Business Marketing Techniques

Archive for March, 2010

Dear all! Small firms that find it difficult to use any of the above means can sell their products via other organizations that export products on behalf of several small firms collectively. These are generally large trading concerns and export management companies that negotiate contracts on behalf of smaller exporters. Such companies can take up several activities such as market assessment, channel selection, financing arrangements, documentation etc. for the smaller exporters.

The scale of operations of the smaller exporters does not permit these firms to be able to manage such activities. Moreover, the larger companies have better access to information about international markets. The firm’s involvement level with the foreign markets is lowest in this case. It may be evaluating the attractiveness of the foreign market before increasing its stake. The investment involved in this effort is the least among all the other alternatives for expansion.

The main advantage of using this strategy is that the exporting company can utilize the expertise of the organization that has knowledge about the country in which the goods are being exported. A company may decide to export its products itself. The company develops overseas contacts, undertakes marketing research, handles documentation and transportation, and decides the marketing mix. Companies can use foreign based agents or distributors.

An agent may agree to handle to company’s product exclusively, or may handle products of other companies too. An agent does not take title to the products and works on commission. Distributors take title to the products. A company appoints distributors when after-scales are required as they are likely to possess the necessary resources. The advantages of foreign based agents and distributors are that they are familiar with the market and have business contacts. Their profit of commission is based on sales generated and they may not be interested in developing long term market positions for the company.

Hi everybody! Despite globalization, geographic, cultural, economic and administrative distances between countries still exist. These differences affect attractiveness of markets, entry strategies, and the chances of success in markets. Companies often overestimate the attractiveness of foreign markets. They are so attracted by the sheer size of untapped markets that they ignore the difficulties of entering new, and often very different markets.

The traditional tool used to make judgments about international investments is country portfolio analysis (CPA). This tool helps a company decide where it should compete by analyzing national GDP, levels of consumer wealth and people’s propensity of consume in the target countries. The problem with CPA is that it lays all the emphasis on potential sales and ignores the cost and risk of doing business in a new market. As a result, companies underestimate the costs and risks of doing business internationally.

Most of these risks and costs result from barriers created by distance and differences in cultural, administrative, political and economic environments between nations. Traditional economic factors like a country’s wealth and size still matter but these differences have a greater impact on the volume of international trade. Distance is also matters in international trade. Cultural distance: A country’s cultural attributes determine how people interact with one another, and with companies and institutions.

Differences in religious beliefs, race, social norms and language are all capable of creating distance between two countries that share a common language will be three times more than between two countries without a common language. Geographic distance: In general, the farther a company is from a country, the harder it will be to conduct business in that country. Besides the distance, the physical size of the country, average within country distances to borders, access to waterways and the ocean, topography, and transportation and communication infrastructures must also be considered.

Hello everyone! Countries are different from one other in terms of language spoken, religion practiced, food eaten and in many other ways. These differences are very real and significant, and marketers should consider how these differences can hinder or facilitate the marketing efforts of the country in the new market. Products which are related to the way people live may have to be altered significantly or will not find acceptance at all, whereas industrial products may find acceptance in countries even with widely different practices of life.

Even marketing and other business practices may have to be tailored to suit the social and cultural nuances of the country. a company would do well to pack a troop of sociologists and anthropologists into the target market before it sends its product developers and marketers. Some marketers initially sell their products to markets that are culturally similar, while some may look for similarities among consumers across various countries where they operate. But in most cases, differences in socio-cultural settings have forced marketers to adapt their marketing mix.

These may be simple changes such as translation of messages into different languages, or can involve creating completely different marketing mixes for various markets that the company operates in. The attractiveness of a market can be assessed by evaluating the market potential in terms of revenues that can be generated, access to the market in terms of the host country being warm to investments by multinational companies, and potential competition and dynamics of the industry in the prospective market.

The revenue and profit potential of a market can be judged on the basis of the level of initial investment required in establishing the operations, the gestation period, the industry structure, and the number and degree of obstacles that the company must face besides competition i.e. the macro environmental factors. Most of these indicators can be obtained by studying the history of other players in the market, or if the market is nascent, by studying similar industries.

Hi folks! Cultural, economic, administrative and geographic arbitrage can create potential advantages for global companies. The globalization effort of most companies comprises extending their business models geographically with necessary modifications to maximize the company’s economies of scale. The key strategic challenge becomes to determine how much to adapt the business model- how much to standardize from country to country versus how much to localize to respond to local differences. Companies focus on similarities across countries and balance localization and standardization. The primary focus is on similarities so that greater scale economies are achieved. Differences from country to country are viewed as obstacles to be overcome.

But in their rush to exploit similarities across borders, multinational have ignored the original global strategy- arbitrage, the strategy of difference. Though still important, arbitrage is much more than cheap capital of labor. The scope of arbitrage is as wide as the differences among countries, which continues to broad and deep. The types of arbitrages are cultural arbitrage, administrative arbitrage, geographic arbitrage and economic arbitrage.

Cultural arbitrage: it exploits differences in culture. The international success of French haute couture, cuisine, wines, and perfumes is due to cultural arbitrage. US based fast food chains exploit the general global surge of American popular culture. Less developing countries and regions also have strong cultures with which outsiders are fascinated. Administrative arbitrage: Legal, institutional, and political differences from country to country enable administrative arbitrage. Tax differentials are common examples.

Geographic arbitrage: Because of decrease in transportation costs, new opportunities for geographic arbitrage have been created. Economic arbitrage: Economic arbitrage comes from differences in the costs of labor and capital, as well as variations in more industry specific inputs such as knowledge or the availability of complementary products, technologies, or infrastructures. The best type of economic arbitrage is the exploitation of cheap labor, which is common in labor intensive industries like clothing. Capital cost differentials are slimmer but considering that most companies earn returns within two to three percentage points of their cost of capital, even such small differences are consequential.

Dear all! It is important to know the attitude of the government and the people of the host country before a company decide to commit resources. A company’s historical record and its professed attitude towards foreign investments and properties should also be considered. Attitude of nationals of a country towards foreign companies, products and citizens have to be seriously considered. Nationals of countries who have been dominated by foreign powers in the past are wary of anything foreign.

Multinational companies should have patience, and demonstrate long term interest among people of the country be becoming actively involved in their well being, besides selling products to them. Streamlined procedures, absence of bureaucratic hurdles, subsidies and incentives are good indicators of a government’s willingness in inviting foreign partners in developing their countries. Political stability and attitude towards foreign investment also matter a great deal in encouraging participation of multinational corporations.

Political stability indicates continuance of policies. Changes in government policies could spell difficulties for the profitability potential of the firm. It is also important for multinational corporations to assess the tax structure and other legal systems and procedures before starting operations in other countries. In many developing countries legal systems are not stringent and multinational firms find it extremely hard to implement and enforce their policies and contracts. In many such countries, there is lot of government interference in the functioning of businesses. And despite liberalization of trade, much protectionism is granted to domestic companies in several developed and developing countries across the world.

Before decides to go global it should conduct an audit of its resources and capabilities. The company should have clear competitive advantages in terms of market knowledge, technology, portfolio of products, reliable partners and other relevant parameters. The company should have people with experience in foreign markets. It would be naive to start operation in a foreign market with star performers of the home market heading the initiative.

Personal selling strategies should be derived from the marketing strategy and should be consistent with other elements of marketing mix. The following variables should be considered while formulating sales strategy.

Call rates: If the intensity of competitive rivalry is high in the industry, salespersons should be calling on their customers more frequently. If the rate of technological changes in the industry is high, the customer is more likely to change equipments frequently and may require the services of the sales team more often to evaluate options. Also when the buyer is expanding his facilities or is venturing into new business, salespersons should be calling on the buyer more often.

Percentage of calls on existing and potential accounts: a salesperson has to divide his time between existing and potential customers in a way that maximizes sales. Some salespeople fix some formula for themselves so that they do not spend excess time with either type of the customers, i.e. he will spend 40 pc of his time with existing customers and rest with prospective customers. But this may not be a good strategy all the time. Division of time between the existing and potential accounts should depend upon the type of industry and the state of business in the industry.

Discount policy: Salespeople are prone to announcing discounts at every hurdle in the selling process. It is important to provide flexibility in prices that salesperson can offer to customers because many deals can be clinched by offering small discounts. Many a time discounts have to given to demonstrate to customers that they are important. But there should be guidelines prescribing the amount of discounts that can be offered to customers under exceptional circumstances. When discounts become pervasive, customers start expecting discounts as routine part of their buying process and the list price loses its sanctity.

The company should reduce its list price under such circumstances to restore the sanctity of its list price. The company will be a better position to know the realized price. Salespeople should be able to sell on the merits of the product and on the strength of the relationship that they have with the customers. Discounts should be provided in exceptional circumstances.

Two critical decisions are determining sales force size and sales force organization.

Sales force size: Sales force size is decided by workload approach. Workload approach is based on calculation of total annual calls required per year divided by the average calls per year that can be expected from one salesperson. It is done following steps: Customers are grouped into categories according to the value of goods bought and their potential for future, call Frequency, i.e. the number of calls per year to an account is assessed for each category of customers, Multiply the call frequency by number of customer in each category, sum up for all categories to get the total number of calls that would be required to meet, Average number of calls that can be expected from a salesperson is estimated, Number of salespersons=c/d.

Sales force organization: The sales force organization depends on the geographic concentration of customers, the number of products sold by the company, the relatedness of products, and the size of each account. The forms of sales force organizations are employed by companies are Geographic, product, customer based and key account management. In Geographic: The sales area is broken down into territories based on workload, i.e. number of calls that a salesman would be required to make, and sales potential of the territory. A salesperson is assigned to each territory to sell ass products of the company. This provides a clear territory to each salesperson and there is proximity to customers as the salesperson spends considerable time in the territory, enabling efficient handling of customer orders. But when products are technically different, the salesperson cannot be knowledgeable about all products and their applications. In customer based: Salespersons can be organized along market segment, account size, or new versus existing account lines. Computer firms organized their sales force on the basis of industry served like banking, retailing and manufacturing, in recognition of their varying needs, problems and potential applications.

High caliber salespeople should be recruited. If company’s most successful sales people were put in a territory by replacing the average ones, 20 pc increases in sales should be expected in two years. Work practices of the company and independence are more important than earnings as the key attraction to a selling career. Sales managers need to discover the reasons why people want to become sales people in their industry so that they can develop recruitment strategies that reflect those desires. Recruitment has five strategies. They are preparation of job description and personnel specifications, source of requirement and method of communication, design of application form, interview and supplementary selection aids.

Preparation of Job Description and Personnel Specifications: Top ten qualities sought in sales people by sales managers of large companies are communication skills, personality, determination, intelligence, motivation, product knowledge, educational background, confidence, appearance, resilience and tenacity. Research has reduced the above ten qualities to two – empathy and ego drive. Empathy is the ability to feel problems and needs of the customer in the same way and with the same intensity that the customer does. Ego drive is the need to make a sale in a personal way i.e. the salesperson will feel miserable if he is not able to make the sell, and not merely for money. Job description will include job title, duties and responsibilities, technical requirements, geographic area to be covered and degree of autonomy given to sales people.

Interview: screening and selection interview is employed. Overall objective is to form a clear and valid impression of strengths and weaknesses of each candidate. Following requirements may be used: Physical requirement, attainments, personal qualities, interests. The interview should start with easy to answer questions that allow the candidate to talk freely and relax. Interviewer should be courteous and appear interested in what the candidate says. Open questions like ‘can you tell about your experiences selling automobiles, ‘encourage interviewers to express themselves. Probes can be used to prompt further discussions. At the end of the interview the candidate should be told when decision will be made and how it will be communicated.

A salesperson’s job is tough and often punishing. His failures should be seen in terms of the odds that he faces in his market. Too often, because a salesperson’s performance can be easily determined by the amount of sales that he generates, management is harsh on them if the figures are not very good.

Geographic separation: There is geographic separation between sales managers and their field sales force. This creates problems of motivation, communication and control. Repeated rejections: salesperson may suffer repeated rejections when trying to close sales. This may cause attrition of the salesperson’s enthusiasm, attitude and skills. Sales managers need to provide support and renew motivation in these adverse circumstances.

Salesperson’s personality and realities of the job: Most sales people are outgoing and gregarious. These are desirable characteristics for people who are selling to customers. But the reality of the job is that only 30 pc of a salesperson’s time is spent face to face with customers, with travelling and administration work contributing the rest. This means that more than half of the salesperson’s time is spent by themselves, which can cause frustration among people who like the company of others.

Over simplification of task: Sales managers take the attitude that they are interested only in results. They believe that it is their job to reward those who meet sales targets and punish those who fail. Such an attitude ignores the contribution that sales force can make to successful achievement of the company’s objectives. Personal selling gives an invaluable opportunity to the company to understand the customer up close and personal, and establish a relationship with him. Though the method is the most expensive form of promotion, it remains unparalleled in terms of the quality of customer interaction. The salesperson has to view every sale from the perspective of the customer to whom the sale is being made. For this reason, the foremost qualification for him is to understand the customer’s behavior.

Business buying concerns the purchase of products and services for use in business activities and not for the buyer’s self gratification. The organization either incorporates the purchased product or service in the product it makes, or the purchased product or service is used to facilitate the running of the organization, or the purchased product is resold with or without adding value. The business buyer buys a product to enable him to make a profit.

Business marketers should always remember that while earning profits is a legitimate goal for them, they can make profits only when their customers make profits. Business marketing should revolve around making business customers’ operations more efficient and profitable. It is important to realize that the same product can be classified as either a consumer product or a business product depending upon the way the product is bought and used. A computer can be bought by an individual for his personal use.

The computer thus bought and used is a consumer product. But the same computer can be bought by a company to help run its operations. Now, this computer is business product. It is important to maintain this difference because even when the same product is bought by an individual and a company, they buy it differently. The motivations of an individual and a company are different even when they are buying the same produce.

Business markets are four types. They are industrial market, Reseller market, Government market and Non-profit organizations. Industrial market concerns those companies that buy products and services to help them produce other goods and services. Industrial goods include raw materials, components, and capital goods such as machinery. Reseller market comprises organizations that buy products and services to resell.

Government market consists of government agencies that buy products and services to help them carry out their activities. Non-profit organizations buy products and services to serve their chosen agenda o social service. Though non-profit organizations do not seek profits, they are keenly interested in improving the effectiveness and efficiency of their organization.