Lovemarks or SafeBets?

What drives consumers in emerging versus mature markets

Professor Koen Pauwels Ozyegin University, Istanbul

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My background: merging academics with business

•  From Belgium to UCLA to Tuck @ Dartmouth to Istanbul

•  Most publications & Awards in my academic cohort

•  Editorial board IJRM, JM, JMR, Marketing Science

•  Founded the Marketing Productivity Group

•  AIMark: Advisory Board & Coordinator Digital Marketing

•  #1 expert on Research/Metrics @marketingprofs.com

•  EU reintegration project: Return on Marketing Investment in Mature vs. Emerging Markets

across countries and industries

•  Fast moving consumer goods : e.g. Unilever

•  Durable goods : e.g. Nissan, Sony Eurasia

•  Retailing : e.g. Old Navy, Marks & Spencer Russia

•  Online services : e.g. Groupon, Kayak

•  Business-to-business: Inofec Dutch Furniture

•  Pharmaceuticals: eg. cholesterol reducers

•  Banking: North-Eastern US banks, Credit Europe

Search Engine Opt. Paid online ads New Products

Price Promotions New Channels

Brand advertising • •

Click throughs? Awareness ? Sales leads ? Satisfaction? Loyalty? Social media

• •

Sales? Profits?

Stock Price?

?

? ROI?

Marketing Performance: Measuring & Improving ROI

Developed Markets Emerging Markets

Emerging markets needed for growth

But: institutional, cultural & economic differences between countries (ICE)

Imply ≠ response • What your research

words mean • How much they trust

and react to ads • How they respond to

marketing

Problem: smarter marketing in emerging markets

Overview

•  What do your market research words mean ?

•  How do consumers trust and share advertising?

•  How do consumers’ hearts, minds, wallets react?

•  Case study: Personal care in Brazil vs the U.K.

•  Conclusion

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What do your market research words mean ?

•  Even the best translation leaves true meaning ambiguous

Case: what does ‘environment’ mean in Germany & Turkey?

Leading multinational of cleaning products was surprised to find out that Turkish consumers had similar enthusiasm and willingness to pay for environment-friendly product

When probed what they meant by ‘environment’, many Turkish respondents said: “My home, my family”

To the follow-up question “What about streets, rivers, lakes?” they responded: “That is the government’s task, not mine”

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How much do consumers trust and share advertising?

•  “Consumers in emerging vs. mature markets are more likely to talk about any kind of online advert” Mindshare 2011

•  Studies show higher trust in offline and online advertising in emerging markets

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2,35

2,4

2,45

2,5

2,55

2,6

2,65

2,7

2,75

0 50 100

Tru

st in

gen

eral

adv

erti

sing

Individualism

Brazil

India

China

US

UK

Netherlands

How do my (e)MBA students decide on electives ?

•  USA: Construct individual utility function based on information search and then each ‘bid’ on electives

•  Turkey: Get together and decide on which elective they should all take and then let administration know

If this differs for students with >6 years of business experience, it may reflect cultural differences

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Which Route should your ads focus on?

Experiential Route

•  Evoke Sensations, Feelings, Imaginations

Has higher impact on ad affect, which lifts purchase intent in mature markets

Germany, France, U.K, Italy, the Netherlands

Functional Route

•  Focus on product features and benefits

Drives ad affect + cognition, which both lift intent in Emerging Markets

BRIC, MIST, Argentina, Mexico, Chile, Poland, Morocco, Saudi Arabia, Pakistan, Thailand, Vietnam, Indonesia, Philippines

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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.”

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Customer Attitude Dynamics (Srinivasan et al. 2010)

What marketers do •  Advertising •  Price •  Distribution

What customers think & feel

Awareness Consideration Liking

What customers do

Brand purchases

Marketing

builds

Attitudes

which convert

to brand sales

How does this differ in emerging markets ?

•  Pauwels, Erguncu and Yildirim, just published in IJRM

•  Explain marketing impact by 2 criteria of attitude

dynamics

– Responsiveness to Marketing

– Conversion to Sales

•  We show that attitude dynamics (and thus marketing effects) differ for emerging vs. mature markets

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1) Responsiveness: can marketers move the attitude?

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2) Conversion: does it translate into sales/profits ?

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Cultural Differences - Individualism

-  Uncertainty av - Power Distance

Economic Differences

- Income - Legal Protection

- Competition

Attitude Dynamics: Stickiness, Conversion

-  Ad Awareness - Consideration

-  Liking

Marketing Response of each attitude to:

- Advertising -  Distribution

- Price

Marketing Effectiveness -Sales

Case study: FMCG in Brazil vs U.K.

•  Recent Data for 3 brands x 2 personal care FMCGs

•  Econometric model of marketing, attitude, sales

Controls for other potential differences:

1)  Brands: same brands in emerging/mature market 2) Market (share) position: similar positioning, share

3) Similar potential: for attitude metrics

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Advertising Response in Emerging vs Mature Market

AD AWARE Emg > Mature

CONSIDER Emg << Mature

LIKING

Emg << Mature 18

0,000

0,005

0,010

0,015

0,020

category 1 category 2 TOTAL

0,000

0,002

0,004

0,006

0,008

0,000

0,002

0,004

0,006

0,008

0,010

0,012

Sales Conversion in Emerging vs Mature Market

AD AWARE Similar

CONSIDER Emg > Mature

LIKING Emg << Mature

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0,00

0,01

0,02

0,03

0,04

0,05 category 1 category 2 TOTAL

0,00

0,05

0,10

0,15

0,20

0,00

0,05

0,10

0,15

0,20

0,25

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

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-0,12

-0,10

-0,08

-0,06

-0,04

-0,02

0,00

0,02

0,04

category 1 category 2 TOTAL

Love Marks or Safe Bets ?

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Low sales conversion

High sales conversion

Low response to marketing

Liking Emerging

Awareness Mature

Consideration Emg

Cost More Mat (-)

High response to marketing

Consideration Mat

Awareness Emg

Liking Mature

Cost More Emerging

As illustrated in US-China debates on what a brand is

•  “Qualitative research reveals that the Chinese consumers feel 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.” 22

KEY TAKE AWAYS

•  You should probe for what words mean exactly

•  You should use higher trust in marketing & research •  You should check which attitudes (cognition, affect)

translate most into behavior in emerging markets

•  You should probe for the attitude response to advertising (higher-lower), price (good-bad),…

•  You should verify how consideration is driven by (online or offline) word-of-mouth

•  Quant needs to be validated by Qualitative Research

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Want to learn more ?

•  It’s not the size of your data, it is how you use it: how to market smarter with analytic dashboards

•  Your free copy at: koen.pauwels@ozyegin.edu.tr

•  Website: www.marketdashboards.com •  LinkedIn/Twitter: koenhpauwels •  Facebook: http://www.facebook.com/pages/

marketdashboardscom/207532115957700

The rise of the middle class

•  Even in countries with high income inequality (e.g. Brazil, Turkey), we see a strong rise of the middle class since 2001

•  Buying in food, cleaning, personal care much more equal •  Narrow focus on top quarter of consumers would leave

more than half of the market to competition! •  From ‘high ground’ expensive products in mature markets

to ‘good enough’ less expensive in emerging markets •  But for travel, recreation, culture: top covers 60% of market

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