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14.18: Reading- Applying Marketing Principles in the Global Environment

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    48227
  • The Marketing Mix in Global Marketing

    Photograph of two globes sitting on a desk.The same marketing principles that lead to marketing success in domestic marketing can also apply to global marketing. With the rapidly growing force of globalization, the distinction between marketing within an organization’s home country and marketing within external markets is disappearing very quickly. With this in mind, organizations are modifying their marketing strategies to meet the challenges of the global marketplace while trying to sustain their competitiveness within home markets. These changes have also prompted brands to customize their global marketing mix for different markets, based on local languages, needs, wants, and values.

    The four Ps of marketing—product, price, placement, and promotion—are all affected as a company moves through the different phases to become and maintain dominance as a global company.

    Global Marketing Mix: Product Plus Promotion

    For multinational corporations (MNCs), the interplay between product and promotion is important because it can enable a company to make minor adjustments to a single product and its promotion strategy rather than totally revamping the product and promotion for different markets. Coca-Cola is a strong example of this principle. The beverage brand uses two formulas (one with sugar and one with corn syrup) for all markets. The product packaging in every country incorporates Coca-Cola’s contour bottle design and signature ribbon in some shape or form. However, the bottle can also include the country’s native language and appear in identical sizes as other beverage bottles or cans in that country’s market.

    Before launching promotional programs, global companies must first define their target markets and determine the products that will resonate most with those consumers and businesses. This research can help inform marketing leaders about what course to take—localization versus standardization strategy—as they learn more about the target market’s receptivity to their goods and services. In addition to pinpointing which price point and distribution channels would best serve a country’s markets, global marketers must decide whether and how to customize their products. Product introductions are also important. Promotional tactics for global audiences can range from television commercials to social-media marketing on Facebook or YouTube. It is the job of global marketers to create and place promotional efforts in settings where local consumers will be most receptive to receiving and acting on those messages. Consumers in each target market have different media habits and preferences, and understanding these behaviors is important for selecting the right promotional mix.

    After product research, development, and creation, promotion is generally the largest line item in a global company’s marketing budget. Using integrated marketing communications can significantly increase efficiency and reduce promotional costs, as messages across multiple channels reinforce and amplify one another. For organizations that pursue a standardized approach to promoting products and building brands, promotion is the crucial component of the mix that enables a global company to send the same message worldwide using relevant, engaging, and cost-effective techniques.

    While a standardized global promotion strategy enables global brands to engage in uniform marketing practices and promote a consistent brand and image, marketers must also be prepared for the challenge of responding to differences in consumer response to marketing mix elements. Marketers must also fend off the full spectrum of local and global competitors, using promotional strategies, branding, and product development to full competitive effect.

    Global Marketing Mix: Promotion

    Before a company decides to become global, it must consider social, cultural, economic, political, competitive, and other factors relative to the global expansion it is considering. Creating a worldwide marketing plan is no simple task. It is virtually impossible for a company to communicate one identical message in a unified voice to global markets unless a company holds the same position against its competition in all markets (e.g., market leader, low cost, etc.). This is rarely the case, so most global companies must be open to some level of localization and be nimble enough to adapt to changing local market trends, tastes, and needs.

    Package of potato chips with Thai lettering
    Global promotion: Language is usually one element that is customized in a global promotional mix.

    Global marketers must balance four potentially competing business objectives when developing worldwide advertising: 1) building a brand while speaking with one voice, 2) developing economies of scale in the creative process, 3) maximizing local effectiveness of advertisements, and 4) increasing the company’s speed of implementation. Global marketers can use several approaches when executing global promotional programs: exporting executions, producing local executions, and importing ideas that travel.

    To successfully implement these approaches, marketers must ensure that their promotional campaigns take into account how consumer behavior is shaped by internal conditions (e.g., demographics, knowledge, attitude, beliefs) and external influences (e.g., culture, ethnicity, family, lifestyle) in local markets. Areas for attention include:

    • Language: Language differences are crucial in global marketing. There are nearly 3,000 languages in the world. Language differences have caused many problems for marketers in designing advertising campaigns and product labels. As discussed in this course’s discussion on naming, language can be problematic in the global naming process, with numerous examples of brand names that work well in some languages but have offensive or unfortunate meanings in other languages. Even countries that use the same language have words with different meanings. Consider the British terms “flat” (apartment in U.S. English), “pants” (underwear in U.S. English), and “lift” (elevator in U.S. English). Marketing messaging and materials could easily go wrong if they are not adjusted to fit in-country dialect and usage. Language becomes even more significant if a country’s population speaks several languages. An additional language consideration for marketers is literacy rates. Depending on the target audience and market, literacy may be a significant issue. Some countries, primarily less-developed countries, still have low literacy rates, such as Afghanistan with just 38 percent adult literacy in 2015, and Haiti with 61 percent. India, with its burgeoning economy, reported a literacy rate of 72 percent in 2015. In many countries, literacy rates can differ widely between men and women in many countries, too.
    • Colors: Colors may have different meanings in different cultures. This highlights the importance of careful testing of packaging and other visual elements intended for global audiences. For example, green is a sacred color in the Muslim faith, and it is not considered appropriate for packaging and branding purposes in Middle Eastern countries. In Japan, black and white are colors of mourning and should be avoided on product packaging. Purple is associated with death in some Hispanic nations.
    • Values: An individual’s values arise from his or her education, moral or religious beliefs and are learned through experiences. For example, as a consumer market, Americans place a very high value on material well-being and are much more likely to purchase status symbols than people in India. Chinese consumers highly value the sense of honor, dignity, and pride, and in some situations they will pay price premiums to “save face” by spending what is perceived to be an appropriate amount to preserve their honor.
    • Business norms: The norms of conducting business also vary from one country to the next. In France, for example, wholesalers do not like to promote products. They are mainly interested in supplying retailers with the products they need.
    • Religious beliefs and holidays: In addition to affecting their values, a person’s religious beliefs can affect shopping patterns and products purchased. In the United States and other Christian nations, the Christmas holiday season is a major sales period. In China, the Chinese New Year brings out the shoppers. In India, a string of Hindu festivals including Dussehra and Diwali mark a holiday season that extends over multiple months.

    Many other factors, including a country’s political or legal environment, economic status, and technological environment, can impact a brand’s promotional mix. Companies should monitor dynamics in their target markets and be ready to quickly respond and adapt to consumer needs and preferences.

    Recommendations for Adjusting the Promotional Mix

    When launching global advertising, public relations, or sales campaigns, global companies test promotional ideas using marketing research systems that provide results comparable across countries. These systems help marketers achieve economies of scale in marketing communications, since they reveal which messaging or creative elements contribute to a product’s market success. Marketing-research measures of nonverbal factors such as flow of attention, flow of emotion, and branding moments can provide insight into what is working in an advertisement or other marketing communication piece across multiple countries and languages.

    The same recommendations about how to research and understand a target market in domestic settings apply to global settings. Marketing research is essential for marketers to build their understanding of which promotional tactics will be successful in any country or region. Informed experimentation and trial and error are also good teachers. Once marketers and brand managers discover what works (and what doesn’t) in the promotional mix, they can import this knowledge to infuse creative ideas into other markets. Likewise, companies can use this intelligence to modify various elements in their promotional mix that are receiving minimal or unfavorable response from global audiences.

    Global Marketing Mix: Price

    Shelf displaying chopsticks in Walmart. The signage is in Chinese.
    Walmart: Placement, product, and promotion work in concert with pricing in the global marketing mix.

    Pricing is the process of determining what a company will receive in exchange for its products. Many pricing considerations in global marketing are similar to domestic marketing. As marketers develop pricing strategy, they should keep the following goals in mind:

    • Achieving the financial goals of the company and generating profits
    • Matching the realities of the marketplace and consumer buying trends
    • Supporting the designated positioning for a product, making it consistent with other elements of the marketing mix, product, promotion and placement

    Similar to domestic marketing, in the global marketing mix, factors that affect pricing include manufacturing cost, distribution channels, marketplace, competition, market conditions, and quality of product. For instance, if distribution is exclusive to one channel partner, then prices are likely to be higher. High prices are required to cover high costs of manufacturing, shipping, extensive advertising, and promotional campaigns. If manufacturing costs go up due to the rise in price of some raw material, then prices will need to rise as well.

    Global Pricing Considerations

    Pricing considerations become more complicated in the global context when it comes to factors affecting global trade. Multinational companies must operate with different currencies, exchange rates, and interest rates. Pricing needs to account for risk associated with fluctuations in the relative value of different currencies in the markets where businesses operate. When the dollar is strong against a foreign currency, for example, imported American goods are more expensive relative to the local competition, so local sales may decrease. When a weak dollar makes product imports more expensive, the final good must carry a higher price tag to cover production costs.

    Pricing can be affected by the cost of production (locally or internationally), natural resources (product ingredients or components), and the cost of delivery (e.g., the availability of fuel). For instance, if a country imposes a minimum wage law that forces the company to pay more to its workers, the price of the product is likely to rise to cover some of that cost. Natural resources, such as oil, may also fluctuate in price, changing the price of the final good. Pricing may be affected by government policy, such as trade tariffs and taxes, or costs associated with regulatory compliance and adherence to administrative or legal criteria of specific jurisdictions.

    Global marketers must be also prepared to deal with other localized factors affecting pricing. Cultural expectations may dictate what consumers are willing to pay for some products and brands. A product’s positioning in relation to the local competition influences the brand’s ultimate profit margin. Global marketers must carefully consider how to position their products in global markets and decide whether their products are considered high-end, economical, or something in between according to cultural norms.

    Global Marketing Mix: Place (Distribution)

    Although other elements of the marketing mix are often more visible during the marketing process, place, or distribution, is essential in getting the product distributed to customers. Placement determines the channels used to distribute a product across different countries, taking in factors such as competition and they way similar brands are being offered to the target market. Regardless of its size or visibility, a global brand must adjust its country strategies to take into account placement and distribution in the marketing mix.

    Global marketing presents more challenges around distribution, compared to domestic or local marketing. Consequently, brands competing in the global marketplace often conduct extensive research to accurately define the market, as well as the environments where consumers will find, buy, and use the product. A country’s transportation and economic infrastructure, customs, marketplace conditions, and the competitive landscape can all factor into strategic decisions around distribution. For example, not all cultures use or have access to vending machines to distribute beverages. In the United States, beverages are sold by the pallet via warehouse stores. But warehouse stores do not exist in all markets.

    Placement decisions must also consider the product’s positioning in the marketplace. A global luxury brand would not want to be distributed via a discount chain in the United States. Conversely, low-end shoemakers would likely be ignored by shoppers browsing in an Italian boutique store. Global marketers must also consider how their products will be distributed across the different shopping venues unique to a particular country or market. Customizing these placement strategies for national and local markets while retaining a strong and consistent brand image can help companies gain significant competitive advantages.

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