How to: identify routes to market
The further you go from your home market, the more essential it becomes to having a route to market that allows you to supply your product or service in a timely, efficient way to your new customers. There are usually several different options available to you.
Repeating the same model
Keep in mind that the model you use in your home market might not suit the profile of customers you plan to target. Equally, the geographical scale of larger markets may make it unsuitable to have just one agent or salesperson covering an entire country. As a rule, in a foreign market, you will be dependent on a relationship with some type of local representative who knows the informal business practices and has long-held connections with established business networks. This relationship is critical for your business, so it’s very important that this relationship is maintained in an equitable way that benefits both parties.
It doesn’t always follow that a market that is geographically close can automatically be served directly from your headquarters. Business cultures that are based heavily on long-standing personal relationships are very common in more distant markets. While accessible, it may not be possible or practical to serve them directly.
At the beginning, you may have to use multiple routes to market before settling on one that works. Having a local customer reference is often critical in winning further business in a new market, and this is likely to involve direct contact with the buyer, or at the very least, significant input from members of your team. Assuming you know the market you want to target and have a clear idea of its potential, you need to decide on the channel by which your product will reach your customers. How you enter a market is a strategic decision that will define the very nature of your business in overseas markets. The decision to either sell directly or partner with someone to sell on your behalf will be guided by resources, opportunity and the nature of your offering.
Choosing the right route to market is critically important; local distributors can provide deep understanding of informal business practices and networks of relationships. You are sacrificing margin by working with intermediaries, but the upside is that you might gain access to a customer base that would be much harder to crack as a new entrant to the market. Despite the relative proximity of the Italian market, for example, its business culture is such that regular visits are an absolute necessity, local representation is essential and it’s becoming increasingly clear that some form of more permanent presence is strongly advised if you are serious about selling there.
Your choice will typically involve one of several possible channels:
- One of the main routes to market, especially for high tech and service companies, is to set up a sales or office presence in the market staffed by employees of your business (see page 36 for more on this)
- You can hire a sales consultant with experience and contacts in your preferred sector, working on behalf of your company
- An independent agent who represents your company (and possibly others) to develop leads in your chosen market
- A locally-based distributor that will hold stock of your products and possibly provide first-line technical support if necessary.
Export checklist: tips for export success
- Check whether your route to market can be repeated overseas, or do you have to use different channels
- Understand the drivers and dynamics of your market – can your product be sold through a third party, or is it too complex, requiring direct input from your team?
- Be prepared to use multiple ways into a market at the start, before settling on a defined route
- Identify local partners who will champion your product
- You need to manage agents and distributors proactively to ensure ongoing commitment from them.
Case study: Nualight
Headquartered in Cork, Nualight (www.nualight.com) is a specialist LED technology company. Focusing on retail, commercial and industrial niches, the company has R&D centres in Europe and manufacturing facilities in Poland and Mexico. Nualight sells turnkey solutions directly to strategic accounts in Europe and distributes its products via a partner network in Europe, North America and Australasia. Around 40 per cent of its business comes through partners. VP of Marketing, Siobhan O’Dwyer, reveals how to find the right route into new export markets.
What lessons have you learned about working out the best route to market for your products?
You need to have a joined-up strategy for when you hit a market first: some products don’t lend themselves to being sold through a channel, either because of margin or else because they’re too complex for a channel sell. For a smaller company, if you don’t have a large sales force it can be difficult to grow your business internationally, so a partner is a great way to do that. You have to look at the potential volumes for that market. If it’s high volume and would be difficult to access without a partner, then it would be very attractive.
“If you recognise that your model isn’t working, you also have to be willing and ready to change”
How does Nualight decide which route works best for a particular market?
In some offices, you need to have a lot of cultural knowledge and it can be difficult to have that without a partner. In Turkey, we absolutely needed to have a partner, even though the margins are tight, because the market is all about personal relationships. The big learning was we tried to crack the American market for several years before gaining real traction. We tried partners and resellers and we tried putting our own people on the ground. Having a good channel partner is a good way to go and one way to ensure that it works is co-development and integration.
For us in North America, it was a very attractive way to grow with limited resources. That gave us access to a very big chunk of the market that we could have never reached ourselves. You’re handing away margin, which is the downside, but otherwise I don’t think we could have realistically done it. In other markets we’ve used a mix of direct sales and channel.
Once you pick a certain model, are you obliged to keep to it, no matter what?
If you recognise that your model isn’t working, you also have to be willing and ready to change. For a smallish company, trying to support a lot of different routes to market can be difficult because how you support each of them could be different. It’s neater if you can have a fairly tight approach that you can replicate in several markets. It doesn’t always work but that’s the ideal.
Our approach has been to try to be relatively open at the start and to put a lot of investment in the relationship. You have to work extremely closely and be prepared to work with a partner – and there has to be an understanding that the relationship has to keep performing or else you decide to end it. It’s not a formula as such. There’s a certain amount of trying things out, learning from them, and figuring out what suits your business.
What advice would you give companies in terms of making an export partnership work?
References are incredibly important. It is really worth ‘buying’ references in a market – getting a very good reference case study – and if you have to give away a bit of margin to get that deal across the line, that is probably the single most important thing you can do.
A good partner will be able to find you reference case studies and equally, good case studies will help you find a very good partner. A partner will never sell product the way you would sell it yourself, so you have to equip them with every thing they need to go out and sell – and maybe that includes lead generation which goes back to them.
You cannot sit back and expect someone else to sell your product for you. You have to invest almost as much as you would in selling the product yourself. You have to invest in education of the partner’s sales force, the relationship and brand building, and put in a tough but mutually beneficial commercial relationship in place.