Structure Of The Chapter
The nature of global promotion
Review Question Answers
Carmel of Israel
Products or services will not sell unless people are told about them. It is true that few companies from developing countries are global in operation, so much of the promotion process is limited to either third party advertising (for example the Dutch advertising Kenya grown flowers) or taking part in international exhibitions (for example the Zimbabwe International Trade Fair in Bulawayo). As many primary products of developing countries become the end products of developed countries, most promotion is limited to mentions of origin in developed country promotion.
Nonetheless, the rules still apply for effective promotion, whether it is of limited or more extensive nature.
Most basic marketing textbooks cover the "ground" rules for effective advertising and promotion and so the reader is referred to these rather than repeat these again here. It is usual to distinguish between "advertising " and "promotion". Advertising is defined as:
"Any form of communication in the paid media".
Promotion, on the other hand, is defined as:
"An incentive, usually at the point of sale, intended to enhance the intrinsic value of a product or service".
Other expressions in common use are "above the line" and "below the line", the line being an imaginary one, defining the boundary between promotion from the retailer to consumer and the other from manufacturer to retailer.
The objectives of this chapter are:
· To show the benefits of global advertising and promotion
· To identify the special problems in international promotion
· To describe the steps involved in designing a promotion campaign.
The chapter starts by looking at the nature of global promotion and the special difficulties involved when sending messages across global boundaries. These are related to translation and transmission problems (non-availability of media) and cultural interpretations. The chapter then goes on to describe briefly the main steps involved in a communications campaign design.
Generally advertising is used primarily for low cost, mass volume consumer products. Products like fertilizers, canned and fresh produce and tobacco - all products which are used by end consumers - are the subject of heavy promotion. In intermediate products like timber, leather and cotton the advertising may be more limited in nature due to the fewer end purchasers of the raw material. Until recently, per capita GNP and advertising were directly correlated, due to the more widespread availability of media and higher incomes, giving a larger potential market for products. This is no longer the case. Optimal levels of advertising occur where the advertising/sales overseas effect is equal to the marginal advertising expenditure. The problem is in estimating the levels of each.
Global expenditure on advertising is believed to be more than US$ 200 billion, with the US the largest spender and Japan next. Individual companies like General Motors and IBM are each spending billions on advertising per annum. Worldwide, although less in Africa, the average advertising expenditure as a percentage of GNP is around 1.4% The major expenditure is on the television medic, the USA spending over US$ 30 billion on this medium. In many African countries radio is widely used, especially where television is not available, as in Malawi. Global programmes like CNN news and MNet television have dramatically increased the global advertising and direct selling possibilities via satellite. Print advertising continues to be a major medium in Africa.
When organisations advertise across international boundaries a number of important factors have to be taken into consideration. Whilst the process is ostensibly straightforward, (that is someone (seller) says something (message) to someone (buyer) through a medium) the process is compounded by certain factors. These are illustrated in figure 11.1.
Figure 11.1 The advertising paradigm
These mitigating factors can be called "noise" and have an effect on the decision to "extend", "adapt" or "create" new messages.
Language differences may mean that straight translation is not enough when it comes to message design. Advertising may also play different roles within developed, between developed and underdeveloped and within underdeveloped countries. In developing countries "education" and "information" may be paramount objectives. In developed countries, the objectives may be more persuasive.
Cultural differences may account for the greatest challenge. However, many, notably Elinder (1961)1 challenged the need to adapt messages and images, as he argued that consumer differences between countries are diminishing. Changes may be needed only in translation. However, this is only one point of view, as there is no doubt that cultural differences do exist across the world. For example, it would be quite unacceptable to have swimsuited ladies advertising sun care products in Moslem countries.
Three major difficulties occur in attempting to communicate internationally: the message may not get through to the intended recipient, due to a lack of media knowledge; the message may get through but not be understood, due to lack of audience understanding and: the message may get through, be understood but not provoke action. This may be due to lack of cultural understanding.
Media availability is a mitigating factor. Take for example, television. Whilst in Africa a number of countries do have it, the extent of its use and time available may be limited. Media use and availability, coupled with the type of message which may or may not be used, is tied to government control. Government may ban types of advertising, as is the case of cigarettes on British television. Intending advertisers should refer to the appropriate codes of advertising practice available in each country.
Before embarking on a promotion campaign, the following questions, among many others, must be answered. What can be said about the product? Which audience is being reached? What resources does the organisation have? Can someone do it better, say an agency? The basic steps in designing a campaign are set out in figure 11.2.
Figure 11.2 Basic steps in conducting an advertising campaign
Advertising must only be undertaken for a specific purpose(s) and this purpose must be translated into objectives. Whilst difficult to directly attribute to advertising, persuasive advertising's ultimate objective is to obtain sales. Other objectives include building a favourable image, information giving, stimulating distributors or building confidence in a product. Whatever objective(s) are pursued, these must be related to the product life cycle and the stage the product is in.
Budgets can be set in a variety of ways. Many budgets use a percentage of past or future sales, objective and task methods, or rule of thumb. "Scientific" methods include sales response methods and linear programming.
Agencies can be used or not depending on the organisation's own abilities, confidence in the market and market coverage. Many organisations, like Lintas and Interpublic, are worldwide and offer a wide range of expertise.
Message selection is probably where the most care has to be taken. Decisions hinge on the standardisation or adaptation of message decision, language nuances and the development of global segments and customers. Message design has three elements, illustration, layout and copy. Advertising appeals should be consistent with tastes, wants and attitudes in the market. Coke and Pepsi have found universal appeal. With the "postmodern age" now affecting marketing, message design is becoming particularly crucial. It is not just a question of selling, but of crafting images. It is often the image, not the product, which is commercialised. Products do not project images, products fill the images which the communication campaign projects. Coke's "Life" theme is a classic in this regard.
In illustrations and artwork, some forms are universally understood. Coke, again, with its "life" theme is applicable anywhere. Cheese and beer adverts would go well together in Germany, but it would have to be cheese and wine in France.
Copy, or text, has been the subject of much debate. Effective translation requires good technical knowledge of the original and translated language, the product and the objectives of the original copy. Care has to be taken that the meaning does not get lost in translation.
There is a great difference in variety and availability of media across the world. The choice of media depends on its cost, coverage, availability, character (national or local or international) and its "atmosphere", for example in Zimbabwe posters versus adverts in the Financial Gazette.
In advertising the choice is television, radio, press, magazines, cinema, posters, direct mail, transport and video promotion. In promotion the choice is wide between money-off offers, discounts, extra quantities, and so on. Other forms of promotion include exhibitions, trade missions, public relations, selling, packaging, branding and sponsored events. Governments can be a very powerful promotion source, both by providing organisations like Horticultural Promotion Councils and by giving information and finance. GATT/UNCTAD Geneva provides a promotional service, giving information about products to interested parties. Trade Fairs are popular both as a "flag flyer", and as a product display and competitive information gathering facility. There are over 600 trade fairs worldwide; These include the Hanover Fair, Germany, the Royal Agricultural Show, UK for machinery and the Zimbabwe International Trade Fair for agricultural produce and other things in general. The criterion for participating in fairs is always cost versus effectiveness.
Scheduling international campaigns is difficult, especially if handled alone rather than with an agency or third party. Scheduling decisions involve decisions on when to break the campaign, the use of media solely or in combination, and the specific dates and times for advertisements to appear in the media.
Advertising campaign evaluation is not very easy at the best of times. Whilst it would be nice to say that "X" sales had resulted from "Y" advertising inputs, too many intervening factors make the simple tie-up difficult. Evaluation takes place at two levels - the effectiveness of the message and the effectiveness of the media. Few African developing countries, except Kenya, have any sophisticated methods for campaign evaluation. Measures include message recall tests, diary completion, and brand recall.
Organisation and control
Whilst companies like Nestle may have centrally organised and controlled advertising campaigns, many are devolved to local subsidiaries or agencies. The degree of autonomy afforded to local subsidiaries depends on the philosophy of the organisation and the relative knowledge of the local market by the principal.
Case 11.1 Zambezi Lager
One of Zimbabwe's successes in international marketing has been the launch of Zambezi lager into the highly competitive U K lager markets. Through use of a UK agency, clever and impressive message design, including scenes of the Victoria Falls, and a premium pricing policy, the product has been established in a number of London outlets. At a retail price of nearly £2 per bottle, this "designer" lager (incidentally sold in a bottle) is nearly nine times the price it would sell on the local Zimbabwe market Television advertising, coupled with retailer support, enabled Zambezi to be positioned in a quality, clear beer segment. This example goes to prove that a quality "buying proposal", through the use of a clever creative proposition, can be universally accepted.
Whilst truly global advertising, or even regional advertising, is a phenomenon not normally associated with African countries, as time goes by it may be. Unfortunately few countries see or use the overseas media to advantage. Fro developing countries, trade missions can be very useful for promotion. This is a relatively cheap but effective medium. Few countries activate their overseas embassies sufficiently to generate possible trade. If, however, it is done, the foregoing sections have to be considered carefully in order that possible mistakes are avoided.
No product or service will sell unless it is promoted. Whilst many commodities from developing countries end up as ingredients in downstream industries, which themselves may promote their brand, many suffer from the lack of a reputation.
As with product choice, promotion decisions are subject to the "standardisation " versus "adaptation" argument, depending on the similarities and differences between product and markets. When the appropriate strategy is chosen then decisions have to be made on the promotional campaign objectives, budget, message and media selection, scheduling and evaluation.
As with global intelligence gathering, promotion campaigns can be subject to all sorts of distortion or "noise". These are mainly related to cultural differences but could also be caused by physical problems including lack of media availability and skilled personnel.
Media evaluation and control
1. Describe the arguments for "adaptation" versus "standardisation" of advertising campaigns when developing global communications strategies.
2. Outline the difficulties which could occur when conducting an advertising campaign across national boundaries.
3. Taking any two of the following products describe what you think is the communications strategy for each one:
a) Coca Cola
b) Del Monte canned fruits
c) John Deere tractors
d) Bayer Agro Chemicals.
1. Adaption versus standardisation Definitions
· Adaption - changing the communications strategy to fit the nuances of each recipient country; and,
· Standardisation - same communications strategy irrespective of country.
· language differences;
· cultural differences;
· physical differences e.g. media form; and,
· egal or regulations differences.
Students should expand on the answers given.
Students should firstly describe steps in conducting a campaign:
· set objectives
· set budget
· Agency use if need be
· Message selection
· Media choice
· Scheduling campaign
· Organisation in evaluation and control of campaign.
Difficulties are associated with a number of factors as follows:-
· Availability of agencies, media, research facilities;
· Cultural differences - language nuances, translation, mores and attitudes, literacy;
· Regulatory and Government issues - what can or cannot be advertised;
· Control issues - control of agency, campaign, expenditure;
· Message difficulties e.g. message not getting through to intended recipient - message getting through but not understood; message getting through, understood but no action resulting;
· Lack of support from retailers, etc.
· Market issues - location, dispersion, buying power, reachability.
3. Students should describe the strategy along the following times:-
· Adaption versus standardisation (e.g. Coca Cola standardised)
· Objectives of campaign
· Mix of communications elements - advertising, promotion, selling, public relations and exhibitions and emphasis
· Message intention and target audience.
· Mix of target audience - consumers, middlemen or other "publics".
Exercise 11.1 Carmel Of Israel
Read the following case "Carmel of Israel" and attempt the following exercise.
a) Identify the "key success factors" in Carmel's operation under the following headings:
· Competitive strategy
· Market entry strategy
b) Do you foresee any dangers to Carmel's international operation? How might they be overcome?
Carmel. The name is practically synonymous with quality and taste in fresh agricultural produce. Its beginnings date back to 1957, when Agrexco, the Agricultural Export Company, was founded and created the Carmel label. A modest shipment of several hundreds kgs of potatoes and gladioli was Carmel's first venture into the foreign trade. Today, Carmel products grace supermarkets shelves throughout Europe and North America, and Agrexco is one of the largest and best known agricultural export companies in the world.
Agrexco was established to plan and organize the export of Israel's fresh agricultural produce. In pre-State days, local production of dairy, fruit and vegetables had more or less coincided with domestic consumption. With Independence, however, new agricultural settlements rapidly sprouted up all over the country, and after a few years of intensive, high technology farming there were large surpluses. Agrexco was formed to meet the pressing need for planning, control and aggressive, forward looking marketing.
In the course of time, Agrexco has become an efficient, well-managed organisation. It learned to compete effectively with long-established rivals in Europe and to deal with the varied and sundry problems that inevitably arise in producing crops and bringing them to market. Before long, agricultural production for export was no longer dependent on chances surpluses, but solidly based on advance planning and dynamically researched product development, which enabled Israeli farmers to grow exactly what European and America consumers wanted, and when.
Among the mainstay of Carmel's strength on the international market are the sheer variety and quantity of its produce. To attain such concentrations, growers were pooled, maximal product uniformity encouraged, and a strict system of quality control implemented. To Agrexco's credit, Israeli agricultural produce has steadily improved in quality and scope, increasingly penetrating new foreign markets while providing ever better service to long standing customers and friends.
Structure and organization
Agrexco is a registered company jointly owned by the Government of Israel, acting through the Ministry of Agriculture, and the farmers. Its sixteen member Board of Directors is evenly divided between eight representatives of the government and eight representatives of the growers. The latter consist of one representative from each of the farmers' four produce marketing boards (the fruit board, vegetables board, flower and ornamental plants board, and poultry board) and four representatives of Tnuva, which is Israel's foremost agricultural marketing cooperative. This mixed ownership gives the farmers considerable say in Agrexco decisions on both current issues and long-term policy, while protecting the public interest.
Although Agrexco operates on a commercial basis, it is a non-profit organization, as it stipulated in its Articles of Association. All sales revenues are shared by the producers and their representatives organizations.
Most of Agrexco's activities are carried out by its local divisions and overseas branches, but for maximum efficiency and operational flexibility subsidiaries and overseas agents provide many vital services.
Produce supply contracts
Approximately 12,000 farmers supply produce to Agrexco. Some of them have individual contracts. Others, such as collective settlements, like kibbutzim and moshavim have bulk contracts. These are two main types of supply contracts: an open contract and a minimum guaranteed price contract. Of all the produce that Agrexco markets, only about a third is marketed under minimum price terms, and that consists mainly of seasonal vegetables. The major portion of Agrexco's fruit and flower exports is contracted through open contracts at market price. In most cases farmers are paid the difference between the gross market proceeds and calculated marketing and transport expenses. At the end of the year, when calculations are adjusted to actual costs, the farmer may receive further payment. Agrexco maintains an "open door" policy towards farmers who feel comfortably at home at Agrexco offices. The easy atmosphere enables Agrexco to fulfil its function as a mediator, bringing the Israeli grower up-to-date information on ever-changing consumer tastes abroad and encouraging him to adapt his production accordingly.
Marketing agricultural produce is different from marketing every other product. Agricultural produce is alive and sensitive. Its quantity, quality and price are almost totally dependent on natural conditions. They literally change with the weather. Moreover, unlike the other products, agricultural stock simply cannot be kept. This means that, unlike other producers, the farmer has no way of regulating the price his goods will fetch on the market. He cannot even assure himself a definite price when he ships them for export.
To deal with these limitations, Agrexco has created an extensive and flexible marketing system which balances, reliable and efficient consumer service with optimal prices for its farmers. Most of its sales are made through a panel of local importers working with the overseas Agrexco branches; some sales are made directly form Israel. In other case, most products are sold on a "regulated consignment" basis. How does it work? Taking into account the short-term supply, forecast and other pertinent market information, Agrexco sets minimum prices for about a week in advance- this to obtain at least a certain stability. But then if anything should change, if a product doesn't sell at the suggested price, for example, or if a bad weather results in an unexpected shortage of something else, prices are readjusted - this for the sale of flexibility.
Agrexco's marketing network consists of nine sales centres, eight in Europe and one in the U.S.A., and two merchandising centres in Israel, one in Tel Aviv, which handles fruit, vegetables and other edibles, and the other at Ben Gurion Airport, which handles flowers, ornamental plants, and cuttings, bulbs and seedlings. In countries where Agrexco does not have a branch or trustee, in Australia and Japan for example, it operates through a local agent. Agrexco has branches in Copenhagen, Cologne, Frankfurt, London, Milan, Paris, Rotterdan, Vienna, Zurich and New York.
One of Agrexco's major assets is the excellent working relationships it has developed with the importers and wholesalers, and especially with the large supermarket chains. Carefully cultivated over many years, these close ties have been a key factor in Agrexco's success. They have enabled Agrexco to keep its finger, so to speak, on the consumer pulse and to supply exactly the products and varieties that ate wanted in the desired amounts, at just the right seasons and in the most popular packaging.
Sales promotion and market research
To find out what its customers want, Agrexco conducts extensive market research into buying habits and consumer preferences. It searches opportunities for new products and for improving its tried and true standbys. It evaluates the success of its marketing, advertising and promotional campaigns, and its follows up to the introduction of new products into the market. All of this prepares the ground work for penetrating new markets and keeps existing ones healthy and growing.
Advertising and promotion let our customers know what Agrexco has to offer and how they can enjoy its many products. Overall planning is directed form the Agrexco office in Israel, while the branches, which are in touch with local media are buying patters are directly responsible for the advertising, public relations, in-store demonstrations and special sales campaigns in each of their countries.
Every year about 500,000 pallets of Carmel products, totalling over 350,000 tons, leave Israel by sea or air.
During the main export season, Agrexco has four refrigerator ships, two of them bearing the Carmel name, in constant operation, as well as a support service of ventilated liners. Agrexco products set sail from Haifa and Ashdod- at the latter, the Carmel Kor (an Agrexco subsidiary) terminal handles 200,000 tons of fresh produce a year. About 80% of the produce is sent to the allocation and distribution center in Marseilles: the rest is shipped directly to ports in the U.K. and Northern Europe. Especially sensitive products, such as flowers, goose liver and strawberries, are sent exclusively by air. Approximately 70,000 tons of fresh agricultural produce leave Ben Gurion Airport every year. Seventy percent of it is flown during the winter season, carried at the rate of about 2500 tons a week, on 20-25 weekly jumbo jet cargo flights, as well as on additional regular flights when necessary. About 45% of the air cargo lands at the allocation and distribution centre in Cologne, Germany; the rest is sent to its various destinations directly.
The Agrexco terminal at Ben Gurion is able to store a large range of produce in quantities that amount to the capacity of four 747 jumbo jets. Boasting an expert staff, the terminal has been equipped with the latest in sophisticated refrigeration, conveyor and computer system to ensure that the fresh produce reaches its destination in the shortest time and best possible condition.
Indeed, the need to transport perishable goods and to keep them in peak condition over very long distances has made transportation Agrexco's largest single expense, far larger than for any of its competitors. Agrexco's leased refrigerator ships, for example, have been especially adapted to transport products requiring different storage conditions and a carefully regulated range of temperatures. Only constant efforts to cut costs through improved organization and technology have enabled Agrexco to stay in the running. Among any other efforts in this direction, Agrexco is cooperation with shipping experts to create a vessel that will meet its own strict specifications for both efficiency and economy. It invests funds, technological expertise and engineering vision to design today the ship that will be right in the future.
Carmel products are under constant quality control, from planting through picking, packing and delivery. All along the way, the products are repeatedly and meticulously inspected for export suitability according to international criteria.
The supervisory process begins with the preparations of the fields and the planting and growing of the crops. Special Agrexco teams dispersed all over Israel provide extension services, which keep the Tel Aviv office informed of what's happening on the farm and assists the growers with needed advice. More than once, disaster has been averted by disqualifying produce while it was still in the ground or by having district supervisors offer on-the-spot counselling.
The product itself is first inspected at the transit and packing stations. Here the Phytosanitary Administration of the Ministry of Agriculture determines whether each and every item does or does not meet internationally agreed upon export standards. Those that do not, are disqualified and channelled to the domestic market or slated for destruction.
At the ports, Haifa and Ashdod seaports and Ben Gurion airport, the produce that has been accepted for export undergoes a rigorous sampling inspection.
Agrexco inspectors examine anonymous samples of the outgoing produce. With the growers identified only by number, Agrexco inspectors look for qualities of taste and appearance above and beyond the minimum required. Growers receive bonuses in accordance with earned quality points. Since renumeration may reach as high as 30% of the average price of the product, the practice serves as a powerful incentive for the farmer to produce superior goods.
The final inspection takes place at the branches abroad. Quality inspectors working alongside the branch managers report to Israel on the quality and conditions of the shipments, follow up consumer complaints, re-sort and re-package produce that has been damaged en route, and provide feed back on new crops and varieties.
Packaging for every product
Carmel products travel a long hard road from the field to supermarkets shelves in European cities. The average route was calculated at 3,000 km. So that every one of hundreds of products reaches its destinations fresh and undamaged, each must be properly packed, in keeping with its particular characteristics and sensitivities. In charge of this task is the packing department, which handles the planning, specifications, purchase and distributions of the packaging. The unit utilizes a large variety of materials and technologies, including paper and plastic, cardboard and metal, wood and fibre, rubber and resins, and a range of receptacles, from bulk crates, cardboard containers, wooden pallets, punnets, bags, and sleeves through to wrapping papers and plastic bags. The annual packaging budget amounts to approximately $15 million.
The packing department is highly respected at home and abroad. It has been honoured with the Kaplan prize for "developing effective packaging which results in significant savings.
Israel is a natural greenhouse. But along with many advantages of its hot sunny climate are a host of difficulties that begin as soon as the fruit or vegetable is detached from the plant and end only when it arrives at market. To stay fresh and crisp over the thousands of kilometres it travels, the produce has to be kept at the right temperature along the entire route, in an unbroken cooling chain. It is picked and packed in the cool early morning hours, promptly loaded onto refrigerator trucks, and kept under refrigeration in the warehouses, ships, planes and trains as well.
Agrexco products, like Agrexco customers, are pampered. Through unrelenting R & D, Agrexco searches out and develops optimal methods for cooling, storing, packing and shipping every one of its more than four hundred products. It carries out experiments in coordination and cooperation with Israel's prestigious Vulcani Institute for Agricultural Research, the Ministry of Agriculture and integrated regional research units.
The end product: better tasting fruit and vegetables with longer shelf life, at lower costs to the consumer and higher returns to the grower.
For example, thanks to especially developed plastic wrapping, the sensitive eggplant, which once had to be sent by air, can now be transported via the more economical sea route. With another variety of plastic wrapping, the highly perishable strawberry now arrives at market in better condition and lasts longer once there.
The application for vacuum pre-cooling has worked similar wonders for lettuce, extending its shelf life seven full days and enabling it, to be sent to ship.
For avocado, a series of experiments has reduced the spoilage rate from a hefty 10%. A long series of experiments on celery and Chinese leaves has resulted in their being kept at optional temperature, humidity and ventilation. As for the exotic Sharon fruit, a new variety of persimmon, developments in its storage transportation have lengthened not only its shelf life but also its marketing season.
Agrexco's on line communications system, operated by its subsidiary Carmel Computers, provides a round-the-clock, two-way flow of information and services running non-stop between the large central computer in Agrexco's Tel Aviv office and the numerous terminals in its department in Israel and its branches and depots abroad.
One example of the efficient use that Agrexco makes of its state-of-the arts communications network is in the marketing of cut flowers. Flowers, as everyone knows, have to be virtually whisked to their destinations if they are to retain their freshness and glow. Once they are cut and arrive at the packing stations Israel, the challenge is to get them to European supermarkets and flower shops no later than the very next evening. The first step is to check them. As the cartons are packed, each box is supplied with a bar code listing the variety, size, number and quality of the flowers inside.
The bar code is read by a computerized optical reader, which relays the vital statistics to Agrexco's central computer, which, in turn, sends the details overseas. The advance information arrives in Europe even before the plane takes off, allowing the branches to schedule sales before it lands.
From here on, the branch computer comes to life - sending bills, keeping stock, following up payments and relaying marketing and accounting information to company headquarters. And the central computer, which in the meantime has also taken in all incoming orders and kept tabs on outgoing shipments, analyzes the sales data, using software that translates foreign currency figures to dollars F.O.B.
1. Elinder, E., "How International Can European Advertising Be?" Journal of Marketing, April 1965, pp. 7-11.
2. Carter, S. (1989) "Lecture Notes". University of Leeds, U.K.