Business Finance - Management WK 5 Assignment

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Global Marketing

Tenth Edition

Chapter 14

Global Marketing Communication Decision Two

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Learning Objectives

14.1 Define sales promotion and identify the most important promotion tactics and tools used by global marketers.

14.2 List the steps in the strategic/consultative personal selling model.

14.3 Explain the contingency factors that must be considered when making decisions about sales force nationality.

14.4 Explain direct marketing’s advantages and identify the most common types of direct marketing channels.

14.5 Describe how global marketers integrate support media, sponsorships, and product placement into the overall promotion mix.

In addition to advertising, publicity and PR, the promotion mix includes:

Sponsorships

Sales promotion

Direct marketing

Personal selling

Internet

Infomercials

In September 2005, with 150 days to go before the opening ceremonies of the 2006 Olympic Games in Torino, Italy, Lenovo Chairman Yuanqing Yang and Philippe Davy, VP Marketing, kicked off the company’s computing equipment sponsorship in New York City. It was the official computing equipment sponsorship for the 2006 Winter Games and the 2008 Games in Beijing as well.

Sales Promotion (1 of 3)

Sales promotion refers to any paid consumer or trade communication program of limited duration that adds tangible value to a product or brand

Price versus non-price promotions

Consumer versus trade promotions

Axe Apollo featured astronaut Buzz Aldrin in promoting a free trip to space for 22 lucky winners.

In a price promotion, tangible value may take the form of a price reduction, coupon, or mail-in refund. Nonprice promotions may take the form of free samples, premiums, “buy one, get one free” offers, sweepstakes, and contests. Consumer sales promotions may be designed to make consumers aware of a new product, to stimulate nonusers to sample an existing product, or to increase overall consumer demand. Trade sales promotions are designed to increase product availability in distribution channels. At many companies, expenditures for sales promotion activities have surpassed expenditures for media advertising. At any level of expenditure, however, sales promotion is only one of several marketing communication tools. Sales promotion plans and programs should be integrated and coordinated with those for advertising, public relations, and personal selling.

Sales Promotion (2 of 3)

Provide a tangible incentive to buyers

Reduce the perceived risk associated with purchasing a product

Provide accountability for communications activity

Provide method of collecting additional data for database

Worldwide, the increasing popularity of sales promotion as a marketing communication tool can be explained in terms of several strengths and advantages. Besides providing a tangible incentive to buyers, sales promotions also reduce the perceived risk buyers may associate with purchasing the product. From the point of view of the sponsoring company, sales promotion provides accountability; the manager in charge of the promotion can immediately track the results of the promotion. Overall, promotional spending is increasing at many companies as they shift advertising allocations away from traditional print and broadcast advertising.

In addition, sweepstakes, rebates, and other forms of promotion require consumers to fill out a form and return it to the company, which can then build up information in its database for use when communicating with customers in the future. For example, the French Ministry of Agriculture recently launched a global promotion aimed at boosting exports of French wine and cheese. Aimed at showing that French cuisine can be relaxed and laid back, the ministry hired Spoexa, a food-marketing company, to organize cocktail parties in 19 countries, including Canada, Spain, and the United States. House Party Inc., an American marketing firm, promoted the U.S. parties through its Web site. Would-be hosts registered online; from that applicant pool, House Party chose 1,000 people. The winners received discount coupons good for purchases of French wine; they also were entitled to free gifts when ordering French cheeses from select Web sites. Each winner also received a basket of party supplies, including a corkscrew and an apron. In return, the hosts agreed to take photos and blog about their party. After the parties, the hosts answered questionnaires to provide sponsors with feedback about the featured food and wine. Finally, in-store promotions on party-related French goods were featured at various shops and supermarkets.

Company Headquarters Involvement in Sales Promotion

Factors that contribute to more involvement of the company headquarters in sales promotion:

Cost. Larger budgets drive more involvement.

Complexity. The formulation, implementation, and follow-up may require more skills that local managers lack.

Global Branding. Maintaining consistency across markets and leveraging successful local programs across other markets justifies more involvement.

Transnational Trade. M&A s lead to increased competition in the retail industry and as the industry globalizes, retailers will seek coordinated promotional programs from suppliers.

Sales Promotion: Global or Local

In countries with low levels of economic development, low incomes limit the range of promotional tools available.

Market maturity can also be different from country to country.

Local perceptions of a particular promotional tool or program can vary.

Local regulations may rule out use of a particular promotion in certain countries.

Trade structure in the retailing industry can affect the use of sales promotions.

In countries with low levels of economic development, low incomes limit the range of promotional tools available. In such countries, free samples and demonstrations are more likely to be used than coupons or on-pack premiums.

Market maturity can also be different from country to country; consumer sampling and coupons are appropriate in growing markets, but mature markets might require trade allowances or loyalty programs.

Local perceptions of a particular promotional tool or program can vary. Japanese consumers, for example, are reluctant to use coupons at the checkout counter. A particular premium can be seen as a waste of money.

Local regulations may rule out use of a particular promotion in certain countries. Table 14-10 lists regulations governing coupon distribution in several countries.

Trade structure in the retailing industry can affect the use of sales promotions. For example, in the United States and parts of Europe, the retail industry is highly concentrated, i.e., dominated by a few key players such as Wal-Mart. This situation requires significant promotional activity at both the trade and consumer level. By contrast, in countries where retailing is more fragmented—Japan is a case in point—there is less pressure to engage in promotional activities.

Sampling

Provides consumer with opportunity to try product at no cost

May be distributed in stores, in the mail, through print media, at events, or door-to-door

Consumers can request samples from web site

May include a free week of premium TV channels or internet service

Kikkoman soy sauce launched a sampling program in supermarkets in the U.S.; today the U.S. contributes 70% of profit from international operations

Point-of-Use sampling:

Marc Pritchard, Chief Brand Officer at Procter & Gamble, noted, “The most fundamental thing that consumers want to do is try before they buy.” A typical sample is an individual portion of a consumer packaged good, such as breakfast cereal, shampoo, cosmetics, or detergent, distributed through the mail, on a door-to-door basis, or at a retail location. The average cost per sample can range from $0.10 to $0.50; 2 to 3 million samples are distributed in a typical sampling program. Cost is one of the major disadvantages associated with sampling; another problem is that it is sometimes difficult for marketing managers to assess the contribution that a sampling program makes to return on investment.

Today, many companies utilize event marketing and sponsorships to distribute samples at concerts, sports events, or special events such as food and beverage festivals attended by large numbers of people. In the information age, sampling may also consist of a week’s free viewing of a cable TV channel or a no-cost trial subscription to an online computer service; Internet users can also request free samples through a company’s Web site.

Compared with other forms of marketing communication, sampling is more likely to result in actual trial of the product. To ensure trial, consumer products companies are increasingly using a technique known as “point-of-use” sampling. For example, Starbucks dispatches “chill patrols” in the summertime to pass out samples of ice-cold Frappuccino to overheated commuters during rush hour in busy metropolitan areas.

Couponing (1 of 2)

A coupon is a printed certificates entitle the bearer to a price reduction or some other special consideration for purchasing a particular product or service.

90% are distributed as free-standing inserts primarily in Sunday newspapers.

On-pack coupons are on the package and can be redeemed at checkout.

In-pack coupons are inside a package for later use.

Coupons are a favorite promotion tool of consumer packaged goods companies such as Procter & Gamble and Unilever. The goal is to reward loyal users and stimulate product trial by nonusers. In the European Union, couponing is widely used in the United Kingdom and Belgium. Couponing is not as widely used in Asia where saving face is important. Although Asian consumers have a reputation for thriftiness, some are reluctant to use coupons because doing so might bring shame upon them or their families.

NCH Marketing Services, which tracks coupon trends, reports that about 300 billion coupons are distributed in the United States each year; only about 1 percent are actually redeemed. Online coupon distribution is growing at a rapid rate; Google is among the players experimenting with them.

Couponing (2 of 2)

Cross coupons are distributed with one product but redeemable for another. (Toothpaste & toothbrush)

70% of consumer promotion spending in the U.S.

Much less or nonexistent in other countries; Some Asians are reluctant to use coupons as they may be bring shame on them.

300 billion coupons distributed but only 1% redeemed

Social Couponing

Hot online trend

Groupon is industry leader

Deals are made with local retailers with Groupon taking a percentage of proceeds

Grown from 1 country to 35 mainly through acquisition

50 million users dozens of countries by 2016

Over 50% of users are in Europe, 33% in U.S.

Founders rejected Google’s $6 billion takeover offer

Sales Promotion (3 of 3)

Regulations for coupon distribution for various countries.

Sales Promotion: Issues and Problems

Fraud

Pepsi promotion with Apple

Regulations vary by country; Highly regulated in Europe; Popular in Scandinavia where broadcast ads are highly regulated; May be seen as exploiting regulatory loopholes in developing countries

Cultural dispositions to coupons and other sales promotions

Malaysians see coupon usage as embarrassing

Islam frowns on gambling so sweepstakes may not work

During the 2004 Super Bowl broadcast, PepsiCo launched a joint promotion with Apple Computer’s iTunes Music Store. Apple planned to give away 100 million songs for free (regular price: $.99); consumers could obtain a code from the caps of Pepsi bottles and enter the code online to quality for the download. The promotion was designed so that anyone purchasing a bottle of Pepsi had a 1-in-3 chance of being a winner. However, many people discovered that, by tilting the bottles to one side, they could tell whether the bottle was a winner. Moreover, they could read the code without having to pay for the Pepsi!

In some emerging markets, companies appear to be exploiting regulatory loopholes and lack of consumer resistance to intrusion. Sales promotion in Europe is highly regulated. Sales promotions are popular in Scandinavia because of restrictions on broadcast advertising, but are subject to regulations. If such regulations are relaxed as the single market develops in Europe and regulations are harmonized, companies may be able to roll out pan-European promotions.

A recent study examined coupon usage and attitudes toward sweepstakes in Taiwan, Thailand, and Malaysia. According to Hofstede’s social values, all three countries in the studies are collectivist, and the researchers found that an individual’s positive attitude toward coupons and coupon usage was influenced by positive attitudes of family members and society as a whole. However, the three nations show some differences in value orientation. For example, Malaysia has a higher power distance and lower uncertainty avoidance than the others. For Malaysians, the fear of public embarrassment was a constraint on coupon usage. In all three countries, media consumption habits were also a factor; persons who were not regular readers of magazines or newspapers were less likely to be aware that coupons were available. Consumers in Taiwan and Thailand look more favorably upon coupons than sweepstakes. In Malaysia, where the population is primarily Muslim, the researchers assumed that consumers would avoid sweepstakes promotions. Sweepstakes can be compared to gambling, which is frowned on by Islam. However, Malaysians showed a preference for sweepstakes over coupons. In Taiwan, where Buddhism, Confucianism, and Taoism are all practiced, religion appeared to have little impact on attitudes.

Personal Selling

Person-to-person communication between a company representative and a prospective buyer

Focus is to inform and persuade prospect

Short-term goal: make a sale

Long-term goal: build a relationship

Especially important in industrial products that are expensive and complex

Important in countries that restrict advertising

Because selling provides a two-way communication channel, it is especially important in marketing industrial products that may be expensive and technologically complex. Sales personnel can often provide headquarters with important customer feedback that can be utilized in design and engineering decisions. Global marketing presents additional challenges because the buyer and seller may come from different national or cultural backgrounds. Despite such challenges, it is difficult to overstate the importance of a face-to-face, personal selling effort for industrial products in global markets.

Personal selling is also a popular marketing communication tool in countries that place various restrictions on advertising. In Japan, for example, it is difficult to obtain permission to present product comparisons in any type of advertising. In such an environment, personal selling is the best way to provide hard-hitting, side-by-side comparisons of competing products. Personal selling is also used frequently in countries where low wage rates allow large local sales forces to be hired. When expanding in Central Europe, HBO built its core of subscribers in Hungary by selling the service through a door-to-door campaign.

Personal Selling Hurdles

Political Risks - unstable or corrupt governments change the rules for the sales team

Regulatory Hurdles - Governments can set up quotas or tariffs that affect the sales force

Currency Fluctuations - increase and decrease in local currencies can make certain products unaffordable

Market Unknowns - lack of knowledge of market conditions, the accepted way of doing business, or positioning of the product may derail the sales team’s efforts

Companies must be aware of these risks and hurdles when implementing a personal sales team in a foreign country because they may reduce the sales team’s effectiveness.

Political risk: Unstable or corrupt governments can completely change the rules for the sales team. Establishing new operations in a foreign country is especially tricky if a coup is imminent or if a dictator demands certain “considerations” (which has been the case in many developing countries). Today, for example, Colombia offers great market potential, and its government projects an image of openness; that was not always the case, however. In the not-so-distant past, many companies found the unspoken rules of the cabal to be inordinately burdensome.

Regulatory Hurdles: Governments sometimes set up quota systems or impose tariffs that affect entering foreign sales forces. In part, governments consider such actions to be an easy source of revenue, but, even more importantly, policymakers want to ensure that sales teams from local firms retain a competitive edge in terms of what they can offer and at what price. Regulations can also take the form of rules that restrict certain types of sales activities. In 1998, for example, the Chinese government banned door-to-door selling, effectively blocking Avon’s business model. Avon responded by establishing a network of store representatives. When direct selling was legalized in 2006, CEO Andrea Jung expected that China would soon be adding $1 billion a year to Avon’s bottom line. As it turns out however, Avon incurred losses in China in connection with the transition from stores to the directsales business model. Compounding the situation was a bribery scandal that originated in

China and spread to other markets; the subsequent investigation tarnished the company’s

reputation and cost it tens of millions of dollars.

Currency Fluctuations: In many instances, a company’s sales effort has been derailed not by ineffectiveness or lack of market opportunity, but rather by fluctuating currency values. In the mid-1980s, for example, Caterpillar’s global market share declined when the dollar’s strength allowed Komatsu to woo U.S. customers away. Then, while Caterpillar’s management team was preoccupied with domestic issues, competitors chipped away at the firm’s position in global markets.

Market Unknowns: When a company enters a new region of the world, its selling strategy may unravel because of a lack of knowledge of market conditions, the accepted way of doing business, or the positioning of its in-country competitors. When a game plan is finally crafted to counter the obstacles, it is sometimes too late for the company to succeed. However, if management devotes an inordinate amount of time conducting market research prior to entry, it may discover that its window of opportunity has been lost to a fast-moving competitor that did not fall victim to the “analysis paralysis” syndrome. Thus, it is difficult to make generalizations about the optimal time to enter a new country.

The Strategic/Consultative Selling Model (1 of 4)

Evolved in response to:

Increased competition

More complex products

More emphasis on customer needs

Long-term relationships

Figure 14-1 The Strategic/Consultative Selling Model

The model consists of five interdependent steps, each with three prescriptions that can serve as a checklist for sales personnel. Many U.S. companies have begun developing global markets and have established face-to-face sales teams either directly, using their own personnel, or indirectly, through contracted sales agents. As a result, the Strategic/Consultative Selling Model is increasingly utilized on a worldwide basis. The key to ensuring that the model produces the desired outcome—building quality partnerships with customers—is to have it implemented and followed on a consistent basis. This is far more difficult to achieve with international sales teams than it is with U.S.-based units that are much more accessible to corporate headquarters. The major categories are discussed on the next two slides.

The Strategic/Consultative Selling Model (2 of 4)

Personal Selling Philosophy - commitment to the marketing concept and a willingness to adopt the role of problem solver/partner

Relationship Strategy - game plan for establishing and maintaining high-quality relationships with prospects/customers

Product Strategy - plan that can assist the sales representative in selecting and positioning products to satisfy customer needs

First, a sales representative must develop a personal selling philosophy. This requires a commitment to the marketing concept and a willingness to take on the role of problem solver or partner in helping customers. A sales professional must also be secure in the belief that selling is a valuable activity. In addition, the representative must develop a relationship strategy, a game plan for establishing and maintaining high-quality relationships with prospects and customers. The relationship strategy provides a blueprint for creating the rapport and mutual trust that will serve as the basis of a lasting partnership. This step connects sales personnel directly to the concept of relationship marketing, an approach that stresses the importance of developing long-term partnerships with customers.

The third step, developing a product strategy, results in a plan that can assist the sales representative in selecting and positioning products that will satisfy customer needs. A sales professional must be an expert who possesses not only a deep understanding of the features and attributes of each product he or she represents, but also an understanding of the competitive offerings. That understanding is then used to position the product and communicate benefits that are relevant to the customers’ wants and needs. As with the selling philosophy and relationship strategy, this step must include comprehension of the target market’s characteristics and the fact that prevailing needs and wants may mandate products that are different from those offered in the home country.

The Strategic/Consultative Selling Model (3 of 4)

Customer Strategy - plan that ensures that the sales professional will be maximally responsive to customer needs

Presentation Strategy - consists of setting objectives for each sales call and establishing a presentation plan to meet those objectives

Develop a customer strategy, which is a plan that ensures the sales professional will be maximally responsive to customer needs. Doing so requires a general understanding of consumer behavior; in addition, the salesperson must collect and analyze as much data as possible about the needs of each customer or prospect. The customer strategy step also includes building a prospect database consisting of current customers as well as potential customers (or leads). A qualified lead is someone whose probability of wanting to buy the product is high. Many sales organizations diminish their own productivity by chasing after too many nonqualified leads. This issue can be extremely challenging for an international sales unit, because customer cues or “buying signs” may not correspond to those identified in the sales rep’s home country.

The fifth and final step, the actual face-to-face selling situation, requires a presentation strategy. This consists of setting objectives for each sales call and establishing a presentation plan to meet those objectives. The presentation strategy must be based on the sales representative’s commitment to provide outstanding service to customers. As shown in Figure 14-2, when these five strategies are integrated into an appropriate personal selling philosophy, the result is a high-quality partnership.

The Strategic/Consultative Selling Model (4 of 4)

This figure illustrates that when these five strategies, from the strategic/consultative selling model, are integrated with an appropriate personal selling philosophy, the result is a high-quality partnership.

The Presentation Plan

Approach

Presentation

Demonstration

Negotiation

Servicing the sale

Approach & Presentation

Approach

Initial contact with the customer/ prospect

Must completely understand the decision-making process and the roles of each participant

Presentation

Prospect’s needs are assessed and matched to the company’s products

The style and message of the presentation must be tailored to the audience

In the six-step presentation plan, the first step, approach, is the sales representative’s initial contact with the customer or prospect. The most crucial element of this step is to completely understand the decision-making process and the roles of each participant, such as decision maker, influencer, ally, or blocker. In some societies, it is difficult to identify the highest-ranking individual based on observable behavior during group meetings. This crucial bit of strategic information often is uncovered only after the sales rep has spent considerable time developing rapport and getting to know the overall customer organization from various perspectives and in various contexts.

During the presentation, the prospect may express concerns or objections about the product itself, the price, or some other aspect of the sale. Dealing effectively with objections in an international setting is a learned art. In some cases, this is simply part of the sales ritual, and the customer expects the representative to be prepared for a lively debate on the pros and cons of the product in question. In other instances, it is taboo to initiate an open discussion where any form of disagreement is apparent: Such conversations are to be handled in a one-to-one situation or in a small group with a few key individuals present. A common theme in sales training is the concept of active listening; naturally, in global sales, verbal and nonverbal communication barriers of the type discussed in Chapter 4 present special challenges. When objections are successfully overcome, serious negotiations can begin.

Demonstration & Negotiation

Presentation

Salesperson has the opportunity to tailor the communication effort to the customer

Can show how the product can meet the customer’s needs

Negotiation

Ensures that both the customer and the salesperson come away from the presentation winners

Next comes the presentation during which the salesperson has the opportunity to tailor the communication effort to the customer and alternately tell and show how the product can meet the customer’s needs. This third step represents one of personal selling’s important advantages as a promotional tool. The prospect’s senses become involved, and he or she can actually see the product in action, and touch it, taste it, or hear it, as the case may be.

During the presentation, the prospect may express concerns or objections about the product itself, the price, or some other aspect of the sale. Dealing effectively with objections in an international setting is a learned art. In some cases, this is simply part of the sales ritual, and the customer expects the representative to be prepared for a lively debate on the pros and cons of the product in question. In some instances, it is taboo to initiate an open discussion where any form of disagreement is apparent; such conversations are to be handled in a one-to-one situation or in a small group with a few key individuals present. A common theme in sales training is the concept of active listening; naturally, in global sales, verbal and nonverbal communication barriers of the type discussed in Chapter 4 present special challenges. When objections are successfully overcome, serious negotiations can begin.

The fourth step, negotiation, is required to ensure that both the customer and the salesperson come away from the presentation as winners. Experienced American sales representatives know that persistence during the negotiation stage is one tactic often needed to win an order in the United States. In contrast, some foreign customers consider American-style persistence (implying tenacity) or arm-twisting rude and offensive. This kind of behavior can end the negotiations quickly—or, in the worst case, can be taken as a display of self-perceived American superiority. Such a perception must be countered aggressively or the pressure tactics brought to an immediate end.

Close & Servicing the Sale

Ask for the sale

Must be culturally sensitive

Servicing the Sale

To ensure customer satisfaction

Implementation process must be outlined

Customer service program established

Having completed the negotiation step, the sales representative is able to move on to the fifth step, the close, in which the rep asks for the order. Attitudes toward the degree of bluntness that is acceptable in making this request vary among countries. In Latin America, a bold closing statement is respected, whereas in Asia, it is something that must be done with more deference toward the decision maker. As with objection handling and negotiation, the close is a selling skill that comes with both knowledge and experience in global business and sales.

The sixth and final step is servicing the sale. A sale does not end when the order is written; to ensure customer satisfaction with the purchase, an implementation process (which may include delivery and installation) must be outlined and a customer service program established (see Exhibit 14-3). Implementation can be complicated because of logistical and transportation issues as well as potential problems with the in-country resources needed to handle all the necessary steps.

Sales Force Nationality

Expatriates

Host-country nationals

Third-country nationals

Other options

A basic issue for companies that sell globally is the composition of the sales force in terms of nationality. It is possible to utilize expatriate salespersons, hire host-country nationals, or utilize third-country sales personnel. The staffing decision is contingent upon several factors, including management’s orientation, the technological sophistication of the product, and the stage of economic development exhibited by the target country.

Not surprisingly, a company with an ethnocentric orientation is likely to prefer expatriates and adopt a standardized approach without regard to technology or the level of economic development in the target country. Polycentric companies selling in developed countries should opt for expatriates to sell technologically sophisticated products; a host-country sales force can be used when technological sophistication is lower. In less-developed countries, host-country nationals should be used for products in which technology is a factor; host-country agents should be used for low-tech products. The widest diversity of sales force nationality is found in a company in which a regiocentric orientation prevails. Except in the case of high-tech products in developed countries, third-country nationals are likely to be used in all situations.

Expatriates

Advantages

Superior product knowledge

Demonstrated commitment to service standards

Train for promotion

Greater H Q control

Disadvantages

Higher cost

Higher turnover

Cost for language and cross-cultural training

Maintaining expatriate sales personnel is extremely expensive; the average annual cost to U.S. companies of posting employees and their families overseas exceeds $250,000. In addition to paying expat salaries, companies must pay moving expenses, cost-of-living adjustments, and host-country taxes. Despite the high investment, many expats fail to complete their assignments because of inadequate training and orientation prior to the cross-border transfer.

Host-Country Nationals

Advantages

Economical

Superior market knowledge

Language skills

Superior cultural knowledge

Fast implementation

Disadvantages

Needs product training

May be held in low esteem

Language skills may not be important

Difficult to ensure loyalty

Locals offer several advantages, including intimate knowledge of the market and business environment, language skills, and superior knowledge of local culture. The last consideration can be especially important in Asia and Latin America. In addition, because in-country personnel are already in place in the target country, there is no need for expensive relocations. However, host-country nationals may possess work habits or selling styles that do not mesh with those of the parent company. Furthermore, the firm’s corporate sales executives tend to have less control over an operation that is dominated by host-country nationals. Headquarters executives may also experience difficulty cultivating loyalty, and host-country nationals are likely to need hefty doses of training and education regarding both the company and its products.

Third-Country Nationals

Advantages

Cultural sensitivity

Language skills

Economical

Allows regional sales coverage

Disadvantages

May face identification problems

May be blocked for promotions

Income gaps

Needs product and/or company training

Loyalty not assured

A third option is to hire persons who are not natives of either the headquarters country or the host country; such persons are known as third-country nationals. For example, a U.S.-based company might hire someone from Thailand to represent it in China. This option has many advantages in common with the host-country national approach. In addition, if conflict, diplomatic tension, or some other form of disagreement has driven a wedge between the home country and the target sales country, a sales representative from a third country may be perceived as sufficiently neutral or at “arm’s length” to enable the company to continue its sales effort. However, there are several disadvantages of the third-country option. For one thing, sales prospects may wonder why they have been approached by someone who is neither a local national nor a native of the headquarters country. Third-country nationals may lack motivation if they are compensated less generously than expats or host-country sales personnel; also, they may find themselves passed over for promotions as coveted assignments go to others.

Other Options

Sales agents

Exclusive license arrangements

Contract manufacturing or production

Management-only agreements

Joint ventures

Sales agents: From a global perspective, it often makes a great deal of sense to set up one or more agent entities to at least gain entry to a selected country or region. In some cases, because of the remoteness of the area or the lack of revenue opportunity (beyond servicing satellite operations of customers headquartered elsewhere), agents are retained on a fairly permanent level. To this day, the majority of U.S., Asian, and European companies with an Africa-based sales presence maintain agent groups to represent their interests.

Agents are less expensive than full-time, in-country national sales representatives; at the same time, they possess the same market and cultural knowledge. If agents are used initially and the sales effort gains traction, they can be phased out and replaced by the manufacturer’s sales force. Conversely, a company may use its own sales force initially and then convert to agents.

Exclusive license arrangements in which a firm will pay commissions to an in-country company’s sales force to conduct personal selling on its behalf. For example, when Canada’s regulatory agency prevented U.S. telephone companies from entering the market on their own, AT&T, MCI, Sprint, and other firms crafted a series of exclusive license arrangements with Canadian telephone companies.

Contract manufacturing or production with a degree of personal selling made available through warehouses or showrooms that are open to potential customers. Sears has employed this technique in various overseas markets, with the emphasis placed on manufacturing and production but with the understanding that opportunities for some sales results do exist.

Management-only agreements through which a corporation will manage a foreign sales force in a mode that is similar to franchising. Hilton Hotels has these types of agreements all over the world, not only for hotel operations, but also for personal selling efforts aimed at securing conventions, business meetings, and other large-group events.

Joint ventures with an in-country (or regional) partner. Because many countries place restrictions on foreign ownership within their borders, partnerships can serve as the best way for a company to obtain both a personal sales capability as well as an existing

Special Forms of Marketing Communications

Direct Marketing

Direct mail

Catalogs

Infomercials, teleshopping

Event Sponsorship

Concerts, sporting events

Product placement in movies

Internet Communications

The Direct Marketing Association defines direct marketing as any communication with a consumer or business recipient that is designed to generate a response in the form of an order, a request for further information, and/or a visit to a store or other place of business. Companies use direct mail, telemarketing, television, print, and other media to generate responses and build databases filled with purchase histories and other information about customers. By contrast, mass marketing communications are typically aimed at broad segments of consumers with certain demographic, psychographic, or behavioral characteristics in common.

Direct Marketing

Any communication with a consumer or business recipient that is designed to generate a response in the form of:

An order

Request for further information

A visit to a store or other place of business

The Direct Marketing Association defines direct marketing as any communication with a consumer or business recipient that is designed to generate a response in the form of an order, a request for further information, or a visit to a store or other place of business. Companies use direct mail, telemarketing, television, print, and other media to generate responses and build databases filled with purchase histories and other information about customers. By contrast, mass-marketing communications are typically aimed at broad segments of consumers with certain demographic, psychographic, or behavioral characteristics in common.

Worldwide, the popularity of direct marketing has been steadily increasing in recent years. One reason is the availability of credit cards—widespread in some countries, growing in others—as a convenient payment mechanism for direct response purchases. (In fact, Visa, American Express, and MasterCard generate enormous revenues by sending direct mail offers to their cardholders.) Another reason is societal: Whether in Japan, Germany, or the United States, dual-income families have money to spend but less time to shop outside the home. Technological advances have made it easier for companies to reach customers directly.

MTV reaches hundreds of millions of households. To reach businesspeople, companies can buy time on CNN, Fox News, or CNBC.

One-to-One Marketing

Building from Customer Relationship Management

Identify customers and accumulate detailed information about them

Differentiate customers and rank them in terms of their value to the company

Interact with customers and develop more cost efficient and effective forms of interaction

Customize the product/service offered to the customer

Direct Marketing versus Mass Marketing

Table 14-2 Comparison of Direct Marketing and Mass Marketing.

Direct Marketing	Mass Marketing
The marketer adds value (creates place utility) by arranging for delivery of the product to the customer’s door.	The product benefits do not typically include delivery to the customer’s door.
The marketer controls the product all the way through to delivery.	The marketer typically loses control as the product is turned over to distribution channel intermediaries.
Direct-response advertising is used to generate an immediate inquiry or order.	Advertising is used for its cumulative effect over time to build image, awareness, loyalty, and benefit recall. Purchase action is deferred.
Repetition is used within the ad/offer.	Repetition is used over a period of time.
The customer perceives higher risk because the product is bought unseen. Recourse may be viewed as distant or inconvenient.	The customer perceives less risk due to direct contact with the product. Recourse is viewed as less distant.

Advice for U.S. Direct Marketers Going Global

The world is full of people who are not Americans. Be sure not to treat them like they are.

Like politics, all marketing is local. Just because your direct mail campaign worked in Texas, do not assume it will work in Toronto.

Although there may be a European Union, there is no such thing as a “European.”

Pick your target, focus on one country, and do your homework.

Customers need to be able to return products locally or at least believe there are services available in their country.

Direct Mail

A vehicle for delivering a personally addressed offer to a prospect targeted by a marketer

Popular with banks, insurance co., other financial service providers

Responses allow the company to build a database

U.S. direct mail lists are easy to rent; Europe and Japan lists are lower in quality

Germans spend the most, $500 per capita, in mail-order shopping

Direct mail is growing in popularity in some parts of the world. In Europe, for example, regulators are concerned about the extent to which children are exposed to, or even targeted by, traditional cigarette advertising. Faced with the threat of increased restrictions on its advertising practices, the tobacco industry is making a strategy shift toward direct mail.

Following the economic crisis in Asia, a number of companies in that region turned to direct mail in an effort to use their advertising budgets more effectively. Historically, the Asian direct marketing sector has lagged behind its counterparts in the United States and Europe. Companies in the banking and telecommunications sectors have been at the forefront of direct marketing initiatives in Asia, using their extensive databases to target individual consumers by mail or Internet.

Catalogs

Catalog: magazine-style publication that features photographs, illustrations, and extensive information about a company’s products

U.S.: 1/3 of world market, peaked in 2007 with 20 billion mailed; dropped in 2015 to 12 million due to online shopping

E U: Elimination of barriers led to growth in cross-border shopping due to no V A T tax

Hong Kong and Singapore have efficient postal systems and highly educated consumers with credit cards

China, South Korea, and Taiwan are attractive markets

Catalogs have a long and illustrious history as a direct marketing tool in both Europe and the United States. The European catalog market flourished after World War II as consumers sought convenience, bargain prices, and access to a wider range of goods.

Catalogs are widely recognized as an important part of an IMC program, and many companies use catalogs in tandem with traditional retail distribution and e-commerce channels.

Even as they continue to develop the Japanese market, Western catalogers are now turning their attention to other Asian countries. In Hong Kong and Singapore, efficient postal services, highly educated populations, wide use of credit cards, and high per capita income are attracting the attention of catalog marketers. Notes Michael Grasee, the former director of international business development at Lands’ End, “We see our customer in Asia as pretty much the same customer we have everywhere. It’s the time-starved, traveling, hardworking executive.” Catalogers are also targeting Asia’s developing countries. Otto GmbH & Co KG, with 2016 revenues of €12.5 billion ($13.2 billion) and about 6 percent of global mail-order sales, is planning to enter China, South Korea, and Taiwan. Because these countries have few local mail-order companies that could be acquisition targets, executives at Otto have mapped out an entry strategy based on acquiring a

majority stake in joint ventures with local retailers.

Executives’ View of Catalogs

“Years ago, it (the catalog) was a selling tool. Now it’s become an inspiration source. We know our customers love a tactile experience.”

Felix Carbullido, C M O Williams-Sonoma

“In 2020 we will still have catalogs, but they will only be more of a source of information. The catalog as something to order from where we show everything we have on paper will be extinct by 2020. Catalogs can’t stay valid for 6 months like they used to.”

Theo Bendler, V P Otto Group, German Retailer

Infomercials and Teleshopping

An infomercial is a form of paid TV in which a particular product is demonstrated, explained, and offered for sale to viewers who call a toll-free number on the screen.

In Asia, infomercials make $100s of millions in sales. Consumers have up to a 40% savings rate since housing and health care are provided by the state. Low penetration rates of private phones, credit cards, & delivery issues create difficulties.

Teleshopping on channels like H S N and Q V C is exclusively devoted to demonstration and selling.

Thomas Burke, president of Saatchi & Saatchi’s infomercial division, calls infomercials “the most powerful form of advertising ever created.” The cost of producing a single infomercial can reach $3 million; advertisers then pay as much as $500,000 for time slots on U.S. cable and satellite systems and local TV channels. Because infomercials are typically 30 minutes in length and often feature studio audiences and celebrity announcers, many viewers believe they are watching regular talk show-type programming. Although originally associated with personal care, fitness, and household products such as those from legendary direct-response pitchman Ron Popeil, infomercials have gone up-market in recent years. For example, Lexus generated more than 40,000 telephone inquiries after launching its used-car program with an infomercial; two percent of respondents ulti