Global Marketing Mix :Global Marketing Mix AG BM 338 Agribusiness in the Global Economy


LEARNING OBJECTIVES :LEARNING OBJECTIVES After today’s class, you should be able to: Articulate the four P’s of the marketing mix Understand alternative production adaptation and product line planning strategies Understand alternative global pricing strategies Understand alternative international promotion tools


MARKETING :MARKETING marketing - the effort to create, develop, and defend markets that satisfy the needs and wants of individual and business customers


THE MARKETING MIX :THE MARKETING MIX The 4 P’s of the marketing mix: Product Price Place (or distribution) Promotion


TERMS RELATED TO THE FOUR MARKETING Ps :TERMS RELATED TO THE FOUR MARKETING Ps product - offerings that customers purchase market segmentation - way to identify consumers who differ from others in purchasing behavior


ADAPTATION VS. STANDARDIZATION :ADAPTATION VS. STANDARDIZATION Elements of the marketing mix could be Standardized across all markets Adapted to appeal to particular market segments Standardization Essentially the same approach to the 4 P’s in every target market Adaptation Marketing mix is tailored to country or to market segment within a country


PRODUCT PROFILE :PRODUCT PROFILE Product characteristics Inherent features of the product Packaging and labeling characteristics Protects the product Communicates information Promotes the product Service characteristics Information and advice (pre- and post-sale) Product repairs and upgrades (durable goods)


FACTORS IN PRODUCT ADAPTATION :FACTORS IN PRODUCT ADAPTATION Internal company considerations Human and financial resource constraints Costs of developing and producing distinct products Customer considerations Customer preferences (example: GMOs) Economic situation of customers (example: farm machinery)


FACTORS IN PRODUCT ADAPTATION (continued) :FACTORS IN PRODUCT ADAPTATION (continued) Competitive considerations Degree of competition in target market Exploiting gaps in competitors’ product lines Legal and regulatory considerations Sanitary and phytosanitary standards Tariff and nontariff barriers (example: milk components) Bottom line: is adaptation profitable, and how long will it take for it to become profitable?


PRODUCT LINE PLANNING :PRODUCT LINE PLANNING Deciding on the right individual product for a market is only one part of the story Need to decide what family of products should be offered The foreign product line is often smaller than the U.S. product line because of financial and market limitations Starting out with a limited product line in a foreign market provides a way to test the market before expanding


EXAMPLE OF PRODUCT ADAPTATION :EXAMPLE OF PRODUCT ADAPTATION Kit-Kat – roughly $1 billion in sales worldwide In Russia, it’s slightly smaller and the chocolate is coarser In Japan, it’s strawberry flavored “Each of these product variations is the result of thorough market research on local tastes. ‘There is no global consumer for the food-and-beverage business. This is a deep belief we have,’ Brabeck says.” (Peter Brabeck is the Chairman and CEO of Nestle)


PACKAGING AND LABELING :PACKAGING AND LABELING Protection of the product Climate control Transportation and handling Packaging usually needs to be more durable for export Shelf life Size of the package Pillsbury uses packages with 6-to-8 servings in developing countries, while 2-serving packages are most popular in North America 2-liter bottles of Coke were too large for the compartments in most refrigerators in Spain


PACKAGING AND LABELING (continued) :PACKAGING AND LABELING (continued) Legal Constraints Packaging recycling requirements Consumer information requirements (food labels) Multilingual labeling requirements Canada (French and English) Belgium (French and Flemish) Finland (Finnish and Swedish) Promotion of the product Brand image Distinguish product from the competition


PRICE :PRICE Pricing situations Export pricing Foreign market pricing (production abroad) Pricing strategies Cost-based strategies Demand-based strategies Eclectic strategies based on short- and long-term company goals


COST-BASED STRATEGIES: EXPORTING :COST-BASED STRATEGIES: EXPORTING Standard worldwide pricing Price is based on average fixed, variable, and export-related production costs Dual pricing Export price is based on marginal costs rather than average costs Constitutes dumping (an example of cost dumping)


COST-BASED STRATEGIES: PRODUCING ABROAD :COST-BASED STRATEGIES: PRODUCING ABROAD Standard within-market pricing Price in each market in based on average fixed and variable production costs in that market With either exporting or producing abroad, cost-based strategies may be out of alignment with market conditions


DEMAND-BASED PRICING STRATEGIES :DEMAND-BASED PRICING STRATEGIES Price discrimination Charge different prices in different markets Can do with exporting or producing abroad A type of dumping when applied to exports (price dumping) How does it work? Lower prices in market segments with more price-elastic demands, higher prices in segments with less price-elastic demands If price differences are too large, run into transshipment (smuggling) problems


ECLECTIC STRATEGIES BASED ON… :ECLECTIC STRATEGIES BASED ON… Short- and long-term company goals Profitability Market share Production costs Demand-side considerations Competitive considerations


PLACE :PLACE Distribution choices are the least flexible choices in the marketing mix International challenges Lack of familiarity with distribution channels Use of intermediaries means relinquishing control


CHANNEL DESIGN: THE 11 C-FACTORS :CHANNEL DESIGN: THE 11 C-FACTORS Customers Culture Competition Company Character Capital Cost Coverage Control Continuity Communication


PROMOTION :PROMOTION Promotion mix includes Advertising Personal selling Publicity Sales promotions Mix will depend on Target audience Company objectives Product or service being marketed Resources available


INTERNATIONAL ADVERTISING :INTERNATIONAL ADVERTISING Media strategy Which media reach your target market? May be much different from the U.S. Media regulations vary by country Promotional message Why would the target consumer buy the product? Emphasize those attributes How is the product positioned? Ads should be consistent with positioning Rational versus emotional appeals Be very sensitive to cultural considerations


INTERNATIONAL ADVERTISING (continued) :INTERNATIONAL ADVERTISING (continued) Ad literacy of target audience Is audience used to connecting ad images and ad messages? Annual per capita spending on advertising varies tremendously by country and region: United States: $153 Canada: $64 Europe: $43 Latin America: $5 Asia and Pacific: $4 Middle East: $2 Africa: 80¢ Statistics: ad spending per capitaby top 100 marketers in 2006 Sources: Advertising Age and Population Reference Bureau


ADDITIONAL PROMOTION TOOLS :ADDITIONAL PROMOTION TOOLS Personal selling – often used… In early stages of international expansion For high-cost products For industrial goods (example: an ingredient) Publicity/Public Relations To earn public understanding and acceptance Anticipate or counter criticisms Portray as good citizens of host country


SALES PROMOTIONS :SALES PROMOTIONS Covers all promotions except for advertising, personal selling, and publicity Includes: Coupons Free samples Consumer education Product demonstrations Point-of-purchase materials Discounts Direct mail Prizes and giveaways