One of the biggest challenges facing businesses that are seeking to grow their export markets is the issue of identifying, evaluating, and appointing highly proficient distributors in relevant territories.
Many companies make the mistake of seeing their first customer in a new market as their de facto distributor. They have no reason to be concerned, as this might indeed result in new orders and some solid new business in brand new market.
When this happens, it is a stroke of luck. However, given the importance of the potential global audience for your products and services, why leave this to chance?
Often it is better for companies to be more measured in their approach to appointing distributors. If it’s done correctly, you can be confident that the distributor or agent you have appointed in a particular territory is the best match for your business, is motivated in the correct way and for the most mutually-beneficial, transparent reasons, and above all has the edge that you need in order to grow your customer base successfully in overseas markets.
Here is another typical scenario which many companies face:
You have often wondered if there could be a large market for your products in a particular region – in South America, for example. Then, one day, you happen to receive an enquiry from a Brazilian company offering to act as your exclusive agent. You’re not too keen on their demand for exclusivity, admittedly, but at the same time you’re not doing any business there at the moment.
Should you pursue this opportunity? If so, what is the most straightforward way to handle it, without incurring any unnecessary costs – especially in terms of missed opportunities if they are not right for the job?
Appointing an exclusive agent in a country after a few emails and phone calls may seem like a simple process and an exciting prospect – after all, they will be out there every day marketing and selling your products and services in a new territory, sending in regular orders and driving your business, won’t they?
There are some important questions to answer before you can be sure that their performance will be mutually beneficial to you both, such as:
- How do you know that they are based in the best city and country within that region for your target market?
- How do you know that they have demonstrable access to the part of the market you are seeking?
- How can you find out how much active promotion they will do on you behalf?
- Do you know what their Service Level Agreements are with their customers?
- How often do they meet with new prospects as opposed to existing clients?
- What are their other revenue streams, and how important will you be to their business?
- How can you understand what motivates them and what will keep them from losing interest after 6 months?
- How do you know that they aren’t seeing this deal as a way to make themselves seem more ‘international’, so that they can then win bids with customers on behalf of their existing product lines?
- How do you know that they are stable and/or growing, and not just seeing this opportunity as a means to stay in business?
- How much of their business is relevant to the products and/or services you are discussing?
Would you ship products to a company on an ‘Exclusive Distributor’ basis without having answers to some, or all, these questions?
Once these questions have been answered, it is then vital to then verify the part of the market in which your new distributor occupies – as this can cause major headaches down the line.
For example, if your product or service has the highest specifications available, and therefore commands a high premium when compared to your competitors, how do you avoid working with a distributor whose core competency is in selling to the low-end, ‘value’ part of the market?
Similarly, if you can deliver a ‘good enough’ product or service more efficiently and at a lower cost than anyone else, it would make little sense to sign up a distributor or agent whose strongest connections are with buyers at the premium end of the market and would require more expensive, ‘feature rich’ products and services which you do not currently offer.
In other words, there is no point trying to sell premium products to companies that do not have a genuine need for the additional features that justify that premium – and there is no point attempting to sell large volumes of budget products to customers that would rather pay extra for features which you have not included in your price.
The importance of adequate market-based due diligence in these cases cannot be underestimated. Lava IP International can help you cut through the noise and make sense of these issues in the international markets we serve. Do your homework, leverage your local network of contacts in those countries, and make sure that you are entering each new market on a stable footing.
That way, you can be sure that your entry into new export markets will be a success.