finding and keeping profitable customers: global marketing .../media/files/gcp/us2/con… ·...

Finding and Keeping Profitable Customers | 2015 1

AMERICAN EXPRESS GROW GLOBAL INSIGHTS SERIES

Finding and Keeping Profitable Customers: Global Marketing, Sales & Service

We’ll explore how it’s possible to accomplish all of this despite language, time zones and cultural differences.

When you commit to growing globally, you’re committing to conquering the challenge of finding, closing and servicing buyers.

Growing globally is an exciting and strategic opportunity for middle market companies. You may want to start your journey by diving into the logistical and transactional details. While these are important topics to consider, don’t let the potential complexity of international transactions distract you from a higher priority. Before focusing on getting paid, you need a strong, realistic and workable plan to find buyers and close the deals. And before they buy, many prospects will want to know how you’ll service them after the sale.

Some of the topics this guide will cover include:

Global Marketing • Helping profitable buyers find you • Why ‘global’ means both here and there• Identifying market opportunities and investing based on data and experience

Global Sales• Closing deals • Role and types of sales channels• Finding/evaluating partners and employees• Building flexibility into channel agreements

After-Sales Service• Keeping buyers satisfied • Supporting new customers• Developing a support and contingency plan

https://business.americanexpress.com/us/business-trends-and-insights/growing-smart




Global means here AND there

Helping profitable buyers find youMany companies build their business using a traditional approach built on advertising, cold calling, networking, direct sales and meetings. Buyers, though, have their own process and priorities. They ignore advertising, delay meetings with sales reps, and use the Internet for extensive research and education. They often decide what they’ll buy and only then contact a provider.

While demand generation and branding are still fundamentally important, they are increasingly functions of “thought leadership,” where a company presents its unique expertise. This approach now undergirds much of the lead generation process. Buyers now commonly search for what they want, when they want it. As search technology improves, buyer behavior evolves further, and increasingly searches are for solutions to problems or areas of interest rather than specific products or brands.

Companies must respond by shifting their mindset and activities from primarily broadcasting information about their products and services to providing potential prospects with insights into the challenges they face and related improvement opportunities. Strategically conceived and meticulously executed digital marketing (also broadly known as content marketing or inbound marketing) is an incredibly powerful tool.

Whether your market is B2B or B2C, you’ve likely built a profile of your ideal prospect. Traditionally that prospect was defined by former successes and those you’re able to reach through advertising.

Because the Internet is unconstrained by geographic and political borders and buyers are turning there with questions, companies are not only evolving from pushing a message to being a helpful resource, they are also potentially becoming global brands - whether it’s baked into the strategy or not.

It’s said that there are more Internet-connected mobile devices in the world than toothbrushes1 - and that means that

1Are There REALLY More Mobile Phones Than Toothbrushes?, 60 Second Marketer, http://60secondmarketer.com/blog/2011/10/18/more-mobile-phones-than-toothbrushes/

GlobalMarketing

The Internet makes marketing business globally easier than ever



http://60secondmarketer.com/blog/2011/10/18/more-mobile-phones-than-toothbrushes/



Identifying market opportunities and investing based on data and experience

An international lead represents both a sales prospect and an important data point. In the data is the power to avoid two of the classic entry hurdles into exporting:

• Uncertainty that an export market exists for your product/service• Hesitance to make a sizeable market entry investment based on research and hypotheticals Actual website traffic, lead and customer data accumulated over time can help companies evaluate and address these concerns and provide a welcome alternative to the traditional theoretical approach of studying markets to ultimately make an ‘educated guess.’ Now companies can make informed, data driven decisions.

Just as individual buyers identify themselves, so do markets over time. For instance, as you learn where you can quickly and profitably close deals you’ll eliminate the reliance on theoretical research that previously may have guided market selection. That actual market feedback empowers companies to select markets for further focus and investment. Follow-up steps like language and cultural localization and trade show participation can be justified with data. It also guides the evolution of sales channel models, which we cover later in this guide. Middle market companies will find this incremental approach important for early stage international growth goals, because it potentially:

• Reduces the extent of speculative investment and mitigates expansion risk• Provides a comfortable way for a buyer to learn more about how you can help even when they may hesitate to

communicate directly by telephone or email because of inconvenient time zones or language barriers• Simultaneously increases domestic activity as well as international activity• Allows companies to adjust and execute based on real data• Incrementally extends the effort in an order and at a rate measured by opportunity rather than arbitrary forecast• Doesn’t unnecessarily distract from the core domestic business• Meshes well with common early stage channel options such as ecommerce and indirect channel

Is the process universally applicable? Not necessarily. Certain highly regulated products may face sales restrictions despite demand. And some lifestyle products such as food and fashion may face cultural resistance that limits enthusiasm and demand. But it is broadly applicable for many B2C and B2B products and services.

as you improve your digital marketing you can generate some amazing international leads concurrent with domestic lead creation. Companies are often amazed to learn how much international web traffic they actually have, even before their sites are multi-language or optimized for international visitors.





Between finding the prospects (or helping them find you) and managing the details of international payments and logistics, there still lies a chasm to cross - you’ve got to actually sell, negotiate and close the orders. The length and detail of that process depends on your product/service, industry, the target market and the buyer.

The buyer is often the most variable – with personality, culture and other factors at play. Among the leads you generate and prospects you uncover will be a range of opportunities. Some buyers, undeterred by distance and unfamiliarity, will quickly buy from you. Those early orders will provide learnings and build organizational awareness of what’s required to sell internationally.

Others will expect you to visit, and then order, while some will be intrigued but unable to overcome their hesitance to place an order with you if you don’t have a local presence. While that’s understandable, it also can be frustrating to the often transaction-oriented American business person. Americans’ predisposition to action and results and quarterly business metrics are all elements of our business culture. That can conflict with expectations of business people from markets where the importance of relationships, even personal friendships, cultivated over time (multiple visits – over years in some cases) is central to the business culture.

Sales channels provide the physical, transactional and cultural market connection. Providing those important relationships is one of the many roles that a sales channel can fill, but finding the best channel model requires a clear understanding of what functions a company needs its sales channel to provide in each market.

GlobalSales

The Final Mile

Closing the deal





Role and Types of ChannelsSales channels provide the ‘feet on the street’ to sell and support remote operations. Channels can fulfill many different functions in addition to allowing a company to be in direct contact with buyers in more locations than a company could manage on their own. Channels can also, for example: Not every company needs all services, nor do all products and all markets require similar approaches. Often sales channel models evolve as companies’ export activities mature and grow, and the best solution is often a hybrid one which incorporates different models.

Basic types of sales channels fall into several categories. These include:

• Licensing and franchising• Ecommerce• Indirect (representatives, agents, distributors)• Direct (employees, representative office, subsidiaries, Joint Ventures (JV))

There are limitless varieties - but these are most common.

Sales channels provide the ‘feet on the street’ to sell and support remote operations. There are limitless varieties, but the most basic and common types of sales channels fall into several categories, including:

• Licensing and franchising• Ecommerce• Indirect (representatives, agents, distributors)• Direct (employees, representative office, subsidiaries, Joint Ventures (JV))

Channels can fulfill many different functions in addition to allowing a company to be in direct contact with buyers in more locations than a company could manage on their own. Channels can also, for example:

Not every company needs all services, nor do all products and all markets require similar approaches. Often sales channel models evolve as companies’ export activities mature and grow, and the best solution is often a hybrid one which incorporates different models.

• Manage local inventory • Provide local relationships• Bridge language and cultural gaps• Create awareness, leads, projects and customers• Facilitate transactions with local payment terms and

currency

• Advise on local regulatory and market requirements• Conduct sales calls, demos, trials• Provide customer support, warranty technical support• Close deals

What’s the best option for my company?Each sales channel option offers advantages and disadvantages. The fundamental tradeoffs are between cost, complexity and degree of control. Often companies could use several or all approaches. Selecting the best one requires matching the attributes of a channel option against the company’s short and long term growth goals and market specifics. Just don’t select one by default!





Franchising and licensing are appropriate for certain industries and products. Each raises special legal and regulatory considerations and should be carefully controlled. Licensing may offer an opportunity to overcome tariff barriers in some markets by allowing for local manufacturing. However, that can increase intellectual property-related risks.

Ecommerce is increasingly common among businesses of all sizes. Online auction and retail platforms provide services to facilitate cross border ecommerce between individuals and small companies. And a new category of service providers is creating tailored services that manage logistics and local payment challenges for companies selling commercially. A strong ecommerce presence also supports overall digital optimization – to get found by more global buyers. Of course there are some challenges. Details like currency, localization (dimensions, voltage, sizes) and varying customs procedures for direct shipments can create complications.

Growth and scale often require an expansion of local activities for inventory, customer service, returns and market-wide activity. Often ecommerce is eventually complimented by another channel model as well.

Indirect channel is the easiest to establish, and therefore where companies often start. Generally, the indirect channel model is to contract with other companies or individuals unrelated to yours to act as your sales team on the ground in a market. Typical variations include representatives who earn a commission for managing a deal, and distributors who buy and resell. Traditionally they’ve carried responsibility for local marketing and lead generation; which means it’s important to ensure that expectations are clear from the outset if these responsibilities are being delegated. Companies’ growing ability to create global awareness and leads remotely has reduced the importance of that traditional indirect channel responsibility. The role of indirect channel is increasingly focused on simply closing deals.

Because indirect channel manages their own local registrations, filings and tax compliance, it’s normally a simple model to implement. Aside from training and sales support, the cost of these channel models is relatively low - reps are only paid as they sell, and distributor discounts are negotiated. Often overlooked, though, is the opportunity cost. Companies have little control over indirect partners, and there’s risk to granting territory control to a partner which occupies a market but doesn’t generate revenue.

Agreements need to fairly account for market development lag time, but hold channel partners accountable to minimum acceptable revenue levels. And agreements should be reviewed by local counsel, because in many markets, what would be an easily cancelled agreement in the U.S. could inadvertently form a long-term and tightly binding obligation that is very expensive to escape internationally.

key consideration: are you willing to hand off execution?

key considerations: is your typical sale a discrete transaction? or is it complex, requiring ongoing support and involvement?

key considerations: do you have a track record of success driving sales through indirect channels elsewhere? if not, keep in mind that starting internationally is challenging so be sure to work from a proven model.

Franchising and Licensing

Ecommerce

Indirect channel





Direct channel offers the most control for companies, but also the highest cost and greatest complexity. As a model, direct sales channel sends your employees (e.g. direct, subsidiary, JV or leased) to act as your sales team on the ground in a market. There are times when the complexity may be unexpected and unwelcome. For instance, engaging an independent contractor to represent your company in a market may trigger a nexus determination (obligation for local registrations, filings and payments) by local authorities - even based simply on his/her LinkedIn title identifying them as an ‘employee.’ Companies need to carefully consider a wide range of issues including type of entity, HR options (including temporary employees) and obligations, various tax issues and others. (Check out our guide “Finding, Vetting and Selecting Experts to Help you Grow Globally” for more on preempting risks and maximizing the opportunity.) There’s no substitute for the strong, long-term commitment to a market that a local office represents. In some cases, such as holding intellectual property, certain foreign locations might offer an advantage.

Most middle market companies start with a less complicated and expensive channel model. But building your own direct channel is a great “next step” in growing globally when local manufacturing or a stronger presence is appropriate.

key consideration: have you verified that the market is a key priority before committing the resources required for a direct channel?

Direct channel



https://business.americanexpress.com/us/business-trends-and-insights/growing-smart/finding-experts-support-your-export-strategy-and-global-expansion



Finding and evaluating partners & employeesThe opportunity cost of a poor partner or employee is high, and in many markets simply disengaging is a protracted and expensive process. Having the right agreements in place is important, but finding the right partners and employees from the outset is always preferable.

Often the best indirect channel partners are those that come to you through important end user companies. As you generate local leads, ask the prospects who they recommend for help with the sort of problems you need to solve.

The U.S. Foreign Commercial Service also offers assistance through its Gold Key and International Partner Search programs to help you find channel partners known, vetted and often experienced in working with U.S. companies. (For more detail, see the Grow Global Insight Series guide, “Bench Strength: Federal, State, and Local Export Resources”)

When it comes to hiring, consider leasing the services of local workers through a U.S. agency that manages all the HR logistics of the employee who is dedicated to you as a contractor. You‘ll pay a premium, but the compliance and regulatory overhead typically shifts to the provider. Later, turn to well-known recruiting firms with a reputable track record delivering the right employees to American companies. Make sure you’re clear on employment regulations and have locally prepared agreements in place for all appropriate employees. (In the U.S., that’s often senior execs, but local counsel can provide best practice information for a specific market and employee type. See our guide, “Finding, Vetting and Selecting Experts to Help you Grow Globally” for more on this topic) There may be a temptation to draw from your own domestic employee pool, and an expat rotation can be a great career development experience and an exciting opportunity, but it’s also expensive, demanding of employees and their families, and may introduce cultural conflicts.

It’s almost certain that the markets where you find greatest successes will be different than your initial expectation, and the paths to success will likely differ as well. You’ll adapt and evolve your model, so plan your channel to retain some freedom of maneuver.

Often companies enter markets with indirect channels because it’s inexpensive, fast and flexible. As volume grows,

Planning for evolution



https://business.americanexpress.com/us/business-trends-and-insights/growing-smart/federal-state-and-local-resources-to-support-export-strategy-and-global-expansion





familiarity with the market increases and the opportunity becomes better defined, then there’s a decision to establish direct channels. Sometimes it replaces the indirect; in other situations it may sell to different market segments (e.g. government while indirect channel sells B2B.)

Companies should consider building that flexibility into their channel agreements from the beginning by carefully weighing exclusive agreements (at least without minimum revenue guarantees) or other limiting restrictions. Plan for the eventuality that you may outgrow your indirect channel, replacing it with a direct model as you grow. Acknowledge it (they likely already expect it) and incorporate an equitable transition plan. That may reduce the risk of a halfhearted market development effort from an indirect partner who expects to be dropped just as the market really gets going.

Other hybrid solutions can deliver flexibility and results, but also create channel conflict. Ecommerce competing against local distribution, or even a local direct channel, is not uncommon, for instance. Be clear with all channels how they’ll fit together. One flexible, early stage hybrid solution is country managers (direct employees) who coordinate multiple local indirect channel partners - a model that balances local expertise against the cost of sales.

Conflict will be unavoidable. Companies need to plan for it, address it proactively, and manage transitions equitably.

Companies often approach exporting with the expectation that they will grow their business organically. Many succeed, but it’s inherently gradual. Acquisitions (and sometimes other structures such as JVs) offer an often overlooked but faster approach to market development. By buying a local player, companies can not only realize immediate revenue, but they can “bolt on” local brand, goodwill and relationships. The entity may provide local manufacturing capability, access to nearby markets (such as within trading blocs) and even cross-sell opportunities among existing customers.

Of course transactions are complicated domestically, and sometimes fail to deliver the expected results. Cross border cultural and accounting factors complicate them further, and U.S. companies face challenges in due diligence and even assume successor liability for certain risks that can’t be warranted away. Success isn’t guaranteed, but is attainable.

Starting with strategic market goals, companies can create a target profile. They should consult with domestic and local advisors to understand any high level implications, and can then either retain investment bankers to conduct a search or identify likely candidates and then engage local advisors to facilitate negotiation.

Many companies incorrectly assume that sales channels, and particularly indirect channels, insulate them against local risks. That is a serious misconception. Foreign Corrupt Practices Act (FCPA) violations, for instance, even when committed by a third party without the knowledge of the U.S. company, may still expose the officers and directors of the U.S. company to personal, criminal liability in addition to corporate liability. And while a distributor may putatively carry the payment risk of their local buyer, they often view their obligation to pay as contingent on their customer’s payment, and they may not hedge currency risk on transactions in USD. You could well face a surprising default by a distributor to whom you’ve sold comfortably for a number of years.

The power of inorganic growth

It’s not a firewall





It’s natural. Buyers will wonder whether they’ll be on their own without local support after they’ve bought from you.

It’s important to expect and preempt their concern. The good news is you’ve already built a model for doing that domestically, which may not translate directly (figuratively or literally), but it provides a great starting point.

What’s required to ensure that buyers are satisfied? Certainly the channel needs to be carefully managed to ensure they sell the right product or service and set appropriate expectations from the outset. But the degree of support will depend on the specifics of your product and market. For instance:

Immediately following the sale• What does start-up entail? • Is it a large, one-time project with little ongoing involvement? • Or is it a long-term gradual ramp up requiring lots of relationship management?

Based on revenue model• Are you receiving and recognizing revenue up front or gradually over time? • Are the economics of your sale based on ongoing parts / consumables / service/ consulting components?

How will it evolve?• How many iterations will a local partner have to experience in order to develop the expertise to execute?• Is your channel pricing structured to incent partners to remain engaged with customers? Or to sell and forget?

Those factors and more will influence how you support customers - and may require adaptation of your sales, service and channel model in certain markets.

After-Sales Service

Ensuring that buyers are satisfied

Everyone will ask... “What happens after we buy?”





Generally buyers aren’t asking for a specific plan for every situation, but they need a level of comfort and assurance that you have thought through contingencies and have a plan. They may have had frustrating experiences with foreign suppliers in the past, so it’s important to tackle this head on. Acknowledge the possibility with something like “That’s an important point. I’m glad you brought it up and I’m happy to outline our support program. But let me ask first, it sounds like you might have had a problem in the past? Can you tell me about that?”

Answer the question they’re asking, not the one you assume they’re asking! The more specialized your product or service is, the more likely they’ll assume that you’ll simply support it remotely. Customers may ask reflexively, or simply to ensure you have a plan.

By the time you’ve reached that point in your conversation, the buyer probably wants to buy from you. So avoid creating a barrier where there doesn’t need to be one!

Have a plan

Buyers typically worry about three support phases:

• Start-up / commissioning / installation / implementation• After-sales service/support• Long-term

Think through how you’ll handle each, and don’t overcomplicate your plan. It may be perfectly reasonable to simply fly someone from the U.S. on occasion. In fact buyers will often value the support of direct employees and experts.

Consider adapting pricing to include initial and periodic involvement from your team members. Plan for labor, travel and logistics costs. When a buyer hesitates to get the help they need because of a small cost later, they’ll end up unsatisfied and you’ll become frustrated. Building it in at the outset, though, is often easier.

Consider language, time zones, communication tools, remote access and other factors, but don’t make them barriers. Skype is an incredible customer success tool that is almost universally available. You may have significant foreign language skills among your staff, and your customer likely does as well. Simply having someone available by phone during off hours may be adequate, especially because actual contacts are often infrequent.

Local support is one of the most important roles of indirect and direct sales channel models. Having local contacts with product familiarity (technical expertise, spare parts, replacements or whatever is appropriate based on your product/service) addresses most perceived and actual support requirements.

This is not just key to getting the first few sales, but in a world of rapid reputation, it’s critical to avoid negative experiences and to create the referrals and case studies on which you’ll build progressive success.

It’s good business to have a workable plan.

Prepare to respond but don’t create complications





join the exporting conversation on linkedin

https://www.linkedin.com/company/american-express-global-corporate-payments

find smart growth resources at


You’ve got a big advantage - buyers recognize U.S. products and services for the quality and value they represent. In many cases it’s your ticket to entry for sales conversations.

With that tailwind as an American exporter, your success hinges on:

1. Ensuring the right prospects find you2. Using the right channel model to close deals locally3. Planning for ongoing customer care and success

As barriers fall and technology opens new avenues to communicate globally, these each become easier to do well; and easier to make mistakes. Make decisions consciously and don’t create complications by accidentally or naively being boxed into an awkward arrangement.

Remember that you may be on foreign soil, but you’re still in control of your business. Leverage your strengths as a middle market company to achieve global success.

• Don’t establish one model and rigidly adhere to it in every market• Adapt your approach to the market and the particular partners you find

The buyers are there, so find them, sell to them and service them!

Steer for Success



https://www.linkedin.com/company/american-express-global-corporate-payments





Grow GlobalAmerican Express Grow Global provides resources for U.S. middle market companies to help assess the risks and rewards at several stages of their exporting journey.

While middle market firms represent less than one percent of American companies, they create 21% of revenue and 28% of employment in aggregate, and have created more than 90% of the net-new jobs in the U.S. since the 2008-09 recession.2

These outsized contributions are largely based on a U.S.-centric business strategy. Imagine the potential growth and economic impact of the middle market segment with an increased emphasis on global sales.

The Grow Global Insight Series was created to help get middle market businesses on the path to expanding business internationally and boosting profits. For more about American Express Grow Global, please visit www.americanexpressgrowglobal.com.

2 Middle Market Power Index, available at http://amex.co/1PlhL3v



http://www.americanexpressgrowglobal.com

http://amex.co/1PlhL3v



GlossaryB2B: Business to business

B2C: Business to consumer

Direct channel: Your employees (direct or through a subsidiary or affiliate)

Ecommerce: Generating and fulfilling sales through online platforms

Foreign Corrupt Practices Act (FCPA): Enacted in 1977 to prohibit the payment of bribes to foreign officials to secure business – to learn more, visit www.sec.gov/spotlight/fcpa.shtml

Indirect channel: Local sales & support personnel that are not employees of your company or a subsidiary. Normally indirect channel is compensated as a percentage of sales.

Joint Ventures (JV): An independent legal entity created as a collaboration between other entities, often for a specific purpose

Leased employee: An employee of record from a leasing firm who is fully dedicated to your business on an open ended basis Trading blocs: Groups of countries with collaborative agreements to simplify trade between themselves

U.S. Foreign Commercial Service (USFCS): Foreign Offices of the trade promotion arm of the U.S. Department of Commerce





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