Can Companies Deal with Differences in Consumer Behavior?

Multinational companies (MNC’s), depending on the type of product or service they offer, should adopt a marketing mix strategy that respects the consumer behavior within the market they wish to enter. Ignoring the aforementioned differences, making the assumption that consumers will behave the same way across different markets will invariably lead to a commercial failure. We have all seen examples of products/services that have failed because of that single reason.

Take Arby’s ® restaurant as an example. In the early 90’s, Arby’s and McDonalds ® entered the Egyptian market more or less at the same time. Both of them were unknown to most of the Egyptian society. Only the elite few, who could afford to travel abroad, recognised their respective brands. McDonalds, having researched the Egyptian market well, knew that it couldn’t price its sandwiches higher than what a middle class Egyptian could afford. Moreover, continuous meal promotions lured many Egyptians, whom now prefer McDonalds over any other fast-food restaurants. Arby’s, despite offering higher quality sandwiches and airing a massive advertising campaign was forced to close a year later as it was perceived as unnecessarily expensive. Egyptian consumers presented a good example of consumers ready to sacrifice quality for a lower price; exemplifying a typical developing country with low PPP, high inflation rates and a collectivistic culture; where one’s choice of brand can immensely affect his/her peers’ choice as well.

It is, however, sometime very challenging to address such behavioral variations. Luis Vuitton ® for example, cannot afford to reposition its product to appeal to the middle class segment. It is a luxury company that only targets the luxury niche of the market. Countries where this elite segment is not large enough to cover LVMH’s sales expectations are simply discarded. This explains the existence of LVMH in Saudi-Arabia, but not in Egypt; despite both being developing countries. Another example of how difficult it can be to challenge consumer perceptions is in the case of Coca-Cola ® in Saudi-Arabia. Coca-Cola has very low brand equity in this market for a very unique reason. Its early entry to the Israeli market in the 60’s precipitated complete rejection of the brand when initially attempting to penetrate the Saudi market in the 90’s. Although Coke tackled consumer behavior issues by the book; ranging from advertisements emphasising family relations, to continuous market promotions, to mega-marketing, to an awe-inspiring distribution and physical access network; it has failed to gain more than a 22% market share. If they had looked deeper into the consumers’ psyche before entering the market, they arguably, would have foreseen the inevitable consequences. Now, being unable to exit the market, its revenues, as speculated by many analysts, to hardly finance its expansion in this market, without a paradigm shift on how the Atlanta’s based conglomarate invest in changing its brand image.

To conclude, a company must spend a considerable amount of time analysing the consumer behavior of the societies within the markets it wishes to enter. Many models have been developed to assist marketers in this complicated task. Some, like Hofstede’s cultural dimensions and the A-B-C-D paradigm, are stated in this article; whilst others remain interesting to study. MNC’s should not expand into new markets if the values they are conveying through their products/services are not coherent with or adapted to the cultural values that they will be a part of. An important point for marketers to note is that being the first and the biggest in an emerging market isn’t always the best way to succeed in it. A better tactic is to learn and build presence carefully.

See the 10 Consumer Behavior Differences between Developed and Developing Countries.

Image by Miguel Michan

References:

Laurel Anderson, Marsha Wadkins, ‘JAPAN – A Culture of Consumption?’, Association for Consumer Research.

P.S Raju, ‘Consumer behavior in global markets: The A-B-C-D paradigm and its application to Eastern Europe and the Third World’, Journal of Consumer Marketing.

Consumer Behavior in Japan and Indonesia

Marieke De Mooji, ‘Convergence and Divergence in Consumer Behavior: Implications for Global advertising’, International Journal of Advertising.

Marieke De Mooji, Geert Hofstede, ‘Cross Cultural Consumer Behavior: A Review of Research Findings’, Journal of International Consumer Marketing.

About Ahmed El-Khatib

I'm a graduate Materials Engineer from the German University in Cairo (GUC). I have aquired a work experience as a Systems Engineer in ABB, as well as a Key Accounts Manager in Pepsi Cola Arabia. I'm currently pursuing my M.Sc. in Business Development at Grenoble Graduate School of Business (GGSB). My research interests include -but not limited to- quantitative strategy, game theory, sustainable business models and financial engineering. I believe that one should not be one more head added to the 7 billion head count occupying this planet. One should stand out to help the remaining 6,999,999,999 in his/her own way. This is success. This is "Development".

Posted on January 18, 2012, in Analysis, BizDev, Emerging Markets, Marketing, Strategy and tagged , , , , , , , . Bookmark the permalink. 1 Comment.

  1. Super article! Keep it up Thank you!

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