CHAPTER 14
DEVELOPING AND MARKETING PRODUCTS
LEARNING OBJECTIVES:
14.1 Describe the factors to consider in developing international product strategies.
14.2 Outline the international promotional strategies and methods available to firms.
14.3 Explain the factors to consider when designing international distribution
strategies.
14.4 Describe the two main international pricing strategies and factors to consider.
CHAPTER OUTLINE:
Introduction
Developing Product Strategies
Laws and Regulations
Cultural Differences
Brand and Product Names
Selecting International Brand and Product Names
National Image
Counterfeit Goods and Black Markets
Shortened Product Life Cycles
Creating Promotional Strategies
Push and Pull Strategies
International Advertising
Standardizing or Adapting Advertisements
Case: The Elusive Euro-Consumer
Blending Product and Promotional Strategies
Communicating Promotional Messages
Product/Communications Extension (Dual Extension)
Product Extension/Communications Adaptation
Product Adaptation/Communications Extension
Product/Communications Adaptation (Dual Adaptation)
Product Invention
Designing Distribution Strategies
Designing Distribution Channels
Degree of Exposure
Channel Length and Cost
Influence of Product Characteristics
Special Distribution Problems
Lack of Market Understanding
Theft and Corruption
Developing Pricing Strategies
Worldwide Pricing
Dual Pricing
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Factors That Affect Pricing Decisions
Transfer Prices
Arm’s Length Pricing
Price Controls
Dumping
A Final Word
A comprehensive set of specially designed PowerPoint slides is available for use
with Chapter 14. These slides and the lecture outline below form a completely integrated
package that simplifies the teaching of this chapter’s material.
Lecture Outline
I. INTRODUCTION
Globalization affects international business activities, industries, and products
differently. Some companies market an identical product worldwide, whereas
others must adjust marketing strategies across national markets. Companies that
same or if they need modification? This dilemma is referred to as the
standardization-versus-adaptation decision.
II. DEVELOPING PRODUCT STRATEGIES
A. Laws and Regulations
1. Companies must adapt their products to satisfy laws and
regulations in a target market.
2. The fact that many developing countries have fewer consumer-
B. Cultural Differences
1. Companies sometimes must adapt their products to suit local
buyers’ preferences rooted in culture.
2. Not all companies modify products but find a different cultural
need that it satisfies.
C. Brand and Product Names
1. Brand name is the name of one or more items in a product line that
identifies the source or character of the items. Consumers assign
products a certain value based on experiences with a brand.
2. Brand names help consumers select, recommend, or reject
products; they also function as legal property that owners can
protect from competitors.
3. A consistent worldwide brand image is important as more
consumers and businesspeople travel internationally.
4. Companies must review its brand image and update it if needed.
5. Selecting international brand and product names
a. Products in international markets need carefully selected
names whether standardized or localized.
markets, but product names do.
D. National Image
1. Value customers obtain from a product is influenced by the image
of the country in which it is designed, manufactured, or assembled.
2. Image can be positive for some products but negative for others.
3. Because it affects buyers’ perceptions of quality and reliability,
national image is an important element of product policy.
4. National image can and does change over time.
E. Counterfeit Goods and Black Markets
1. Counterfeit goods are imitation products passed off as legitimate
2. Counterfeit brand name consumer goods, such as watches,
3. Topping the list for counterfeits: China, India, Russia, Thailand,
4. Counterfeit goods can damage buyers’ images of a brand when the
counterfeits are of inferior quality to the original. Buyers who
purchase a brand expect a level of craftsmanship and satisfaction;
when the product fails to deliver on expectations, the buyer is
dissatisfied and the company’s reputation is tarnished.
F. Shortened Product Life Cycles (See Chapter 5 – International Product Life
Cycle)
1. Companies traditionally managed to extend a product’s life by
2. Advances in telecommunications have alerted consumers around
3. Companies now undertake new product development at a rapid
pace and shorten product life cycles.
III. CREATING PROMOTIONAL STRATEGIES
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Efforts by companies to reach distribution channels and target customers through
communications such as personal selling, advertising, public relations, and direct
marketing are called its promotion mix.
A. Push and Pull Strategies
1. Pull strategy: Create buyer demand that will encourage channel
2. Push strategy: Pressure channel members to carry a product and
3. The strategy to use depends on the type of distribution system,
access to mass media, and the type of product.
a. Distribution system: Implementing a push strategy is
difficult when channel members wield a great deal of
power relative to that of producers. It can be ineffective
when distribution channels are lengthy. It might be easier to
use a pull strategy.
b. Access to mass media: Developing and emerging markets
have fewer forms of mass media, making it difficult to
increase consumer awareness and generate product
want before they buy it. Push strategies are appropriate for
inexpensive consumer goods for buyers who are not brand
loyal; low brand loyalty means that a buyer purchases one
of the brands carried by the retailer.
B. International Advertising
International advertising differs from domestic advertising. Cultural
similarities mean that ads are only slightly modified in different nations.
Cultural differences may mean that entirely new ads must be created.
1. Standardizing or adapting advertisements
a. Most advertising in any one nation is produced solely for
that domestic audience. Companies that advertise in
multiple markets must determine the aspects of the
Copyright © 2019 Pearson Education, Inc.
2. Case: The Elusive Euro-Consumer
a. The integration of EU nations causes marketers to think
they can standardize advertising to appeal to the Euro-
consumer.
b. Advertising agencies have tried a pan-European advertising
approach only to fail due to national differences; Europe’s
many languages create translation issues for marketers.
c. Successful pan-European ads contain visuals, few words,
and a focus on the product.
C. Blending Product and Promotional Policies
When companies extend marketing to international markets, they develop
communication strategies that blend product and promotional policies. A
company’s communication strategy for a market considers the nature of
the product and the promotion mix. There are five product/promotional
methods.
1. Communicating promotional messages
a. Marketing communication is the process of sending
promotional messages about products to target markets.
b. Marketing internationally often means translating
promotional messages from one language to another.
Marketers must also be knowledgeable of cultural nuances
that affect how buyers interpret a promotional message.
c. Laws that govern promotion in another country can force
changes in marketing communication.
d. Marketing communication is typically considered a circular
process (Figure 14.1):
i. The company with an idea to communicate is the
source.
ii. The idea is encoded (translated into images, words,
and symbols) into a promotional message.
iii. The promotional message is sent to the audience
(potential buyers) through various media—radio,
television, newspapers, magazines, billboards, and
6 Ch 14: Developing and Marketing Products
company’s promotional message is incorrectly
translated into the local language.
2. Product/communications extension (dual extension)
a. Extends the same home-market product and marketing
promotion into target markets. Under certain conditions, it
3. Product extension/communications adaptation
a. Extends the same product into new target markets, but
alters its promotion. Communications require adaptation
because the product satisfies a different need, serves a
different function, or appeals to a different type of buyer.
b. Contains costs because the product does not undergo any
alterations; developing new promotional campaigns is
expensive.
c. Low economic development can demand that
communications be adapted to local conditions. In
developing countries, television and radio coverage are
limited and the Web is years behind; marketers use door-to–
door personal selling and regional product shows or fairs.
4. Product adaptation/communications extension
a. Requires a company to adapt its product to the international
market yet retain the original marketing communication.
b. Company may adapt its product for reasons such as legal
5. Product/communications adaptation (dual adaptation)
a. Adapts a product and its marketing communication to suit
the target market. The product itself is adapted to match the
needs or preferences of local buyers. The promotional
message is adapted to explain how the product meets those
needs and preferences.
Ch 14: Developing and Marketing Products 7
b. High cost means few companies employ this strategy; it
can be implemented successfully if a large and profitable
market segment exists.
6. Product invention
a. Requires that an entirely new product be developed for the
target market. Product invention is necessary when many
differences exist between the domestic and target markets.
b. One reason for invention is that local buyers cannot afford
a product because of low purchasing power.
c. Product inventions can arise due to lack of infrastructure.
IV. DESIGNING DISTRIBUTION STRATEGIES
Planning, implementing, and controlling the physical flow of a product from its
point of origin to its point of consumption is called distribution.
The physical path that a product follows on its way to customers is called
Companies develop their international distribution strategies based on two
related decisions: (1) how to get the goods into a country and (2) how to distribute
goods within a country. See Chapter 13 for a review of the different ways
companies can get their products into countries.
A. Designing Distribution Channels
When managers establish distribution policies, they consider the market
exposure needed and the cost of distribution.
1. Degree of exposure
a. Exclusive channel: Manufacturer grants the right to sell its
product to one or a limited number of resellers. Gives
control over sales to channel members such as wholesalers
and retailers; this helps constrain distributors from selling
competing brands.
b. An exclusive channel creates a barrier that makes it
difficult or impossible for outsiders to penetrate the
increasing global trend toward retailers developing their
8 Ch 14: Developing and Marketing Products
own private label brands—brands created by retailers
themselves.
2. Channel length and cost
a. Channel length refers to the number of intermediaries
between the producer and the buyer.
b. Zero-level channel (called direct marketing): producers sell
and so on.
d. The more intermediaries, the more costly it becomes
because each one adds a fee for services.
B. Influence of Product Characteristics
1. Value density: Value of a product relative to its weight and
transporting these products is small relative to their values, they
can be processed or manufactured and then shipped.
C. Special Distribution Problems
A country’s distribution system develops over time and reflects its unique
cultural, political, legal, and economic traditions. The distribution system
of each nation has its own unique pros and cons.
1. Lack of market understanding
This can create frustration and financial loss for companies.
2. Theft and corruption
This can present major obstacles to distribution.
V. DEVELOPING PRICING STRATEGIES
The pricing policy must match a company’s overall international strategy.
A. Worldwide Pricing
1. Establishes one selling price for all international markets.
2. Difficult to achieve for four reasons:
a. Production costs differ from one nation to another.
b. Producing in just one location cannot guarantee the same
selling price in international markets because of the
different cost of reaching different markets.
c. Purchasing power of local buyers must be considered.
d. Fluctuating currency values can affect a product’s price
abroad.
B. Dual Pricing
1. Product has a different selling price (typically higher) in export
markets than it has in the home market.
2. When a product has a higher selling price in the target market than
it does in the home market, it is called price escalation, which
results from exporting costs and currency fluctuations.
3. Product’s export price may be lower than the price in the home
5. To apply dual pricing in international marketing, a company must
keep domestic and international buyers separate. If a company
cannot keep its buyers separate, they could undermine the policy
through arbitrage—buying products at lower prices and reselling
them at higher prices.
C. Factors That Affect Pricing Decisions
Several key factors affect pricing decisions.
1. Transfer prices
a. Price of products between a company and a subsidiary.
b. Companies enjoyed freedom in setting transfer prices;
subsidiaries in countries with high taxes charged a low
price for outputs to subsidiaries. The subsidiary lowered the
parent company’s taxes by reducing profits in the high-tax
country.
c. Large firms used transfer pricing to manage their global
taxes and become more price-competitive.
2. Arm’s length pricing
a. Free-market price that unrelated parties charge one another.
b. Although companies had great latitude in assigning transfer
prices, many governments are assigning them arm’s length
prices to clamp down on tax evasion. There is also pressure
3. Price controls
a. Upper or lower limits placed on the prices within a country.
b. Upper-limit price controls provide price stability in an
inflationary economy (when prices are rising). Companies
that want to raise prices must apply to government
authorities.
c. Lower-limit price controls prohibit the lowering of prices
below a certain level.
10 Ch 14: Developing and Marketing Products
d. Governments impose lower-limit prices to help local
companies compete against the less expensive imports of
international companies or to ward off price wars.
4. Dumping (See Chapter 6)
a. Price of a good is lower in export markets than in the
domestic market.
b. Accusations of dumping are often made against foreign
competitors when inexpensive imports flood a domestic
market.
c. Although charges of dumping normally result from
deliberate efforts to undercut the prices of competitors in
the domestic market, changes in exchange rates can cause
unintentional dumping.
d. Antidumping tariffs punish producers in the offending
nation by increasing the price of their products.
VI. A FINAL WORD
Despite the academic debate over globalization and the extent to which
companies should standardize their international marketing activities, many
companies continue to adapt to local conditions. Sometimes this takes the form of
only slightly modifying promotional campaigns and at other times it can require
production obtained by selling one product worldwide.
Quick Study Questions
Quick Study 1
1. Q: Deciding whether to keep a marketing strategy the same or modify it a broad
is also known as what?
A: This dilemma is referred to as the standardization versus adaptation decision.
U.S. researcher Theodore Levitt argued that because the world is becoming
Ch 14: Developing and Marketing Products 11
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physical features of their products and marketing strategies. Others find that their
products require physical changes to suit the tastes of consumers abroad.
Consumers in different national markets demand products that reflect their tastes:
cultural, political, legal, and economic environments affect consumer preferences
and industrial buyers worldwide. Certain products do appeal to practically all
cultures. Product standardization is more likely when nations share the same level
of economic development.
2. Q: What factors influence a country’s international product strategy?
A: Many factors influence a company’s product policies. First, laws and
regulations of the target market can force product alteration. Cultural differences
3. Q: What product characteristic is more likely than others to offend people in
another country?
Quick Study 2
1. Q: A strategy that pressures channel members to carry and promoted a product is
called what?
2. Q: Firms that standardize international advertising often control campaigns from
where?
3. Q: The process of sending promotional messages about products to target
markets is called what?
A: The process of sending promotional messages about products to target markets
12 Ch 14: Developing and Marketing Products
Quick Study 3
1. Q: What type of channel grants the right to sell a product to many resellers?
2. Q: In terms of channel length, direct marketing is known as what?
3. Q: A product with a low value density tends to have a distribution system that is
more what?
A: The value of a product relative to its weight and volume is called its value
Quick Study 4
1. Q: What makes worldwide pricing difficult to achieve?
A: A pricing policy in which one selling price is established for all international
2. Q: To apply dual pricing successfully, how must a firm treat its domestic and
international buyers?
3. Q: Parent firms and subsidiaries often transfer products among themselves as a
price called what?
Ethical Challenge
You are a lawyer working with the International Court of Justice in The Hague in the
Netherlands. Your task is to review a recent decision by a U.S. judge regarding
extraterritoriality. The case: French survivors of the Holocaust sued Yahoo USA because
French citizens were purchasing Nazi memorabilia on Yahoo’s U.S. website. The lawsuit
also charged Yahoo USA with hosting the websites of anti-Semitic groups. Although both
these actions are illegal according to French law, they are permitted in the United States
because of U.S. legislation protecting free speech. Because Yahoo’s French website did
not violate French law, the U.S. federal judge hearing the case threw it out. The judge
ruled that French law does not have the right to dictate the behavior of U.S. firms
operating inside the United States. Today, the Internet can make it difficult to determine
where jurisdictions begin and end.
14-5 If you had been the U.S. judge in this case, would you have ruled similarly?
Explain.
A: Students responses will vary. However, extraterritoriality is the right or
14-6 What factors most influenced your decision?
14-7 Do you know of any Internet controls that companies or governments can use to
stop such cases from occurring in the future?
A: There are a number of ways to view this dilemma. From the U.S. perspective,
French law does not have jurisdiction over the operations of U.S. firms within
14 Ch 14: Developing and Marketing Products
Products often service different needs, appeal to different buyers, or are perceived
differently in different markets. Consider a good or service that is sold in your country
and another using different marketing strategies in each. One of the countries must be the
countries home market.
14-8 In the home market, was the product’s initial introduction a new innovation or an
extension of an existing product?
14-9 From the product’s home market, which one of the five product and promotion
methods was used in the other market?
14-10 What factors likely explain why the company selected that particular method?
Psychology of Global Marketing
14-13 Q: If you were Stephan Loerke, of the World Federation of Advertisers, how
would you argue for the EU to enact more strict advertising laws?
14-14 Q: Do you personally agree with the case you made above?
14-15 Q: Thinking of a specific product sold in industrialized nations, do you think it
could create more than it satisfies needs if it were marketed in a developing
country?
A: Ads can indeed create wants. The cell phone is a good example. Before cell