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Global businesses are embracing augmented reality (AR) and virtual reality (VR) to offer potential customers a feel for his or her products before buying, whether virtually trying on a lipstick shade, exploring a brand’s world in Roblox or seeing how a brand new couch might look in your front room.
But getting it right within the virtual world doesn’t mean the identical thing in every global market, a University of Maryland marketing professor present in recent research.
It’s well established that multinational firms often struggle to compete against local businesses in overseas markets—an idea often called Liability of Foreignness (LOF)—and it seems that the identical disadvantages can apply to immersive technologies intended to interrupt down traditional barriers, in keeping with a University of Maryland-led study published last month within the Journal of International Business Studies.
Culture influences how people interact with so-called prolonged reality (XR) technologies, which makes it tough for multinational firms to have an XR approach that works well in every country, said lead researcher P.K. Kannan, Dean’s Chair in Marketing Science on the Robert H. Smith School of Business.
“If you’re a firm coming into an area market, you may have the liability of being a foreigner because you actually don’t understand the cultural nuances and you would possibly not find a way to obviously communicate your value proposition in the way in which that the local culture will understand,” he said. “Basically what we’re saying is don’t just take XR that has been developed for one market and just immediately assume it’ll work the identical way in one other market.”
Kannan and co-authors Hyoryung Nam Ph.D. ’12, now at Syracuse University, and Yiling Li and Jeonghye Choi at Yonsei University in Seoul, Korea, investigated XR marketing strategy in tech-savvy South Korea. “They are on the leading edge of those applications in retail,” Kannan said. “They have many locally based firms, in addition to foreign firms coming into market products.”
They teamed up with a market research company to review 257 beauty brands in South Korea over a three-year period from 2019-22, particularly how XR innovations affected brand engagement with foreign brands versus local brands.
They focused on “brand buzz”—how often a brand gets mentioned on social media, a key indicator of name engagement. The team confirmed that LOF does exist within the virtual world for foreign firms, attributable to cultural mismatches in how people process information.
“If your XR shouldn’t be really resonating with consumers, there won’t generate much brand engagement,” Kannan said.
The problems were especially apparent in cases where the XR applications created highly interactive, extremely vivid but less realistic experiences. For example, there’s a greater risk of cultural mismatch interacting with products in a completely imaginary, stylized virtual world than with a simple application that uses an individual’s own image to try on makeup shades or fashion accessories.
But a really recent brand or one introducing a brand new product is less more likely to face LOF, Kannan said. “The uncertainty about something recent takes over, making people more focused on experiencing the brand new brand or product moderately than noticing cultural mismatches.”
The researchers also found that firms can avoid cultural mismatch problems through strategic marketing investments in local markets. Brands which have their very own platforms that allow direct connections with local customers are far less more likely to experience LOF.
Kannan offered the next recommendations for firms in search of to make use of XR to attach with customers in foreign markets:
1. Know the culture. “Understand the cultural norms and nuances of a brand new market before you enter it. Tailor your XR technique to fit the local culture, ensuring it feels relevant and interesting for local consumers.”
2. Choose XR technology correctly: “Some XR technologies will be more difficult for foreign businesses. Highly interactive and imaginative XR, which regularly use more advanced technology, may increase the chance of cultural mismatches. If you’re not very acquainted with the local market, start with simpler XR features and step by step introduce more advanced ones.”
3. Leverage newness: “For multinational firms, while you’re a brand new brand or introducing a brand new product, that comes with a novel advantage—individuals are more focused on experiencing something recent. This gives you some room to introduce more advanced XR in foreign markets.”
4. Build a community: “Ensure that you just get onto your personal platform and begin constructing brand communities around your product. That will show you how to in the long term to scale back the impact of the liability of foreignness.”
In general, having XR is best than not having it, said Kannan. But adopting it comes with risks. If you provide you with the unsuitable technology and the unsuitable approach, it might harm your brand — sometimes even worse than not having XR in any respect.
“We find that firms that use XR generally perform higher than firms that don’t use these technologies. But when you use it within the unsuitable way, it might harm your brand,” he said.
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