Chapter

8
Local Marketing
in Mature Markets

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved

 Outline
Basic Marketing in Mature Markets
Pan-European Marketing
Marketing in Japan
Marketing in Australia and New Zealand
Marketing in North-America
Takeaways.
Segmentation and Positioning (MSPP)
MATURE MARKETS
MARKET SEGMENTATION
• Segmentation is vital, customers
are extremely particular with well
developed preferences
• Small differences in products &
services make a big difference to
the consumer
• Narrow niche segments
continually increase
• Foreign entrant must be skilled in
finding the proper niche
PRODUCT POSITIONING
• Brand image, name, are very
important indicators of quality &
reliability
• “Country of origin” effect may
have positive/negative
implications on customer
perceptions
• Foreign entrants from third world
countries may try to introduce
low-end products to undercut
other brands; such a strategy will
only work in the short term
 The 4Ps in Mature Markets
PRODUCT
• 3rd world countries tend to sell
low-cost “me too” products;
success depends on price
sensitivity of the local market
• Introducing a new product has
little or no competition: first
mover advantage
• Brand name always matters
DISTRIBUTION
• Well developed
• Hardly any problems in terms of
infrastructure
• Channels are crowded & hard to
get into (e.g. slotting fees)
PRICING
• Target positions may be high end
or low end, with temporary deals
& offers to steal share & attract
consumers
• Fierce competition makes
discounts and other pricing
scheme necessary
• Perceived status of the brand will
always affect buyer behavior
PROMOTION
• Market share is the criterion of
success
• All types of promotion tools are
used to break habitual choices of
loyal consumers
 Customer Satisfaction
(CS)
MATURE MARKETS

• Intense competition has produced a management

focus on customer satisfaction
• Focusing on satisfaction ensures a steady loyal
customer base
• Quality must be instilled in each level (product quality,
functional performance, delivery, warranty, after sales
service) in order to prevent post-purchase cognitive
dissonance
• “Real” satisfaction comes from emotional factors such
as personal attention, courtesy, value-added services
or features, exceeding expectations
 CS and two kinds of quality
HIGH EMOTIONAL
LEVEL OF QUALITY
SATISFACTION

FUNCTIONAL QUALITY

LOW
LEVEL OF QUALITY HIGH

LOW
Pan-European Marketing
 Pan-European Marketing

MARKET BACKGROUND

• 1992 European integration stimulated many companies to

analyze the potential of pan-European marketing
strategies.
• EU means a changed strategic environment.
• Tariff barriers and customs duties within EU scrapped.
• Common external tariff.
• 1989 fall of the Berlin Wall slowed down the momentum
toward EU unity.
• The expansion to 25 members in 2004 resolved the issue
of what Eastern European countries would do.
• The EU market is a challenge for previously primarily
national European companies.
 The 25 EU Members in 2005
The six original: Benelux (Belgium, Netherlands,
Luxembourg), France, Germany, Italy
Nine added 1973-1995: Austria, Denmark, Finland,
Greece, Ireland, Portugal, Spain, Sweden, United
Kingdom
Ten added 2004: Cyprus, Czech Republic, Estonia,
Hungary, Malta, Latvia, Lithuania, Poland, Slovakia,
Slovenia

Market size: 450 million people.

Pan-European Marketing: Consolidation

• Large European corporations start coordinating previously

independent national subsidiaries.

• Costly national differences in product designs, brand names, and

promotions eliminated.

• Non-European companies with high global brand name

recognition well placed to take advantage of the integration.

• Threat from these foreign entrants has been met by the creation
of larger & stronger firms
Pan-European Marketing: Consolidation

• EU integration has been a boon for global

advertising agencies with experience of multi-
cultural campaigns.

• European agencies have initiated mergers and

acquisitions.

• A pan-European strategic response is not

necessarily the correct approach for all companies
in all industries (smaller firms can offer service to
a special niche segment).
 Pan-European Marketing: MSPP
MARKET SEGMENTATION
• European-wide target
segments.
• Dalgic: Six basic plus four
potential European segments.
• Scale advantages in clusters
(Mediterranean countries,
Northern Europe, etc.).
• Niche segments by ethnicity
and traditional preferences.
PRODUCT POSITIONING
• Product positioning can be
the same across countries,
but different product lines or
models target different
customer segments.
• Marketing mixes have
moved toward uniformity.
• Few products and brands
can maintain different
images in different countries
of Europe.
 Pan-European Marketing: The 4Ps
PRODUCT
• Pan-European products and brands
(Euro-branding).
• Use of leading markets for the core
product.
• More "me-too" products because of
competition.
• Packages in four languages (e.g.
English, French, German, and
Spanish.
• Gray trade problem with pan-
European products.
PRICING
• The euro forces coordinated
prices.
• Pricing corridors for limited
local flexibility.
• End of protective regulations
which had generated high local
prices.
 Pan-European Marketing: The 4Ps
DISTRIBUTION
• Rationalization of the
manufacturers' sales network.
• Retail and wholesale middlemen
shift from country-based to large
integrated EU networks.
• Integrated networks help facilitate
the introduction of pan-European
strategies among manufacturers.
• Growth of relationship marketing.
PROMOTION
• Pan-European TV advertising.
• Satellites beaming across
previously closed borders.
• Growth of commercially based
broadcast media.
• In-store promotion: Still
differing regulations among
countries.
Marketing in Japan
 Marketing in Japan: Background
• Japan is the size of California but has over 120 million people.

• In the 40 years up to the 1990s per capita incomes grew from poverty
level to the highest in the world.

• Japan's expansion was export-led, becoming a leading example for

other Asian nations.

• In 1990 the Japanese economy's speculative "bubble" in finance and

real estate burst, and the economy has been slow throughout the
decade and into the new millennium. Japanese firms are still doing
well in overseas markets, helping to offset some of the pressure from a
recessionary home market.

• The Japan market has still great potential for foreign firms in a wide
variety of products and services. Even though tariffs are down, non-
tariff barriers are high, making it very hard to succeed there.
 Marketing in Japan: MSPP

MARKET SEGMENTATION

• With deregulation and the economic slowdown, the Japanese

are becoming more similar to Westerners.

• While Japanese customers were always demanding in terms of

quality, service, and up-to-date technology and design, they
are now also open to discounted prices. "Bargain" is no
longer a dirty word.

• For each product category, there are now (1) upscale

segments, (2) middle-of- the-roaders who buy the tried and
true, and (3) those buying on price, looking for cheaper
imports and private labels.
Marketing in Japan: MSPP

PRODUCT POSITIONING

• Well-known global brand names fetched high

price premiums, especially in the luxury product
categories.

• Choices between close competitors could be

based on design, brand image, and other
"intangible" positioning criteria.

• More value-conscious, trading off features against

prices. But there is no compromise on quality.
 Marketing in Japan: The 4Ps

PRODUCT

• Adapting products/services to Japanese customers'

requirements is often necessary.
• More attention to detail
• Japanese companies are producing high-quality stripped
down versions of their upscale products.
 Marketing in Japan: The 4Ps

PRICING

• Consumers more price-sensitive, firms respond with

lower priced models
• Imports pose an increasing competitive threat to
domestic companies
• Traditional retail outlets try to sustain premium brand
prices while discount outlets have begun to sell brand
name products at reduced prices.
 Wheel of Retailing in Japan:
Price is Coming Back
MOST
IMPORTANT
FACTOR

PRICE QUALITY SERVICE

Se
lity
e
Q

Pr
r
vic

vic a
ua

ice
u

ic
e
r
lit y

e
Se

Pr

TIME
 Marketing in Japan: The 4Ps

DISTRIBUTION

• Complex and inefficient multi-tiered distribution systems

(barrier to entry)
• Contact between manufacturers and small middlemen
involve smaller packages, fewer units, and faster
restocking of supplies.
• Wholesalers/manufacturers have power over most
retailers
• SII (Structural Impediments Initiative, in the late 1980s)
involved Western pressure on Japanese authorities to
open up channels, which has now partly occurred,
helped by price pressure from discounters.
 Marketing in Japan: The 4Ps

PROMOTION

• Advertising unfocused and nonsensical. Ads are seen as

a kind of art form instead of a sales tool, recently shifting
to an American style unique selling proposition approach
• Japanese buyers spends more time in stores
• Store clerks are knowledgeable about their products.
• Lack of storage limits certain promotions
Marketing in Australia and New Zealand
Marketing in Australia and New Zealand
MARKET BACKGROUND

• Mature economies with a British heritage

• Australia, a vast country, with 18 million inhabitants

• Agriculture and raw materials, minerals in particular

• New Zealand, with four million people, basically agrarian

• Economic base in four industries: Forest products, dairy

products, meat products, fruits
Marketing in Australia and New Zealand

FOREIGN TRADE AGREEMENTS

• APEC (Asia-Pacific Economic Cooperation).

• ARF (ASEAN Regional Forum) grouping.

• ANZCERTA pact (Australia New Zealand Closer Economic Relations

Trade Agreement).
Marketing in Australia and New
Zealand:
MSPP
MARKET SEGMENTATION

• Segmentation criteria involve cultural roots, urban

versus rural, and demographics, including age.

• Young people ready for the new global markets,

older generation nostalgic for British roots.

PRODUCT POSITIONING

• Still pro-home country bias in several product

categories.

• Abroad, companies use their country-of-origin in

promotions to create a unique positioning.
Marketing in Australia and New Zealand:
The 4Ps
PRODUCT PRICING
• Global products and • Although many global
services products and brands are
• only slight adaptation to available in the region,
appeal to customers in prices in the region tend to
these markets. be higher than elsewhere.
DISTRIBUTION

• PROMOTION
Distribution is efficient
• Prime markets are clustered • Global communications
around the coast line and make it feasible to reach
metropolitan areas where these markets with globally
the distribution system is integrated promotional
modern and up-to-date. messages.
Marketing in North-America
Marketing in North-America
MARKET BACKGROUND

• Canada & USA

• One of the most competitive markets in the world
• Players are many of the strongest multinationals
• Low trade barriers in many industries
• Diversity complicates marketing communications
• Many competitors means large marketing budgets

FOREIGN TRADE AGREEMENTS

NAFTA (North America Free Trade Agreement –

includes Mexico)
Marketing in North-America

• 4 market idiosyncrasies:
Ethnic diversity
Religion, and the separation of
state and church
Decentralization - diffused
economic activity
Local marketing regulations vary
(central vs. regional governments)
 TWO DIFFERENT MODELS OF ETHNIC DIVERSITY

“Melting Pot” “Sticky” and

multicultural

USA CANADA
Marketing in North-America: MSPP

MARKET SEGMENTATION

• Market segmentation is a "must“ because of the

maturity and the diversity of the markets.

• Hispanic sub-market

• African-American sub-market

• Subset of states and provinces (e.g. Coors beer,

Walmart drug stores, and Kroger supermarkets)
Marketing in North-America: MSPP

PRODUCT POSITIONING

• Basics: Individual consumers are assumed to make

rational purchase decisions based on the trade-offs
between various attributes or benefits.

• Clear positioning communication, targeting specific

segments.

• Don't be "everything to everyone."

Marketing in North-America: The 4Ps
PRODUCT PRICING

• Product proliferation. • Price-to-quality ratios are

important
• Ethnic variety.
• No resale price
• Convenience and speed. maintenance

• Strong intra-brand
competition

• Large price differentials

between stores

• Prices are important

Marketing in North-America: The 4Ps

DISTRIBUTION PROMOTION

• Large-scale stores • Advertising-to-sales ratios

are high, clutter is a real
• Nation-wide chains problem, wide media
choices
• Efficient transportation
• U.S.: Communicate the
• Channels are powerful vis- positioning in concrete
à-vis manufacturers. terms.

• Canada: Cultural
sensitivity, soft sell.
Marketing in North-America: Price Wars

INTRA-BRAND COMPETITION

Same brand, different stores

P P Brand P
1
Brand
1
Brand
1

Store A Q Store B Q Store C Q

(regular price (high price (low price

location) location) location)
Marketing in North-America: Price Wars

INTRA-BRAND COMPETITION

Same brand, different stores

P Store
B
Store
Brand 1’s A
Demand Curve
Store
C
Q
Marketing in North-America
INTERBRAND COMPETITION
Different brands, same store

P
Product Category
Brand Demand Curve (Store A)
1
Brand
2
Brand
3

Q
 Takeaway

In mature markets, the adage “the customer is King” is most

apt. It is also in mature markets that the marketer must apply
the most advanced marketing tools and techniques.
 Takeaway

Not all mature markets are the same from a

marketing perspective, regardless of how similar
they seem on the surface.

Different geographical regions tend to foster unique

types of markets, for climate, cultural, political and
other reasons.
 Takeaway

In mature markets, managers must be more

understanding of, and more forgiving of local marketers
who say “our market is not the same” when global
strategies are imposed.
 Takeaway

Trading blocs become important determinants of regional

market segments, encouraging the development of pan-
regional products and programs.

A good example of this is the emergence of pan-European

companies and marketing strategies.
 Takeaway

The development of new trade blocs do not only

benefit domestic companies but can be a boon
also for multinationals based in other countries.

The key is to establish operations within the trade

bloc, and operate as an insider.