Lesson 30. PLACE AND PROMOTION ELEMENTS
Module 8. International marketing
PLACE AND PROMOTION ELEMENTS
The goal of most of the organizations is to achieve the possible synergies by using, optimum mix of appropriate marketing promotion tools. Communication mix for international market is influenced by market size, cost of promotional activity, resource availability especially finance, media availability, type of product and its price sensitivity, mode of entry into international market, market characteristics.
Effective promotion of the product is very crucial for success of the company in this competitive world. A company generally makes use of all the promotional tools.
It is a paid form of non personal communication by an identified sponsor. This is the most widely used promotion method for mass marketing. A company may use either a standardized advertising strategy or customized advertising strategy of different markets. The extent of standardization also varies. Advertisement with no change uses the same theme, copy or illustration except for translation. When advertisements uses different celebrities in different countries but maintain the same advertisement copy the theme is called standard advertisement with change in illustration. Use of standard advertising by companies is increasing as preferences, lifestyle of consumers and consumer behavior is also becoming similar across the world. Increased reach of all forms of international media (TV, magazines, news papers) etc. has also accelerated the phenomena. When advertisement message, copy or content is changed, is called adaptation or customization. Customization is essential in international advertisement as there exists difference in cultural value among nations, difficulties in exactly translating language, differences in level of education of target groups, differences in social attitude towards advertising and regulatory framework of target market. Some of the examples of international advertising practices adopted by firm are cited as:
- Benetton Group Spa, the Italy based global clothing retailer uses global advertising campaigns with same theme.
- Virginia slims, market leader in women's cigarette endorse local models in different countries.
- Lux also maintains common advertising concept throughout the world. It endorses local film models in their advertisement.
- Pepsi customized its advertising campaign to depict its core values of youthfulness associated with generation next.
30.2.2 Personnel selling
Due to differences in language, social, customs and business culture, personnel selling as a promotion mode in international market is complex, personnel selling is used in low income countries as wages are low compared to advertising, in multi linguistic markets, in low literacy level countries. Its practice varies from country to country. For example, personal selling plays a special role in Japanese market owing to its peculiar socio cultural features such as: a) Individuality and independence is highly valued in western countries. But it is not so in Japan. Japanese marketers and sales people are less inclined to take credit for success or blame others for failures. (b) Non financial incentives are seldom used in Japan to recognize, praise or reward sales people for good performance as it is simply expected and special praise is deemed unnecessary. (iii) One of the fundamental characteristic of Japanese society is loyalty to one's employer. Sales personnel consider it their duty to grow business of their organization. They do not get and do not expect special compensation for their duty. Thus, commissions are generally an unnecessary component of their compensation package.
30.2.3 Sales promotion
Trade promotions and consumer promotions as methods of sales promotion are also used by international marketer to generate trials for new or related products, to generate more sales. The promotional offer has a local focus and generally varies from country to country. Some promotional tools are legally not permissible in some countries. for example: Buy one get one free is not allowed is Germany, Games are subject to compliance with lotteries and amusement act in UK, contests are legally permitted in Spain but the firm must be registered with the government, rebate / refunds are illegal in Italy, Gift vouchers are legally permissible but very strict restriction apply, product sampling is legally permissible in Poland except alcohol, cigarettes to Muslims.
30.2.4 Public relations
This promotion method helps the firm to build corporate image and influencing media and other target groups to have a favorable publicity. This is carried out by sponsoring specific events, giving awards and prizes, providing press release etc. In high income countries, professional firms offer specialized public relation services whereas in low income countries the word of mouth mode of publicity is mostly used for spreading a message.
30.2.5 Fairs and exhibition
Trade fairs and exhibition of various type viz., general trade fair, specialized trade fair, specialized trade fair, consumer fairs, minor trade fair, solo exhibition, catalogue shows etc. are used by firms from low income countries owing to less financial and other resources required for marketing communication.
30.3 Distribution Channels
Company has to use distribution channels to make the product available to consumers. Distribution channels in international market are a set of interdependent organizations networked together to move the product from firm to consumer. In international distribution channels network, products has to move longer distance so the firm has to commit more resource. The political system varies in different countries which dictate the rules for movement of goods which makes the process complex.
Fig. 30.1 Distribution channels
30.3.1 Direct channels
Agents: This is located in foreign markets. They do not take title of the goods. This is further categorized in the following types:
Foreign based broker / commission agent: They are located in foreign markets. They keep continuous close contact with buyer and seller to facilitate sale. They provide match making services to export and import. They specialize in food products and commodities and work on brokerage per deal base.
Product agent / sale representative: Small firms, who lack resources & experience, employ such agents. This agent conducts the business on behalf of company. They provide their services to more than one firm as they do not take title of goods, looses are to be borne by company.
Foreign based buying agents: Some firms maintain exclusive contract with agents to sell their products. Such agents work on the basis of specific percentage of profit & deal in all type of products.
30.3.2 Market intermediaries
This is categorized in the following types:
Merchant importer: This is a foreign based trader who imports products and then sells them to wholesaler or retailer. They take possession and title of goods and thus responsible for risk and bear loss.
Distributor: They purchase the goods and resell them to market intermediary or final consumer. They take title of goods and thus responsible for risk and losses. They enter into contract with company and work on margins.
Wholesalers: They purchase goods from the merchant exporter or distributor and sell them to retailers.
Retailers: They purchase goods from whole seller or distributors and finally sell to consumer. They carry inventories, attend credit, display the product and undertake point of purchase promotion.
E-channels and Web based Marketing: The revolution in information technology has facilitated the e-commerce through e-channels. E-commerce has eliminated and increased the speed of delivery of goods with reduced cost.
Companies that act internationally do not usually make the transition from traditional marketing to full-blown Web marketing in one step. Web-based interaction is a two-way street. Customers learn about the company, its products, and its policies. Simultaneously, the Web marketer learns what the customer learns while browsing the website. In an international setting, effective Web-based marketing should encourage customers to learn about the company in a “proper” way. For example, an appropriate learning sequence for an international customer would be one, where he/she first reads about the company's profile, then learns about its products and services, and finally contacts the firm to set up a sales meeting. When this process is looked from the perspective of the organization who establishes a website geared to its international markets, the critical task is to learn what the customers have learned. This can be done by website traffic analysis. Such an analysis generates reports that provide information about the visitors of the website, answering questions such as When do they visit? Where do they visit from?, and What do they do during the visit to the site?
The Internet alters the perception of distances and thus directly influences a company’s internationalization process. Earlier, physical distances in time and space were key dimensions in defining what international business was all about – a company became international when it began to transact with customers across national borders. Today, even for companies that do not (or do not want to) do cross-border transactions, the reality of globalization is inescapable: the Web knows no boundaries. Furthermore, because collecting market information at a low cost is now feasible, knowledge about promising markets outside the home market is created, thereby leading to an increase in international transactions.
30.4 Indirect Channels
The different types of agents in indirect channels are of following four types.
Commission agent/broker: They bring the seller and buyer at one place. They maintain relationships with exporters and importers and work on commission base.
Buying agents of importers: Many companies depute their agents to foreign markets to obtain supplies. They are very helpful as they visit small exporters and judge the suitability of their products according to the need of their client importers.
Country controlled buying agents: They are appointed by government. They find out the best importers for their country.
Buying offices: Companies, who want to procure specific materials from other countries on continuous base, establish their branch office in supplier’s countries which ensure continuous supply of their requirement.
30.4.2 Merchant intermediaries
These are of following type
Merchant exporter: They procure materials/ products from many manufacturers and export directly under their name.
International trading companies: This is global companies which collect, transport and distributes products in various markets.
Trading/export house: These are local large companies associated with certain minimum level of export business. They get certain incentives from government.