Winning Hearts, Minds and Sales in
Emerging versus Mature Markets
Why Long-Term Marketing Effectiveness Differs
Koen Pauwels, Ozyegin University, Istanbul
Selin Erguncu, Koc University, Istanbul
Marketing Dynamics 2011: Jaipur, India
1
Overview
• Branding and marketing effectiveness
• Customer Attitude Dynamics and Criteria
• How CAD differs in emerging vs mature markets
• Empirical comparison across 2 categories
2
Is a brand = a brand = a brand ?
“Marketing principles are universally applicable, and the marketer’s
task is the same whether applied in Dimebox, Texas or
Katmandu, Nepal”(Cateora and Hess 1966, p. 4)
"We have passed through the age of information and knowledge
and we now live in the age of ideas. Successful brands tell stories.
They are romantic and mysterious.“Roberts (2005, Lovemarks)
“In the end, it’s really the basic work, whether you have reliable
quality, good service, that are the fundamental attributes of a
brand.” Mr Zhou (CEIBS, 2008)
3
Do consumer behavior & marketing effects differ ?
“in India, people are even more brand-conscious than they are in
the U.S., particularly for PCs. If someone buys a PC, all the
neighbors come and ask not only which brand you bought, but
what type of processor it has in it” (Deepak Advani, IBM, 2009)
“In emerging markets, brands are seen as an important mark of
quality and status. People value the reassurance provided by a
well-known brand name, and if they can, they may be willing to
pay more for it. They believe it is important to get the right
brand even if they have to shop around for it. In mature
markets, people are more likely to assume that all brands stocked
by mainstream retailers will deliver the same basic quality”
(Nigel Hollis, Millward Brown 2010)
4
Emerging Markets
• are countries that are restructuring their economies
along market-oriented lines;
• offer a wealth of opportunities in trade, tech transfers,
and foreign direct investment;
• are regional economic powerhouses with large
populations, resource bases, and markets;
• will also become more significant buyers of goods and
services than industrialized countries.
Cultural & Economic Differences
Cultural
Differences
• Self-Construal / collectivist
• Power Δ / status seeking
• Search
Economic
Differences
• Income
• Consumer Protection
• Technology, Competition,…
BIC versus Anglo-Saxon market descriptives (st.dev.)
Brazil, India, China
USA, UK, Netherlands
Individualism
35 (14,19)
87 (6,08)
Power Distance
75 (5,69)
38 (2,52)
4.310 (3.636)
43.313 (6.971)
Technology Level
3,89 (0,30)
5,38 (0,75)
Trust in General Advertising
2,7 (0,12)
2,4 (0,03)
Trust in Traditional Advertising
2,8 (0,15)
2,5 (0,06)
Trust in Online Advertising
2,6 (0,10)
2,3 (0,03)
GDP per capita (US$)
7
50
2.75
45
2.7
Brazil
Trust in general advertising
GDP per capita (US$)
40
35
30
25
20
15
10
2.65
India
2.6
China
2.55
US
2.5
UK
2.45
Netherlands
2.4
5
2.35
0
0
50
Individualism
100
0
50
Individualism
100
8
Customer Attitude Dynamics (Srinivasan et al. 2010)
Marketing
What marketers do
• Advertising
• Price
• Distribution
builds
Attitudes
What customers think & feel
Awareness
Consideration
which convert
to Brand Sales
What customers do
Brand purchases
Liking
Customer Attitude Dynamics Criteria
• Hanssens, Pauwels, Srinivasan and VanHeule (MSI 2010)
• Explain marketing impact by 4 criteria of attitude dynamics
– Potential: room to grow ?
– Stickiness: do changes last ?
– Responsiveness to Marketing
– Conversion to Sales
• This paper proposes that attitude dynamics (and thus
marketing effects) differ for emerging vs. mature markets
10
Our Conceptual Framework
Cultural
Differences
-Self-Construal
- Search
Attitude Dynamics:
Stickiness, Conversion
Marketing Response
of each attitude to:
Economic
Differences
- Awareness
-Consideration
- Liking
-Advertising
- Distribution
-Price
-Income
-Consumer
Protection
Marketing Effectiveness
-Sales
H1: Interdependent self-construal leads to (a) higher
stickiness for consideration and (b) liking, and thus a
(c) lower responsiveness to advertising.
Connectedness
Communal
decisions
Strong relation
Comparing
experiences
Interdependent
self-construal
Higher stickiness for
consideration and
liking
Lower responsiveness
to advertising
12
H2: Higher information search leads to (a) lower
stickiness for awareness, and thus (b) higher
responsiveness to advertising and (c) to distribution.
Status conveyed
by consumption
Low consumer
protection
Higher trust in
advertising
Higher search:
higher upside
benefits AND
downside costs
Less blocking of
advertising
Higher responsiveness
to advertising and
distribution
Lower stickiness
Less ad-blocking
technology
13
H3: (a) Consideration has higher sales conversion than
liking; (b) distribution not as crucial as in mature
markets, but (c) high price perception helps sales
High PriceQuality
Perception
Insufficent
protection of
consumer
interests
‘Cheapest’
goods may be
poor quality
Higher sales converstion
for consideration
Will “shop
around” to
avoid poor
quality
Buy Known
Hi-end Brands
Lower sales conversion
for liking
14
H4: High price (a) increases consideration, but
reduces (b) liking and (c) sales due to low income
Low Income
Higher consideration
Limited
purchasing
power
High Price
Lower sales effects
and lower liking
High Quality
Stronger price-quality associations
15
Marketing Effects Emerging versus mature markets
Awareness
Advertising
Responsiveness
[H2b]
Distribution
Responsiveness
[H2c]
Price
Responsiveness
Stickiness
Conversion
[H2a]
Consideration
)
[H1c]
Liking
[H1c]
Sales Effects
Lower ST but
longer LT
[H3b]
[H3b]
[H4a]
[H3c]
[H1a]
[H1b]
[H3a]
[H3a]
16
Methodology: system of univariate equations
• Potential = remaining distance to the natural ceiling
– Similar to classic dynamic response models (Vidale & Wolfe)
• Stickiness = staying power without further inducement
– Measured as own lagged terms (∑AR terms univariate model)
– Range of stickiness is 0 stickiness to 1 (permanent shift)
• Responsiveness=marketing’s power to move attitude needle
– Is short-term elasticity, different for each metric and action
17
Attitude-to-Sales Conversion
• Regression of sales on attitude metrics & AR(1)
• Consumer attitude metrics Granger Cause sales:
they help us predict sales beyond past sales info
MSFE( S | S(-k) ) > MSFE ( S | S(-k), A(-k) )
– S = sales revenue
– A = attitude metric
– k>0
18
Long-Term Marketing Effectiveness
| 19
Vector-Autoregressive Model of Sales and Marketing:
11j
 Pr icet  CP   P 
 Dist      12
J  j
C

21
t 
D  D





  Seast   j

 Adst  C A   A  1
j 1 31
 j

    
41
 Salest  CS   S 
12j
22j
32j
42j
13j
23j
33j
43j
14j   Pt  j   P ,t 

  
j  D
24   t  j   D ,t 
 
j 

 A ,t
34 At  j


 
j 
44   St  j   S ,t 
› Lags J selected by Bayesian Information criterion
› Immediate impact through error covariance matrix
› Cumulative sales effect: impulse response function
Data challenges
•
1)
2)
3)
Control for other differences:
Brands: same brands in emerging/mature market
Market (share) position: similar positioning, market shares
Similar potential: for attitude metrics ideally
• Data for non-food FMCG in 2000s: marketing, attitudes
Emerging market: a BIC country (global top 10)
Mature market: a highly industrialized country (global top 10)
Same 3 global brands, similar market share position, potential
20
Attitude Stickiness in Emerging vs Mature Market
category 1
AD AWARE
Emg < Mature
category 2
TOTAL
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
0.7
0.6
CONSIDER
Emg > Mature
0.5
0.4
0.3
0.2
0.1
0.0
0.7
LIKING
Emg >> Mature
0.6
0.5
0.4
0.3
0.2
0.1
0.0
21
Sales Conversion in Emerging vs Mature Market
category 1
category 2
TOTAL
0.05
0.04
AD AWARE
Inconclusive
0.03
0.02
0.01
0.00
0.20
CONSIDER
Emg > Mature
0.15
0.10
0.05
0.00
0.25
LIKING
Emg << Mature
0.20
0.15
0.10
0.05
0.00
22
Advertising Response in Emerging vs Mature Market
category 1
AD AWARE
Emg > Mature
category 2
TOTAL
0.020
0.018
0.016
0.014
0.012
0.010
0.008
0.006
0.004
0.002
0.000
0.008
CONSIDER
Emg << Mature
0.006
0.004
0.002
0.000
0.012
LIKING
Emg << Mature
0.010
0.008
0.006
0.004
0.002
0.000
23
Distribution Response in Emerging vs Mature Market
category 1
category 2
TOTAL
0.7
0.6
0.5
AD AWARE
Emg > Mature
0.4
0.3
0.2
0.1
0.0
CONSIDER
Inconclusive
LIKING
Emg < Mature
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
24
Price-Attitude Response in Emerging vs Mature Market
category 1
category 2
TOTAL
0.5
0.0
AD AWARE (-)
Emg >> Mature
-0.5
-1.0
-1.5
-2.0
-2.5
1.4
1.2
CONSIDER
Emg > Mature
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
1.0
LIKING
Emg - , Mature +
0.5
0.0
-0.5
-1.0
-1.5
-2.0
25
Long-Term Sales Effects
Emerging vs. Mature Markets
1.160
1.3
0.8
0.521
0.3
0.108
0.020
-0.2
EMG
MATURE
-0.7
Advertising Effect
EMG
MATURE
Distribution Elasticity
EMG
MATURE
Price Elasticity
-1.2
-1.487
-1.7
-2.2
-2.053
26
Love Marks or Safe Bets ?
Low sales
conversion
High sales
conversion
Low response to
marketing , high
staying power
Liking Emerging
Consideration
Emerging
High response to
marketing, low
staying power
Consideration
Mature
Liking Mature
27
As illustrated in US-China debates on what a brand is
• “A recent study reveals that the average Chinese consumer
feels the need to wear at least three branded items to feel
comfortable at work. Yet, when probed further, they were at
a loss, unable to define the features of a brand. However,
they had no difficulty describing the product. It seems that
for them, the product is the brand. The emotional
connection is simply absent” (Lindstrom 2011)
• Advani (2006) : "We are trying everyday to make Lenovo a
global brand. Our goal is, not only people here but also
people around the world know us. They will have an
emotional connection with Lenovo. Becoming a name is
one thing but having a deep emotional connection with the
company is quite another. That is what our aspirations are:
to become a brand that people around the world love.”
28
Romance & Reliability
• Roberts (2005) identifies 3 key elements of a
Lovemark: mystery, sensuality and intimacy: "We
have passed through the age of information and
knowledge and we now live in the age of ideas.
Successful brands tell stories. They are romantic
and mysterious.“
• Mr Zhou (CEIBS, 2008) “In the end, it’s really the
basic work, whether you have reliable quality, good
service, that are the fundamental attributes of a
brand.”
29
CONCLUSIONS
• Different long-term marketing effectiveness in
emerging versus mature markets
• Can be explained by differences in stickiness,
responsiveness and sales conversion of attitudes
• Emerging markets experience a higher stickiness
of consideration & liking (interdependent self)
• But a higher responsiveness of ad awareness to
advertising & distribution (more search)
• Consideration converts more than liking
30
Which raises further questions:
• Symbolic > Experiential brand benefits in emerging market
• Self expansion (Aron et al. 2005) is the desire to incorporate
others (people or brands) into the self concept (Park et al.
2010): do mature market consumers care more about
emotional connections with brands because they have
fewer connections with people (eg Erdem on religion?)
• As countries transition to industrial & to service-oriented
economies (Inglehart and Baker 2000), will consumers
continue go for ‘safe bets’, i.e. brands with reliable quality
and good service or will they go for ‘love marks’, i.e. brands
that are “romantic, sensual and intimate” ?
31
Thank you !
QUESTIONS ?
32
Relative Price, Consideration and Love for 3 brands
Category 1
Category 2
1.4
1.4
1.2
1.2
Emg Price
1
1
Mat Price
0.8
0.8
Emg Consider
0.6
0.6
Mat Consider
0.4
0.4
Emg Like
0.2
0.2
Mat Like
0
0
A
B
C
A
B
C
33
‘Cost More’ Sales Conversion: + Emg, - Mature Market
category 1
category 2
TOTAL
0.04
0.02
0.00
-0.02
-0.04
-0.06
-0.08
-0.10
-0.12
34
1) Potential: does attitude have room to grow ?
40%
95%
35
2) Stickiness: how much carries over ?
36
3) Responsiveness: can we move it?
37
4) Conversion: does it translate into sales ?
38
Customer Attitude Dynamics (Srinivasan et al. 2010)
What marketers do
•
•
•
Advertising
Price
Distribution
Indirect effect:
Direct Effect:
Harvesting
Attitudes
building attitudes
What customers think & feel
Awareness
Consideration
Liking
and converting them to sales
What customers do
Brand purchases