24 Mar 2015

How to Introduce a New Concept into an International Market

Taking a look at how international brands have introduced new concepts to emerging markets – with differing levels of success.

Last week we looked at the difficulties Kellogg’s experienced when they first tried to introduce breakfast cereals to the Indian consumer. Indian households weren’t accustomed to drinking their milk cold or unsweetened. Sugar wouldn’t dissolve in cold milk and heating the milk made the flakes soggy and unappealing. Faced with these established habits and tastes, it took a while for Kellogg’s Cornflakes to catch on in the market.

Kellogg’s overcame the problem partly by introducing ready-sweetened flakes to the market and tailoring the messaging. This week we’re going to look at how other brands have introduced a new concept to a market – with differing levels of success.

Drive through in China

When McDonald’s first introduced the drive-through to their Chinese franchises, not all local consumers immediately understood the concept. Some McDonald’s managers observed that many customers use the drive-through lane to order their food, and then park up and go inside the restaurant to eat it there.

Fast forward just a few years and just under half of new McDonald’s branches are drive-throughs. The Shanghai Daily has identified drive-throughs as one of China’s fastest-growing sectors, and it’s perhaps no surprise: China is now the world’s largest car market.

The fast food giant is taking a risky approach by opening many franchises in up-and-coming areas – that is to say, neighbourhoods that are currently considered a bit edgy. It’s also placing them in close proximity to petrol stations, so you can refuel your car and yourself at the same time.

It seems McDonald’s policy is to make the drive-through so prolific that the car-owning Chinese culture eventually adopts it. Despite confusing customers in the early days, it seems the concept of the drive-through food outlet is expected to be a big in China and retailers are planning accordingly.

Indian food in USA

The USA has a thriving dine in and dine out restaurant culture, yet Indian food has never quite caught on. In comparison to Mexican and Chinese restaurants, there’s a surprising dearth of Indian eateries.

The absence of eateries serving this cuisine doesn’t seem attributable to the local ethnic population size: in New York City there are around 20 times as many people of Indian heritage as Thai yet the number of restaurants serving these cuisines are roughly equal.

The reason seems to be rooted in American expectations about pricing. Indian food is too labour intensive to prepare to meet American price expectations. This refusal to pay for quality Indian meals drives down quality, meaning the cuisine isn’t well-represented and has never caught on. Commentators have identified a ‘thirty dollar threshold’, the most money consumers expect to pay for restaurant food but a price point below which Indian restaurateurs can’t turn a profit.

It’s the reason one of America’s most successful restaurateurs threw in the towel on a venture aiming to bring upmarket Indian food to New Yorkers. Daniel Meyer’s contemporary Indian restaurant, Tabla, closed in 2010.

At this time a number of other Indian restaurants were closing across the country. Speaking from long experience within the restaurant trade, Meyer concluded that Americans just didn’t have the same allegiance to Indian cuisine as they did to others.

When the economic downturn came and households cut their eating out budgets, they were loyal to other cuisines. It seems pricing was the main barrier to this eating style really catching on in the States.

Flat pack furniture

IKEA, pioneer of the self-assembly furniture concept, is seeing some of its strongest growth from the retailer’s Chinese stores. Catering to China’s rising middle classes, the upwardly-mobile Chinese consumers seems to have taken to the flat pack concept with enthusiasm. Unlike other local furniture stores, IKEA encourages its customers to sit and lie on the furniture in-store for as long as they want which has been a showroom concept that appeals to local consumers.

But whilst the furniture itself and the showroom interaction concept has been popular in China, the money-saving concept of self-assembly isn’t as relevant. Labour costs in China are relatively cheap compared to markets like the West where people prefer self-assembly to save money. Chinese customers are the ones in the world most like to use IKEA’s assembly services.

IKEA stores are generally built around the concept of collecting the furniture yourself because flat-pack easily fits into a domestic car. With only a relatively small proportion of its Chinese customer base currently owning cars, IKEA has chosen sites near public transport links, and offers local and long-distance home delivery. But in anticipation of a near future where many more of its customers own vehicles, the stores still have massive car parks.

IKEA’s quick and easy furniture has been introduced into China at the right time, just as living space grows along with incomes. This story isn’t so much about the success of the self-assembly concept; rather that IKEA’s home furnishing offering has just come at the right time for China’s households.

Self checkouts in the USA

When Tesco introduced its small grocery chain of Fresh ‘n’ Easy stores to the west coast USA, it pioneered the concept of the self-checkout. Customers were used to manned tills and having support to bag their groceries so this was a new concept; one that won both fans and detractors.

Ultimately the store chain failed not because of the self-checkouts but because the shopping style it offered didn’t suit local habits. Fresh ‘n’ Easy offered a smaller store than the usual giant supermarkets, less variety and more emphasis on ready meals.

Whilst some customers found it suited their needs, commentators generally agreed that Americans weren’t ready for the ‘little and often’ style of grocery shopping on offer. Local households preferred to make infrequent trips and buy in bulk.

The experience was also less thrilling as the store couldn’t offer the range of more unexpected items, which was what made grocery shopping a fun event at larger stores. Whilst the consumer could adapt to self-checkouts, the small store shopping concept just wasn’t quite able to fly in this market.

Conclusion

Whilst consumers can adopt new ideas and sometimes embrace them with enthusiasm, it’s hard to get new concepts off the group if they seriously contradict prevailing habits and expectations. Researching your market thoroughly and speaking to local people is really the best way to see whether a market may be ready to swallow a whole new concept.



 
 

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