Stay competitive: The five Ps in an exporter’s toolbox
Product, price, place and promotion: Those are the four essential tools in an effective marketer’s toolbox. But when it comes to selling in international markets, these tools must be tweaked, says global strategy consultant Amy Karam. She also adds a fifth consideration for exporters – politics.
Karam, a former international executive and author of The China Factor, says her adapted version of the five Ps are essential to understanding your competition in international markets.
And if you want to be competitive internationally, says Karam, you need to consider the competition from the start.
“Don’t put your strategy together and wait to look at your competition,” said Karam, one of four panelists in EDC’s November 30th webinar, 5 Steps to Taking on Your International Competition. “You have to incorporate the competition into every piece of your strategy.”
Karam elaborated on the traditional definition of “product”, stressing that you’re not just selling a thing, but an innovation and a solution.
The West no longer enjoys the innovative advantage it once did, says Karam, which means Canadian companies need to focus on developing something new if they want to stand out from the crowd.
“There are more, differently creative companies and countries out there and these new players do business differently,” she said. “If we don’t look at ways to evolve our innovation advantage, it’ll be difficult for us.”
A consideration of the other tools can help you get there, says Karam. Instead of “price,” think of your product or service’s unique value add in the new market. How will it add value to your customer’s life?
“Place,” says Karam, is about forming partnerships and networks in the global trade world. “Promotion” should be looked at vis-a-vis customer relationships.
“You need to understand your customers and how your competition treats its customers,” said Karam. This is a starting point to seeing where you can add value.
Finally, she sees politics as important because it’s about partnering with governments to navigate political and regulatory barriers.
How to price appropriately for your market
Karam acknowledged that pricing across different markets is challenging. Her advice? Don’t compete on price.
“It comes back to how you create and defend your value add,” she said. “You might have 24-hour support for a product or your company might have longevity.” The other aspect is “digging into why your customer is asking for a discount,” and finding a solution for them, rather than negotiating on price.
Credit management matters
Price aside, how you collect money from clients can make a difference to your overall competitive position, says Sarah van Wolde, senior underwriter at EDC.
Generally when companies are starting to export, says van Wolde, they ask for cash in advance, but this doesn’t put them in the most competitive position.
“[Cash] is easy. It’s a hundred per cent risk free. You’re paid before any goods and services are extended, but that does put you at a competitive disadvantage,” she says. “You may be losing business as a result of requiring those funds in advance.”
She recommends having a solid credit management strategy in place instead. This allows you to offer flexibility to clients in how they pay for your products.
Once you’ve determined a client’s ability to pay, you can offer them credit terms. This gives them the chance to sell your product and generate revenue of their own before having to pay for the product
“This gives your sales people an edge in being able to promote your product because your clients can get those terms,” says van Wolde. It’s good for the clients, she adds, because “they can generate cash flow from selling your product before they need to pay you back.”
Many companies just starting out are unsure about offering credit terms because they need the cash flow. Some may consider an insurance policy that will encourage their bank to offer larger margining and allow them to extend credit.
“As other [potential clients] in that market realize that you do offer credit terms, they’re going to come knocking at your door looking to buy your product as well,” says van Wolde.
If cash really is an issue, you don’t have to look at credit terms as all or nothing. There is room for flexibility. You could ask for a 10-15 per cent deposit before you ship the goods, for example, allowing you a bit of cash flow.
Use all competitive resources available to you
When going into new markets, there are a lot of tools and resources available to help exporters, says Andrew Keenan, global practice lead in venture capital for the Canadian Trade Commissioner Service (TCS). And you don’t have to find everything on your own. The TCS offers a lot of help to Canadian exports who want to be internationally competitive.
Keenan’s wing of the TCS, for example, helps technology firms access foreign venture capital. In other words, they connect companies find funds in markets where they want to compete.
Keenan recounted the recent story of a small Ontario software company that was looking for venture capitalists (VCs) in the U.S. and China, as well as potential customers.
The TCS was able to give them a road map and help the company make connections to be more competitive internationally.
“We mapped out the VCs in the U.S. and China who are best positioned to invest in them and introduce them to the right customers,” Keenan said. “We also mapped the key relationships they need to develop. We came back almost with a relationship tree that gave them a snapshot of where they need to focus.”
Get on a plane; meet your customers in person
Remaining competitive internationally revolves around three dynamics, said Kevin Hamm senior vice-president of Acadian Seaplants, a Nova Scotia-based company exports a rare seaweed product to more than 70 markets. Hamm says they’ve used consistent methods to remain competitive in various markets.
First, would-be exporters must find out what makes their target market country tick, says Hamm. Second, they must do their research and analysis and enter a market for the right reason. And finally, they must not compromise on price.
In order to do all of these things, said Hamm, you must have people on the ground in every different market to garner a deep understanding of how you can work with them. Acadian Seaplants has employees in 13 countries.
To put yourself in a competitive position internationally, says Hamm, it’s important to visit the countries in person and be in it for long-term relationship development.
“We get on a plane and meet face to face wherever we want to do business,” he says. And although they never negotiate on price or corporate values, says Hamm, there is an understanding that a company must adapt to succeed and compete internationally.
“We retrofit ourselves to their country and market.”
Watch on demand: 5 Steps to Taking on your International Competition