How to: work with a partner or distributor in export markets
When your company has decided its most suitable route to market is via a local partner or distributor, the next step is to identify which one. Keep in mind, this organisation will effectively be representing your brand in the market. Choosing the right partner is possibly the single most important decision you will make when exporting.
Your route into a new market can often be smoother when you have a local partner and this usually leads to higher levels of sales – even if you may need to sacrifice margin to bring them on board. Any commercial terms with a partner should be agreed in advance and stated clearly in any contract.
The benefits of a good local partner or distributor are many:
- Where your products or services are complementary, they can provide access to an existing customer base in a brand-new market
- They will have well-established networks of contacts
- They may be able to help you navigate complex bureaucratic procedures, or simply provide guidance on the local business culture.
Finding the right partner
Research consistently shows that the correct choice of partner in your overseas market is one of the most critical success factors for SMEs. Setting and agreeing expectations is the key to establishing a strong relationship with a partner from the outset. The types of details you may want to consider include sales objectives and shared marketing plans, exclusivity, pricing, margins, discounts and payment terms.
It’s important to conduct thorough checks into your chosen partner. In many markets, it’s possible to conduct formal due diligence to establish the company’s credit history. Where this option is not available, use business networks or existing contacts in the market. In some cases, if you have already made contact with a customer, you could ask them if they have a preferred partner or supplier with whom they do business, but this may not always yield results.
Making the relationship work
Exporters say that if possible, you should look to work with your preferred partner or distributor on a fixed-period trial basis to test the working arrangements in practice. Like any good relationship, it needs regular work. To get the most from this arrangement, your company should support the partner by visiting the market regularly and engaging in joint marketing activities. It’s also wise to include a ‘get out’ clause if targets are not being met or the arrangement is not working.
Case study: Combilift
Combilift (www.combilift.com) knows what it takes to export successfully. The Monaghan-headquartered company has sold more than 24,000 materials handling and specialist forklift units in more than 75 countries. Combilift co-founder and managing director Martin McVicar, shares some tips about making the relationship with a distributor or partner successful in export markets.
Based on your experience, what’s the best way to start working with partners in a new market?
Combilift’s general approach to a new market is to focus on finding end-users of our product before we put any serious effort into finding a distributor or partner. We find this method effective as the distributor can be hesitant to do anything until they know the market for your product. A customer is more likely to recommend a distributor that they have had first-hand experience of working with in another capacity. Seeing a Combilift product in operation at a customer’s facility often gets the interest of a distributor and they will contact us. The customer can then give us good advice as to who we could work with.
We’ve found that a lot of the customers we already deal with are bringing us into new markets, which is a very cost-effective way of entering a new market. Our experience is, that if you appoint a distributor without already having one or two customers in the market, there is added pressure on the distributor to find new customers. This results in the distributor losing interest very quickly. You can put a lot of energy into motivating a distributor and if they don’t already see where the market is, you don’t see the results.
“We like to work with a distributor that already sells either direct or indirect competitors’ products as these distributors will have a better understanding of our market.”
How do you make your final decision about which distributor to work with?
We purposely don’t look for the distributor that has the biggest name: success will depend on the distributor’s salespeople on the ground and whether they understand and believe in your product – rather than the name of the company. We like to work with a distributor that already sells either direct or indirect competitors’ products as these distributors will have a better understanding of our market.
Many exporting companies are resistant to going down the route of using distributors with links to competitive products. I believe that if you are confident your product is innovative, and if the distributor can appreciate the value of what you are offering, they can get you off the ground the fastest. You don’t have to spend time educating them, they already know the target market and they already know customers using similar products so they know the type of customers to target.
What’s the key to supporting the distributor, and making the relationship work?
Our most effective way of training distributors is what I refer to as “spending windshield time” with them. That means going on the road with their salespeople, knocking on doors and visiting customers in their market. We are continuously learning from this. You need to spend as much time as possible with that distributor. Obviously that depends on your budget and how near they are to you. We find that once a year is not enough. Twice a year is better, but if you can be with them four times a year, you will have more success.
As our products are concept products, if distributors are not known, sales don’t come anyway – even if a market is booming. For any company entering a new market, a distributor, unless it’s an exceptional case, is going to sell other product lines. The distributor’s business will have been surviving on those products before you began dealing with them so what you want to do is get the distributor to spend more time on your product. When you’re not with the distributor, other suppliers will be. If you’re on the road with the salesperson for a week, you will see a clear rise in activity in the following month, however this dwindles until you have a repeat visit.
Also, having a salesperson dedicated to the market gets the distributor more focused and gets the brand more established. As our business has grown, we are now employing sales support people in local markets, and they generally have the local language. As of today, we have 35 salespeople based abroad in the key export markets, and their role is to support the distributors in the larger markets.