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Winning Hearts, Minds and Sales in Emerging versus Mature Markets

Winning Hearts, Minds and Sales in Emerging versus Mature Markets Why Long-Term Marketing Effectiveness Differs Koen Pauwels, Ozyegin University, Istanbul Selin Erguncu , Koc University, Istanbul Marketing Dynamics 2011 : Jaipur, India. Overview.

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Winning Hearts, Minds and Sales in Emerging versus Mature Markets

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  1. Winning Hearts, Minds and Sales in Emerging versus Mature Markets Why Long-Term Marketing Effectiveness Differs Koen Pauwels, Ozyegin University, Istanbul Selin Erguncu, Koc University, Istanbul Marketing Dynamics 2011: Jaipur, India

  2. Overview • Branding and marketing effectiveness • Customer Attitude Dynamics and Criteria • How CAD differs in emerging vs mature markets • Empirical comparison across 2 categories

  3. Is a brand = a brand = a brand ? “Marketing principles are universally applicable, and the marketer’s task is the same whether applied in Dimebox, Texas or Katmandu, Nepal”(Cateora and Hess 1966, p. 4) "We have passed through the age of information and knowledge and we now live in the age of ideas. Successful brands tell stories. They are romantic and mysterious.“Roberts (2005, Lovemarks) “In the end, it’s really the basic work, whether you have reliable quality, good service, that are the fundamental attributes of a brand.” Mr Zhou (CEIBS, 2008)

  4. Do consumer behavior & marketing effects differ ? “in India, people are even more brand-conscious than they are in the U.S., particularly for PCs. If someone buys a PC, all the neighbors come and ask not only which brand you bought, but what type of processor it has in it” (Deepak Advani, IBM, 2009) “In emerging markets, brands are seen as an important mark of quality and status. People value the reassurance provided by a well-known brand name, and if they can, they may be willing to pay more for it. They believe it is important to get the right brand even if they have to shoparound for it. In mature markets, people are more likely to assume that all brands stocked by mainstream retailers will deliver the same basic quality” (Nigel Hollis, Millward Brown 2010)

  5. Emerging Markets • are countries that are restructuring their economies along market-oriented lines; • offer a wealth of opportunities in trade, tech transfers, and foreign direct investment; • are regional economic powerhouses with large populations, resource bases, and markets; • will also become more significant buyers of goods and services than industrialized countries.

  6. Cultural & Economic Differences

  7. BIC versus Anglo-Saxon market descriptives (st.dev.)

  8. Customer Attitude Dynamics (Srinivasan et al. 2010) • What marketers do • Advertising • Price • Distribution Marketing builds Attitudes • What customers think & feel Awareness Consideration Liking which convert to Brand Sales What customers do Brand purchases

  9. Customer Attitude Dynamics Criteria • Hanssens, Pauwels, Srinivasan and VanHeule (MSI 2010) • Explain marketing impact by 4 criteria of attitude dynamics • Potential: room to grow ? • Stickiness: do changes last ? • Responsiveness to Marketing • Conversion to Sales • This paper proposes that attitude dynamics (and thus marketing effects) differ for emerging vs. mature markets

  10. Our ConceptualFramework • Cultural Differences • Self-Construal • Search • Attitude Dynamics: • Stickiness, Conversion • Awareness • Consideration • Liking • MarketingResponse of each attitude to: • Advertising • Distribution • Price • Economic Differences • Income • Consumer Protection Marketing Effectiveness -Sales

  11. H1: Interdependent self-construal leads to (a) higher stickiness for consideration and (b) liking, and thus a (c) lower responsiveness toadvertising. Connectedness Communal decisions Interdependent self-construal Strong relation Comparing experiences Higher stickiness for consideration and liking Lower responsiveness to advertising

  12. H2: Higher information search leads to (a) lower stickiness for awareness, and thus (b) higher responsiveness to advertising and (c) to distribution. Status conveyed by consumption Higher search: higher upside benefits AND downside costs Higher responsiveness to advertising and distribution Low consumer protection Higher trust in advertising Less blocking of advertising Lower stickiness Less ad-blocking technology

  13. H3: (a) Consideration has higher sales conversion than liking; (b) distribution not as crucial as in mature markets, but (c) high price perception helps sales High Price- Quality Perception Insufficent protection of consumer interests ‘Cheapest’ goods may be poor quality Will “shop around” to avoid poor quality Buy Known Hi-end Brands Lower sales conversion for liking Higher sales converstion for consideration

  14. H4: High price (a) increases consideration, but reduces (b) liking and (c) sales due to low income Low Income Limited purchasing power Lower sales effects and lower liking High Price High Quality Higher consideration Stronger price-quality associations

  15. Marketing Effects Emerging versus mature markets

  16. Methodology: system of univariate equations • Potential = remaining distance to the natural ceiling • Similar to classic dynamic response models (Vidale & Wolfe) • Stickiness = staying power without further inducement • Measured as own lagged terms (∑AR terms univariate model) • Range of stickiness is 0 stickiness to 1 (permanent shift) • Responsiveness=marketing’s power to move attitude needle • Is short-term elasticity, different for each metric and action

  17. Attitude-to-Sales Conversion • Regression of sales on attitude metrics & AR(1) • Consumer attitude metrics Granger Cause sales: they help us predict sales beyond past sales info MSFE( S | S(-k) ) > MSFE ( S | S(-k), A(-k) ) • S = sales revenue • A = attitude metric • k>0

  18. Long-Term Marketing Effectiveness | 19 • Vector-Autoregressive Model of Sales and Marketing: • Lags J selected by Bayesian Information criterion • Immediate impact through error covariance matrix • Cumulative sales effect: impulse response function

  19. Data challenges • Control for other differences: • Brands: same brands in emerging/mature market • Market (share) position: similar positioning, market shares 3) Similar potential: for attitude metrics ideally • Data for non-food FMCG in 2000s: marketing, attitudes Emerging market: a BIC country (global top 10) Mature market: a highly industrialized country (global top 10) Same 3 global brands, similar market share position, potential

  20. Attitude Stickiness in Emerging vs Mature Market AD AWARE Emg < Mature CONSIDER Emg > Mature LIKING Emg >> Mature

  21. Sales Conversion in Emerging vs Mature Market AD AWARE Inconclusive CONSIDER Emg > Mature LIKING Emg << Mature

  22. AdvertisingResponse in Emerging vs Mature Market AD AWARE Emg > Mature CONSIDER Emg << Mature LIKING Emg << Mature

  23. DistributionResponse in Emerging vs Mature Market AD AWARE Emg > Mature CONSIDER Inconclusive LIKING Emg < Mature

  24. Price-Attitude Response in Emerging vs Mature Market AD AWARE (-) Emg >> Mature CONSIDER Emg > Mature LIKING Emg - , Mature +

  25. Long-Term Sales EffectsEmerging vs. Mature Markets

  26. Love Marks or Safe Bets ?

  27. As illustrated in US-China debates on what a brand is • “A recent study reveals that the average Chinese consumer feels the need to wear at least three branded items to feel comfortable at work. Yet, when probed further, they were at a loss, unable to define the features of a brand. However, they had no difficulty describing the product. It seems that for them, the product is the brand. The emotional connection is simply absent” (Lindstrom 2011) • Advani (2006) : "We are trying everyday to make Lenovo a global brand. Our goal is, not only people here but also people around the world know us. They will have an emotional connection with Lenovo. Becoming a name is one thing but having a deep emotional connection with the company is quite another. That is what our aspirations are: to become a brand that people around the world love.”

  28. Romance & Reliability • Roberts (2005) identifies 3 key elements of a Lovemark: mystery, sensuality and intimacy: "We have passed through the age of information and knowledge and we now live in the age of ideas. Successful brands tell stories. They are romantic and mysterious.“ • Mr Zhou (CEIBS, 2008) “In the end, it’s really the basic work, whether you have reliable quality, good service, that are the fundamental attributes of a brand.”

  29. CONCLUSIONS • Different long-term marketing effectiveness in emerging versus mature markets • Can be explained by differences in stickiness, responsiveness and sales conversion of attitudes • Emerging markets experience a higher stickiness of consideration & liking (interdependent self) • But a higher responsiveness of ad awareness to advertising & distribution (more search) • Consideration converts more than liking

  30. Which raises further questions: • Symbolic > Experiential brand benefits in emerging market • Self expansion (Aron et al. 2005) is the desire to incorporate others (people or brands) into the self concept (Park et al. 2010): do mature market consumers care more about emotional connections with brands because they have fewer connections with people (eg Erdem on religion?) • As countries transition to industrial & to service-oriented economies (Inglehart and Baker 2000), will consumers continue go for ‘safe bets’, i.e. brands with reliable quality and good service or will they go for ‘love marks’, i.e. brands that are “romantic, sensual and intimate” ?

  31. Thank you ! QUESTIONS ?

  32. Relative Price, Consideration and Love for 3 brands Category 1 Category 2

  33. ‘Cost More’ Sales Conversion: + Emg, - Mature Market

  34. 1) Potential: does attitude have room to grow ? 40% 95%

  35. 2) Stickiness: how much carries over ?

  36. 3) Responsiveness: can we move it?

  37. 4) Conversion: does it translate into sales ?

  38. Customer Attitude Dynamics (Srinivasan et al. 2010) • What marketers do • Advertising • Price • Distribution Indirect effect: building attitudes • What customers think & feel Direct Effect: Harvesting Attitudes Consideration Liking Awareness and converting them to sales What customers do Brand purchases

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