10 questions to ask before you begin
For many companies, the route to export markets comes through some variation of sales and marketing partnerships locally versus a direct sales approach. Channel development – the recruitment of indirect partners such as distributors, agents, VARs, etc – is an essential part of the overall export strategy. This blog highlights the importance of planning before engaging in any channel development strategy and identifies 10 key questions for your company to consider before you begin this journey. When used correctly, the answers to these questions can assist in decision making about which export markets are more/less suitable and indeed the sequence of your longer term channel development strategy:
1) Do you understand the size of the market opportunity?
It’s easy to gather macro-economic (eg. GDP) or demographic information (population figures) but very few products and service opportunities can be defined by such figures. The true measure of market opportunity needs to come from a clear understanding of the specific segments you are targeting and market value of purchases or spend for your specific product within this segment. This is especially true for B2B exporters where the number of target customers is often a far more reliable indication of opportunity than any measure of overall economic output.
2) Who is your customer?
When it comes to channel development it should always start with the customer. It sounds obvious but do not assume that your customer in Ireland will be the same as your customer in export markets! They may require different product features, demand different levels of service, undervalue what you believe to be your key selling points and possibly even highlight a new opportunity you didn’t consider. There is no substitute for visiting the market and engaging with potential customers in advance of a channel development effort. It will sharpen your approach. To learn more, you can read our blog on why localisation is key here.
3) What current channels exist in the market?
It is far easier to sell into an export market when you integrate with existing channel structures rather than seeking to create a new one. It is really important therefore to understand the existing purchase process for your products and services. How does the customer buy similar products today? Do they use distributors, agents, systems integrators, or maybe they insist on dealing directly with the manufacturer? What are the typical customer and channel margins required to compete and will a channel structure be profitable for your company and products?
4) Who is your competition?
It’s amazing how many companies engage in channel development strategies without a good understanding of local competition and yet, competitive knowledge is something we take very seriously in our domestic market. Even a comprehensive internet search is within the capability of every company and will highlight who the competitors are, detailed product/service descriptions, how they position themselves and their sales structures. Look up local tradeshows and events, industry directories and even Linked-In can provide insights into the strengths and weaknesses of your local competition and whether it is a market you can compete in.
5) What is your value proposition?
An extension of the previous question but you cannot define your “competitive advantage” until you first know your “competition”. Equally, your value proposition is the message you will promote to the local market which tells a customer and channel partners why they should choose you over anybody else. Entering a new market has many challenges but the majority are secondary to the lack of a clear value proposition.
6) What barriers to entry exist to doing business locally?
Barriers to entry are defined as obstacles which will make it difficult to sell your product or service in a given export market. These can vary greatly from one industry sector to another and include local regulatory requirements, certifications, local laws, taxes, degree of government involvement, etc. Other barriers can include culture, time/distance from you to the market and language. The list is different for every company but the identification of key barriers is a great way of prioritising export market potential.
7) What is your ideal channel structure and why?
This needs a lot of thought and must be driven by your knowledge of the local market – in particular your customer (2), current sales channels (3) and competition (4). Your channel structure should define the type of partners you need (eg distributor, agent, etc), geographic coverage (national or regional) and sector focus (all or specialist) and even how many partners.
8) What will the role of the channel partner be?
Channel partnerships can vary greatly from simple stock/resell relationships to detailed sales and marketing partnerships. The first step is to determine what skills, resources and service levels are necessary to sell your product in the local market and then look for partners who can match this requirement. Having a good idea of this before you start can save a lot of time and also provide clarity in early stage channel discussions. Be prepared to sacrifice a greater amount of margin in line with the degree of service and support expected from your partner. Here are some questions you should ask a potential channel partner.
9) What level of commitment can you give on an ongoing basis?
It would be a mistake to view the recruitment of a local sales partner as the finishing line; in fact it is only the start. It is typically accepted that the first 6 months in any new channel partnership are key. Early customer success or even the creation of a healthy pipeline of opportunities is critical to channel confidence and the time they invest in your products and services. Be prepared to invest, above all else, your time in supporting your new channel.
10) What internal alignment will be necessary to support your sales channels?
Most companies fail to align their internal structures to support export sales channels. Marketing, Customer Service, Finance and Engineering all need to (a) understand the role of the channel partner and (b) adapt to support the export market. One of the best suggestions is to bring your new channel partners to Ireland and hold meetings with your team so as an organisation you can understand the support required to achieve mutual success.
In summary
Channel development is very time consuming and often far from straight forward. When carefully planned your chances of success are much higher, so take the time to understand the customer, market and channel structures required before beginning any formal partner recruitment process. We are currently working with several Irish businesses to export into new markets through the Enter The Eurozone program from Enterprise Ireland.
If you would like to discuss your plans to export into new markets, please get in touch by emailing [email protected] or call us on +353 91 739450