CHAPTER 20INTERNATIONAL ADVERTISING AND PROMOTION

Chapter OverviewThe purpose of this chapter is to introduce the student to the role of advertising and promotion in a company’s international marketing program. We discuss the growing importance of U.S. companies being able to compete in the global marketplace and the importance of international advertising and promotion. The international environment and the major factors influencing marketing and promotional decisions in foreign markets are discussed and attention is given to the issue of global or standardized versus local or customized marketing and advertising. This chapter also examines how companies organize for international advertising, select agencies and make decisions in various areas such as research, creative strategy, and media selection. While the primary focus of this chapter is on international advertising, attention is also given to how other IMC tools are used in international marketing including sales promotion, personal selling, public relations, and the Internet.

Learning Objectives1. To examine the importance of international marketing and the role of international advertising and

promotion.

2. To examine the various factors in the international environment and how they influence advertising and promotion decisions.

3. To consider the pros and cons of global versus localized marketing and advertising.

4. To examine the various decision areas of international advertising.

5. To examine the role of other promotional mix elements in the international integrated marketing communications program.

Chapter and Lecture Outline

I. THE IMPORTANCE OF INTERNATIONAL MARKETING

Throughout this book attention has been focused on the development of promotional programs for products and services sold to the U.S. market. However, many companies are recognizing the opportunities that foreign markets offer for new sources of sales and profits as well as the necessity of marketing their products internationally. Today, world trade is driven by global competition among global companies for global consumers. It has become increasingly important for U.S. companies to adopt an international marketing orientation since imports are taking significant amount of the domestic market for many products and are likely to continue doing so. The balance-of-trade deficit and movement toward a global economy is requiring companies to become more adept at marketing their products and services to other countries.

Professor Notes

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II. THE ROLE OF INTERNATIONAL ADVERTISING AND PROMOTION

Advertising and promotion are important parts of the international marketing program of firms competing in the global marketplace. While the United States still leads the world in terms of advertising, expenditures outside of the U.S. have increased dramatically over the past decade and now exceed over $200 billion annually. It is worth noting and discussing the importance of large foreign-based multinationals such as Unilever, Nestle, and Toyota and their high level of advertising spending in the international marketplace as shown in Figure 20-1.

Advertising and promotion are the most visible as well as the most culture-bound of a firm’s marketing functions. Companies planning on marketing and advertising their products or services abroad are faced with an unfamiliar marketing environment and consumers with different customs, values, consumption patterns and habits, as well as different purchase motives and abilities. Media options are often more limited in foreign countries than in the US and different creative and media strategies, as well as changes in other promotional mix elements, are often required for foreign markets.

Professor Notes

III. THE INTERNATIONAL ENVIRONMENT

Just as with domestic marketing, companies engaging in international marketing must carefully analyze and consider the major environmental factors of each market in which they compete. Consideration of environmental factors is important, not only in evaluating the viability and/or potential of each country as a market, but also in designing and implementing a marketing and promotional program. Figure 20-2 shows some of the factors marketers must consider in each category when analyzing the environment of a country or market. The major environmental factors that must be considered include:

A. Economic Environment—a country’s economic conditions indicate its present and future potential for consuming. Marketers must consider the economic infrastructure or the communications, transportation, financial, and distribution networks needed to conduct business in a particular country. The recent economic crisis in Asia provides a very good example of how the economic environment impacts demand for products and services in foreign markets.

B. Demographic environment—international marketers must also examine the demographic characteristics of a country including factors such as income levels and distribution, age and occupation distributions, household size, literacy, education and employment rates.

C. Cultural environment—an aspect of the international marketing environment that is very important to advertising and promotion is the culture of each country. Among the most important aspects of culture are the language, customs, tastes, attitudes, life style, values, religion, and ethical/moral standards of each society.

D. Political/legal environment—the political and legal environment is one of the most important factors influencing advertising and promotional programs of international marketers. Government regulations and restrictions can affect a variety of aspects of a company’s advertising program, including:

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the types of products and services that can be advertised in a country the content or creative approach that may be used in advertisements the media that all advertisers are permitted to employ the amount of advertising a single advertiser may use in total or in a specific medium the use of foreign languages in ads the use of advertising material prepared outside the country the use of local versus international advertising agencies specific taxes that may be levied against advertising

IV. GLOBAL VERSUS LOCALIZED ADVERTISING

In recent years a great deal of attention has been focused on the concept of global marketing whereby a firm utilizes a standard marketing plan for all countries in which it markets its product or service. Global advertising falls under the umbrella of global marketing as a means of implementing this strategy by using the same advertising approach in all markets. The theorizing of Harvard professor Theodore Levitt helped popularize the concept of global marketing. However, not everyone agrees with Levitt’s global marketing theory, particularly with respect to advertising, as they argue that products and advertising messages must be designed and/or adapted to meet the differing needs of consumers in various countries. The advantages and limitations of global marketing and advertising in particular should be discussed.

A. Advantages of Global Marketing and Advertising—The use of a global marketing and advertising program offers numerous advantages to a company including: Economies of scale in production and distribution Lower marketing and advertising costs as a result of reductions in planning and control Lower advertising production costs Abilities to exploit good ideas on a worldwide basis and introduce products quickly into various world markets A consistent international brand and/or company image Simplification of coordination and control of marketing and promotional programs

B. Problems With Global Advertising—While the concepts of global marketing and advertising have received a great deal of attention recently, not everyone agrees with this strategy. Some of the problems with global marketing and advertising include: Differences in culture, market and economic development, consumer needs, media

availabilities and legal restrictions make it extremely difficult to develop an effective universal approach to marketing and advertising

Advertising in particular is difficult to standardize because of cultural differences in circumstances, language, values, beliefs, lifestyle and so on

Usage patterns and perceptions of a product may vary from one country to another and require adjustments in the marketing and advertising program rather than just using a global campaign (i.e. Nescafe instant coffee example on pp. 670-71)

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C. When Is Globalization Appropriate? - While many advertisers view globalization of advertising as a difficult task, some progress has been made in learning what products and services are best suited to worldwide appeals. Products and services that can take advantage of global marketing and advertising opportunities include:

1. Brands that can be adapted for a visual appeal that avoid the problems of trying to translate words into dozens of languages.

2. Brands that are promoted with image campaigns that lend themselves to themes that play up to universal appeals such as sex or wealth.

3. High-tech products coming to the world for the first time; new technology products coming on the world at once and not steeped in the culture heritage of the country.

3. Products with nationalistic flavor if the country has a reputation in the field such as Swiss chocolate, French wine or German beer

4. Products that appeal to a market segment with universally similar tastes, interests, needs and values. Examples of global market segments include the wealthy who can afford expensive clothing, jewelry, automobiles, hotels and other products and services. Teens are another example of a global market segment that is targeted by many companies.

D. Global Products, Localized Messages—While the pros and cons of globalized marketing and advertising continue to be debated, many companies are taking what might be called an in-between approach by standardizing their products and basic marketing strategy but localizing their advertising messages to appeal to the local realities and conditions of each market. This approach has been given different labels such as “Think global, act local,” or “Global vision with a local touch.” Although some marketers use global ads with little or no modification, most companies adapt their messages to respond to differences in language, market conditions and other factors. Many global marketers use a strategy called pattern advertising whereby their ads follow the same basic approach, but themes, copy and sometimes even visual elements are adapted to differences in local markets. Another way marketers adapt their campaigns to local markets is by producing a variety of ads with a similar theme and format and allowing managers in various countries or regions to select those messages they feel will work best in their markets. Coca-Cola uses this strategy in its “Coca-Cola Enjoy” campaign, which is used in many countries. One of the ads from this campaign is shown in Exhibit 20-12.

A study which examined the international advertising strategy of successful US multinational corporations found that only 9 percent used totally standardized or global advertising for foreign markets, 37 percent used all localized advertising, and the remaining 54 percent used a combination strategy of standardizing some portions of their advertising for local markets. A more recent study shows a slight revision in this strategy. Many companies are moving toward a Think globally, act regionally” strategy which involves giving regional offices the autonomy to adapt the global theme for their local markets.

Professor Notes

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V. DECISION AREAS IN INTERNATIONAL ADVERTISING

As with domestic marketing, certain organizational and functional decisions must be made by companies developing advertising and promotional programs for international markets. This section examines these decision areas.

A. Organizing for International Advertising—One of the first decisions a company must make when it decides to market its products to other countries is how to organize the international advertising and promotion function. There are three basic options for organizing this function.

1. Centralization—all decisions and planning is done at the firm’s home office. Complete centralization is likely when market and media conditions are similar from one country to another, when the company has only one or a few international agencies, when it uses global marketing and advertising, or when it desires a consistent image worldwide.

2. Decentralization—marketing and advertising managers in each market have the authority to make their own decisions such as selecting agencies, developing budgets, conducting research, approving creative themes and executions, and selecting media.

2. Combination—many companies actually use a combination of the first two approaches whereby the home office will have the most control over advertising policy, guidelines and operations in all markets, while managers in local offices will be responsible for submitting advertising plans and budgets for their markets which must be reviewed and approved by the international advertising manager. This approach allows for consistency and uniformity in a firm’s international advertising program yet still permits local input and adaptation of the promotional program.

B. Agency Selection—One of the most important decisions a firm engaged in international marketing must make is the selection of an advertising agency. The three basic alternatives in selecting an agency include:

1. Choosing a major agency with both domestic and overseas office. A number of multinational companies are consolidating their advertising with one large agency to develop a consistent global image.

2. Choosing a domestic agency that is affiliated with agencies in other countries or belongs to a network of foreign agencies. Many agencies are now affiliated with agencies in other countries or belong to a global network of agencies.

3. Selecting a local agency for each national market in which the company sells its products or services. Some companies prefer to use local agencies because they often provide the best talent in each market. This also increases the morale and involvement of local managers by giving them input into the agency selection process.

Criteria for agency selection—the selection of an agency or agencies to handle a firm’s international advertising depends on how the firm is organized for international marketing and the type of assistance it needs to meet its goals and objectives in foreign markets.

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Specific criteria a company might use in making the agency selection decision are shown in Figure 20-3.

C. Advertising Research—Research is used in the development of international advertising and promotion programs to help managers make more informed and better decisions. However, many companies do not conduct marketing research in foreign markets because of high costs and budget limitations. Areas where information from research on foreign markets can help firms make intelligent advertising and promotional decisions include: Information on demographic characteristics of markets Information on cultural differences such as norms, lifestyles, and values Information on consumers’ product usage, brand attitudes, and media preferences Information on media usage and audience size Copy testing to determine reactions to different types of advertising appeals and executions Research on the effectiveness of advertising and promotional programs in foreign markets

D. Creative Decisions—Creative strategy development for international advertising is basically similar in process and procedure to domestic advertising as communication objectives must be set based on the marketing strategy and market conditions for each market, major selling ideas must be developed, and specific appeals and execution styles must be chosen. An important factor influencing the development of creative strategy for international markets is the issue of global versus localized advertising. Global advertising uses the same basic appeal and execution style in all countries and requires the development of advertising that will transcend cultural differences and communicate effectively in every country. Companies following a localized advertising strategy must determine what type of selling idea, appeal and execution will work in each market. A product or service may have to be positioned differently in each market depending on consumers’ usage patterns and habits.

E. Media Selection—One of the most difficult decision areas for international advertisers is that of media strategy and selection. U.S. firms usually find that there are major differences in media outside this country and media conditions may vary considerably from one area to another, particularly in developing countries. Problems and differences include the types of media available, the characteristics of media, availability of media information, and restrictions from one country to another. Media planners have two basic media options available.

1. Local media—using the local media of a country to reach its consumers, such as local magazines, newspapers, radio, billboards, direct mail and, where available and/or permitted, television.

2. International Media—international advertisers can also reach audiences in various countries through the use of international media that have multimarket coverage. The primary types of international media are magazines and newspapers. Some multinational commercial television stations and networks are operating in Europe and are likely to continue to expand with the growth of direct broadcast by satellite (DBS) to homes equipped with low cost receiving dishes.

Professor Notes

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V. THE ROLE OF OTHER PROMOTIONAL MIX ELEMENTS

The focus of this chapter has been on advertising since it is usually the primary element in the promotional mix of the international marketers. However, as in domestic marketing, promotional programs for foreign markets will generally include other elements such as personal selling, sales promotion and public relations. The role of these other promotional mix elements will vary depending on the firm’s marketing and promotional strategy in foreign markets.

A. Sales Promotion—Many companies rely on sales promotional tools and techniques to help sell their products in foreign markets. Promotional tools that are effective in the US such as free samples, premiums, contests, and gifts may also work well in other markets. One form of sales promotion that has become very popular among many U.S. firms for use in foreign markets is sponsorship of sporting events, concerts and other music-oriented radio and television programs.Unlike advertising, which often can be done on a global basis, sales promotion must often be adapted to local markets. Kashani and Quelch note several important differences among countries that must be considered in developing a sales promotion program including:

Economic development—the ability to use various sales promotion tools can be influenced by the stage of economic infrastructure and stage of development of a country

Market maturity—the stage of development of the market for the product or service within a country. Different types of sales promotion tools are needed to introduce a product or service versus competing in a mature market

Consumer perceptions—consumer perceptions of and willingness to use various sales promotion tools varies by country

Trade structure – the willingness and ability of channel members to accommodate sales promotion programs

Regulations ( the appendix at the end of the chapter show the restriction on sales promotion in various countries around the world)

Figure 20-5 presents a framework for analyzing the role of centralized or headquarters versus local management in sales promotion decisions based on various stages of globalization. Discussion of this exhibit in class is strongly recommended.

B. Personal Selling—For some companies personal selling may be the most important promotional element and advertising may play more of a supportive role. Because it involves personal contact and communication, personal selling is generally even more culture-bound than advertising. Many companies use sales representatives from the host country to staff their sales force and personal selling activities and sales programs are adapted to each market. Management of the sales force is often decentralized to the local subsidiaries. However, the firm may make decisions regarding general sales policies and offer advice to foreign managers on various aspects of sales management and the development of sales programs.

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C. Public Relations—Public relations plays an important role in supporting and enhancing the marketing and advertising efforts of companies involved in international advertising. Public relations activities are needed to deal with local governments, media, trade associations and the general public. The job of PR agencies in foreign markets is not only to help the company sell its products or services but also to present the firm as a “good corporate citizen” who is involved with and concerned about the future of the country. Companies must have a favorable reputation and image if they are to be successful in foreign markets, as groups may feel threatened by the presence of a foreign multinational in their country. Public relations efforts may also be needed to deal with specific problems a company faces in international markets. Many multinational companies are choosing ad agencies that offer public relations capabilities so their entire communication program can be integrated and conducted on a global basis. Global Perspective 20-5 discusses the major public relations problems that McDonald’s has experienced in Europe recently.

D. The Internet—Use of the Internet by consumers as well as marketers is highest in the United States and Western Europe. In the Asia/Pacific region, Internet use is high in Hong Kong, Singapore, and Thailand where there are considerable numbers of high-end users and several domestic service providers. Internet use in international markets is still limited by low number of consumers with Internet access, but Internet growth is expected to develop quickly as telecommunications companies move into emerging markets such as Eastern Europe and Latin America and improve the communications infrastructure.

Professor Notes

Teaching SuggestionsIn this chapter we turn our attention to the area of international advertising and promotion. We feel that it is very important to cover this area as many U.S. companies are finding that our domestic market offers them limited opportunity for expansion due to slow population growth, saturated markets, and intense competition. Moreover, imports are taking a larger and larger share of the domestic market for many products and are likely to continue to do so. American companies must learn how to defend against foreign inroads into their domestic markets and how to market their products and services to foreign countries. We are living in very fascinating and rapidly changing time with respect to developments in the international arena. The impact of the recent economic crisis in Asia can be discussed as well as the emergence of a strong consumer market in China. It is important that students are encouraged to keep abreast of these social, political and economic changes, how they are affecting the global marketplace, and their implications for international marketing and advertising. While most of the chapter discusses issues of relevance to international advertising, the chapter does include a discussion of the role of other integrated marketing tools in international marketing including sales promotion, personal selling, public relations the use of the internet. We use the Quelch and Kashani model as a framework for analyzing the management of sales promotion in foreign markets. You may want to refer to their article in Business Horizons (May/June 1990, pp. 37-43) for more insight into this model. You might note that we have added an appendix to this chapter that shows the legal restrictions on various sales promotion tools in various countries. This is an excellent resource for understanding the restrictions marketers face as they develop promotional programs for foreign markets. Another excellent source of information on international advertising is AdAgeGlobal.com which is available online from Advertising Age.

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Answers to Discussion Questions1. The opening vignette to the chapter discusses the requirements by the A.C. Nielsen Company to be on

its global brand list. Do you think that a brand should have to meet these criteria in order to achieve global brand status? Why might marketers disagree with the requirements set by A.C. Nielsen?

To be part of A.C. Nielsen’s global brand list, a brand is required to have sales over a billion dollars (US), have at least 5 percent of its sales outside of its home region, and have a geographic presence in all major regions of the world. A.C. Nielsen is trying to set some standards regarding the use of the term “global” as many companies make very liberal use of this term when describing their brands. Nielsen wants to bring some common understanding as to what a global brand really is and ensure that companies rightfully describe their brands as global in scope. Many marketers will label a brand as global if it is sold in more than one country or if is it has any amount of foreign sales.

Many marketers and advertising executives question the requirements set by A.C. Nielsen for a brand to achieve global brand status. First of all, the billion dollars sales requirement is very large and only the world’s largest brands would be able to meet this high level. There are many brands that are sold all over the world but do not come close to this level of sales. Thus it is unreasonable that these brands cannot be described as global because they do not achieve a very high level of sales. Also, many companies market the same basic brand globally but may use different names in various countries or regions. These companies argue that as long as there is one basic brand platform and over-arching strategy for the brand, it is reasonable to consider it a global brand. Finally, many companies have successfully marketed a brand globally on a multi-category basis and Nielsen only considers a brand to be global if it meets the criteria within any one category. For example, Unilever considers its Knorr brand of soups and sauces to be global as it achieves over $3 billion in annual sales across the various product categories.

2. Why are international markets are becoming so important to U.S. companies such as Starbucks, McDonald’s and Coca-Cola, as well as to European companies such as Nestle, Unilever and Nokia? Discuss the role of advertising and other forms of promotion in these companies’ international marketing programs.

There are several reasons why international markets are becoming so important to U.S. companies such as Starbucks, McDonald’s and Coca-Cola. The U.S. market offers limited growth potential to many firms because of our slow population growth, saturated markets, and intense competition. Also, in some industries such as alcoholic beverages and tobacco, socio/cultural and regulatory trends are causing many markets to stagnate or even decline. U.S. companies are also losing market share to imports and are likely to continue to do so in the future. As the standard of living and economic situations improve in many foreign markets, U.S. companies will want to take advantage of the marketing opportunities in these areas. In some countries such as Japan, changing values and lifestyles are also resulting in more consumption and spending by consumers and represent an opportunity to many U.S. companies. A key demographic segment for the three companies mentioned is the teen market as they are heavy consumers of soft drinks, fast-food and athletic shoes. Many foreign countries have a very young population with a large number of teens and young adults who are very receptive to Western ways and products. Thus, these companies have an opportunity to grow by penetrating foreign markets.

For European companies such as Nestle, Unilever and Nokia, foreign markets are vital to their success. These companies are based in Switzerland, the Netherlands, and Finland respectively which are relatively small in size and without foreign markets these companies would not have the large enough market nor economies of scale to survive against larger U.S. and Japanese companies. Advertising and promotion play a very important role in many firms’ international marketing programs as they must communicate information about their products and services to foreign markets and convince inform consumers of their particular attributes, features and benefits. Advertising and

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promotion are the most visible of all of the firm’s marketing activities as well as the most culture bound.

3 Discuss the importance of the economic environment in a country in evaluating its market potential. How do the economic conditions and factors impact the type of integrated marketing communications program a company can use in a country?

A country’s economic conditions impact the present and future potential for foreign markets, since demand for products and services are a function of factors such as consumer purchasing power, which is in turn affected by the strength of the economy. Many companies learned just how important economic conditions are in a country when the Asian economic crisis hit in the late ’90 and has continued into the new millennium. Many countries experienced a severe recession that resulted in major declines in consumer spending. Economic factors impact the type of IMC program a company can use in several ways. For example, in industrialized countries with well-developed economic infrastructures, consumers will have the income to buy various products and services and communication networks and media will be available for advertising. In underdeveloped nations, such as most third world countries, consumers will not have adequate purchasing power and communication networks may not be available to reach the mass markets. In less developed countries such as Vietnam, Kenya, and Egypt, most consumers do not have access to the media and they may not have any contact with a company’s IMC efforts until they enter a store. Thus, outdoor media, packaging and other point-of-purchase elements will be more important than print and TV ads.

4. Global Perspective 20-1 discusses how many multinational companies have been focusing more attention on the 4 billion consumers who live in the remote, rural communities of developing countries. Discuss the challenges companies face in marketing their products to the world’s poorest consumers. How do they have to adapt their integrated marketing communication programs in selling to these consumers?

Marketers face a number of challenges in marketing their product to the world poorest consumers. Many of these 4 billion people live in remote, rural communities of developing countries such as India or China. The tiny villages where many of them live are in remote areas that are beyond the reach of mass media and distribution. Many of these people live in severe poverty and are illiterate or nearly so. Thus t is difficult to communicate with them as well as to get products to them and they cannot afford to pay for even the most basic items. Marketers have to adapt their marketing programs as well as their integrated marketing communication programs in selling to these impoverished consumers. Products have to be made available in very small, single-use sachets that can be sold for the equivalent of pennies and easily distributed through small kiosks.

Marketers have to adapt their IMC programs in a number of ways in selling to these consumers. They cannot use conventional media to reach them since they are not available or cannot be read by most of them. Other contact tools such as event marketing, road shows, demonstrations and sampling programs are the primary ways to reach them. Word –of-mouth communication is a very important and marketers have to find ways to get information to opinion leaders and others and encourage them to tell others about their products.

5. What are some of the cultural variables that marketers must considering in developing advertising and promotional programs in a foreign market? Choose one of these cultural variables and discuss how it has created a problem or challenge for a company in developing an advertising and promotional program in a foreign market.

Cultural factors influence the development of advertising and promotional programs for foreign markets in a number of ways. Advertisers must consider the language, customs, tastes, attitudes, lifestyle, values, religion, and ethical/moral standards of each society when developing an advertising

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campaign. Cultural factors determine what products and services marketers can sell to foreign markets as well as how they can communicate with consumers. They must understand not only the language of the country but also its nuances, idioms and subtleties. They must also be aware of the connotations of words and symbols they use in their ads and how ad copy and slogans will be translated. Students should be asked to choose a particular cultural variable such as customs, values, or ethical/moral standards and find an example of how it has created a specific challenge or problem for a company in a specific country.

6. Discuss the arguments for and against the use of global marketing and advertising. What types of products and services are best suited for global advertising? What developments have taken place in recent years that support the use of global advertising and what factors might make this approach more difficult to use effectively?

There are several advantages to global advertising including lower advertising production costs, the ability to exploit good creative ideas on a worldwide basis, the opportunity to have a consistent brand and/or company image all over the world, and the simplification of coordination and control of advertising programs. Problems with global advertising are that differences in culture, market and economic development, consumer needs and usage patterns, media availability and regulations make it extremely difficult to develop an effective universal approach to advertising. Advertising is very difficult to standardize because of cultural differences such as language, traditions, value, lifestyles, customs, and the like. Another problem with the use of global advertising is that consumer usage patterns and perceptions of a product may vary from one country to another and may require adjustments in marketing and advertising approaches. Marketers must also recognize that the use of a global advertising campaign can alienate consumers as well as local employees if they feel their individual differences or cultural diversities are being ignored.

Products and services that can take advantage of global advertising include the following:

brands that can be advertising using primarily a visual appeal and thus avoiding the problems of translating words into various languages

brands that are promoted using image advertising that lend themselves to themes with universal appeal such as sex, status, wealth, etc.

high-tech products being introduced to the world market for the first time that are not steeped in the cultural heritage of the country

products with strong nationalistic flavor that take advantage of a country’s reputation in the field

Advances in technology such as the Intent, telecommunications, cable and satellite television, travel and other areas are making the use of global marketing more feasible. Consumers around the globe are exposed to the same music, movies, TV shows, sporting events and web sites. Advances in travel are making it possible for consumers to visit other countries and experience their culture. One thing that is making global marketing more difficult is the trend in many countries to return to more localized music, TV shows and other forms of entertainment. Some countries are trying to preserve their local culture and national identity and may be less receptive to brands from foreign countries that are advertised globally. Global advertising is likely to be inappropriate when there are strong cultural differences among consumers that may influence their interpretation of, and responses to, advertising or when consumer usage patterns and perceptions of a product or service may vary from one country to another. However, these cultural differences are disappearing rapidly, particularly among certain markets such as young people.

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7. What is meant by the “think global, act local” approach to global marketing and advertising? Discuss some of the ways marketers can adapt their advertising to local markets.

Proponents of global marketing such as Professor Theodore Levitt argue that the worldwide marketplace is becoming homogenized and the basic needs, wants and expectations of consumers transcend geographic, national and cultural boundaries. They argue that consumers around the world are very similar with regard to tastes, needs, wants, preferences and emotional desires and motives. Obviously much has happened over the past two decades that lends greater support to the call for global marketing. There have been significant developments in communications and technology that are leading to the globalization of markets. Satellite-delivered programming has resulted in the television shows being seen by consumers around the world as governments can no longer control what shows are seen in their countries. The Internet is clearly a new global medium that provides companies with access to consumers around the globe. Entertainment such as sporting events, movies, TV shows and concerts are now seen by consumers around the world and having an impact on them. Thus products and services can be marketed in a similar fashion around the world using global marketing approaches.

Not everyone agrees with the concept of pure global marketing as they argue that total standardization is unrealistic and changes need to be made for local markets. They advocate a “think global, act local” approach whereby the same basic advertising theme or approach is used in each country but modifications are made to adapt to differences in culture, language, market conditions and other factors. Marketers use this approach by adapting their campaigns to local markets by producing ads with a similar theme or positioning platform but with copy, visual, models and other executional elements that are adapted to the local market.

8. What is meant by a global market segment? Provide an example of a company that has identified a global market segment and advertises its product or service the same way around the world to this market.

A global market segment is a group of consumers who are alike in certain ways and will respond similarly to some aspect of marketing strategy such as advertising. Global market segments have been identified on the basis of demographics, socioeconomic characteristics or lifestyle. Global segmentation is also possible on the basis of technology as businesses and consumers around the world purchase high tech products such as computers and fax machines for the same basic reasons. As discussed in Global Perspective 20-2, young people (and teenagers in particular) are viewed by many marketers as a global market segment. Teens around the world show amazing similarities in taste, interests, language and attitudes. A number of companies whose products have universal appeal to teens such as Nike, Coca-Cola and Pepsi, and Nintendo can use global advertising strategies. High tech companies such as IBM, EDS and Hewlett Packard also use global advertising. Students should have no trouble identifying other companies whose products have universal appeal to global market segments and discussing how they can reach them with a global marketing and advertising campaign.

9. What are the three basic options a company has for organizing its international advertising and promotion function? Discuss the pros and cons of each.

There are three basic options for organizing the international advertising and promotion function including centralization, decentralization or a combination of the two. The centralized organizational structure involves having all advertising and promotional decisions such as agency selection, research, creative strategy and campaign development, media strategy and budgeting done at a company’s home office. Under a decentralized organizational structure, marketing and advertising managers in each market have the authority to make their own advertising and promotional decisions for their local markets. Under the combination approach, the home office or headquarters will have the most control over advertising policy, guidelines and operations in all markets. However, the local advertising managers will submit advertising plans and budgets and play a major role in working with

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the agency in adapting the advertising appeals to their particular markets and making media selection decisions.

Centralization works well when market and media conditions are similar from one country to another, when, the company has only one or a few international agencies handling its advertising, when the company can use standardized advertising or when it desires a consistent image worldwide. Centralization also works best when a company’s international business is small and it operates through foreign distributors or licensees. The decentralized approach is used when companies want to give more control and authority to local managers and believe they know the situations in their markets the best. Decentralization also works best in small or unique markets where advertising must be adapted to fit the conditions of the local market. The combination approach allows for standardization and consistency in a company’s international advertising yet allows for local input or adaptation.

10. Discuss the problems and challenges international marketers face in developing media strategies for foreign markets

Companies face a number of problems in developing media strategies for foreign markets. First, the types of media available in each country are different. For example, TV sets are not as prevalent in many homes in developing countries and even if they are, the amount of commercial time available may be limited. Companies who plan on making the Internet a major part of their integrated marketing communications strategy must consider the penetration of personal computers in homes and businesses in foreign markets. The characteristics of media also differ from country to country in terms of coverage, cost, and quality of reproduction, restrictions and the like. Multinational companies also face problems in getting reliable media information such as circulation figures of magazines, audience profiles, and costs. Media rates may also fluctuate because of unstable currencies and economic conditions. There also may be differences in consumer characteristics and media usage patterns due to factors such as literacy rates or media preferences.

11. How would the planning of a promotional program differ for a global brand versus a regional or local brand?

Factors that must be taken into consideration in developing a sales promotion program in different countries include the stage of economic development, market maturity, consumer perceptions of promotional tools, trade structure, and legal restrictions and regulations. All of these factors must be considered for each country as they can have an impact on whether and how sales promotion can be used. For example, promotions that rely heavily on retailer involvement and cooperation may not be as effective due to differences in distribution channels in foreign markets. Cultural differences may affect the type of promotional incentives that will work best with consumers in various countries. Laws and restrictions for sales promotion are generally more restrictive in other countries than in the U.S. as shown in the appendix to the chapter.

For global brands the planning of a sales promotional program will occur at a headquarters or centralized level. Global brands require a high degree of uniformity in marketing communications and thus the promotional strategy should be determined at this level. However, implementation of the promotional program should be done at the local level and the responsibility of local managers. Regional brands do not require the same level of standardization as global brands and the promotional strategy can be developed by regional offices and implemented at the local level. For local brands, decisions regarding promotional strategy, program design and execution are left to local managers.

12. Discuss the role of public relations in the integrated marketing communications program for an international marketer. How would the role of public relations differ from advertising?

Public relations activities in foreign markets are needed to deal with local governments, media, trade associations, and the general public as these groups may feel threatened by the presence of a foreign

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multinational in their country. A major focus of the public relations effort in foreign countries is to present the firms as “a good corporate citizen” who is involved with, and concerned about, the host country. Companies also work on generating publicity for their products in foreign markets just as they do domestically. Thus the publicity arm of the public relations function is very important for international marketers. Public relations plays a different role than advertising as the former is more focused on managing the image of the company and performing many of the functions noted above. However, the advertising is often the primary element in the promotional mix of the international marketer as it is designed to communicate information about a company and/or its brands and to achieve various objectives such as building and maintaining awareness and interest in a brand as well as helping to create or maintain a brand image or position.

Additional Discussion Questions (not in text)

13. Choose two foreign countries and discuss the problems a U.S. consumer packaged goods company might encounter in developing an advertising and promotion program in these markets.

Students should choose two countries and discuss some of the problems a US firm might encounter in advertising in these markets. The potential problems might include the unfamiliar marketing environment in each country, as there may be different values, customs, consumption patterns, life styles, purchase motives and abilities. Different economic situations, limited media options and political/legal restrictions can also create problems for U.S. companies in developing advertising programs in foreign markets. The various factors that influence the development of sales promotion programs such as economic development, market maturity, consumer perceptions, trade structure and regulations might also be discussed.

14. The text discusses how the New Balance 576 model running shoe has become very popular as a fashion brand in France. Do you think New Balance can maintain the popularity of its shoes as a fashion brand in the French market? What risk might this pose for the company regarding its positioning as a manufacturer of high-quality running shoes, both in France and in other countries?

The tremendous popularity of the New Balance 576 running shoe as a fashion brand in France is a very interesting phenomenon. As the text notes, the company and the buyers from the trendy shops in Paris help make the brand popular among the city’s fashion elite by limiting distribution to a few elite stores and increasing the price to give the brand an aura of exclusivity. They also kept introducing new colors and personalized the shoes by stitching the wearer’s name on the tongue as a retro fashion statement. The company hopes to maintain this elite image of exclusivity for the brand by keeping prices high and limiting distribution. However, New Balance may find it difficult to maintain the popularity of the brand since styles change and fashion-conscious consumers are always looking to find new brands to maintain their image as being fashionable and trendy. Moreover, as the brand becomes more popular, more consumers will be seen wearing the shoes which may hurt the 576 image as being a unique and different brand.

New Balance is confronted with an interesting positioning problem. New Balance has always positioned its running shoes a high quality, high tech brand for the serious runner. The company has refused to hire athletes to endorse its brand and has even run ads with headlines that read “Endorsed by no one” and copy that notes how the company invests in manufacturing and product quality rather than paying athletes or celebrities to endorse its shoes. The company let the local French subsidiary go with its instinct and pursue the fashion position for the 576. The company will have to pursue a dual positioning strategy for its brand it wants to pursue the more broad-based performance segment of the market. Since this market is reached through a different retail channel of sports stores, New Balance may be able to appeal to the serious runner while continuing its fashion positioning for the 576.

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15. Many large multinational companies are consolidating all of their worldwide advertising with one large agency. Evaluate the pros and cons of this approach.

A number of factors are driving this consolidation trend. Major corporations recognize they must develop a consistent global image for the company and/or its brands and speak with one coordinated voice. For example, the reason given by IBM for consolidating all of its advertising with Ogilvy & Mather was that the company had been projecting too many images with its advertising divided among so many agencies. IBM recognizes that it is competing in a global market for computers and feels it is important to deliver clear, consistent messages that take advantage of the high amount of equity in the IBM name. The agency consolidation move will allow IBM to gain greater control over and facilitate coordination of its worldwide advertising. IBM may also feel that a high tech product such as computers can be advertised using a global advertising campaign since the reasons for purchasing them are the same the world over. Companies are also consolidating their global advertising in an effort to increase efficiency and save money. Finally, advances in technology such as fax machines, e-mail, video conferencing, and airline connections make it much easier to manage accounts around the globe.

The risk of the consolidation decision is that one centralized agency may not be able to develop as effective advertising in many foreign markets as a local agency. Local agencies often have a better understanding of the marketing and advertising environment in their country or region and thus may be able to develop more effective advertising than a large multinational agency. Using a single agency also means that a marketer has no backup agency to turn to if there are problems such as ineffective ad campaign. Companies who consolidate also face the problem of selling the idea to regional offices and local country managers who may not like having control of advertising taken from them.

16. What are the three basis alternatives a company has in selecting an agency to handle its international advertising? What are some of the criteria a marketer can use in evaluating and selecting an agency to handle its international advertising and promotion programs?

There are three basic alternatives a company has in selecting an agency to handle its international advertising. First, the company can choose a major agency with both domestic and foreign offices. Many companies prefer to use one large agency, as this gives them greater control and facilitates the coordination of overseas advertising. Many large agencies offer the multinational marketer the opportunity for “one-stop shopping” by offering integrated services such as sales promotion and public relations capabilities. A second option for the international marketer is to choose a domestic agency that is affiliated with agencies in other countries or belongs to a network of foreign agencies. The advantage of this arrangement is that the client can use a domestic-based agency yet still have access to foreign agencies that have detailed knowledge and understanding of each local market. A third alternative is to select a local agency for each market in which the firm markets its products or services. Local agencies often have the best knowledge and understanding of the marketing and advertising environment in a country and thus may be able to develop the most effective advertising. In many countries, small independent agencies may be doing the best creative work and be more willing to take risks. The use of a local agency may also increase the involvement and morale of personnel in foreign subsidiaries.

Specific criteria that might be used by a company to select an agency to handle its international advertising include the quality of the agency’s creative work, its understanding of the market, the ability of the agency to coordinate an integrated international marketing communications program and its market research, public relations, and other IMC related services the agency might offer. As the text notes, a recent study conducted among marketing directors of European companies found that creative ability was ranked as the most important factor in selecting an agency followed by understanding of the market, understanding of the client’s marketing goals, and ability to produce integrated marketing communications.

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17. Global Perspective 20-5 discusses the public relations problems McDonald’s has been facing in France while the text discusses the public relations crisis Coca-Cola encountered in Europe during the summer of 1999. Evaluate the measures each company used to respond to its public relations problem in Europe.

McDonald’s received a considerable amount of negative publicity from anti-American protests by angry French farmers who seized on the company as a symbol of American cultural imperialism. Initially McDonald’s took a low-key approach to the protests as the company declined pressing charges for vandalism in its restaurants and placing posters in the stores to explain how the company is a major partner of the French agricultural sector. However, as the protests continued McDonald’s decided to be more aggressive and use a refutational campaign in the national press. The “Made in France” campaign consisted of ads that underscored the company’s policy of buying French products and its role in France’s agricultural sector, while thanking customers who have remained loyal. The ads were designed to respond to the particular context of the ongoing demonstrations. The messages also pointed out that McDonald’s 240 French franchise owners employ more than 30,000 workers and create 2,500 jobs each year. The self-defense campaign was an effective way of informing the French public that while its brand may be American, the products served in the McDonald’s outlets throughout the country are overwhelmingly French in origin and the fast-food chain makes significant contributions to the French economy. In addition to the media campaign, McDonald’s responded to the farmers concerns by substituting locally produced specialties such as duck breast and Roquefort cheese, for traditional ingredients in the company’s Big Mac and menu items. This action was received favorably by the protesters as it signified that McDonald’s was taking measures to address their concerns.

Coca-Cola has been criticized for its handling of the contamination scare that led to the product recall in Europe in the summer of 1999. The company waited more than a week before issuing an apology to consumers and its top executives, including the company chairman, initially assumed a low profile and waited before becoming involved in the handling of the crisis. As the crisis grew worse, Coca-Cola ran full-page ads in newspapers, which contained a contrite apology from the company’s chairman and an acknowledgement that he should have spoken to the public earlier. When the ban on its products in countries such as Belgium was lifted, Coca-Cola issued vouchers and coupons for free family-sized bottles of its product and also ran ads thanking consumer for their loyalty and guaranteeing the safety and quality of locally produced products. Coca-Cola may have underestimated the severity of the crisis and might have responded sooner. However, the company was successful in regaining its market share.

IMC ExerciseIn recent years considerable attention has been focused on the debate over global versus localized marketing strategies for firms competing in international markets. Analyze the debate over global versus localized marketing from a cross-cultural consumer behavior perspective. Do you feel that global, or even regional markets such as Western or Eastern Europe, are similar enough in terms of cultural values to allow for the use of a standardized marketing program? Discuss the types of products or services for which a global marketing and advertising strategy may or may not be appropriate. Find examples of two companies using global marketing strategies for one or more of their products or services. Analyze the logic of this strategy from a consumer behavior perspective. Find an example of a company that uses a localized a localized marketing strategy for international markets. What are some of the consumer behavior factors that necessitate the use of a localized strategy by this company?

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