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.