This article was written by Mr. Jeffrey P. Graham originally intended for Citibank's now defunct international business portal. © Citibank. All Rights Reserved.
Marketing Your Products
IntroductionGenerally speaking, the term international marketing is actually a misnomer that is commonly used to describe import-export marketing. International marketing, per se, actually refers to cross-border marketing that is most often carried out by multinational corporations while small and medium sized domestic companies by way of foreign trade intermediaries most often carry out import-export marketing or trade. While import-export marketing and cross-border marketing do share common or similar characteristics in some aspects, it is very important for newcomers to understand the real differences. As a practical matter, articles written about both subjects sometimes blur the distinctions and this can become slightly confusing. So that we do not confuse you, we shall place both international marketing and import-export trade or import-export marketing under one umbrella term, “global marketing”.
OverviewFor reasons that should be obvious to most readers, we are focusing here on import-export marketing or import-export trade. The aforementioned confusion about the use of terminology is actually crucial for a clearer understanding of exactly how trade, the buying and selling of goods and services, is facilitated. What is important to note here is that multinational corporations and small and medium sized domestic companies often use different channels to distribute and sell their products in overseas markets. As a general rule, multinational companies are usually selling goods that are sold to individual consumers such as cars, electronics, household appliances, food and beverage products and personal care items. Small and medium sized companies (SME’s) typically sell their products overseas to business customers. SME’s might sell industrial machine parts and various custom made machine shop items, medical products used in hospitals and clinics, industrial machinery and materials handling equipment like fork lifts and tools. In foreign markets, the most significant difference between multinational corporations who use cross-border marketing techniques and SME’s who use intermediaries is that the SME’s are selling business to business and the multinationals are using advertising driven national marketing strategies to reach individual consumers.
How Is International Trade Facilitated?In Understanding Trade Regulations, we discussed the role of the foreign freight forwarder in moving products from the factory floor to their final destination overseas. Most import-export trade is further facilitated by what are known as trade intermediaries. Many people know trade intermediaries as “middlemen” and have this notion that intermediaries find both buyer and seller and put them together and earn a commission for arranging an international transaction thusly. Nothing could be further from the truth. Most intermediaries represent either the buyer or the seller and do their work solely on behalf of their client. The idea that a middleman could identify a buyer and a seller and then could keep both parties ignorant of each other is just plain fiction. Unfortunately, too many people come to international trade with this notion already firmly established in their minds and have extreme difficulty in accepting the reality of how import-export transactions are actually arranged.
There are really only two types of import-export transactions: 1) distributor/intermediary purchases and 2) sourcing and procurement buying. In the case of distributor/intermediary purchases, a foreign distributor will normally attempt to directly contact manufacturers or export management companies who represent manufacturers in order to develop a distributor relationship with the manufacturer that grants the distributor a defined territory in which to sell the manufacturer’s products. Most foreign distributors try to gain exclusivity rights in their country for a particular manufacturer. If a manufacturer is well known, exclusivity can be very profitable for the distributor. In the case of sourcing and procurement buying, an individual company is normally attempting to procure some equipment that it will use to do business or it is trying source components for its products at a lower price. Therefore, companies who do export their products will sell to two types of clients: distributors, intermediaries or other resellers and end-users.
Evaluating Trade LeadsPlease read Evaluating Trade Leads by Mr. Jeffrey P. Graham. Many global business experts consider this article to be the finest ever written about the subject of trade leads and more specifically trade leads and the Internet. There is an article about Mr. Graham and his opinions on this subject that appears on page 40 of the January 2000 issue of Entrepreneur Magazine and it might be helpful in understanding this aspect of marketing your product in overseas markets.
Identifying Foreign CustomersFor most newcomers to going global, the most daunting task is how to identify potential customers in foreign countries. A colleague of mine who worked with me at a large global trading company once said, “Finding a foreign distributor is very easy. Finding a good foreign distributor is another matter entirely.” It only took me six months to discover just how prophetic her words were. Because finding good foreign distributors and other value added resellers in foreign markets is not an easy task.
Proponents of the Internet will tell anybody who is willing to listen that the Internet has made it easier to find foreign customers. Unfortunately, as with trade leads, this is not true. In Choosing a Foreign Distributor, Mr. Graham once again debunks some myths about foreign distributors and takes a very hard look at how the choice should be made. While it is indeed true that the WWW disseminates more useful information than was available as recently as five years ago, it is also the case that such information is often very difficult to assimilate into the business enterprise. There are literally thousands of websites, many known as “trade boards” that are dedicated to posting trade leads and providing information about how to contact foreign distributors. The U.S. Department of Commerce, individual state offices for international business development, local and foreign chambers of commerce and industry and trade groups and business associations are just some of the organizations that offer assistance in finding foreign customers. Yet, with so much assistance and information readily available, the task is not made any easier. The most compelling reason why contacting foreign clients is getting harder instead of easier is that the criteria for appropriate foreign buyers has not changed as rapidly as the Internet. Merely claiming to be a legitimate buyer via e-mail and a website does not hold up to real scrutiny from any experienced trade intermediary.
Trade IntermediariesThere is really only one true trade intermediary: a global trading company. Global trading companies have been a part of global trade in the modern era for almost six hundred years now. A global trading company is exactly what its name implies. It is a company that trades on a global basis. That is, it is involved with several manufacturers and/or distributors and other value added resellers in a variety of import and export transactions around the world. Some of you might be more familiar with the export management company. Well, in reality, the export management company is nothing more than a specialized type of global trading company that focuses on exporting for its manufacturer clients.
There are other types of people and organizations that perform some functions that come under the heading of trade intermediary. Sales agents, commission merchants, manufacturers representatives, commodity brokers, sales brokers, procurement agents and buying agents all perform various aspects of facilitating trade. Some of these entities do become involved in import-export transactions, but their involvement is usually very specialized and most newcomers will not become involved with them upon their first foray into global marketing. Note: Technically speaking, foreign distributors can also act as intermediaries in some instances.
As was previously mentioned above, global trading companies are not middlemen. In fact, with rare exceptions, the highly glorified middleman does not truly exist. That is, it is not the role of the intermediary to bring together buyer and seller, all the while keeping each party unknown to the other. This is a highly unusual case and in most instances, it just does not work. The middleman of whom people speak is the global trading company, but its role is far different than people imagine. When a trading company represents a seller, it functions as an export management company. When it represents a buyer, it functions as an importer. In both instances, it is the intermediary. That is, its role is to facilitate the transaction. Normally, there is only one intermediary per each transaction. Obviously, wannabe intermediaries are always attempting to insert themselves into transactions for a so-called small “piece of the action”. However, only very inexperienced traders would allow this to happen. In some instances, such as the case of foreign governments making tender offers, intermediaries in the country where the tender originates have the opportunity to participate guaranteed by their government.
What does the intermediary actually do? In reality, the role of an intermediary is not at all sexy as most people imagine. Foreign companies who need to make a one-time procurement purchase of a big-ticket item sometimes retain trading companies. In this instance, an import-export clerk would go to the local library and search through hard print industrial directories in order to find as many manufacturers of the particular item requested unless the buyer already limited its choices to a few select manufacturers. Then a trade specialist would compose an RFQ: a request for a price quotation and then send it to all of the different manufacturers. Normally, the manufacturer would initially respond by asking the trading company about the destination of the product. Scrupulous companies would reply honestly. If the manufacturer had an exclusive distributor in that country, it would usually decline to send the trading company a price quotation in order to not “step on” or hamper the efforts of its local distributor. The trade specialist would then evaluate the price quotations of various manufacturers who did respond. (These price quotations are normally sent by way of what is called a pro forma invoice, which is merely a mock invoice.) The trade specialist might then contact the logistics department of the trading company in order to determine the transport and insurance costs. It would then send its own price quotation to the buyer. If the buyer accepts, then the trading company might shop around to different banks for the best deal on a letter of credit and would forward that information to the buyer. If a letter of credit is successfully opened, a shipping clerk at the trading company would note entry requirements for the destination country and then would advise the shipping department at the manufacturer about packing and marking requirements as well as required paperwork. The import-export clerk and trade specialist might review the required paperwork with the manufacturer and once it was completed, the logistics department of the trading company might then contact local trucking companies near to the manufacturer and look for a steamship going to the foreign destination. Once the cargo is loaded onto the steamship and the captain draws up a bill of lading, the trading company will get paid when the bank executes the letter of credit after all of the proper documents have been submitted. This is not something that an amateur without training, education or experience can do properly.
Success FactorsMany executives that are newcomers to global marketing, wonder about what exactly are the success factors. Well, to be honest and frank, one size never fits all in global marketing. There are, however, some general guidelines that newcomers should try to follow:
Set aside sufficient budget for going global. This is a very serious mistake that far too many companies make when going global. Global marketing is not really that much more expensive than most domestic marketing, but the volume is significant. Many business executives try to go global “on the cheap” as it were. This is a recipe for certain failure. The sales cycle in global business is much longer than in your domestic market. This means that you should not expect any quick returns on your initial investment. Set aside enough money.
Localize your product or service for your foreign clients’ tastes. “Well, if it is good enough for this market, then it should be good enough for them.” This is a very typical response heard many times from many executives. In most instances, product localization only involves minor setup costs that are quite often recouped after the first order is received. Yet, this is another area where business executives fail to properly follow through on significant export opportunities.
Provide excellent quality collateral materials in the foreign language used in the foreign market. This is actually a parallel product localization issue, but we are treating it as a separate item because it creates significant problems for so many companies. Even as globalization moves forward at tremendous speed with enormous momentum, there are still business executives who steadfastly refuse to acknowledge that the whole world does not speak one language. Business executives in the United States are probably guiltier of this oversight than executives in any other country. Beyond the foreign language aspect is the problem of not sending adequate product catalogs along with price lists. Foreign business executives are not mind readers. Send them enough information to allow them to be capable of making a positive buying decision in your favor.
Learn how to listen to foreign distributors. Some executives bristle when a foreign distributor writes to them with advice and/or criticism about their products. Foreign distributors earn their profits by selling the products of local and foreign manufacturers to their customers. They usually know what their customers want and they make every effort to provide what their customers are eager to buy. If such a company takes time to evaluate your product and then contacts you with their impressions, you should listen very carefully because this distributor is telling you how to be successful in this particular market.
Place the Internet in its proper perspective. The World Wide Web will not compensate for shoddy and inconsistent product quality and poorly kept promises about delivery schedules. Some companies are placing too much emphasis upon developing their websites and too little emphasis upon developing their real core competencies. Just because e-mail provides instantaneous communications capability does not mean that you’re more likely to receive a faster response from a foreign buyer. Use the Internet as a tool to educate yourself and your employees, conduct better business research and to communicate with more people in more places around the world.
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