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Chapter four
Product Policy, Decision and
Planning
4. Introduction
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Selling the products made for domestic buyers to foreign
market is less effective.
Some products cannot be sold at all in foreign markets without
modification; others may be sold as it is.
From customer value perspective, product acceptance is greater
when it is tailored specifically to market needs.
Therefore, international marketers should carefully make
product decision such as;
Standardization Vs adaptation, branding, labeling, packaging,
other product attributes, quality, and product lifecycle stage.
4.1. PRODUCT
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A product is often considered in a narrow sense as
something tangible
This definition is misleading since many products includes
intangible features (e.g., services).
Also, in international market not only tangible products are
exported, other valuable things can also be exported.
E.g. Movies, Business-consulting services and others.
Cont’d
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Product consists tangible and intangible features,
quality aspect, brand, warranty, after sales services
(repair, maintenance).
Multinational marketer must look at a product as a
total, complete offering or customer values.
4.2. PRODUCT ACCEPTANCE
(ADOPTION)
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Product adoption is the major question of marketers or
production managers while engaged in developing product.
Do the customers accept or reject the newly introduced
product would be the headache.
For the product to gain acceptance it should demonstrate
the followings;
i. Relative advantage over the existing alternatives,
ii. Compatibility with local customs and habits. E.g. A
freezer, where people prefer fresh food.
Cont’d
iii. Trial ability/divisibility: capable of being divided and tested in
small trial quantities to determine its suitability and benefits.
iv. Observable: it must be publicly observed to get social
acceptance and reinforcement.
v. Less Complexity: less difficulty in understanding a product’s
qualities, usage, and importance. It should be simpler to
operate.
International marketer would have to consider these product
requirements in product development decision.
4.3. International Product Life Cycle
(IPLC)
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IPLC is the stage through which a product passes from its inauguration to its
death (losing acceptance from the customer.)
It is a valuable framework for marketing planning on a multinational basis so that
the marketers need to analyze each stages to understand different marketing
implication.
Stages and characteristics
There are five distinct stages (Stage 0 through Stage 4)
1. Stage 0: Local innovation
2. Stage 1: Overseas innovation
3. Stage 2: Maturity
4. Stage 3:Worldwide imitation
5. Stage 4: Reversal
Stage 0: Local innovation
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Represents a regular and highly familiar product life cycle in
operation within its original market.
Innovations are most likely to occur in highly developed countries due
to;
Firms with technological know-how,
Abundant capital to develop new products.
Wealthy consumers with relatively unlimited wants
Once these firms see maturity of products at home market, they look
for overseas market to expand their sales and profits.
Stage 1: Overseas Innovation
The innovating firm will look to overseas markets, as
soon as the original market well cultivated, and local
demands adequately supplied.
also known as a “pioneering” or “international
introduction” stage.
The firm should be noticed;
Technological gap in other advanced nations
Competition from home country and other advanced nation
Production cost tends to be decreasing at this stage due
to improved production process and decline in
aggregate production costs.
Stage 2: Maturity
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Growing demand in advanced nations provides their firms an impetus to
domestically produce the products
The innovating firm’s sales and export volumes are kept stable because least
developed countries (LDCs) are now beginning to generate a need for the
product.
Stage 3 – Worldwide Imitation
Tough times for innovating nation due to continuous decline in exports.
No more new demand anywhere and Production costs begin to rise again.
As the product becomes more and more widely disseminated, imitation picks
up at a faster pace.
At the end of this stage, export falls almost to nothing, and any production
remain for local consumption.
Stage 4: Reversal
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The major functional characteristics of this stage are product
standardization and comparative disadvantage
The product is no longer capital-intensive or technology-intensive
but instead has become labor-intensive – a strong advantage
possessed by LDCs.
LDCs – the last imitators – establish sufficient productive facilities
to satisfy their own domestic needs as well as to produce for the
biggest market in the world.
Product Policy
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Product policy is concerned with defining the type, volume and
timing of products a company offers for sale. The product policies
are general rules set up by the management itself in making product
decisions.
Good product policies are the basis on which the right products are
produced and marketed successfully.
It comprises; product planning, mix, branding positioning,
packaging and so on…
Cont…
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IPLC emphasizes the importance o f cost advantage.
Innovating firm must keep its product cost competitive using different
mechanisms;
Cut labor costs through automation and robotics.
Eliminate unnecessary options
Use local manufacturing in other countries
Examine the traditional vertical structure
Outsourcing
Switch from producing simple versions to producing sophisticated models or new
technologies
Cont’d
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Initially, charging a premium price
But, must be adjusted down-ward in the second and third stages of
IPLC to discourage potential newcomers and to maintain market
share.
Promotion Policy
A new product should be promoted as a premium product with a high-quality
image.
Place (distribution) policy
A strong dealer network
Most qualified agents/distributors
The distribution network should be expanded further as the product becomes more
diffused/distributed
Product Standardization Vs. Adaptation
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1. Product Standardization
A product designed originally for a local market is exported to other
countries with virtually no change, except perhaps for the translation of
words and other cosmetic changes.
It’s simple and cost-effective.
Standardization:
Achieving maximum productivity through standardization of product or
delivery achieving global economy of scale and lowest unit cost
Standardization means "one size fits all”.
Factors that promote standardization
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Convergence in customer preferences and income across
target countries with economic development and trade
Competition from successful global products
International brand awareness
Cost benefits from standardization
Standardization is assumed to be the best method as it
could give a maximum profit
Cont’d
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Standardization is tempting because of;
Potential economies of scale in production, promotion, distribution and research
and development.
Contribute to a coherent and consistent global image of the firm and its products.
However, there are many obstacles to the application of uniform
marketing policies variations across markets in;
Consumer attitudes,
Competitive environments, and
Marketing management related variables
2. Product Adaptation
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Customization refers to the tailoring of the campaign according to the needs of
an individual or groups of individuals.
These are high margin products where the volumes are low and the buyers are few.
Also called differentiation or localization or customization
Forces calling for local products (customization)
Differences in customer preferences and income across target countries
Build local brand recognition
Competition from successful domestic products
Regulatory requirements (quality, safety, technical specifications, domestic content)
Eg; In Europe, there are restrictions on the sale of beef from cows treated with growth
hormones
Product adaptation is necessary under several conditions
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Mandatory product modification
Without adaptation a product either cannot enter a market or is
unable to perform its function there. Makes the adaptation
decision easy; a marketer must either comply or remain out of
the market.
It consists:
Government’s mandatory standards
Electrical current standards,: variations in electrical
standards in d/t countries (phase, frequency, and voltage)
abroad can easily harm products
Measurement standards: vary from country to country;
Imperial system of measurement (feet, pounds)
Cont’d
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Optional product Modification
Physical distribution
Local use conditions, including climatic conditions. The hot/cold,
humid/dry conditions may affect product durability or performance.
Physical appearance: short or long, fat or tin
Users’ habits
Environmental characteristics
Price
Historical preference
Local customs and culture
Branding and Packaging Decisions
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When branding and packaging for international products, careful
consideration must be placed on factors such as;
Language, colors, customs, aesthetics and placement.
Packaging decisions must be in tune with such issues as how the
target market purchases, transports, uses and stores product.
A large number of brands of various products are available to the
consumer to choose and select from after a careful analysis of a
number of factors;
Associated with the product, the manufacturer, the brand name,
the packaging, the price, the contents etc.
A. Branding
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Branding is personalizing the product by giving it a name.
The right name has to be the product of a carefully
prepared strategic brief, showing creativity, selected with
a lot of linguistic and cultural research.
A good name is an incredibly valuable asset.
Naming, in today’s global market, has evolved into a
complex creative process and is also subjected to
stringent legal checks.
The Basic Purposes of Branding
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1. Create identification and brand awareness,
2. Guarantee a certain level of quality, quantity, &
satisfaction,
3. Help with promotion.
Common goal of these purposes is to induce repeat
sales
Brand Origin and Selection
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Brand names can come from a variety of sources;
Firm’s founders
Letters and numbers
Coined words
It is sometimes easier simply to purchase an existing brand
In selecting a brand name, a marketer should;
First find out whether a brand name has any negative connotation in the
target market.
Consider whether the brand reflects the desired product image.
Branding in a foreign language
Brand name that is unique or distinctive
International brand name,
Not overlooked the legal aspect of branding
Brand strategy
A company has five choices when it comes to brand strategy, which are as
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follows:-
i) Line extension:
Line extension occur when a company introduces additional items in the same
product category under the same brand name, usually with features, such as
new flavors, forms, colors, added ingredients, package sizes, and so on.
ii) Brand Extension: sony
A company may decide to use an existing brand name to launch a product in a
new category. Brand extension strategy offers a number of advantages. A
well-regarded brand name gives the new product instant recognition and
earlier acceptance.
It enables the company to enter new product categories more easily. i.e.
Sony puts its name on most of its electronic products and instantly establish
a connection of the new products high quality.
iii) Multi brands:
A company will often introduce additional brands in the same product
category.
There are various motives for doing this. Sometimes the company is
trying to establish different features and/or appeal to different buying
motives
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A multi branding strategy also enables the company to lock up more
distributors shelf space and to protect its major brand by setting up
flanker brands.
For example, Seiko establishes different brand names for its higher priced
(Seiko LaSalle) and lower-priced watch (pulsar) to protect its flanks.
iv) New brand:
When a company launches products in a new category, it may find that
none of its current brand names are appropriate.
v) Co-brands :
A rising phenomenon is the appearance of co-branding (also called dual
branding), is which two or more well-known brands are combined in an
offer. Each brand sponsor expects that the other brand name will
strengthen brand preference or purchase intention.
B. Packaging Decisions
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Packaging is another integral part of a product.
Packaging serves two primary purposes:
a) Functional: capable of protecting the product
e.g. Plastic and throw-away bottles are regarded as being wasteful,
b) Promotional:
For shipping
For point-of-purchase display,
Novel shapes and designs may be used to stimulate interest and
create excitement.
Communicate message
Package Made or Material
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What should be the package of the product is the
other important decision in designing package.
Should the package be made from the metal or
plastic or wood or paper?
What should be the level of package development?
Primary level, secondary level or tertiary level
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