Local Marketing in New Growth Markets

Chap

ter

9

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

Outline

Basic Marketing in New Growth MarketsMarketing in Latin AmericaMajor Country Markets in Latin AmericaMarketing in New Asian Growth MarketsMajor Country Markets in AsiaTakeaways.

1. Those rich in NATURAL RAW MATERIALS but where most people have suffered under authoritarian political regimes & colonial domination (e.g. Latin American countries, South Africa)

2. Those rich in LOW COST LABOR have turned to Western-style capitalism recently, with the help of FOREIGN DIRECT INVESTMENT (e.g. Asian countries, Israel)

Two Kinds of New Growth Markets

1. Membership in trade blocs makes the country more attractive to foreign investors

(e.g. Malaysia & Thailand through ASEAN)

2. Trade blocs enlarge market potential for members

(e.g. Argentina & Brazil through MERCOSUR)

Marketing in New Growth Countries

2 REASONS WHY MEMBERSHIP IN TRADE BLOCS IS IMPORTANT

• New growth markets are in the growth phase of the product life cycle

• Certain markets may be mature but there is a lot of room for new variants & international offerings

• As incomes rise people demand variety & experiences offered by more mature markets

MARKET SEGMENTATION PRODUCT POSITIONING

• Core middle class emerges

• Well known brand names are favored

• Foreign capital and technology fuels economic growth, hence foreign brands are considered the “real thing”

• Neo-colonialism emerges as consumers shun domestic products

New Growth Markets: MSPP

MASS MARKET FOCUS

NICHE MARKET FOCUS

EMERGING MARKETS

NEW GROWTH MARKETS

MATURE MARKETS

Few strong

segments

Strong core middle class

One-to-one marketing

The Importance of a Middle Class

• Basic localization to ensure that the product functions well

• Being positioned as a “foreign” brand attracts certain segments

• Brand name must be strongly supported.

PRODUCT PRICING

• Status positioned products must be high-priced

• Price must not be too limiting, despite increase purchasing power of consumers

• Pricing must foster brand loyalty

New Growth Markets: The 4Ps

• Firms must think long-term, setting up service centers and more outlets

• Expansions are suggested in order to counter competitive threats

• Cash flow is sacrificed in the short-term, awaiting long-term gains

DISTRIBUTION PROMOTION

• Products must communicate their future potential benefits

• Strong brand images must be created

• Good relations with local sales/staff should foster brand equity

New Growth Markets: The 4Ps (cont’d)

Marketing in Latin America

Large geographical area, Indian background with Spanish, Portuguese, and Catholic influences,varied ethnicities, relatively poor, monetary and price instability, political upheavals.

Language is Spanish, except for Brazil’s Portuguese.Total population is 537 million people, with Brazil

largest at 176 million followed by Mexico at 102 million.

Marketing in Latin America

MARKET BACKGROUND

Growth fueled by regional trading blocs, a political shift toward increased democracy, and a gradual emergence from a large debt burden in several of the countries.

Free trade is surging. A movement toward pan-regional marketing.

Marketing in Latin America

MARKET BACKGROUND (CONT’D)

REGIONAL TRADE AGREEMENTS

•LAIA - Latin American Integration Association.

•ANCOM - Andean Common Market.

•MERCOSUR - Southern Cone Common Market.

•NAFTA - North American Free Trade Area.

•FTAA - Free Trade Area of the Americas

Marketing in Latin America

• Urban versus rural (80% purchasing power in urban areas).

• Age and income level.

• Large young, style-conscious segment.

• Religious, tradition-bound, family-oriented.

MARKET SEGMENTATION

Marketing in Latin America: MSPP

PRODUCT POSITIONING

• Status-conscious urban markets means brand names matter.

• Upgrading quality of life with consumer durables.

• Successful mass marketing through creative packaging (small volume, low-price units), taking new product roll-outs incrementally, and spending heavily on advertising.

Marketing in Latin America: MSPP (cont’d)

• Continuous upgrading of products and services because of increased competition from foreign producers and new trade agreements between Latin American countries.

• Localization changes but only limited product adaptations.

• Pent-up demand for global brands.

• Increase in pan-regional products.

PRODUCT PRICE

• Foreign companies price higher than locals.

• Top-to-midrange for global brands (not only skimming prices), low-end local brands.

• Midrange core market increasing as middle class expands.

• Plans for a common Mercosur currency.

Marketing in Latin America: The 4Ps

• Towards larger units, hypermarkets, integrated chains.

• Rural areas have weak infrastructure.

• Foreign entrants investing (including joint ventures) to help improve efficiency.

• Some regulatory barriers.

DISTRIBUTION PROMOTION

• Brand TV advertising high, sponsorship of daytime soap operas.

• Religions, political, ethnic, and cultural issues are sensitive.

• Detailed product information, with colorful and lively presentation, including popular music.

• Many retailers do not handle manufacturers' coupons.

Marketing in Latin America: The 4Ps (cont’d)

• After WWII, was one of the 10 riches countries in the world on a per capita income basis

• Population = 38 million• Peso devaluation led to a crisis

situation, now improved• Highly sophisticated industrial &

agricultural sector• Consumers oriented toward

western/global products/brands

ARGENTINA

Major Country Markets: Argentina

BRAZIL

• Largest Latin American country, population = 176 million

• Generates a third of South America’s economic output, & is a major consumer of its exports

• Highly attractive to foreign investors

• 10% of exports are manufactured goods

Major Country Markets: Brazil

• Population = 15 million• Most vigorous growth,

booming consumer markets• Credit card issuers have

lowered application requirements, encouraging spending

• Shopping mall boom

CHILE

Major Country Markets: Chile

MEXICO

• Population = 102 million• 2nd largest market in Latin

America• Home to many foreign

manufacturing plants• Mexico City: major market

for global brands & upscale consumer goods

• NAFTA membership encourages economic come-back

Major Country Markets: Mexico

Marketing in Asian Growth Markets

• Annual growth rates between 5-10% (China is at 10% plus, see ch.10).

• Size: from Indonesia's almost 200 million people to Singapore's 3 million. • Ethnic Chinese with economic leadership.

• Love-hate relationship with Japan: WWII vs. FDI.

• Output from raw materials and apparel to technology products.

MARKET BACKGROUND

Marketing in Asian Growth Markets

REGIONAL TRADE AGREEMENTS

ASEAN (The Association of South East Asian Nations)

APEC (Asia-Pacific Economic Cooperation)

ARF (ASEAN Regional Forum)

AFTA (ASEAN Free Trade Area)

Marketing in Asian Growth Markets

• Basics: cultural, ethnic, and religious roots.

• Significant middle class ("have some’s").

• Large metropolitan areas.

• Poor rural areas.

• Demographics: Age, marital status.

• Pan-regional marketing via trading blocs.

MARKET SEGMENTATION

Asian Growth Markets: MSPP

PRODUCT POSITIONING

• Global luxury brands ("if you've got it, flaunt it")

• Imports: globally standardized products.

• Pent-up demand for Western products.

• Less affluent segments: less advanced, adapted products.

• Use of acquired local brand names.

Asian Growth Markets: MSPP (cont’d)

• Product design. Localized by offering smaller packages. Style and finish important.

• Product line. Achieve "a harmonious whole". Full-line policies with interrelated products. Material possessions clearly signify one's worth.

• New Products. Not lead markets, but followers (except for emerging markets and selected electronics products). Endorsement of brand's success elsewhere is important.

PRODUCT

Asian Growth Markets: The 4Ps

PRICE

• Natural positioning of a global brand entering is at the upper end (skimming).

• Lower-end products alternatives through acquired local or adapted brands (penetration pricing). In Asia, the entry price will lock in the brand's positioning ("harmony"). Risks of gray trade are high.

Asian Growth Markets: The 4Ps (cont’d)

• Dynamic urban retail sector.

• Rural areas have weak infrastructure.

• Underdeveloped transportation networks.

DISTRIBUTION

Asian Growth Markets: The 4Ps (cont’d)

PROMOTION

• Advertising minimally adapted from elsewhere (pattern standardization).

• Local language and native endorsers, including local sports heroes and television stars.

• Sales promotion tools adapted to local regulations and culture. Ex: Few sales calls to the home -- meet in the offices, and offer family conveniences in dealerships.

Asian Growth Markets: The 4Ps (cont’d)

• Population = 45 million • Per capita income on par with

many European countries (as of 1995)

• Market entry barriers are high• Pent-up demand for western goods

as preferred over domestic products

• Distribution regulations gradually eased

SOUTH KOREA

Major Country Markets: South Korea

TAIWAN ( aka REPUBLIC OF CHINA)

• Population = 23 million• Political struggle with mainland China• Vigorous export industry, through skilled

labor & high technology• Entry barriers going down• Large MNC activity• Particularly exacting consumers, used to

test market products before Asian roll-out

Major Country Markets: Taiwan

• Population = 6 million• Most affluent of S. East Asian nations• Geographic central hub for firms entering

Asian markets• Very international consumers,

trendsetters for the rest of Asia• High-end/luxury brands thrive

HONG KONG

Major Country Markets: Hong Kong

As western markets have matured, new growth markets in Asia, Latin America, and elsewhere have become the new sources of growth for global companies – and for their own

domestic firms as well.

Takeaway

Despite recent global turmoil, many of these countries still have strengths as markets and producers, and sustained

potential for the longer run.

Takeaway

Trading blocs are good for these economies because as stand-alone markets they tend to be too small for targeting - &

blocs provide advantages for their own exports.

Takeaway

Marketing in a high-growth market in a newly industrialized economy is not the same as marketing in a high growth

market in a mature economy.

There is less stress on new product development and more on generic market development for existing products.

Takeaway

Standardized global products & brands can be successful due to pent-up demand in many of these markets.

As markets evolve and affluence grows, customers quickly become fickle consumers requiring adaptation &

customization, much like consumers in mature markets.

Takeaway