A Short Guide to Euromarketing

When our Denmark subsidiary asked us to review their newest advertisement, we were happy to do so. Upon seeing the [...]

March 1 1992 by Philippe Kahn


When our Denmark subsidiary asked us to review their newest advertisement, we were happy to do so. Upon seeing the ad, however, many of our top marketing executives were aghast! The gentleman in the ad was smoking-in order, our Denmark colleague explained, to imply a relaxed atmosphere. Of course, smoking is regarded so negatively in the U.S., it would never be used in advertising except to promote cigarettes.

But in Denmark and the rest of Western Europe, smoking really is not noticed at all. We deferred to the judgment of our Denmark colleague, and the ad was very successful in that market. This particular experience, however, reinforced an important point: Successful marketing in Western Europe requires those of us in the U.S. to discard our cultural baggage. Last fall, the international accounting firm KPMG Peat Marwick surveyed 700 U.S. executives, 65 percent of whom were planning, or had already begun, to expand their production or services in Europe. According to that same survey, high technology, transportation, and manufacturing are leading the way. This fascination with Europe is expected to increase in the next few years over a variety of industries.

So, how can chief executives prepare for this wide-open opportunity? Let’s focus on the true nature of competition in Europe, and how it compares to what we know so well, competition in the U.S.

THE NATURE OF COMPETITION IN WESTERN EUROPE

The 12 European Community (EC) countries have a total gross domestic product of approximately $4.4 trillion and about 320 million potential customers. To put this into perspective, the U.S. total gross domestic product is $4.57 trillion, and Japan‘s is $2.53 trillion. Therefore, the EC is America‘s largest “single” customer-approximately $200 billion of capital is transacted each year between Europe and the U.S. The largest customer is somewhat of a misnomer, however; Europe remains fragmented by the various countries that compose it. Among the 12 EC countries, there are 12 different currencies and 10 languages. This will not change in 1992, at the time when the EC countries will be “united.”

Certainly, most trade barriers will be lifted, but trade barriers are really not inhibitors to consumer product sales. Of course, 1992 is going to be a very important year for banks, interest companies, airlines and similar organizations to which different monetary systems and trade laws are the real barriers. But in a practical sense, consumer product companies are not held back by these barriers. On the other hand, these companies will encounter country-by-country cultural barriers that will not be “lifted” so easily even in Europe.

Therefore, the competitive environment will not alter dramatically in 1992. Competitively, each country in Western Europe is distinct; the top-selling products and competitors differ from country to country. For example, in Germany my company’s best-selling programming language product is Turbo Pascal, although in the U.S. it is Borland C++. In France, our chief competition in the spreadsheet market is a product called MultiPlan. In the U.S., it is Lotus 1-2-3. MicroSoft Corporation is stronger in France than in the U.K., and so on. My colleagues tell me that this is not limited to computer software; it holds true for all consumer products in Western Europe.

Government restrictions also play a part in the competitive environment in certain countries. Both Italy and France maintain quotas on Japan‘s auto imports, and as a result, Japanese automakers hold only 10 percent of the European market. In fact, the Japanese situation is a case in point. The auto quotas are supposed to be abolished after 1992. Yet, the EC recently obtained majority agreement to phase out the quotas over a seven-year period instead, allowing European automakers to develop cars of comparable quality to their Asian competitors. This suggests that 1992 may not be a true free market economy.

The failure to reach agreement on farm subsidies echoes this protectionist mentality. Many U.S. and European experts agree that the EC’s 30-year-old Common Agriculture Policy is clearly antiquated and costly. It guarantees a set price for produce no matter how much surplus exists. Yet, the EC is not anxious to amend this policy, which could put many of its farmers out of business. Instead, it allows the policy to continue to eat up two thirds of the EC’s budget-and creates mountains of unused grain and lakes of unused butter. However, it does offer protection to all European farmers.

PENETRATING WESTERN EUROPE

Despite rhetoric of the single European market opening in 1992, European businessmen seem to want more protection than the EC ministers originally bargained for. European businessmen are banding together in a flurry of alliances and cross-shareholding pacts to shield them from outside competition. As U.S. marketers, how do we work around such sentiment?

One method is to establish your operation in Western Europe as a joint venture or limited partnership with a local company, which is already embedded in the country’s economic fabric. Larger U.S. companies may consider acquisitions as an alternative, taking care to maintain the identity of the local company. Also, consider licensing agreements-contracting out manufacturing and sales to local firms. Any of these options can provide a foot in the door for companies who may otherwise be knocking on that same door for years. As in the U.S., your company must take care to research the current market leader and market share of all competing companies, and then position your company accordingly. Once in the door, basic free-market competition presides, much like the U.S.

According to another KPMG Peat Marwick survey of 800 U.S. executives, most agree on two strategies to successfully penetrate Western Europe: form alliances with EC firms and increase on-site manufacturing in Europe.

BUILDING BRAND LOYALTY WITHIN CULTURAL BARRIERS

If you want to compete successfully in the pan-European market, it is vitally important to remember that you cannot regard Western Europeans as a single entity. There are Italians, Frenchmen, Spaniards, and so on. Think of Europe as a symphony orchestra. When the musicians play together, they create a melodic composition. However, upon listening to any one of them playing a solo, you would not mistake the sound of the strings for the percussion or the wind instruments. Similarly, a company that does so and decides to market homogeneously to Western Europe is certain to fail.

The true Western European market comprises separate, distinct markets within each country because of barriers stronger than any physical obstacle. These untraversable barriers include language and social/cultural differences. For example, try marketing a widely successful U.S. product for baby boys in France. You are likely to learn that the French will not buy your “blue” product; in France, the preferred color for boys is pink!

Understanding cultural differences is the greatest challenge facing U.S. companies marketing in Europe. It is also the predecessor to building brand awareness within a country. The North American market is the largest monolithic market in the world. Too often, we try to apply U.S. tactics in Europe-dragging “cultural baggage” with our marketing efforts-and thus unintentionally destroy our chances for success.

How can we market products to obtain brand loyalty within such a divergent market? First, we must remember that just as there are no Western Europeans, there are no pan-European products. Instead, there are 12 tailored versions of the same product. Building brand loyalty must be done country by country. Some of my competitors are tackling Western Europe as a homogeneous whole, attempting to remove barriers between the countries, addressing the similarities and ignoring the differences. They are having a difficult time, to say the least. These cultural harriers are ingrained through hundreds of years of cultivation. Perhaps many years from now, we can approach Europe as a whole. But now is not the right time.

Begin by targeting Europe, country by country, building from a low visibility position. Virtually every company, no matter how large, is working from a low visibility position in Europe. Do not assume your company is known overseas. Have you ever heard of Allianz? Allianz is listed among the 100 largest companies in the world. So, why should they have heard of you? Effective marketing will help your company become highly visible.

Marketing techniques in the Western European countries are virtually the same as in the U.S.-product launches, advertising, and point-of-purchase displays. Sometimes the coordination of those elements varies-when booking advertising space in the U.K., for example, rates are highly negotiable; in Germany, rates are negotiable by volume; in France, prices are firm and unchangeable. You build brand loyalty as you might in the U.S., but the difference is that each country’s marketing program will be slightly different than the next.

Consider developing a universal message that can be translated into 11 languages and adapted to attract attention in each country. Take care to avoid language-based jokes, puns, double meanings and any visuals that might be considered market-specific. Then take the universal message and tailor it in each country to consumers in the specific markets. This may mean changing the look of the packaging, advertising, or changes in the product itself. Remember that some languages, such as German, require a lengthier, more formal style and thus additional space for copy in their advertisements or direct mail pieces. From a purely practical point of view, you can construct a generic message that is less creative but that can be adapted to each country with minimal changes. This may save time and costs. Flexibility is the key-being able to mix the corporate message with on-the-ground expertise.

If you are fortunate to have a strong following in the U.S., that is a plus. Mention that in your marketing; sometimes this will entice purchases of your product. Keep your subsidiaries informed of all product launches in the U.S. They can help to promote that information to the local press, which helps “prepare” the market for that product when it is available in Europe. Plus, if the product launch happens in the U.S., it is likely that Europe is aware of it. If the media call your subsidiary to inquire about the newest U.S. product, you shoot yourself in the foot if you say, “We don’t know,” or “No comment.”

STRATEGY FOR MARKETING IN WESTERN EUROPE

What will make American businesses shine in Europe is close attention to business practices within each country. It is essential that chief executives recognize that many of our accepted U.S. business values may not be shared by European counterparts. For example, in the U.S., many executives tend to share information with colleagues and managers, virtually everyone at any level in the company. But on a recent trip to Europe, I discovered that is not the case in many countries. We made the identical presentation to six different subsidiaries about our recent profits helped by their efforts. In Italy, this information was well received; people patted each other on the back and asked lots of questions. In France, it was’ a little less jovial. The U.K. employees, however, seemed embarrassed at hearing this information, and the management took us aside after the presentation to gently scold us for sharing those numbers. That experience was extremely helpful. I learned that the French are less demonstrative than their more gregarious Italian neighbors, and the British do not release sales figures to employees below the executive level.

As an extension to business practices, one also must research and understand the unique details of each country, especially cultural differences. Then, each marketing plan and its elements must be evaluated within the context of this research. The Japanese call it “dochakuka”-becoming a native or “part of the woodwork.”

A classic example of not doing this research is Chevrolet’s attempt to market the Nova overseas. Because -no va” means “it does not go” in some languages, European sales were slow due to customers’ lack of confidence in the product’s name.

In addition to language differences, be sure to research the popular home industries, local laws and customs, transportation options, and local politics. For example, if you are marketing a product that is in direct competition with a home industry, you may not receive local cooperation. Also, the environmental lobby is very strong in Europe, so ensure that your products are environmentally acceptable. Thoroughly research the communications capabilities of the various countries and compare those with your needs for your business. Telephone and fax communications are sometimes poorly served; electronic mail via computers is often highly superior.

It is also a good idea to hire native countrymen to manage or at least advise operations in each country. Give them as much flexibility and latitude as possible.

This is possibly the single most successful strategy I have seen. It is vital to trust the subsidiary managers completely and allow them a high degree of autonomy. In essence, develop the corporate goals and messages and provide those to them. Like fine bakery chefs, subsidiary managers choose how to “frost the cake” so that it appears the most appetizing to consumers in their target market.

For example, our Italian subsidiary is less stringent about terms and conditions, discounts and so on-concurrent with Italian business practices. If it operated more strictly, as we do in the U.S., our business in Italy would suffer because we would not be on par with the local marketplace. In Germany, there is an extremely high priority on attention to product support after customers have purchased the software-more so than on sales of the products. While we have a commitment to providing technical support worldwide, in some markets, from time to time, callers may get busy signals or placed on hold when they call the customer assistance number. Our German office made the decision to employ a disproportionate number of product support representatives to sales representatives. German callers, therefore, many times have their calls answered on the first ring! The financial results in Italy and Germany show that those systems are working for those markets.

Expect to expend a financial investment for Western Europe as a whole that is comparable to that for the U.S. It may seem simplistic, but well-financed companies will do better in Europe than poor ones. Half-hearted attempts will not penetrate the European market. Do not use Europe as a dumping ground for products you are having difficulty selling or surplus from the U.S. Be prepared to make the investment required to establish European brands. Again, check with experts in each country to determine whether it is best if you set up manufacturing facilities there to encourage local support. That will require a significant additional expense.

Finally, remember that our relationship with Western Europe has always been based on the mutual defense of democracy and free market capitalism. If the U.S. makes the effort, walls can be torn down, doors will open, and Western Europe will offer a spectrum of marketing opportunities.


Philippe Kahn is chairman and chief executive of Scotts Valley, CA-based Borland International, a developer of high-performance software products with annual revenues of $226 million.