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Chapter 12
The Marketing
of Services
Over the course of the past 40 years, the fastest-growing segment of the American economy
has not been the production of tangibles but the performance of services. Spending on services
has increased to such an extent that today it captures more than 50 cents of the consumer’s
dollar. In addition, the service sector in the United States produces a balance-of-trade surplus
and is expected to be responsible for all net job growth in the forseeable future.1 The domi-
nance of the service sector is not limited to the United States. The service sector accounts for
more than half the gross national product (GNP) and employs more than half the labor force in
most Latin American and Caribbean countries. Over the course of the next decade, the service
sector will spawn whole new legions of doctors, nurses, medical technologists, physical thera-
pists, home health aids, and social workers to administer to the needs of an aging population,
along with armies of food servers, child care providers, and cleaning people to cater to the
wants of two-income families. Also rising to the forefront will be a swelling class of technical
workers, including computer engineers, systems analysts, and paralegals.

Many marketing textbooks still devote little attention to program development for
the marketing of services, especially those in the rapidly changing areas of health care,
finance, and travel. This omission is usually based on the assumption that the marketing
of products and services is basically the same, and, therefore, the techniques discussed under
products apply as well to the marketing of services. Basically, this assumption is true.
Whether selling goods or services, the marketer must be concerned with developing
a marketing strategy centered on the four controllable decision variables that comprise the
marketing mix: the product (or service), the price, the distribution system, and promotion. In
addition, the use of marketing research is as valuable to service marketers as it is to product
marketers. However, because services possess certain distinguishing characteristics, the task
of determining the marketing mix ingredients for a service marketing strategy may raise dif-
ferent and more difficult problems than those encountered in marketing products.

The purpose of this chapter is fourfold. First, the reader will become acquainted with
the special characteristics of services and their strategy implications. Second, key con-
cepts associated with providing quality services will be discussed. Third, obstacles will be
described that in the past impeded and still continue to impede development of services
marketing. Finally, current trends and strategies of innovation in services marketing will
be explored. With this approach, the material in the other chapters of the book can be inte-
grated to give a better understanding of the marketing of services.

Before proceeding, some atte ntion must be given to what we refer to when using the
term services. Probably the most frustrating aspect of the available literature on services

Part D 
M

arketing in Special Fields

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is that the definition of what constitutes a service remains unclear. The fact is that no
common definition and boundaries have been developed to delimit the field of services.
The American Marketing Association has defined services as follows:2

1. Service products, such as a bank loan or home security, that are intangible, or at least
substantially so. If totally intangible, they are exchanged directly from producer to user,
cannot be transported or stored, and are almost instantly perishable. Service products
are often difficult to identify, since they come into existence at the same time they are
bought and consumed. They are composed of intangible elements that are in separable;
they usually involve customer participation in some important way, cannot be sold in
the sense of ownership transfer, and have no title. Today, however, most products are
partly tangible and partly intangible, and the dominant form is used to classify them as
either goods or services (all are products). These common, hybrid forms, whatever they
are called, may or may not have the attributes just given for totally intangible services.

2. Services, as a term, is also used to describe activities performed by sellers and others
that accompany the sale of a product and that aid in its exchange or its utilization (e.g.,
shoe fitting, financing, an 800 number). Such services are either presale or postsale and
supplement the product but do not comprise it.

The first definition includes what can be considered almost pure services, such as
insurance, banking, entertainment, airlines, health care, telecommunications, and hotels;
the second definition includes such services as wrapping, financing an automobile, pro-
viding warranties on computer equipment, and the like because these services exist in
connection with the sale of a product or another service. This suggests that marketers of
goods are also marketers of services. For example, one could argue that McDonald’s is not
in the hamburger business. Its hamburgers are actually not very different from those of the
competition. McDonald’s is in the service business.

More and more manufacturers are also exploiting their service capabilities as stand-
alone revenue producers. For example, General Motors, Ford, and Chrysler all offer
financing services. Ford and General Motors have extended their financial services offer-
ings to include a MasterCard, which offers discounts on purchases of their au tomobiles.

The reader can imagine from his or her own experience that some purchases are very
tangible (a coffeemaker) while others are very much intangible (a course in marketing).
Others have elements of both (lunch on a flight from New York to Chicago). In other
words, in reality there is a goods–service continuum, with many purchases including both
tangible goods and intangible services. Figure 12.1 illustrates such a continuum. On the
goods side of the continuum, the buyer owns an object after the purchase. On the ser-
vices side of the continuum, when the transaction is over, the buyer leaves with an experi-
ence and a feeling. When the course in marketing is over or the flight from New York to
Chicago is completed, the student or passenger leaves with a feeling.

The examples of services on the right side of Figure 12.1 are mostly or entirely
intangible. They do not exist in the physical realm. They cannot appeal to the five senses.

Golf clubs
Car
Suit
Airplane

Green fees with sleeve of balls included
Oil change
Suit with alterations
Air flight with lunch

Tangible

Green fees
Taxi ride
Alterations
Air flight

IntangibleMixed
FIGURE 12.1
The Goods–Service
Continuum

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IMPORTANT CHARACTERISTICS OF SERVICES

Services possess several unique characteristics that often have a significant impact on
marketing program development. These special features of services may cause unique
problems and often result in marketing mix decisions that are substantially different
from those found in connection with the marke ting of goods. Some of the more impor-
tant of these characteristics are intangibility, inseparability, perishability and fluctuat-
ing demand, a client relationship, customer effort, and uniformity. They are presented
in  Figure 12.2.

Intangibility

The obvious basic difference between goods and services is the intangibility of services,
and many of the problems encountered in the marketing of services are due to intangibility.
To illustrate, how does an airline make tangible a trip from Philadelphia to San Francisco?
These problems are unique to service marketing.

The fact that many services cannot appeal to a buyer’s sense of touch, taste, smell, sight,
or hearing before purchase places a burden on the marketing organization. For example,
hotels that promise a good night’s sleep to their customers cannot actually show this ser-
vice in a tangible way. Obviously, this burden is most heavily felt in a firm’s promotional
program, but, as will be discussed later, it may affect other areas. Depending on the type of
service, the intangibility factor may dictate use of direct channels because of the need for
personal contact between the buyer and seller. Because a service firm is actually selling an
idea or experience, not a product, it must tell the buyer what the service will do because it
is often difficult to illustrate, demonstrate, or display the service in use. For example, the
hotel must somehow describe to the consumer how a stay at the hotel will leave the cus-
tomer feeling well rested and ready to begin a new day.

The preceding discussion alludes to two strategy elements firms should employ
when trying to overcome the problems associated with service intangibility. First, tangi-
ble aspects associated with the service should be stressed. For example, advertisements
for airlines should emphasize (through text and visuals) the newness of the aircraft, the

Intangibility

Inseparability

Perishability

Client relationship

Customer effort

Uniformity

Characteristic Services Goods

The customer owns only memories, out-
comes, or feelings such as an airline flight,
greater knowledge, or styled hair.
Services often cannot be separated from the
person providing them. They are often pro-
duced and consumed at the same time.
Services can be used only at the time they are
offered. They cannot be inventoried, stored,
or transported.
Services often involve a long-term personal
relationship between buyer and seller.

Customers are often heavily involved in the
production.
Because of inseparability and high involve-
ment on the part of the buyer, each service
may be unique, with the quality likely to vary.

The customer owns objects that can be used, resold, or
given to others.

Goods are usually produced and sold by different
people.

Goods can be placed in inventory for use at another
time.

Goods often involve an impersonal short-term relation-
ship although in many instances relationship strength
and duration are increasing.
Customer’s involvement may be limited to buying the
completed product and using it.
Variations in quality and variance from standards can
be corrected before customers purchase products.

FIGURE 12.2 Unique Characteristics Distinguishing Services from Goods

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roominess of the cabin, and the friendliness of the flight attendants. Second, end benefits
resulting from completion of the service encounter should be accentuated. In the case of
air travel, an individual’s ability to make an important meeting or arrive home in time for
a special occasion could be the derived benefit.

Inseparability
In many cases, a service cannot be separated from the person of the seller. In other words,
the service must often be produced and marketed simultaneously. Because of the simultane-
ous production and marketing of most services, the main concern of the marketer is usually
the creation of time and place utility. For example, the bank teller produces the service of
receiving a deposit and markets other appropriate bank services at the same time. Many ser-
vices, therefore, are tailored and not mass produced. Often, because a company’s employees
are “the company” at the point of contact, they must be given wide latitude and assistance in
determining how best to tailor a specific service to meet customer needs.

The implication of inseparability on issues dealing with the selection of channels of dis-
tribution and service quality is quite important. Inseparable services cannot be inventoried,
and thus direct sale is the only feasible channel of distribution. Service quality cannot some-
times be completely standardized due to the inability to completely mechanize the service
encounter. However, some industries, through innovative uses of technology, have been able
to overcome or, at least, alleviate challenges associated with the inseparability characteristic.

For example, in the financial services industry, automated teller machines (ATMs)
and home banking, through use of computers and telephones, have contributed greatly to
eliminating the need for the customer to directly interact with a bank teller. Further, many
banks are developing computer applications to allow tellers and other service representa-
tives to think like expert problem solvers. These applications allow for platform banking,
a means of enabling bank representatives in any location to bring up on a screen all the
information the bank has about the customer. Every face-to-face contact with a customer
can mean an opportunity to make a sale and, more importantly, further the relationship
with the customer. Of course, the bank representative is still of critical importance as the
one who might recognize by the customer’s expression or words that this visit is not the
appropriate time to be marketing additional services.

MARKETING INSIGHT What Is an E-Service?
12–1

Source: Hewlett Packard Company. All rights reserved.

Service

Application

Business
process

Application

is a
(an)

available
via

and is
hosted bythat

The Net Completes
tasks

ISPs/ASPs

Solves
problems

Conducts
transactions Telcos

CompaniesInformation technology
resource

An e-service

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In addition to technology, tangible representations of the service can serve to overcome
the inseparability problem. For example, in the insurance industry, a contract serves as
the tangible representation of the service. The service itself remains inseparable from the
seller (insurance provider), but the buyer has a tangible representation of the service in the
form of a policy. This enables the use of intermediaries (agents) in the marketing of insur-
ance. Another example is in the use of a credit card—the card itself is a tangible represen-
tation of the service that is being produced and consumed each time the card is being used.

Perishability and Fluctuating Demand
Services are perishable and markets for most services fluctuate either by season (tourism),
days (airlines), or time of day (movie theaters). Unused telephone capacity and electrical
power; vacant seats on planes, trains, buses, and in stadiums; and time spent by catalog service
representatives waiting for customers to reach them all represent business that is lost forever.

The combination of perishability and fluctuating demand has created many problems for
marketers of services. Specifically, in the areas of staffing and distribution, avenues must be
found to have the services available for peak periods, and new strategies need to be developed
to make use of the service during slack periods. Some organizations are attempting to cope
with these problems through the use of pricing strategy. Off-peak pricing consists of charg-
ing different prices during different times or days in order to stimulate demand during slow
periods. Discounts given for weekend calling, Saturday night stay-overs, early-bird dinners,
or winter cruises are all examples of efforts service providers make to redistribute demand.

Other organizations are dealing with issues related to peak period demand through the
use of technology. To illustrate, a well-designed voice mail system allows companies and
callers to cut down on missed phone calls, eliminates long waits on hold, and delivers
clear, consistent messages. In the catalog industry, automated call routing (ACR) is used
to route incoming calls to available service representatives in the order in which they were
received. Finally, in the utilities industry, many electric utilities no longer have to generate
capacity that will meet peak electrical demand. Instead, they rely on buying unused power
from other utilities in other regions of the country.

Client Relationship
In the marketing of a great many services, a client relationship, as opposed to a customer
relationship, exists between the buyer and the seller. In other words, the buyer views the
seller as someone who has knowledge that is of value. Examples of this type of rela-
tionship are the physician–patient, college professor–student, accountant–small business
owner, and broker–investor. The buyer, many times, abides by the advice offered or sug-
gestions provided by the seller, and these relationships may be of an ongoing nature. In
addition, since many service firms are client-serving organizations, they may approach the
marketing function in a more professional manner, as seen in health care, finance, legal,
governmental, and educational services.

Professionals face at least two marketing challenges. First, in many cases, fear or hostility
is brought to the transaction because the customer is uncertain about how genuine the profes-
sional’s concern for his or her satisfaction is. For example, many unpleasant reasons exist for
consulting doctors, lawyers, bankers, or even visiting a college professor. These could include
having surgery, being sued, having to take out a loan, or doing poorly on an exam. Second,
even high-quality service delivery by the professional can lead to dissatisfied customers.
For a physician, the ability to provide high-quality medical care may be overshadowed by a
brusque, unfriendly personality. For a college professor, the demand on students to contact or
visit him or her only during office hours, coupled with students’ own hectic work schedules,
can diminish the impact of the professor’s classroom presentations. It is vitally important that
the professional service provider strive to build long-term positive relationships with clients.

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Customer Effort
Customers are often involved to a relatively great degree in the production of many
types of service. In some restaurants you clean your table. You may carry your luggage
to a cart parked next to a baggage compartment of the plane. If you wish to enjoy an
exhibit at a local art museum, you must walk around the facility and pay careful atten-
tion to what is on display. If an organization purchases the services of an advertising
agency, employees will have to work with the agency, review its ideas, and make the
final selections.

Obviously, not every service requires the same degree of customer effort. Your effort
with a credit card service may be little beyond taking it from your wallet to make a pur-
chase and writing a check once a month to pay the bill.

Uniformity
The quality of services can vary more than the quality of goods. Producers of goods
have procedures to prevent, identify, and correct defects. If these procedures are work-
ing, customers are unlikely to purchase defective products. This is not the case with
most services. Because they are often human performances and often customized to the
needs of the buyer, quality can vary. Each trip to the bank or airline flight or univer-
sity course can be a different experience. Many service jobs such as nursing, teaching,
and career counseling require a positive attitude; how employees feel influences their
performance.

12–2
MARKETING INSIGHT Customers or Clients, Which One

Will It Be?

Practicing relationship marketing is a challenge for service organizations because there are
important differences between “customers” and “clients.” The notion of “client” is critical
for relationship marketing to succeed in a service organization.

Customers Clients

1. Customers may be nameless. 1. Clients must have names.

2. Customers are served as part of 2. Clients are served on an individual basis.
a large mass of people.

3. Customers are statistics; their needs 3. Clients are individual entities. Specific
are reflected in market summaries.        information about them is stored in a
For example, the most popular ice        database. For example, Mr. Smith wants
cream for people over 50 in 2018        only morning flights, first class seats,
was vanilla.                            vegetarian meals, aisle seats, airport
                           motels, and mid-size rental cars.

4. Customers are served by the first 4. Clients are served by a trained professional
available person. For example,        who has been assigned to them.
airline ticket agent, bank teller.        For example, travel agent, personal banker.

5. Customers have no strong reason to 5. Clients often have a strong relationship
feel any loyalty or allegience        with the service provider.
to the service provider.

Source: Based on the work of James H. Donnelly Jr., Leonard L Berry, and Thomas W. Thompson.

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PROVIDING QUALITY SERVICES

In today’s increasingly competitive environment, quality service is critical to organiza-
tional success. Unlike products in which quality is often measured against standards, ser-
vice quality is measured against performance.3 Since services are frequently produced in
the presence of a customer, are labor intensive, and are not able to be stored or objectively
examined, the definition of what constitutes good service quality can be difficult and, in
fact, continually changes in the face of choices.4 Customers determine the value of service
quality in relation to available alternatives and their particular needs. In general, problems
in the determination of good service quality are attributable to differences in the expecta-
tions, perceptions, and experiences regarding the encounter between the service provider
and consumer. These gaps can be classified as follows:

1. The gap between consumer expectations and management perceptions of consumer
expectations.

2. The gap between management perceptions of consumer expectations and the firm’s
service quality specifications.

3. The gap between service quality specifications and actual service quality.
4. The gap between actual service delivery and external communications about the service.

In essence, the customer perceives the level of service quality as being a function of
the magnitude and direction of the gap between expected service and perceived service.
Management of a company may not even realize that they are delivering poor-quality ser-
vice due to differences in the way managers and consumers view acceptable quality levels.
To overcome this problem and to avoid losing customers, firms must be aware of the deter-
minants of service quality. A brief description of these determinants follows.

1. Tangibles include the physical evidence of the service. For example, employees are
always visible in a hotel lobby dusting or otherwise cleaning up. Similarly, clean, shiny,
up-to-date medical equipment or aircraft are examples of tangible elements.

2. Reliability involves the consistency and dependability of the service performance.
For example, does a bank or phone company always send out accurate customer
statements? Similarly, does the plumber always fix the problem on his or her
first visit?

3. Responsiveness concerns the willingness or readiness of employees or professionals to
provide service. For example, will a physician see patients on the same day they call in
to say they are ill? Will a college professor return a student’s call the same day?

4. Assurance refers to the knowledge and competence of service providers and the ability
to convey trust and confidence. This determinant encompasses the provider’s name and
reputation; possession of necessary skills; and trustworthiness, believability, and hon-
esty. For example, a bank will guarantee same-day loan processing; a doctor is highly
trained in a particular specialty.

5. Empathy refers to the service provider’s efforts to understand the customer’s needs and
then to provide, as best as possible, individualized service delivery. For example, flight
attendants on a customer’s regular route learn what type of beverages the customer
drinks and what magazines the customer reads.

Each of these determinants plays an important role in how the customer views the service
quality of a firm. Turning service quality into a powerful competitive weapon requires con-
tinuously striving for service superiority—consistently performing above the adequate ser-
vice level and capitalizing on opportunities for exceeding the desired service level. Relentless

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MARKETING INSIGHT Examples of Customer Judgments of
Service Quality Dimensions 12–3

efforts to continually improve service performance may well be rewarded by improvements
in customer attitudes toward the firm: from customer frustration to customer preference to
customer loyalty. What should be obvious is that to be successful, a service firm must have
both an effective means to measure customer satisfaction and dedicated employees to pro-
vide high-quality service.

Customer Satisfaction Measurement
As mentioned earlier, satisfied customers can become loyal customers. Service quality
and customer satisfaction are of growing concern to business organizations throughout the

Industry Tangibles Reliability Responsiveness Assurance Empathy

Car repair
(consumer)

Repair facility;
waiting area;
uniforms;
equipment

Problem fixed the
first time and ready
when promised

Accessible; no
waiting; responds
to requests

Knowledgeable
mechanics

Acknowledges
customer by name;
remembers
previous problems
and preferences

Airline
(consumer)

Aircraft;
ticketing
counters;
baggage area;
uniforms

Flights to promised
destinations depart
and arrive on
schedule

Prompt and
speedy system for
ticketing, in-flight
baggage handling

Trusted name;
good safety
record; compe-
tent employees

Understands
special individual
needs; anticipates
customer needs

Medical care
(consumer)

Waiting room;
exam room;
equipment;
written
materials

Appointments are
kept on schedule;
diagnoses prove
accurate

Accessible;
no waiting;
willingness to
listen

Knowledge;
skills; credentials;
reputation

Acknowledges
patient as a
person; remembers
previous problems;
listens well; has
patience

Architecture
(business)

Office area;
reports; plans
themselves;
billing
statements;
dress of
employees

Delivers plans
when promised
and within budget

Returns phone
calls; adapts to
changes

Credentials;
reputation; name
in the community;
knowledge and
skills

Understands
client’s industry;
acknowledges
and adapts to
specific client
needs; gets to
know the client

Information
processing
(internal)

Internal reports;
office area; dress of
employees

Provides needed
information when
requested

Prompt response
to requests; not
“bureaucratic”;
deals with
problems
promptly

Knowledgeable
staff; well trained;
credentials

Knows internal
customers as
individuals;
understands
individual and
departmental
needs

Internet
brokerage
(consumer
and business)

Appearance of
the website as
well as flyers,
brochures, and
other print
materials

Provides correct
information and
executes customer
requests accurately

Quick website
with easy access
and no downtime

Credible
information
sources on the
site; brand
recognition;
credentials
apparent on site

Responds with
human interaction
as needed

Source: Adapted from Valarie A. Zeithaml, Mary Jo Bitner, and Dwayne D. Gremler, Service Marketing: Integrating Customer Focus
Across the Firm, 7th ed. (New York: McGraw-Hill, 2018), p. 92. Reprinted with permission of McGraw-Hill Education.

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world, and research on these topics generally focuses on two key issues: (1) understand-
ing the expectations and requirements of the customer, and (2) determining how well a
company and its major competitors are succeeding in satisfying these expectations and
requirements.5

As such, an organization’s approach to measuring service quality through customer
satisfaction measurement (CSM) and effectively implementing programs derived from
results of such studies can spell the difference between success and failure. Research on
market leaders’ CSMs found they had the following aspects in common:

1. Marketing and sales employees were primarily responsible (with customer input) for
designing CSM programs and questionnaires.

2. Top management and the marketing function championed the programs.
3. Measurement involved a combination of qualitative and quantitative research methods

that primarily included mail questionnaires, telephone surveys, and focus groups.
4. Evaluations included both the company’s and competitors’ satisfaction performance.
5. Results of all research were made available to employees, but not necessarily to customers.
6. Research was performed on a continual basis.
7. Customer satisfaction was incorporated into the strategic focus of the company via the

mission statement.
8. There was a commitment to increasing service quality and customer satisfaction from

employees at all levels within the organization.

The Importance of Internal Marketing
Properly performed customer satisfaction research can yield a wealth of strategic infor-
mation about customers, the sponsoring company, and competitors. However, service
quality goes beyond the relationship between a customer and a company. Rather, as
shown by the last aspect listed, it is the personal relationship between a customer
and the particular employee that the customer happens to be dealing with at the time
of the service encounter that ultimately determines service quality. The importance of
having customer-oriented, front-line people cannot be overstated.6 If front-line service
personnel are unfriendly, unhelpful, uncooperative, or uninterested in the customer,
the customer will tend to project that same attitude to the company as a whole. The
character and personality of an organization reflects the character and personality of
its top management. Management must develop programs that will stimulate employee
commitment to customer service. To be successful, these programs must contain five
critical components:

1. A careful selection process in hiring front-line employees. To do this, management has to
clearly define the skills the service person must bring to the job.

2. A clear, concrete message that conveys a particular service strategy that frontline
people can begin to act on. People delivering service need to know how their work
fits in the broader scheme of business operations.7 They need to have a cause because
servicing others is just too demanding and frustrating to be done well each day with-
out one.8

3. Significant modeling by managers, that is, managers demonstrating the behavior that
they intend to reward employees for performing. For example, some airline executives
regularly travel economy class to talk to customers and solicit ideas for improvement.9

4. An energetic follow-through process, in which managers provide the training, support,
and incentives necessary to give the employees the capability and willingness to pro-
vide quality service.

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5. An emphasis on teaching employees to have good attitudes. This type of training usu-
ally focuses on specific social techniques, such as eye contact, smiling, tone of voice,
and standards of dress.

However, organizing and implementing such programs will only lead to temporary
results unless managers practice a strategy of internal marketing. We define internal mar-
keting as the continual process by which managers actively encourage, stimulate, and sup-
port employee commitment to the company, the company’s goods and services, and the
company’s customers. Emphasis should be placed on the word continual. Managers who
consistently pitch in to help when needed, constantly provide encouragement and words
of praise to employees, strive to help employees understand the benefits of performing
their jobs well, and emphasize the importance of employee actions on both company and
employee results are practitioners of internal marketing. In service marketing, successful
internal marketing efforts, leading to employee commitment to service quality, are a key
to success.

Federal Express serves as a prime example of the benefits accruing to a company that
successfully practices internal marketing.10 Federal Express is the first service organi-
zation to win the Malcolm Baldrige National Quality Award. The company’s motto is
“people, service, and profits.” Behind its purple, white, and orange planes and uniforms
are self-managing work teams, gainsharing plans, and empowered employees seemingly
consumed with providing flexible and creative services to customers with varying needs.
Federal Express is a high-involvement, horizontally coordinated organization that encour-
ages employees to use their judgment above and beyond the rulebook.

OVERCOMING THE OBSTACLES IN SERVICE MARKETING

The factors of intangibility and inseparability, as well as difficulties in coming up with
objective definitions of acceptable service quality, make comprehension of service marketing
difficult. However, in view of the size and importance of services in our economy, con-
siderable innovation and ingenuity are needed to make high-quality services available at
convenient locations for consumers as well as businesspeople. In fact, the area of service
marketing probably offers more opportunities for imagination and creative innovation than
does goods marketing. Unfortunately, many service firms still lag in the area of creative
marketing. Even today, those service firms that have done a relatively good job have been
slow in recognizing opportunities in all aspects of their marketing programs. Four reasons,
connected to past practices, can be given for the lack of innovative marketing on the part of
service marketers: (1) a limited view of marketing, (2) a lack of strong competition in the
past, (3) a lack of creative management, and (4) no obsolescence.

Limited View of Marketing
Because of the nature of their service, many firms depended to a great degree on popula-
tion growth to expand sales. A classic example here is the telephone company, which did
not establish a marketing department until 1955 long after other industries had established
them. It was then that the company realized it had to be concerned not only with population
growth but also with meeting the needs of a growing population. Increases in educational
levels and the standard of living also bring about the need for new and diversified services.

Service firms must meet these changing needs by developing new services and new
channels and altering existing channels to meet the changing composition and needs of
the population. For many service industries, growth has come as a result of finding new
channels of distribution. For example, some banks and health care companies were able to

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grow and tap into new markets by establishing limited-service kiosks in malls and super-
markets. Airlines successfully brought in a whole new class of travelers when they began
offering advance-purchase discounted fares. Traditionally, users of these fares either drove
or used other means of transportation to reach their destination, now most tickets are pur-
chased on the Internet.

While many service firms have succeeded in adopting a marketing perspective,
others have been slow to respond. It was not until deregulation of the telecommunications
industry that telephone companies began taking a broadened view of marketing. Even
today, critics point to the obsession with inventing new technology versus using current
technology in meeting customer needs as a weakness of these companies.

Limited Competition
A second major cause of the lack of innovative marketing in many service industries was
the historical lack of competition. Many service industries such as banking, railroads,
and public utilities have, throughout most of their histories, faced very little competition;
some have even been regulated monopolies. Obviously, in an environment characterized
by little competition, there was not likely to be a great deal of innovative marketing.
However, two major forces have changed this situation. First, in the past four decades
the banking, financial services, railroad, cable, airline, telecommunications industries,
and utilities have all been deregulated in varying degrees. With deregulation has come a
need to be able to compete effectively. Second, service marketing has taken on an interna-
tional focus. Today, many foreign companies are competing in domestic service markets.
Foreign interests own several banks, many hotels, and shares in major airlines. Similarly,
American companies are expanding overseas as markets open up.

Noncreative Management
For many years, the managements of service industries have been criticized for not being
progressive and creative. Railroad management has long been criticized for being slow
to innovate. More recently, however, railroads have become leading innovators in the
field of freight transportation, introducing such innovations as piggyback service and

12–4
MARKETING INSIGHT The Internet Is a Service

An interesting way to look at the influence of technology is to realize that the Internet is just
“one big service.” All businesses and organizations that operate on the Internet are essen-
tially providing services—whether they are giving information, performing basic customer
service functions, facilitating transactions, or promoting social interac tions among individu-
als. Even mobile-to-mobile offerings are services at their core. Thus, all the tools, concepts,
and strategies you learn in studying service marketing and management have direct appli-
cation in an Internet or e-business world. Although technology and the Internet have pro-
foundly changed how people do busi ness and what offerings are possible, it is clear that
customers still want basic service. They want what they have always wanted: dependable
outcomes, easy access, respon sive systems, flexibility, apologies, and compensation when
things go wrong. But now they expect these outcomes from technology-based businesses
and from e-commerce solutions. With hindsight it is obvious that many dot-com start-ups
suffered and even failed because of lack of basic customer knowledge and failure of imple-
mentation, logistics, and service follow-up.

Valarie A. Zeithaml, Mary Jo Bitner, and Dwayne D. Gremler, Service Marketing: Integrating Customer
Focus Across the Firm, 7th ed. (New York: McGraw-Hill, 2018), p. 17. Reprinted with permission of
McGraw-Hill Education.

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containerization, and in passenger service, introducing luxury overnight accommoda-
tions on trains. Some other service industries, however, have been slow to develop new
services or to innovate in the marketing of their existing services.

No Obsolescence
A great advantage for many service industries is the fact that many services, because of
their intangibility, are less subject to obsolescence than goods. While this is an obvious
advantage, it has also led some service firms to be sluggish in their approach to marketing.
Manufacturers of goods may constantly change their marketing plans and seek new and
more efficient ways to produce and distribute their products. Since service firms are often
not faced with obsolescence, they often failed to recognize the need for change. This failure
has led to wholesale changes in many industries as new operators who possessed marketing
skills revolutionized the manner in which the service is performed and provided. Many bar-
bershops and hair dressers have gone out of business due to an inability to compete against
hairstyling salons. Many accountants have lost clients to tax preparation ser vices, such as
H&R Block, that specialize in doing one task well and have used technology, including
Internet filing services, to their advantage. Similarly, the old, big movie house has become
a relic of the past as entrepreneurs realized the advantages to be gained from building and
operating theater complexes that contain several minitheaters in or near suburban malls.

MARKETING INSIGHT Relationship Marketing in Service
Organizations 12–5

Throughout this book we have stressed the importance of building long-term relationships in which
the initial sale is viewed as a beginning step in a process, not an end or goal. For marketers of ser-
vices, relationship marketing can present a special set of challenges which require a different new
view of the business and a change in strategy.

For decades, most service marketers were concerned with attracting new customers. Promotion
programs and convenient locations focused on the acquisition of new customers. During the last
two decades, however, service marketers are beginning to think about marketing in a fundamentally
new way. The idea is that marketing is about having customers, not merely acquiring customers.
Service marketers now understand that attracting new customers is only the first step in the process,
that making existing customers better customers is marketing too. In other words, service marketers
understand the importance of relationship marketing. It is fundamentally different from the traditional
view of marketing in service organizations.

Traditional Service Marketing Relationship Service Marketing

1. Marketing focuses on attracting 1. Marketing focuses on “clients.” Customer
new “customers.”    attraction is a beginning step.

2. Emphasis on selling the service 2. Emphasis on establishing and building a
the customer requests.    long-term relationship.

3. Need satisfaction is approached from 3. Need satisfaction is approached from the
the standpoint of the “part.” For example,    standpoint of the “whole.” For example, total
haircut, checking account, airline ticket.    hair care, day spa, personal banker, travel
   management.

4. Primary sales contact is through process 4. Primary sales contact is through a trained
driven providers. For example, airline ticket    marketing professional.
agent, bank teller.   For example, travel agent, personal banker.

5. Profitability is assessed on individual services. 5. Profitability is assessed on the total
For example, individual haircut.    relationship. For example, haircut plus shampoos,
   conditioners, brushes, combs,
   dryers, etc.

Source: Based on the work of James H. Donnelly Jr., Leonard L. Berry, and Thomas W. Thompson.

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IMPLICATIONS FOR SERVICE MARKETERS

It is important for service firms to utilize all of the components of the marketing mix. Many
service firms have been criticized for an overdependence on advertising. The overdepen-
dence on one or two elements of the marketing mix is a mistake that service marketers
cannot afford. The sum total of the marketing mix elements represents the total impact
of the firm’s marketing strategy. The slack created by restricting one element cannot be
compensated by heavier emphasis on another because each element in the marketing mix
is designed to address specific problems and achieve specific objectives.

Just like tangible products, services must also be made available to prospective users,
which implies distribution in the marketing sense of the word. Service marketers must
distinguish conceptually between the production and distribution of services. The problem
of making services more widely available must not be ignored.

Finally, service marketers must stress the role of new service development. The devel-
opment of new services paves the way for firms to expand and segment their markets.
With the use of varying service bundles, new technology, and alternative means of distrib-
uting the service, service firms are now able to practice targeted marketing.

The preceding sections also pointed out the critical role of new service development. In
several of the examples described, indirect distribution of the service was made possible
because “products” were developed that included a tangible representation of the service.
This development facilitates the use of intermediaries, because the service can now be
separated from the producer. In addition, the development of new services paves the way
for companies to expand and segment their markets. With the use of varying service bun-
dles, new technology, and alternative means of distributing the service, companies are now
able to practice targeted marketing.

SUMMARY

This chapter has dealt with the complex topic of service marketing. While the marketing
of services has much in common with the marketing of products, unique problems in the
area require highly creative marketing management skills. Many of the problems in the
service area can be traced to the intangible and inseparable nature of services and the dif-
ficulties involved in measuring service quality. However, considerable progress has been
made in understanding and reacting to these difficult problems, particularly in the area of
distribution. In view of the major role services play in our economy, it is important for
marketing practitioners to better understand and appreciate the unique problems of ser-
vice marketing.

Client relationship: Relationship in which the buyer of services views the seller as someone who
has knowledge that is of value; may be of an ongoing nature.
Customer effort: For many services, the involvement of customers to some degree in the produc-
tion of the service (e.g., some restaurants, airline baggage).
Inseparability: An important characteristic of services, the impossibility of separating a
service from the person of the seller. In other words, services must often be produced and
consumed simultaneously.

Key Terms
and Concepts

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Intangibility: An important difference between goods and services is the intangibility of services
which means that most services cannot appeal to a buyer’s sense of touch, taste, smell, sight, or
hearing before purchase, intangibility places a burden on the marketing organization.
Internal marketing: The continual process by which managers actively encourage, stimulate, and
support employee commitment to the organization and its customers.
Off-peak pricing: The different prices service marketers charge during different times or days in
order to stimulate demand during slow periods and hopefully, smooth out demand for the service.
Perishability and fluctuating demand: Services are perishable, which means that unused capac-
ity represents business that is lost forever. The demand for many services also fluctuates by season,
day of the week, or time of the day.
Quality service: Customers’ perception of quality as a function of (1) tangibles, which include
physical evidence of the service; (2) reliability, which involves the consistency and dependability
of the service performance; (3) responsiveness, which is the willingness or readiness of employees
or professionals to provide service; (4) assurance, which refers to the knowledge and competence
of service providers and the ability to convey trust and confidence; and (5) empathy, which is the
service provider’s efforts to understand the customer’s needs.
Services: Activities performed by sellers and others that accompany the sale of a product and that
aid in its exchange or its utilization (e.g., financing, an 800 number).
Service products: Products that are intangible, or at least substantially so. If totally intangible,
they are exchanged directly from producer to user (e.g., hair cut, medical service), cannot be trans-
ported or stored, and are almost instantly perishable. Service products are often difficult to identify
since they come into existence at the same time they are bought and consumed.
Uniformity: An important characteristic of services is that their quality can vary more than the
quality of goods. Because they are often human performances and often customized to the needs of
the buyer, (e.g., haircut), uniformity is difficult to achieve and quality can vary.

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Part D 
M
arketing in Special Fields

Chapter 13
Global Marketing
A growing number of U.S. corporations have transversed geographical boundaries and
become truly multinational in nature. For most other domestic companies, the question
is no longer, Should we go international? Instead, the questions relate to when, how, and
where the companies should enter the international marketplace. The past 35 years have
seen the reality of a truly world market unfold.

Firms invest in foreign countries for the same basic reasons they invest in their own
country. These reasons vary from firm to firm but fall under the categories of achieving
offensive or defensive goals. Offensive goals are to (1) increase long-term growth and
profit prospects, (2) maximize total sales revenue, (3) take advantage of economies of
scale, and (4) improve overall market position. As many American markets reach satura-
tion, American firms look to foreign markets as outlets for surplus production capacity,
sources of new customers, increased profit margins, and improved returns on investment.
For example, the ability to expand the number of locations of McDonald’s restaurants in
the United States is becoming severely limited. Yet, on any given day, only 0.5 percent
of the world’s population visits McDonald’s. Indeed, in the recent past, of the 50 most
profitable McDonald’s outlets, 25 were located in Hong Kong. For PepsiCo, the results
are similar. Its restaurant division operates more than 10,000 Kentucky Fried Chicken,
Pizza Hut, and Taco Bell outlets abroad.

Multinational firms also invest in other countries to achieve defensive goals. Chief
among these goals are the desire to (1) compete with foreign companies on their own turf
instead of in the United States, (2) gain access to technological innovations that are devel-
oped in other countries, (3) take advantage of significant differences in operating costs
between countries, (4) preempt competitors’ global moves, and (5) avoid being locked out
of future markets by arriving too late.

Such well-known companies as Zenith, Pillsbury, Shell Oil, CBS Records, and Firestone
Tire & Rubber are now owned by non-U.S. interests. Since 1980, the share of the U.S.
high-tech market held by foreign products has grown from less than 8 percent to more than
50 percent. In such diverse industries as power tools, tractors, television, and banking, U.S.
companies have lost the dominant position they once held. By investing solely in domestic
operations or not being willing to adapt products to foreign markets, U.S. companies are
more susceptible to foreign incursions. For example, there has been a great uproar over
Japan’s practice of not opening up its domestic automobile market to U.S. companies.
However, not too many years ago, a great majority of the American cars shipped to Japan
still had the steering wheel located on the left side of the vehicle—the opposite of where it
should be for the Japanese market.

In many ways, marketing globally is the same as marketing at home. Regardless of
which part of the world the firm sells in, the marketing program must still be built around

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13–1
MARKETING INSIGHT Selected U.S. Companies and

Their International Sales

a sound product or service that is properly priced, promoted, and distributed to a carefully
analyzed target market. In other words, the marketing manager has the same controllable
decision variables in both domestic and nondomestic markets.

Although the development of a marketing program may be the same in either domestic
or nondomestic markets, special problems may be involved in the implementation of mar-
keting programs in nondomestic markets. These problems often arise because of the envi-
ronmental differences that exist among various countries that marketing managers may be
unfamiliar with.

In this chapter, marketing management in a global context will be examined. Methods
of organizing global versus domestic markets, global market research tasks, methods of
entry strategies into global markets, and potential marketing strategies for a multinational
firm will be discussed. In examining each of these areas, the reader will find a common
thread—knowledge of the local cultural environment—that appears to be a major prereq-
uisite for success in each area.

With the proper adaptations, many companies have the capabilities and resources
needed to compete successfully in the global marketplace. To illustrate, companies as
diverse as Kellogg’s, Avon, Eli Lilly, and Sun Microsystems all generate a large percent-
age of their sales from foreign operations. Smaller companies can also be successful.

THE COMPETITIVE ADVANTAGE OF NATIONS

As each year passes, it becomes more and more clear that some industries and companies
succeed on a global scale while others do not. Harvard Business School professor Michael
Porter introduced what he calls the “diamond” of national advantage to explain a nation’s
competitive advantage and why some companies and industries become global business
leaders. Figure 13.1 presents Porter’s model. The diamond presents four factors that deter-
mine the competitive advantage or disadvantage of a nation.

1. Factor conditions. The nation’s ability to turn its natural resources, skilled labor, and
infrastructure into a competitive advantage.

Company
Global Revenues

(billions)
Percent Revenues from

Outside the United States

Apple $170.9 61.3%
Avon 10.0 85.4
Boeing 86.6 56.6
Chevron 211.6 75.9
Direct TV 31.8 21.0
Ford 146.9 41.8
IBM 99.8 65.1
Intel 52.7 82.8
Johnson & Johnson 71.3 55.3
Mondelez (Oreos, etc.) 35.3 80.2
Walmart 474.3 29.0

Philip R. Cateora, Mary C. Gilly, John L. Graham, and R. Bruce Money, International Marketing, 17E, 2016, p.
10. Reprinted with permission of McGraw-Hill Education.

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2. Demand conditions. The nature of domestic demand and the sophistication of domestic
customers for the industry’s product or service.

3. Related and supporting industries. The existence or absence in the country of supplier
and related industries that are also internationally competitive.

4. Company strategy, structure, and rivalry. The conditions in the nation that govern
how companies are created, organized, and managed, and how intensely they compete
domestically.

Before Porter developed his model, he studied companies in more than 100 industries.
While the most successful companies differed in many ways and employed different strat-
egies, a very important common theme emerged: A company that succeeds on a global
scale, first succeeded in intense domestic competition. His model is a dynamic model and
illustrates how over time, a nation can build up and maintain its competitive advantage in
any industry.

ORGANIZING FOR GLOBAL MARKETING

When compared with the tasks it faces at home, a firm attempting to establish a global
marketing organization faces a much higher degree of risk and uncertainty. In a foreign
market, management is often less familiar with the cultural, political, and economic situa-
tion. Many of these problems arise as a result of conditions specific to the foreign country.
Managers are also faced with the decisions concerning how to organize the multinational
company.

Problems with Entering Foreign

Markets

While numerous problems could be cited, attention here will focus on those that firms most
often face when entering foreign markets.

Cultural Misunderstanding
Most of us are familiar with our American culture. It consists of the customs, laws, and
morals that influence our behavior and that most of us share. Other countries have their

Company
strategy, structure,

and rivalry

Related and
supporting
industries

Demand
conditions

Factor
conditions

FIGURE 13.1
Porter’s Diamond of
National Advantage

Source: The Competitive
Advantage of Nations by
Michael E. Porter.

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own cultures, and some aspects may be very different from ours. It is generally agreed that
these differences occur in four areas: communication, spatial boundaries, perception of
time, and behavior. For example:

1. Communication. Standing with your hands on your hips is a gesture of defiance in
Indonesia, and having your hands in your pockets during a conversation is frowned
upon in Belgium, France, Sweden, and Finland.

2. Spatial boundaries. In some Asian countries, touching another person is thought of as
an invasion of privacy, while in southern European and Arabic countries, it is an indica-
tion of warmth and friendship.

3. Perception of time. Being on time is very important in Denmark and China, while in
Latin countries it is much less important.

4. Behavior. In Spain, there is a negative attitude toward life insurance. By receiving the
benefits, a wife feels she is profiting from her husband’s death. In western Europe,
many people are very reluctant to buy anything on credit other than a house.

Marketing managers must make the necessary efforts to learn, understand, and adapt to
the cultural norms of customers as well as company managers and sales team members in
countries in which they do business.

Many American companies have made some very costly and unnecessary mistakes in
product development, pricing, distribution, and promotion because they failed to be sensi-
tive to cultural differences.1

Political Uncertainty
Governments are unstable in many countries, and social unrest and even armed conflict
must sometimes be reckoned with. Other nations are newly emerging and anxious to
seek their independence. These and similar problems can greatly hinder a firm seeking
to establish its position in foreign markets. For example, at the turn of the century, firms
scaled back their investment plans in Russia due to, among other reasons, (1) a business
environment plagued by mobsters, (2) politics badly corrupted by the botched invasion of
Chechnya, and (3) an economy troubled by runaway inflation and a plummeting ruble.2
This is not to say investment in Russia is a poor choice. Rather, in situations like this, cau-
tion must be used and companies must have a keen understanding of the risks involved in
undertaking sizable investments.

Import Restrictions
Tariffs, import quotas, and other types of import restrictions hinder global business. These
are usually established to promote self-sufficiency and can be a huge roadblock for the
multinational firm. For example, a number of countries, including South Korea, Taiwan,
Thailand, and Japan, have placed import restrictions on a variety of goods produced in
America, including telecommunications equipment, rice, wood products, automobiles,
and produce. In other cases, governments may not impose restrictions that are commonly
adhered to in the United States. For example, Chrysler pulled out of a proposed investment
deal in China, worth billions of dollars, because the Chinese government refused to protect
its right to limit access to technological information.

Exchange Controls and Ownership Restrictions
Some nations establish limits on the amount of earned and invested funds that can be
withdrawn from it. These exchange controls are usually established by nations that are
experiencing balance-of-payment problems. In addition, many nations have a requirement

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13–2
MARKETING INSIGHT Learning about Different Cultures

The following is an initial list of resources to assist in building cross-cultural knowledge
and skills

1. The U.S. Central Intelligence Agency’s World Factbook. This online reference provides
information on the history, people, government, economy, geography, communications,
transportation, and transnational issues for 266 world entities. (See www.cia.gov/library/
publications/the-worldfactbook/.)

2. Intercultural Press (Nicholas Brealey Publishing Company). A publisher of books about
the principles and practices for improving cross-cultural communication. It offers
resources for working and living around the world. For businesspeople, the company
has a selection of DVDs, simulations, and books that promote cultural awareness and
sensitivity. (See www.interculturalpress.com/store/pc/home.asp.)

3. Berlitz. With more than 130 years of experience and 470 offices in 700 countries, Berlitz
has an established record in providing language instruction and cross-cultural train-
ing for businesspeople. The company also has total immersion language programs
that deliver conversational proficiency in as little as two to six weeks’ time. (See www
.berlitz.com.)

4. Expatica.com. A large number of websites are available for individuals, partners, and
families, who have decided to accept an overseas assignment. One such resource,
Expatica.com, provides local news and information for English-speakers living in several
countries in Europe. Information covers diverse areas including employment, housing,
health, education, family, and children. (See www.expatica.com.)

Source: Adapted from James L. Gibson, John M. lvancevich, James H. Donnelly Jr., and Robert Konopaske,
Organizations, 14th ed. (Burr Ridge, ll: McGraw-Hill, 2012), p. 438.

that the majority ownership of a company operating there be held by nationals. These
and other types of currency and ownership regulations are important considerations in
the decision to  expand into a foreign market. For example, up until a few years ago,
foreign holdings in business ventures in India were limited to a maximum of 40 percent.
Once this ban was  lifted, numerous global companies such as Sony, Whirlpool, JVC,
Grundig, Panasonic, Kellogg’s, Levi Strauss, Pizza Hut, and Domino’s rushed to invest
in this market.3

Economic Conditions
As noted earlier, nations’ economies are becoming increasingly intertwined, and busi-
ness cycles tend to follow similar patterns. However, there are differences, mainly due to
political upheaval or social changes, and these may be significant. In determining whether
to invest, marketers need to perform in-depth analyses of a country’s stage of economic
development, the buying power of its populace, and the strength of its currency. For
example, when the North American Free Trade Agreement (NAFTA) was signed, many
American companies rushed to invest in Mexico, building production facilities and retail
outlets. These companies assumed that signing the agreement would stabilize Mexico’s
economy. In the long term, these investments may pay off. However, many companies
lost millions of dollars there due to the devaluation of the peso. Indeed, the crash of the
peso caused the retail giant Walmart to scale back a $1 billion investment project to open
stores throughout Mexico.

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Organizing the Multinational Company
There are two kinds of global companies—the multidomestic corporation and the global
corporation. The multidomestic company pursues different strategies in each of its foreign
markets. It could have as many different product variations, brand names, and advertising
campaigns as countries in which it operates. Each overseas subsidiary is autonomous. Local
managers are given the authority to make the necessary decisions and are held accountable
for results. In effect, the company competes on a market-by-market basis. Honeywell and
General Foods are U.S. firms that have operated this way.

The global company, on the other hand, views the world as one market and pits its
resources against the competition in an integrated fashion. It emphasizes cultural sim-
ilarities across countries and universal consumer needs and wants rather than differ-
ences. It standardizes marketing activities when there are cultural similarities and adapts
them when the cultures are different. Since there is no one clear-cut way to organize a
global company, three alternative structures are normally used: (1) worldwide product
divisions, each responsible for selling its own products throughout the world; (2) divi-
sions responsible for all products sold within a geographic region; and (3) a matrix
system that combines elements of both of these arrangements. Many organizations, such
as IBM, Caterpillar, Timex, General Electric, Siemens, and Mitsubishi, are structured
in a global fashion.

Most companies are realizing the need to take a global approach to managing their busi-
nesses. However, recognizing the need and actually implementing a truly global approach
are two different tasks. For some companies, industry conditions dictate that they take
a global perspective. The ability to actually implement a global approach to managing
international operations, however, largely depends on factors unique to the company.
Globalization, as a competitive strategy, is inherently more vulnerable to risk than a mul-
tidomestic or domestic strategy, due to the relative permanence of the organizational
structure once established.

In determining whether or not to globalize a particular business, managers should look
first at their industry. Market, economic, environmental, and competitive factors all influ-
ence the potential gains to be realized by following a global strategy. Factors constituting
the external environment that are conducive to a global strategy are:

1. Market factors. Homogeneous market needs, global customers, shorter product life cycles,
transferable brands and advertising, and the ability to globalize distribution channels.

2. Economic factors. Worldwide economies of scale in manufacturing and distribution,
steep learning curves, worldwide sourcing efficiencies, rising product development
costs, and significant differences in host-country costs.

3. Environmental factors. Improving communications, favorable government policies,
and the increasing speed of technological change.

4. Competitive factors. Competitive interdependencies among countries, global moves of
competitors, and opportunities to preempt a competitor’s global moves.

Many of the reasons given in the first part of the chapter about why a domestic company
should become a multinational company can also be used to support the argument that a
firm should take a global perspective. This is because the integration of markets is forcing
companies that wish to remain successful not only to become multinationals but also to
take a global perspective in doing so. In the past, companies had the option of remaining
domestic or going multinational due to the separation of markets. This is no longer the case.

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MARKETING INSIGHT The 10 Commandments of
Global Branding 13–3

Several internal factors can either facilitate or impede a company’s efforts to under-
take a global approach to marketing strategies. These factors and their underlying
dimensions are
1. Structure. The ease of installing a centralized global authority and the absence of rifts

between present domestic and international divisions or operating units.
2. Management processes. The capabilities and resources available to perfo rm global

planning, budgeting, and coordination activities, coupled with the ability to conduct
global performance reviews and implement global compensation plans.

3. Culture. The ability to project a global versus national identity, a worldwide versus
domestic commitment to employees, and a willingness to tolerate interdependence
among business units.

4. People. The availability of employable foreign nationals and the willingness of current
employees to commit to multicountry careers, frequent travel, and having foreign superiors.
Overall, whether a company should undertake a multidomestic or global approach to

organizing its international operations will largely depend on the nature of the company
and its products, how different foreign cultures are from the domestic market, and the com-
pany’s ability to implement a global perspective. Many large brands have failed in their

Growth in global markets has created opportunities for building global brands. The advan-
tages are many and so are the pitfalls. Here are 10 commandments that marketers can use
when planning a global branding campaign.
1. Understand similarities and differences in the global branding landscape. The best

brands retain consistency of theme and alter specific elements to suit each country.
2. Don’t take shortcuts in brand building. Build brands in new markets from the

“bottom up.”
3. Establish marketing infrastructure. Most often, firms adopt or invest in foreign partners

for manufacturing and distribution.
4. Embrace integrated marketing communications. Because advertising opportunities

may be more limited, marketers must use other forms of communication such as spon-
sorship and public relations.

5. Establish brand partnerships. Most global brands have marketing partners ranging
from joint venture partners to franchisees and distributors who provide access to
distribution.

6. Balance standardization and customization. Know what to standardize and what to
customize.

7. Balance global and local control. This is very important in the following areas: organiza-
tion structure, entry strategies, coordination processes, and mechanisms.

8. Establish operable guidelines. Set the rules about how the brand will be positioned and
marketed.

9. Implement a global brand equity measurement system. The ideal measurement system
provides complete, up-to-date information on the brand and on all its competitors to the
appropriate decision makers.

10. Leverage brand elements. If the meanings of the brand name and all related trade-
marked identifiers are clear, they can be an invaluable source of brand equity worldwide.

Sources: Kevin Lane Keller, “The Ten Commandments of Global Branding,” MBA Bullet Point, October 3–16,
2000, p. 3; Kevin Lane Keller, Strategic Brand Management, 4th ed. (Upper Saddle River, NJ: Prentice-Hall,
2013), chap. 14.

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quest to go global. The primary reason for this failure is rushing the process. Successful
global brands carefully stake out their markets, allowing plenty of time to develop their
overseas marketing efforts and evolve into global brands.

Indeed, in many cases, firms do not undertake either purely multidomestic or global
approaches to marketing. Instead, they develop a hybrid approach whereby these
global brands carry with them the same visual identity, the same strategic positioning,
and the same advertising. In addition, local characteristics are factored in. Regardless
of the approach undertaken, management and organizational skills that emphasize the
need to handle diversity are the critical factors that determine the long-term success of
any company’s endeavors in the global marketplace.

PROGRAMMING FOR GLOBAL MARKETING

In this section of the chapter, the major areas in developing a global marketing program
will be examined. As mentioned at the outset, marketing managers must organize the same
controllable decision variables that exist in domestic markets. However, many firms that
have been extremely successful in marketing in the United States have not been able to
duplicate their success in foreign markets.

Global Marketing Research
Because the risks and uncertainties are so high, marketing research is equally important in
foreign markets and in domestic markets and probably more so. Many companies encoun-
ter losing situations abroad because they do not know enough about the market.4 They
don’t know how to get the information or find the cost of collecting the information too
high. To be successful, organizations must collect and analyze pertinent information to
support the basic go/no-go decision before getting to the issues addressed by conventional
market research. Toward this end, in attempting to analyze foreign consumers and markets,
at least four organizational issues must be considered.

Population Characteristics
Population characteristics are one of the major components of a market, and significant
differences exist between and within foreign countries. If data are available, the marketing
manager should be familiar with the total population and with the regional, urban, rural,
and interurban distribution. Other demographic variables, such that the number and size of
families, education, occupation, and religion, are also important. In many markets, these
variables can have a significant impact on the success of a firm’s marketing program. For
example, in the United States, a cosmetics firm can be reasonably sure that the desire to
use cosmetics is common among women of all income classes. However, in Latin America
the same firm may be forced to segment its market by upper-, middle-, and lower-income
groups, as well as by urban and rural areas. This is because upper-income women want
high-quality cosmetics promoted in prestige media and sold through exclusive outlets. In
some rural and less prosperous areas, cosmetics must be inexpensive; in other rural areas,
women do not accept cosmetics.

Ability to Buy
To assess the ability of consumers in a foreign market to buy, four broad measures should
be examined: (1) gross national product or per capita national income, (2) distribution of
income, (3) rate of growth in buying power, and (4) extent of available financing. Because
each of these vary in different areas of the world, the marketing opportunities available
must be examined closely.

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Willingness to Buy
The cultural framework of consumer motives and behavior is integral to the understanding of
the foreign consumer. If data are available, cultural values and attitudes toward the material
culture, social organizations, the supernatural, aesthetics, and language should be analyzed for
their possible influence on each of the elements in the firm’s marketing program. It is easy to
see that such factors as the group’s values concerning acquisition of material goods, the role of
the family, the positions of men and women in society, and the various age groups and social
classes can have an effect on marketing because each can influence consumer behavior.

In some areas tastes and habits seem to be converging, with different cultures becom-
ing more and more integrated into one homogeneous culture, although still separated by
national boundaries. This appears to be the case in Western Europe, where consumers are
developing into a mass market. This convergence obviously will simplify the task for a
marketer in this region. However, cultural differences still prevail among many areas of the
world and strongly influence consumer behavior. Marketing organizations may have to do
primary research in many foreign markets to obtain usable information about these issues.

Differences in Research Tasks and Processes
In addition to the dimensions mentioned earlier, the processes and tasks associated with
carrying out the market research program may also differ from country to country. Many
market researchers count on census data for in-depth demographic information. However,
in foreign countries the market researcher is likely to encounter a variety of problems in
using census data. These include

1. Language. Some nations publish their census reports in English. Other countries offer
census reports only in their native language; some do not take a census.

2. Data content. Data contained in a census vary from country to country and often omit
items of interest to researchers. For example, most foreign nations do not include an

MARKETING INSIGHT Global Product Development
13–4

Procter & Gamble: According to the P&G website, P&G products are developed as global
R&D projects. P&G has 22 research centers in 13 countries from which they can draw exper-
tise. As a good example of a global product, consider the Swiffer mop. P&G made use of its
research centers in the United States and France to conduct market research and testing in
support of this new product.

Apple: In the development of the iPod, Apple worked with about 10 different firms and inde-
pendent contractors throughout the world, and did product design and customer require-
ment definition in both the United States and Japan.

Ikea: The Swedish furniture retailer knows that its target market (middle-class strivers)
crosses international and intercontinental lines, so it operates globally in a streamlined fash-
ion. It identifies an unmet customer need (say a certain style of table at a given price point),
commissions in-house and outsourced designers to compete for the best design, then its
manufacturing partners worldwide compete for the rights to manufacture it. Excellent global
logistics complete the value delivery to customers.

Bungie Studios: This boutique software company, now owned by Microsoft, developed the
MS Halo gaming software series in the United States, but product-tested it in Europe and
Asia. Like Ikea customers in the prior example, gamers are much alike the world over.
Sources: Loida Rosario, “Borderless Innovation: The Impact of Globalization on NPD in Three Industries,”
Visions, june 2006; Merle Crawford and Anthony DiBenedetto, New Products Management, 13e, 2017, p. 11.

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income question on their census. Others do not include such items as marital status or
education levels.

3. Timeliness. The United States takes a census every 10 years. Japan and Canada con-
duct one every five years. However, some northern European nations are abandoning
the census as a data-collection tool and instead are relying on population registers to
account for births, deaths, and changes in marital status or place of residence.

4. Availability in the United States. If a researcher requires detailed household demograph-
ics on foreign markets, the cost and time required to obtain the data will be significant.
Unfortunately, census data for many countries do not exist. For some it will be difficult
to obtain, although data about others can be found on the Internet.

Global Product Strategy
Global marketing research can help determine whether (1) there is an unsatisfied need
for which a new product could be developed to serve a foreign market or (2) there is
an unsatisfied need that could be met with an existing domestic product, either as is or
adapted to the foreign market. In either case, product planning is necessary to determine
the type of product to be offered and whether there is sufficient demand to warrant entry
into a foreign market.

Most U.S. firms would not think of entering a domestic market without extensive
product planning. However, some marketers have failed to do adequate product planning
when entering foreign markets. An example of such a problem occurred when American
manufacturers began to export refrigerators to Europe. The firms exported essentially the
same models sold in the United States. However, the refrigerators were the wrong size,
shape, and temperature range for some areas and had weak appeal in others—thus failing
miserably. Although adaptation of the product to local conditions may have eliminated this
failure, this adaptation is easier said than done. For example, even in the domestic market,
overproliferation of product varieties and options can dilute economies of scale. This dilu-
tion results in higher production costs, which may make the price of serving each market
segment with an adapted product prohibitive.

The solution to this problem is not easy. In some cases, changes need not be made at
all or, if so, can be accomplished rather inexpensively. In other cases, the sales poten-
tial of the particular market may not warrant expensive product changes. For example,
Pepsi’s Radical Fruit line of juice drinks was introduced without adaptation on three
continents. On the other hand, U.S. companies wishing to market software in foreign
countries must undertake painstaking and costly efforts to convert the embedded code
from English to foreign languages. This undertaking severely limits the potential markets
where individual software products can be profitably marketed. In any case, management
must examine these product-related problems carefully prior to making foreign market
entry decisions.

Global Distribution Strategy
The role of the distribution network in facilitating the transfer of goods and titles and in the
demand stimulation process is as important in foreign markets as it is at home. Figure 13.2 illus-
trates some of the most common channel arrangements in global marketing. They range
from no control to almost complete control of the distribution system by manufacturers.

Global distribution strategy can be extremely challenging because sellers must influ-
ence two sets of channels: one in the home country and one in the foreign country. There
are many possibilities as the figure clearly illustrates. The arrows indicate to whom
the producers and various middlemen might sell in order to move products between
countries.

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Manufacturers can become more directly involved and, hence, have greater control over
distribution, when they select agents and distributors located in foreign markets. Both per-
form similar functions, except that agents do not assume title to the manufacturers’ prod-
ucts, while wholesalers do. If manufacturers should assume the functions of foreign agents
or wholesalers and establish their own foreign branch, they greatly increase control over
their global distribution system. Manufacturers’ effectiveness will then depend on their
own administrative organization rather than on independent intermediaries. If the foreign
branch sells to other intermediaries, such as wholesalers and retailers, as is the case with
most consumer goods, manufacturers again relinquish some control. However, since the
manufacturers are located in the market area, they have greater potential to influence these
intermediaries. For example, Volkswagen, Anheuser-Busch, and Procter & Gamble have
each made substantial investments in building manufacturing facilities in Brazil. These
investments allow the companies to begin making direct sales to dealers and retailers in
the country.

The channel arrangement that enables manufacturers to exercise a great deal of con-
trol is where the manufacturer sells directly to organizational buyers or ultimate consumers.
Although this arrangement is most common in the sale of organizational goods, some con-
sumer goods companies have also pursued this arrangement.

Global Pricing Strategy
In domestic markets, pricing is a complex task. The basic approaches used in price determi-
nation in foreign markets are the same as those discussed earlier in the chapter on pricing.
However, the pricing task is often more complicated in foreign markets because of addi-
tional problems associated with tariffs, antidumping laws, taxes, inflation, and currency
conversion.

Import duties are probably the major constraint for global marketers and are encoun-
tered in many markets. Management must decide whether import duties will be paid by
the firm or the foreign consumer, or whether they will be paid by both. This and similar

FIGURE 13.2
International Channel-
of-Distribution
Alternatives

Source: Philip Cateora, John
Graham and Mary Gilly,
lntemational Marketing 16E,
2013, p. 442.

Open distribution
via domestic
wholesale
middlemen

Exporter Importer

Foreign
agent or
merchant
wholesalers

Foreign
retailer

Foreign
consumer

Export management
company or
company sales force

Home country

Foreign country

The foreign marketer or
producer sells to or through

Domestic
producer
or marketer
sells to or
through

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constraints may force the firm to abandon an otherwise desirable pricing strategy or may
force the firm out of a market altogether.

Another pricing problem arises because of the rigidity in price structures found in many
foreign markets. Many foreign intermediaries are not aggressive in their pricing policies.
They often prefer to maintain high unit margins at the expense of low sales volume rather
than develop large sales volume by means of lower prices and smaller margins per unit.
Many times this rigidity is encouraged by legislation that prevents retailers from cutting
prices substantially at their own discretion. These are only a few of the pricing problems
foreign marketers encounter.

Global Advertising and Sales Promotion Strategy
When expanding their operations into the world marketplace, most firms are aware of the
language barriers that exist and realize the importance of translating their messages into the
proper idiom. However, numerous other issues must be resolved as well, such as selecting
appropriate media and advertising agencies in foreign markets.

There are many problems in selecting media in foreign markets. Often the media that
are traditionally used in the domestic market are not available. For example, it was not
until recently that national commercial TV became a reality in the former Soviet Union.
If media are available, they may be so only on a limited basis or they may not reach the
potential buyers. In addition to the problem of availability, other difficulties arise from the
lack of accurate media information. There is no rate and data service or media directory
that covers all the media available throughout the world. Where data are available, their
accuracy is often questionable.

Another important promotion decision that must be made is the type of agency used
to prepare and place the firm’s advertisements. Along with the growth in multinational
product companies, more multinational advertising agencies are available. Among the top
15  global advertising agencies, less than half are U.S. owned. Alliances and takeovers
have stimulated growth in the formation of global agencies. The U.S. company can take
either of two major approaches to choosing an agency. The first is to use a purely local
agency in each area where the advertisement is to appear. The rationale for this approach is
that a purely local agency employing only local nationals can better adapt the firm’s mes-
sage to the local culture.

The other approach is to use either a U.S.-based multinational agency or a multinational
agency with U.S. offices to develop and implement the ad campaign. For example, the
Coca-Cola Company uses one agency to create ads for the 80 nations in which Diet Coke
is marketed. The use of these so-called super agencies is increasing (annual growth rates
averaged over 30 percent in the last decade). By using global advertising agencies, com-
panies are able to take advantage of economies of scale and other efficiencies. However,
global agencies are not without their critics. Many managers believe that small, local agen-
cies in emerging markets take a more entrepreneurial and fresher approach to advertising
than do global agencies. Much discussion has developed over which approach is best, and
it appears that both approaches can be used successfully.

The use of sales promotion can also lead to opportunities and problems for marketers
in foreign markets. Sales promotions often contain certain characteristics that are more
attractive than other elements of the promotion mix. In less-wealthy countries, consum-
ers tend to be even more interested in saving money through price discounts, sampling,
or premiums. Sales promotion can also be used as a strategy for bypassing restrictions on
advertising placed by some foreign governments. In addition, sales promotion can be an
effective means for reaching people who live in rural locations where media support for
advertising is virtually nonexistent.

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ENTRY AND GROWTH STRATEGIES FOR GLOBAL MARKETING

A major decision facing companies that desire either to enter a foreign market or pursue
growth within a specific market relates to the choice of entry or growth strategy. What type
of strategy to employ depends on many factors, including the analysis of market opportu-
nities, company capabilities, the degree of marketing involvement and commitment the
company is willing to make, and the amount of risk that the company is able to tolerate.5
A company can decide to (1) make minimal investments of funds and resources by limiting
its efforts to exporting, (2) make large initial investments of resources and management
effort to try to establish a long-term share of global markets, or (3) take an incremental
approach whereby the company starts with a low-risk mode of entry that requires the least
financial and other resource commitment and gradually increases its commitment over
time. All three approaches can be profitable. In general, a company can initially enter a
global market and, subsequently, pursue growth in the global marketplace in six ways:

1. Exporting. Exporting occurs when a company produces the product outside the final
destination and then ships it there for sale. It is the easiest and most common approach
for a company making its first international move. Any company with a website can
easily become a global marketer as long as there are shippers available to deliver
products and  it is legal to sell them in foreign countries. Exporting has two distinct
advantages. First, it avoids the cost of establishing manufacturing operations in the host
country; second, it may help a firm achieve experience-curve and location economies.
By manufacturing the product in a centralized location and exporting it to other national
markets, the firm may be able to realize substantial scale economies from its global
sales volume. This method is what allowed Sony to dominate the global TV market.
The major disadvantages related to exporting include (a) the sometimes higher cost
associated with the process, (b) the necessity of the exporting firm to pay import duties
or face trade barriers, and (c) the delegation of marketing responsibility for the product
to foreign agents who may or may not be dependable.

2. Licensing. Companies can grant patent rights, trademark rights, and the right to use
technological processes to foreign companies. This is the most common strategy for
small and medium-size companies. The major advantage to licensing is that the firm
does not have to bear the development costs and risks associated with opening up a
foreign market. In addition, licensing can be an attractive option in unfamiliar or politi-
cally volatile markets. The major disadvantages are that (a) the firm does not have
tight control over manufacturing, marketing, and strategy that is required for realizing
economies of scale; and (b) there is the risk that foreign companies may capitalize on
the licensed technology. RCA Corporation, for example, once licensed its color TV
technology to a number of Japanese firms. These firms quickly assimilated the technol-
ogy and used it to enter the U.S. market.

3. Franchising. Franchising is similar to licensing but tends to involve longer-term com-
mitments. In addition, franchising is commonly employed by service firms, as opposed
to manufacturing firms. In a franchising agreement, the franchisor sells limited rights to
use its brand name in return for a lump sum and share of the franchisee’s future profits.
In contrast to licensing agreements, the franchisee agrees to abide by strict operating
procedures. Advantages and disadvantages associated with franchising are primarily the
same as with licensing except to a lesser degree. In many cases, franchising offers an
effective mix of centralized and decentralized decision making.

4. Joint ventures. A company may decide to share management with one or more col-
laborating foreign firms. Joint ventures are especially popular in industries that call for

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large investments, such as natural gas exploration and automobile manufacturing. Con-
trol of the joint venture may be split equally, or one party may control decision mak-
ing. Joint ventures hold several advantages. First, a firm may be able to benefit from
a partner’s knowledge of the host country’s competitive position, culture, language,
political systems, and so forth. Second, the firm gains by sharing costs and risks of
operating in a foreign market. Third, in many countries, political considerations make

13–5
MARKETING INSIGHT Tips for Entering Emerging

Markets

1. Adapt the innovation strategy. Adapt organizational structure and culture so that devel-
opment of lower-cost, lower-tech products receive attention, not just products aimed at
the “top of the pyramid.” Siemens has a strategic initiative known as SMART (simple,
maintenance-friendly, affordable, reliable; and timely-to-market) to develop products for
previously-missed markets.

2. Meet the new customers. Learn about them. Listen to the voice of these customers. Go to
meet them in their own cultural environment. Nokia engineers have done ethnographic
research in India and Nepal to determine specific customer needs (such as screens that can
be read in bright sunlight or address books using icons that can be used by the illiterate).

3. Offer a new price-performance ratio. To do this, it might be better to design a product
from scratch than to try to strip features out of an existing product. The Dacia Logan,
designed by Renault and built in Romania, is low-cost ($6500 purchase price), carries
five people, is half as expensive to service as a regular Renault, and can be easily ser-
viced by basic mechanics (it does not need to go to a Renault dealership for service).

4. Apply simplified engineering. The mindset of headquarters employees needs to change,
toward an attitude of willing product simplification. The answer is not always to find the
newest technology. Automotive supplier Bosch made adjustments to simple technologies
to provide parts for the inexpensive Tata Nano, designed for sale in India, For example,
the injection technology used in the Nano was adapted from two-wheeler technology.

5. Localize R&D activities. New products for emerging markets are often best developed
in those very markets. This keeps development costs low and taps the know how of
local engineers who may come up with cheap, unconventional solutions. GE’s R&D
facility in Bangalore developed an inexpensive, portable electrocardiogram (ECG) that
suited the needs of local doctors. The engineers also adapted an Indian portable-ticket
printer lot use as the EGG printer.

6. Adapt marketing and sales. Learn how marketing is different in the target country, and
adapt, Nokia has had success selling through a network of 90,000 points of sale in India
by adapting to local methods. In rural neigh borhoods, customers prefer talking to sales-
people in person, so sales vans pass by occasionally, and sales people teach people
about cell phones and provide after-sale service.

7. Introduce new business models. Nokia-Siemens developed a new business model using
smart technology (Village Connection) that reduces capital expenditure for phone com-
panies, allowing them to enter low-end mar ket segments profitably despite very low
monthly spending per capita on phone services.

8. Find a local partner. Use the partner’s expertise to learn quickly about local market con-
ditions. Having a local partner helps overcome any appearance of foreigness. GE brings
professors from top Indian universities to spend their sabbatical at the Bangalore facility,
and cooperates with the Indian Institute of Technology on research projects.

Source: C. Merle Crawford and C. Anthony Di Benedetto, New Product Management. 11E, 2015, p. 531;
Source: Anna Dubiel and Holger Ernst, “Success Factors of New Product Development for Emerging
Markets,” in K. N. Kahn, S. E. Kay, R. J. Slotegraaf and S. Uban (Eds.), The PDMA Handbook of New Product
Development (Hoboken, NJ: John Wiley), 2013, Ch. 6, pp. 100–114.

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joint ventures the only feasible entry mode. Finally, joint ventures allow firms to take
advantage of a partner’s distribution system, technological know-how, or marketing
skills. For example, General Mills teamed up with CPC International in an operation
called International Dessert Partners to develop a major baking and dessert-mix busi-
ness in Latin America. The venture combines General Mills’ technology and Betty
Crocker dessert products with CPC’s marketing and distribution capabilities in Latin
America. The major disadvantages associated with joint ventures are that (a) a firm
may risk giving up control of proprietary knowledge to its partner, and (b) the firm may
lose the tight control over a foreign subsidiary needed to engage in coordinated global
attacks against rivals.

5. Strategic alliances. Although some consider strategic alliances a form of joint venture,
we consider them a distinct entity for two reasons. First, strategic alliances are normally
partnerships that two or more firms enter into to gain a competitive advantage on a
worldwide versus local basis. Second, strategic alliances are usually of a much longer-
term nature than are joint ventures. In strategic alliances, the partners share long-term
goals and pledge almost total cooperation. Strategic alliances can be used to reduce
manufacturing costs, accelerate technological diffusion and new product develop-
ment, and overcome legal and trade barriers. The major disadvantage associated with
formation of a strategic alliance is the increased risk of competitive conflict between
the partners.

6. Direct ownership. Some companies prefer to enter or grow in markets either through
establishment of a wholly owned subsidiary or through acquisition. In either case, the
firm owns 100 percent of the stock. The advantages to direct ownership are that the firm
has (a) complete control over its technology and operations, (b) immediate access to
foreign markets, (c) instant credibility and gains in the foreign country when acquisi-
tions are the mode of entry or growth, and (d) the ability to install its own management
team. Of course, the primary disadvantages of direct ownership are the huge costs and
significant risks associated with this strategy. These problems may more than offset the
advantages depending upon the country entered.

Regardless of the choice of methods used to gain entry into and grow within a for-
eign marketplace, companies must somehow integrate their operations. The complexities
involved in operating on a worldwide basis dictate that firms decide on operating strate-
gies. A critical decision that marketing managers must make relates to the extent of adapta-
tion of the marketing mix elements for the foreign country in which the company operates.
Depending on the area of the world under consideration and the particular product mix,
different degrees of standardization/adaptation of the marketing mix elements may take
place. As a guideline, standardization of one or more parts of the marketing mix is a func-
tion of many factors that individually and collectively affect companies’ decision making.6
It is more likely to succeed under the following conditions:

∙ When markets are economically similar.
∙ When worldwide customers, not countries, are the basis for segmenting markets.
∙ When customer behavior and lifestyles are similar.
∙ When the product is culturally compatible across the host country.
∙ When a firm’s competitive position is similar in different markets.
∙ When competing against the same competitors, with similar market shares, in different

countries, rather than competing against purely local companies.
∙ When the product is an organizational and high-technology product rather than a

consumer product.

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∙ When there are similarities in the physical, political, and legal environments of home
and host countries.

∙ When the marketing infrastructure in the home and host countries is similar.

The decision to adapt or standardize marketing should be made only after a thorough
analysis of the product-market mix has been undertaken. The company’s end goal is to
develop, manufacture, and market the products best suited to the actual and potential needs
of the local (wherever that may be) customer and to the social and economic conditions of
the marketplace. There can be subtle differences from country to country and from region
to region in the ways a product is used and what customers expect from it.

SUMMARY

The world is truly becoming a global market. Many companies that avoid operating in the
global arena are destined for failure. For those willing to undertake the challenges and risks
necessary to become multinational organizations, long-term survival and growth are likely
outcomes. The purpose of this chapter was to introduce the reader to the opportunities,
problems, and challenges involved in global marketing.

Diamond of national advantage: Developed by Michael Porter, an explanation of a nation’s
competitive advantage and why some companies and industries become global business leaders.
Direct ownership: An organization’s strategy for entering and growing in global markets either
through the establishment of a wholly owned subsidiary or through acquisition where it owns
100 percent of the stock.
Exporting: A strategy for entering global markets where a firm produces the product outside the
final destination and then ships it there for sale. It is the easiest and most common approach to
entering a foreign market.
Franchising: A market entry strategy that is similar to licensing but usually involves longer-term
commitments. The franchisor sells limited rights to use its brand name in return for a lump sum
and share of the franchisee’s future profits. It is more commonly employed by service organizations
than manufacturers.
Global company: A company that views the world as one market and employs its resources
against the competition in an integrated fashion. It emphasizes cultural similarities across countries
and universal consumer needs and wants rather than differences. It standardizes marketing activities
where there are cultural similarities and adapts them when the cultures are different.
Joint venture: An organization’s entry into a foreign market by sharing management with one
or more collaborating foreign firms. Decision making may be shared equally or controlled by one
party.
Licensing: Organization’s granting of patent rights, trademark rights, and the right to use techno-
logical processes to foreign markets. By licensing, an organization does not have to bear the costs
and risks associated with actually locating in a foreign market.
Multidomestic company: A company that pursues different strategies in each of its foreign
markets. It could have as many different product variations, brand names, and advertising
campaigns as countries in which it operates.
Strategic alliance: Partnerships where two or more firms invest in each other to gain competitive
advantages on a worldwide versus local level. They are usually of a much longer-term nature than a
joint venture.

Key Terms
and Concepts
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• Part D: Marketing in Special Fields

Chapter 12: The Marketing of Services
Important Characteristics of Services
Intangibility
Inseparability
Perishability and Fluctuating Demand
Client Relationship
Customer Effort
Uniformity
Providing Quality Services
Customer Satisfaction Measurement
The Importance of Internal Marketing
Overcoming the Obstacles in Service Marketing
Limited View of Marketing
Limited Competition
Noncreative Management
No Obsolescence
Implications for Service Marketers
Summary
Chapter 13: Global Marketing
The Competitive Advantage of Nations
Organizing for Global Marketing
Problems with Entering Foreign Markets
Organizing the Multinational Company
Programming for Global Marketing
Global Marketing Research
Global Product Strategy
Global Distribution Strategy
Global Pricing Strategy
Global Advertising and Sales Promotion Strategy
Entry and Growth Strategies for Global Marketing
Summary