International marketing management lesson 06

UNIT III LESSON INTRODUCTION TO MARKETING MIX CONTENTS 6.0 Aims and Objectives 6.1 Introduction 6.2 Concept of Marketing Mix 6.2.1 Product 6.2.2 Price 6.2.3 Place 6.2.4 Promotion 6.3 Importance of Marketing Mix 6.4 Need to Prioritise the Marketing Mix Elements 6.5 Marketing Mix Priorities and Synchronization 6.6 Unorganised Markets and Marketing Mix Elements (FMCG) 6.7 Let us Sum up 6.8 Lesson End Activity 6.9 Keywords 6.10 Questions for Discussion 6.11 Suggested Readings 6.0 AIMS AND OBJECTIVES After studying this lesson, you will be able to: Describe the concept of marketing mix in international context Know what are the elements of international marketing mix Appreciate the importance of marketing mix 6.1 INTRODUCTION Finding the right marketing mix is crucial if you are serious about developing your international business The right marketing mix will increase your international success and will also keep your international expansion costs down 92 International Marketing Management Successful brands establish critical linkages across marketing mix elements This is critical in a competitive environment, especially when product differentiation may not provide a long-term advantage A brand known for its innovative features will soon have competition from 'follower' brands and hence may have to create brand associations which revolve around the strength of the brand as this would place the brand `on top of' consumers' minds and create a preference even when other brands follow the pioneering brand with regard to the core offering Internet marketing can help businesses reach international clients It is easy to set up At little or no cost, internet marketing is an important element in international business development today But you need to be sure to add the right mix to your internet marketing to actually reach your international markets and to get international sales Here are the different factors you have to find the right international marketing mix: There are in fact different means of communication using the internet: emails, websites, ezines, podcasts, blogs, and more There are different channels of traditional communication: direct mail, radio, magazines, flyers, and so on There are different skills in international marketing: traditional international marketing skills, multicultural communication, cross cultural communication, cultural sales negotiation All of these factors need to come into play at some stage of your international internet marketing You will need to tweak your mix, stimulate foreign market feedback and readjust further, until you create real communication with your foreign markets Finding the right mix for your particular markets gets you more international clients Two Simplifiers For International Expansion There are two big differences with traditional international business expansion and today's international internet business development: Internet marketing can be tested and adjusted in real time at no cost Internet marketing is great for information product marketing and sales These two differences make international expansion is easier than ever before Any business can find a way to use internet marketing for foreign lead generation An initial international internet marketing strategy with the right marketing mix is an ideal starting phase for any international development program 6.2 CONCEPT OF MARKETING MIX Marketing Mix is defined as a set of marketing tools that the firm uses to pursue its marketing objectives in the target market The marketing mix is an essential part of the formulation of a firm's marketing strategy In the past, the most frequently manipulated element of the marketing mix was price, because it is easy to manage Texas Air, relentlessly trying to lower prices without regard for customer's needs, lost both competitiveness and money In 1988, while the rest of America's domestic airlines had a record breaking year, Texas Air managed to lose 3.5 market share points and $718.6 million Traditionally, the marketing mix consisted of four broad categories of variables known as the P's of Marketing: product, price, place, and promotion 6.2.1 Product Product describes the product or service being offered This includes product ideas and development, variety and assortment, quality, features, style, brand name, packaging, warranties, product logos, trademarks, public perception, as well as supporting and complementary services One of the aims of McDonald's is to create a standardized set of items that taste the same whether in Singapore, Spain or South Africa McDonald's learned that, although there are substantial cost savings through standardization, being able to adapt to an environment ensures success Therefore the concept of "think global, act local" has been clearly adopted by McDonald's Adaptation is required for many reasons including consumer tastes/preferences and laws/customs There are many situations where McDonald's adapted the product because of religious laws and customs in a country For example, in Israel, after initial protests, Big Macs are served without cheese in several outlets, thereby permitting the separation of meat and dairy products required of kosher restaurants McDonald's restaurants in India serve Vegetable McNuggets and a mutton-based Maharaja Mac (Big Mac) (Web, 1) Such innovations are necessary in a country where Hindus not eat beef and Muslims not eat pork There are also many examples of how McDonald's adapted the original menu to meet customer needs/wants in different countries In tropical markets, guava juice was added to the McDonald's menu In Germany, beer is sold as well as McCroissants In Thailand, McDonald's introduced the Samurai Pork Burger with sweet sauce These are all examples of how McDonald's has adapted its product offer in international environments 6.2.2 Price Price describes the price charged and terms associated with the sale, such as list price, discounts, allowances, credit terms, payment period, coupons, and sales policy McDonald's has realized that, despite the cost savings inherent in standardization, success can often be attributed to being able to adapt to a specific environment This is indeed the case with its implementation of its pricing strategy, which is one of localization rather than globalization McDonald's has had to come up with different pricing strategies for different countries More importantly, rather than just having a different pricing policy for the Big Mac, McDonald's has had to select the right price for the right market 6.2.3 Place Place is the distribution and logistics function that needs to be considered in making the product or service available, in particular distribution channel strategies and plans, shelf space allocation and management, inventory and warehouse management, transportation, degree of vertical and horizontal integration, service level policy and standards, facility location and convenience McDonald's currently has over 30,000 restaurants in 119 countries across the world McDonald's continues to focus on managing capital outlays more effectively through prudent and strategic expansion In 1998, the company added 1,668 restaurants systemwide (whether operated by the company, franchisee or joint venture), compared with 2,110 in 1997 and 2,642 in 1996 McDonald's realizes the potential for growth in international markets and plans to benefit from lessons that they learned in the USA 93 Introduction to Marketing Mix 94 International Marketing Management 6.2.4 Promotion Under promotion we understand all promotion and communication activities associated with marketing the product or service, such as advertising, personal selling, sales promotion, and public relations, also called the Promotion Mix Promotion, or the marketing communications mix, was seen by Kotler (1994) as consisting of five major tools: (1) Advertising; (2) Direct marketing; (3) Sales promotion; (4) Public relations and publicity; and (5) Personal selling Using these tools, McDonald's looks to localize its marketing communications strategy as it needs to consider the enormous range of cultural and other differences that it would be faced with in each country (Web, 3) It needs to analyze consumers' attitudes towards its product, usage patterns and ethnic, moral and religious considerations in that environment Although the idea is to promote McDonald's as a global image, McDonald's focuses on the needs of the communities they are entering In a communications context, the maxim "brand globally, advertise locally" (Sandler and Shani, 1991) is the McDonald's promotional strategy After analyzing the marketing mix of McDonald's, it is clear that the company can be said to be `global', i.e combining elements of globalization and internationalization McDonald's have achieved this through applying the maxim, `think global, act local' (Ohmae, 1999), to all the elements of the marketing mix 6.3 IMPORTANCE OF MARKETING MIX Elements of the marketing mix form the foundation for any marketing strategy It establishes the brand's strategy in a systematic and structured manner It helps the marketer to establish linkages with the focused target segment Decades ago, companies may have attempted third degree marketing - which is `placing' the brand in the market and later fine-tuning the marketing mix elements (if the situation demanded) to suit the needs of the target segment In the Indian context, during the pre-liberalised era there was practically no competition and a few brands dominated the market in several product categories This, in fact, encouraged marketers to practice third degree marketing (even without the need to either clearly define the market or to fine-tune marketing mix elements) In today's context, even the brands which have been in the market for several decades make a planned attempt to construct a strategy based on marketing mix, carefully identifying the scope for providing a competitive marketing mix Amrutanjan has used a number of marketing mix elements to become competitive in recent times with several product variants for different segments of the market Iodex is one more brand which has contemporarised its marketing mix elements Though Maruti has been around in the Indian market only from the early eighties, it has been forced to attempt a number of strategies to maintain its leadership - launching new models, sub-brands, providing several services which today includes trading used cars and expanding its distribution Bajaj, almost a generic name in the category of scooters, has introduced several variants, built up brands in the motorcycle category and even launched models with a lifestyle proposition (Classic, Bravo) The importance of marketing mix elements not only emphasises the combination of marketing mix elements; they also stress the timing of such combinations Kores was a well-known brand in the category of copiers; Rajdoot had considerable brand equity even during the eighties; HMT watches were associated with Indian-made watches at a time when the trend of digital watches had not yet set in Zodiac was probably the earliest readymade-wear brand in the category of men's readymade wear In a number of these cases, it is clear that the timing of the marketing mix elements would have played a greater role in sustaining the equity of the brand which was created because of the pioneering lead It would be interesting to note that timing should not mean being ahead of consumers' needs Gestetner introduced digital copiers in a market where digital copiers form an insignificant share While Eveready may offer alkaline (longer life) batteries, the marketing mix has to carefully take into consideration that over 90 per cent of the Indian market still buys the conventional batteries A number of tyre brands may offer radials but the market is yet to use them in a significant manner Merlin brand came out with home theatre systems in the mid-eighties when consumers were just getting used to two-in-ones (mass market) and televisions Even today hometheatres have a limited market While a brand could develop a product offering to cater to a niche market (Dove moisturiser bar or even the plasma television sets which cost a couple of lakhs of rupees), it has to have a conscious marketing mix plan taking into consideration the realities of the market Check Your Progress 1 Define product What are the elements of promotion? 6.4 NEED TO PRIORITISE THE MARKETING MIX ELEMENTS In a competitive situation, a firm has to prioritise marketing mix elements This does not mean concentrating only on a few elements and ignoring the others Prioritising emphasises the need to recognise the fact that some elements may be important than others at a given point in time When Samsung entered the Indian context, it had sophisticated offerings but the priorities were to develop a brand with such associations and to develop a distribution channel Whirlpool, the fastest growing refrigerator brand in India, emphasised product offerings adapted to local consumers through marketing research This enabled the brand to come out with offerings which were in tune with the needs of consumers Heinz, the globally known ketchup brand, entered India where Kissan and Maggi are well established and with which consumers were familiar Though the brand may have had a superior offering in terms of product attributes, there was a need to create brand awareness and then link the brand's attributes to the name of the brand Advertising through a well-planned positioning strategy was required to bring the brand within the `consideration set' of consumers It should be noted that the penetration of the category (ketchup) is low, in the order of 2-3 per cent The Heinz advertising campaign mentioned 95 Introduction to Marketing Mix 96 International Marketing Management that the brand was synonymous with the category of ketchup in a market where consumers were unfamiliar with the brand Besides, the brand followed an upmarket skimming pricing strategy of pricing the offering higher than the competitive offerings While advertising may have been prioritised by the brand as a prerequisite for its `startup' strategy, the brand had probably assumed that consumers in India are familiar with the brand and would associate it with the category (which could be true of other markets in the world) Further, pricing the product high in a country where there is a need to sell the concept and create a market need not have been a priority A lower priced variant introduced with an innovative recipe drawn from traditional foods could have made a better impact on consumers The brand later introduced a sales promotion which was followed by the strongly entrenched brands in the category The priority of the brand should have been a low-priced variant positioned to create a trial for the brand and expand the market Kellogg's, another global brand in the category of foods, created trials for its cornflakes initially when it entered the Indian context but was unable to sustain repeat purchase because of its high prices (almost 100 per cent over the existing competitive brands) Prioritisation of marketing mix elements starts from the clarity associated with the definition of target segment If a brand of cereal aspires to be a niche brand it should have a marketing mix very different from that for middle-class consumers (to make them substitute their regular breakfast with cereals, which is not easy as eating is a part of the culture in any part of the world) A niche brand could prioritise premium pricing and a high visibility advertising campaign emphasising its global associations A mass market brand (however global it is) has to prioritise low unit price in a country like India Perhaps there could be some logic for a global brand to even be the loss leader (with a low price) in India until the time a strong loyalty is established Having an approach like this would enable the brand to increase the share of the customer besides expanding the market This could be a workable strategy, especially for a brand entering the food category as experience all over the world shows that such brands take decades to become a part of the `consumer's habit' 6.5 MARKETING MIX PRIORITIES AND SYNCHRONIZATION Titan, which holds a significant share of the organised quartz market, has been able to plan the marketing mix priority and also synchronise the linkages between different marketing mix elements The brand may currently be working towards stabilising its profitability (due to some reasons) but the approach of the company towards marketing mix elements has been methodical The unorganised sector in the quartz watch market is larger than the organised sector and the brand's progress has been due to the carefully orchestrated marketing mix - as stated earlier, prioritisation of marketing mix elements should lead to synchronisation as demanded by the situation The basic decision of Titan during the mid-Eighties was to be only in the quartz watch market (product decision) The initial campaigns of the brand created awareness by mentioning that Titan is as good as foreign makes Then the brand developed the emotional appeal by projecting the popular Titan jingle (it is today the `property' of the brand and almost every advertisement of the brand carries the music) Simultaneously the brand transformed the `watch buying' experience from bazaar shops to exclusive outlets which offered ambience and comfort Several variants were created at different price points for various segments and perhaps the initial problems in differentiation between various models was overcome by the effective application of sub-brands (Bandhan, Nebula, Dash, Fast Track and so on) The brand has also developed an effective retail network with its presence in multi-brand outlets All the efforts later with regard to the marketing mix elements have resulted in the brand being well within the `top of mind' recall of most Indian consumers contemplating the purchase of a watch The approach of Titan could be compared with that of Citizen (the well-known Japanese brand) in the Indian market Citizen had excellent brand equity - it was known for its quality The brand could have effectively made use of marketing mix elements in the Indian context, given the reality that a major chunk of watches purchased in the country are priced at below Rs 1,000 Sony in television, Reebok in the category of footwear, Rayban in the category of sunglasses and Mercedes in cars and some brands which entered the Indian context with a tremendous degree of equity and a well-planned marketing mix could enable them to adapt effectively to the Indian context Check Your Progress What you understand by marketing mix? What are the elements of promotion mix? 6.6 UNORGANISED MARKETS AND MARKETING MIX ELEMENTS (FMCG) India is probably one of the very few markets in which brands need to compete with the unorganised sector (biscuits, pens, detergents, footwear, dishwashing powders, traditional snacks, tea, edible oil and commodities to name a few categories) The most important aspect of the marketing mix in most of these categories is the value - the quality of the product and the price at which the quality is offered to consumers at the lower end An equally important element is promotion - a high-visibility campaign which creates awareness about the brand offering the value A-1 tea, Vendee edible oil (loose branded oil offered through vending machines), Vim, Lakhani footwear, Tiger biscuits, Haldiram's and MTR snacks and Nirma detergent are some examples which have demonstrated the usefulness of the approach Tiger from Britannia is a very good example of a brand providing value at the lower end of the market Biscuits almost form a part of the food consumption culture and Tiger provided an offering which effectively competed with other offerings from the unorganised sector at an affordable price The brand also created memorable campaigns Marketing mix elements are equally important in international marketing They even influence the manner in which a brand's associations are formed in the psyche of the consumer Mont Blanc's products (known more for its classy pens) are premium products the world over but Citibank has different associations in different international markets (a mass market bank in the US and a premium bank offering banking services in several markets in Asia) 97 Introduction to Marketing Mix 98 International Marketing Management Marketing mix elements have to be dynamic in a digital environment but within the boundaries of an organisation's capabilities 6.7 LET US SUM UP Finding the right marketing mix is crucial if you are serious about developing your international business Internet marketing can help businesses reach international clients Successful brands establish critical linkages across marketing mix elements This is critical in a competitive environment, especially when product differentiation may not provide a long-term advantage An initial international internet marketing strategy with the right marketing mix is an ideal starting phase for any international development program Marketing Mix is defined as a set of marketing tools that the firm uses to pursue its marketing objectives in the target market Traditionally, the marketing mix consisted of four broad categories of variables known as the P's of Marketing: product, price, place, and promotion Elements of the marketing mix form the foundation for any marketing strategy It establishes the brand's strategy in a systematic and structured manner It helps the marketer to establish linkages with the focused target segment Marketing mix elements are equally important in international marketing They even influence the manner in which a brand's associations are formed in the psyche of the consumer 6.8 LESSON END ACTIVITY Develop a complete marketing mix programme for a new brand cellular phone in international market 6.9 KEYWORDS Marketing Mix: A set of marketing tools that the firm uses to pursue its marketing objectives in the target market Price: It describes the price charged and terms associated with the sale, such as list price, discounts, allowances, credit terms, payment period, coupons, and sales policy Promotion Mix: Advertising, personal selling, sales promotion, and public relations are called the Promotion Mix Product: Anything which is offered to the market to satisfy consumer needs and wants 6.10 QUESTIONS FOR DISCUSSION Discuss the importance of marketing mix What are the elements of marketing mix for international market? Describe the role of internet in international marketing mix What you understand by marketing mix priorities and synchronization? Check Your Progress: Model Answers CYP 1 Product describes the product or service being offered The main elements of promotion are: advertising, direct marketing, sales promotion, public relations and publicity CYP Marketing Mix: It is defined as a set of marketing tools that the firm uses to pursue its marketing objectives in the target market Traditionally, the marketing mix consisted of four broad categories of variables known as the P's of Marketing: product, price, place, and promotion Promotion, or the marketing communications mix, was seen by Kotler as consisting of five major tools: (1) Advertising; (2) Direct marketing; (3) Sales promotion; (4) Public relations and publicity; and (5) Personal selling 6.11 SUGGESTED READINGS PKVasudeva, International Marketing, Excel Books, New Delhi, 2006 Shyam Shukla, International Business, Excel Books, New Delhi, 2008 Philip R Catero, International Marketing Keegan, Global Marketing Management 99 Introduction to Marketing Mix ... studying this lesson, you will be able to: Describe the concept of marketing mix in international context Know what are the elements of international marketing mix Appreciate the importance of marketing. .. potential for growth in international markets and plans to benefit from lessons that they learned in the USA 93 Introduction to Marketing Mix 94 International Marketing Management 6.2.4 Promotion... initial international internet marketing strategy with the right marketing mix is an ideal starting phase for any international development program Marketing Mix is defined as a set of marketing