhancement in an offering keeps on
providing value. Its contribution to a long-term
relationship and customer lifetime value should
exceed the out-of-pocket expense of providing it.
• Procurement needs partners who can ensure
reliable supply, high efficiency, and
EVALUATING BUSINESS SERVICES
• The technical competence
• The competence
• The quality of the service delivery [friendliness,
thoroughness, response time, time to
completion, …]
• Successful outcome
ADDING VALUE TO P/L AND OEM
CUSTOMER RELATIONSHIPS
SHORT-TERM VALUE
LONG-TERM VALUE
Current product cost reduction
Improved business systems interfaces
Business systems services
UNDERSTANDING BRANDS
• Your main brand
•
• Other brands
– OEM
– Private Label
BRAND TERMINOLOGY
WHY HAVE A PRIVATE LABEL?
• Provide consumers a cost-effective
alternative to the big name brand
• Adds to owner brand power
–
• A strong alternative to weak brands
– take their shelf space
– reason to discontinue slow movers
•
WHY HAVE A PRIVATE LABEL?
• Minimal conflicts with manufacturer’s
brand since it is often made by the big
brand company
• Provide access to product markets
• Improve market segmentation to include
more of the less brand conscious buyers
PRIVATE LABELELLERS ISSUES
•
• Private label strategy
– Creativity [product line extensions]
– Breadth and depth
COMPETING AGAINST PRIVATE
LABEL BRANDS?
• No imitations allowed
– IP
• Fakes
• Close imitations
– Packaging
•
•
•
•
Vigorously defend your positioning
Reinforce creativity, innovation, originality
Use promotions
Stress investment in R&D, NPD
SHOULD WE MAKE BRANDS FOR
OTHER FIRMS/
• Additional volume spreads fixed costs
• Benefit from economies of scale
– Purchasing power
– Especially if only the package is different
• Profitable
– Little sales or IMC expense [%]
• Your competitors will likely provide the
products if you do not act.
BRAND MANAGEMENT AND NEW
PRODUCT DEVELOPMENT
SECTION 21
International Brands and Issues
Alan L. Whitebread
International Brands and Programs
• Global programs and market flexibility
• Differences in
– wants,
– needs,
– desires,
– uses, and
– cultural issues
INTERNATIONAL BRAND
SENSITIVITY
• Cultural environment
–
–
–
– Relationships
– Language
INTERNATIONAL EXPANSION
STRATEGIES
• NARROW FOCUS
– concentrated markets / countries
• COUNTRY FOCUS
– country-by-country
• COUNTRY DIVERSIFICATION
–
• GLOBAL DIVERSIFICATION
–
POTENTIAL BARRIERS TO MARKET
ENTRY
•
•
•
•
•
•
Insufficient scale
Cost disadvantages unrelated to scale
Capital requirements
Government policies and procedures
FOREIGN MARKET ENTRY
ALTERNATIVES
CONTRACTUAL
DIRECT
FRANCHISING
INVESTMENT
INDIRECT
LICENSING
EXPORTING
DIRECT
EXPORTING
COPYRIGHT A. WHITEBREAD, 2001-2010
ENTERING FOREIGN
MARKETS
INDIRECT EXPORTING
• RISKS
– LIABILITY, CONTROL
– VERY ERRATIC DEMAND
– FIT WITH OPERATIONS
• REWARDS
– VERY LITTLE SALES EFFORT
– INCREMENTAL VOLUME AND PROFIT
Manufacturer
COPYRIGHT A. WHITEBREAD, 2001-2010
Agents / Distributors
[Not in destination country
- Usually in home country]
ENTERING FOREIGN
MARKETS
DIRECT EXPORTING
• RISK
– CONTROL OF INDEPENDENT RESELLERS
• REWARD
• DIRECT CONTACT WITH LOCAL MARKET
Resellers
[Usually not in
home country]
Manufacturer
COPYRIGHT A. WHITEBREAD, 2001-2010
Sales
Subsidiary
Individual
Accounts
OEM’s
ENTERING FOREIGN MARKETS
LICENSING & FRANCHISING
• RISK
– CONTROL OF RESELLERS
• REWARDS
– MINIMIZE ENTRY RISK
– PROFIT STREAM
Resellers
Manufacturer
COPYRIGHT A. WHITEBREAD, 2001-2010
Licensees
or
Franchisees
Individual
Accounts
ENTERING FOREIGN
MARKETS
DIRECT INVESTMENT
[ACQUISITION, GREENFIELD, BROWNFIELD]
• RISKS
– START-UP OPPORTUNITY COST; INVESTMENT; WC
– COUNTRY STABILITY; CURRENCY EXCHANGE
• REWARDS
– DIRECT MARKET CONTACT
– PROFIT STREAM
Manufacturer
Subsidiary
(Manufacturing)
COPYRIGHT A. WHITEBREAD, 2001-2010
Resellers
OEMs
Individual
Accounts
ENTERING FOREIGN
MARKETS
CONTRACTUAL
[JOINT VENTURE, STRATEGIC ALLIANCE, CONTRACT MANUFACTURING]
• RISKS
– AUDIT & CONTROL
– START-UP INVESTMENT; WC
• REWARDS
– MINIMIZE ENTRY RISK
– PROFIT STREAM
Manufacturer
Contract
Manufacturing
COPYRIGHT A. WHITEBREAD, 2001-2010
Resellers
Individual
Accounts
LIKELY ENTRY ALTERNATIVES
SITUATION
OPTION[S]
A small firm wants to export only.
Indirect or direct
exporting
A specialized machinery manufacturer wants to
increase their presence in key country markets.
A firm is having difficulty supplying enough goods
to a regional market.
A firm wants to aggressively increase its sales in a
region
ENTITY OPTIONS
• Sole Proprietorship
• Corporation
– C or S in the U.S.
• Partnership
– General
– Limited Liability Partnership [LLP]
• Limited Liability Company [LLC]
TYPES OF VERTICAL MARKETING
SYSTEMS [VMS]
Greater
CORPORATE
Common Ownership at Different Channel Levels
CONTRACTURAL
Degree Contractual Agreements Among Channel Members
of
Direct
Control
ADMINISTERED
Leadership is Assumed by One or a Few Dominant
Members; Contracts are not common
Lesser
TYPES OF CHANNELS
International Vertical Marketing Systems [VMS]
Corporate
Subsidiary
or JV
Contractual
Resellers
Licensees [Franchisees]
Administered
No agreement
International channels of distribution may use any possible combination
of the above systems. There is frequently significant region-to-region
variation and sometimes major country-to-country differences. Each
business must build the best combination for their needs.
DISTRIBUTION STRATEGY:
INTENSITY
INTENSIVE
SELECTIVE
EXCLUSIVE
CONSUMER CHANNEL MAP
[Simple distribution]
Manufacturer
Manufacturer’s
Internet Site
Mass
Merchandiser’s
Internet Site
Wholesaler
Retail Store
Direct distribution
Indirect distribution
CONSUMERS
STRUCTURING CHANNELS WITH
TERMS & CONDITIONS OF SALE
ACCOUNT TYPE
PAYMENT TERMS
Regional
Distributor
Choose from:
Net _ days
Prompt pay discount
…
Distributor
Dealer
B2B Consumer
DELIVERY TERMS
Choose from:
FOB [Ex works]
Time
Special charges
Shipping fees
Drop ship
…
SPECIAL TERMS
Choose from:
Inventory
adjustment
Minimum order size
…
PROMOTION AND
INCENTIVES
Choose from:
Co-op advertising
Sales promotions
…
MEXICO BEARING INDUSTRY - 2000
Domestic Mfgs.
Foreign Mfgs. + subs.
Wholesalers (also
major importers)
$1.00
$1.25
Distributors
(11,000)
V. Large End-Users
(auto assembly, …)
53% of consumption
<(20-30% MU)
brands
$1.56
Retailers or Dealers
(20,000)
(20-30% MU)
Major End-Users
(few in number)
$1.95
Sm. & Med. End-Users
(???)
Copyright A. Whitebread 3/1/98, updated 12/1/05
International Brands and Programs
• Differences in
– Product development
– Competitive environment
– Legal environment
– Government regulations
•
•
•
International Brands and Programs
• International Product Standards
• How should we enter a foreign market?
International Brands and Programs
• Global programs and market flexibility
• Differences in wants, needs, desires,
uses, and cultural issues
• Sometimes limited marketing tools
CONSUMER PROMOTIONS
Germany
Italy
Multi-purchase offers
M
Y
Extra product
M
Y
Free product
Y
Y
Mail-in offers
N
Y
Purchase-with-purchase
N
Y
Contests
M
Y
Sweepstakes
N
M
Money-off coupons
N
M
Next-purchase coupons
N
M
Cash rebates
M
N
In-store demos
Y
Y
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
THE INTERNATIONAL PRODUCT LIFE
CYCLE: AN OVERVIEW
Most developed
nations – stream
of new product
introductions
Medium
developed
nations – trailing
introduction
Least developed
nations – simple
product version
G
H
-I
E
-J
E
-K
SALES
D
A
B
Introduction
C
Growth
Maturity
TIME
Decline
IMPLEMENTING THE MARKETING
MIX
Every country will likely
have a unique marketing
mix.
Country #5
Country #4
Sometimes a regional
marketing approach will
work. There may still be
some changes in the
marketing mix – especially
with the IMC.
Country #3
Country #2
Country #1
Marketing Mix
TYPES OF SALES FORCES
FIELD
DIRECT
MARKETING
DIRECT SALES
TELESALES
SUBSIDIARIES
NATIONAL
ACCOUNTS
DIRECT MAIL
MANUF. REP’S
CATALOG
FRANCHISES
INTERNET
LICENSEES
OEM
GOVERNMENT
HOUSE
JOINT
VENTURES
AFFILIATES
Copyright A. Whitebread, 2001-2010.
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