During spring break, I went to Switzerland as part of my International Study Trip class. In a size of 35 people, this group started from Zurich, Basel, crossed the country’s capital city Bern, and then ended up at the International organizational hub, Geneva.
During the five-day week, we visited companies and organizations like Novartis, International Red Cross, CERN, the United Nations, Zurich University, etc. At Swiss Re, an insurance company, we understood Switzerland’s competency as a financial center. At Novartis, a Fortune 500 public company, we saw how much effort they had made to attract and retain talents. At MudiPharma, a private pharmaceutical company, this group was inspired by the Greek CEO and his leadership philosophy. On non-profitable side, we gained a deeper understanding on humanity at International Red Cross. We learned the cutting-edge particle research at CERN. From the political perspective, diplomats at US Embassy provided their view of this world, and the mayor of Nyon, a small local city, shared their social service practice.
Switzerland has been a window through which I see the difference between the Europe and the US. Accordingly, business marketing practices in Europe should be different from in the US. As a memo for my international marketing practice in CPG (Consumer Package Goods) industry, below is my summary of my observations on the European market.
1) Customer profile
Language is the first element that contribute to the diversity on this continent. Namely, German, French, Italian, Portuguese, Spanish, and many more. In Switzerland alone, four official languages are mixed with many different regional dialects.
Psychographically, consumers in Europe are highly educated. They work hard but also value family life. People in regions like Switzerland, Germany, Northern Italy and UK work like an engine, leading the prosperity of the European economy. These individuals are independent and confident. They form their opinions and make choices through their own study and research. People in the US and China are more likely to be influenced by words-of-mouth and pop culture. This assumption in difference may lead to a quantitative study on the effectiveness of social media marketing campaign in the Europe. Presumably, the fabulous ROI (Return-On-Investment) of a social media campaign in the US is hard to be duplicated in the Europe.
Europe is not an integrated market, even though the formation of EU (European Union) creates congruencies. It is just as diverse as the US if not more. European countries’ histories are intertwined all together. This has developed the similarity of the customers’ profiles of different countries. However, representing different parties in those historical events, different European countries are also dissimilar to each other. For example, Italian consumers are more likely to be price sensitive than Swiss. French consumers are more likely to be attracted to a prestige brand and style whereas German consumers are probably more interested in accuracy and functionality. The dissimilarity challenges the effectiveness of a uniformed marketing communication package on this continent.
Each customer segment in Europe is not extraordinarily large in size. This makes it hard for companies in Europe to have a cost benefit through commercialization. However, individual customers there are valuable because their LTV (Life Time Value) is high. The high-level income determines their consumption. Their relatively high brand loyalty is the other contributor. Fewer bounces between different brands allows companies to reduce the advertising expenditure while maintaining a stable customer base and top-line sales.
Given the customer’s characteristics in the European market, differentiation becomes the key to serve each niche segment. While companies in the US and emerging markets can be a cost leader by leveraging the economy of scale, a business in Europe should strategize to serve a well-defined customer cluster with a highly differentiated product. The target customers’ profile and their needs should be clear. The product should solve the specific problem and be superior to other substitutes.
In marketing practice, branding is a subject worth focusing on. Themes such as quality, legacy, prestige, fashion, luxury, should be the messages to the target customers to create value that resonates with them.
A potential challenge for branding is localization. Countries like Switzerland do not have many resources. Their commercial goods mainly depend on import. On the other hand, the small population makes Switzerland a small market in which a cost-leadership company can hardly survive. Swiss residents know how difficult to run a local business, so they strongly support local businesses. As a result, this put an international company in Switzerland at risk if the company simply attempt the same strategy with the global market without a localized image. A brand actively interacting with the local community is likely to be more reputable than those burning money on advertising.
3) External Environment
Besides the customers, the regulatory and political situation also have shaped the landscape of this market. The EU plays a significant role in terms of integrating the market. However, it is a controversial organization. Many countries are still not participating and do not even plan to participate in the future, especially, Switzerland. Additionally, many questions remain. How will the EU system work in the future, how much impact will it have and to what extent will it pull Europe together are questionable?
Let’s put the EU aside. As independent political entities, European countries are not equally attractive to investors.
Among the best investment destinations, Switzerland stands out. Its low corporate tax rate makes it an optimal location for business headquarters. The easy access to its reputed banking industry is another appeal. In addition, its neutrality and independency create the stability to allow businesses to operate in peace. While CSR (Corporate Social Responsibility) has become a hot topic, Switzerland promotes the opportunities better than any other areas in the world for businesses to go beyond the scope of profitability. NGOs (Non-Government Organizations) in Switzerland create an atmosphere for businesses or even individuals to think big and perform well while doing good.
To a great extent, all these elements help to offset the disadvantage of the high labor cost in this county.
To summarize, Europe is an attractive and unique market. Marketing in Europe is a complex business practice. As a marketer, you may want to ponder: How strong the brand image is locally? Who are your collaborators? Will they help you to better understand the local market? To what extent can you be adaptive to integrate into the local community? All this must be done before you make a move into this market.
Blogpost by Elizabeth Liu – Class of 2016