How does a company achieve sustainable growth in export markets through country distributors, with limited investments in brand building, no local team, and stretched personnel at the center?
There is no magic formula, but a disciplined approach has a high probability of success.
There is no magic formula, but a shared outsourced team and a disciplined approach has a high probability of success. This team must develop a strong strategy and supplement it with detailed execution plans, then effectively implement those plans. When this disciplined approach is led by people with experience, expertise, judgment and drive, the probability of a business getting results rises significantly.
Effective Brand Building
Effective brand-building is essential for sustainable growth in any market. Exceptions notwithstanding, starting a business without a brand-building approach generally results in products barely moving off the shelves. Subsequent orders, if any, may be infrequent and at low volumes. The net result is a ‘flash in the pan’ business, in which after initial containers are sold, business either comes to a grinding halt, or slows to a trickle – much below the potential the country offers. Clearly, it becomes a marketing failure primarily because the brand fails to communicate and resonate with the consumers.
If this trend repeats in other countries that the company has expanded into, it results in overall failed international expansion. In addition, it is a monumental missed opportunity to notch consistent market share increase and start achieving scale.
Without brand-building it is usually a ‘flash in the pan’ business, in which after initial containers are sold, business either comes to a grinding halt, or slows to a trickle which is much below the potential the country offers.
The bad news is that many companies face this issue with their international expansion initiatives. The consequence is anemic sales, disappointed leadership and disgruntled distribution partners.
The good news is that it does not have to be so. With a brand-building approach, the probability of success increases significantly. Therefore, companies need to move away from an opportunistic approach regarding exports to a brand-building approach in order for their international expansion efforts to be sustainable and live up to the potential market opportunity available in that country.
However, effective brand-building does not happen by itself. It’s a proactive, intentional and systematic process that requires an investment in brand-building as part of the overall business strategy. It is however not necessary for a brand owner to make a huge upfront investment in brand-building before turning it into a profitable business. Brand-building investments based on a pay-as-you-go model are viable as long as the market share aspirations and objectives are aligned to the pay-as-you-go model, and planning and execution are sharp to avoid waste in investment.
Strategy – Planning – Execution
Success of a business in a country requires a combination of sound strategy, detailed planning and effective execution. This is even more important when the model is ‘pay as you go’.
The critical components for the success of a business are a combination of sound strategy, detailed planning, and effective execution. This is even more important when the model is ‘pay-as-you-go’. Sound strategy with weak execution will not deliver because the greatest strategy will never get a chance to play out with sub-par execution. Effective execution of a weak strategy will fail because the products may either not get placed on the shelf or not move off the shelf. While this may be stating the obvious, it is all too common where personnel resources are constrained.
A thorough strategy has different dimensions. A company embarking upon international expansion needs to clearly define and document the business strategy, the brand/product strategy and the distribution strategy.
A company expanding into a country typically does so with an expectation of achieving some specific desired revenue and profit numbers in the short, medium and long term. A cross functional business strategy is required to support these business goals. For example, a company may decide to export products into a large country, establish a premium position, and after achieving a certain level of business, get a range of products manufactured in the country itself. Local manufacturing then enables the company to have products priced to appeal to a mid-level customer segment, with margins that support higher investments in advertising. But without clearly defined business goals supported by an effective international execution strategy, the company will be shooting in the dark without night-vision gear. It will need a stroke of luck to achieve success.
The brand strategy needs to account for the realities of the local market. Brands may need to be positioned differently in international markets from how they are positioned at home if the competitors and their products are different. According to the company Euromonitor, “Brands that are generally perceived in developed markets as standard, or affordable, tend to be perceived as more luxurious in emerging markets.” Such brands command a premium. All actions taken on the brand need to then support the premium position of the brand.1 As an example, a brand positioned as premium needs to have a premium regulatory sticker, affixed at a particular spot on the pack, made with high quality paper and printing. Even better will be to have a separate packaging by country to eliminate ugly stickers. This attention to detail is possible only when the strategy is clear and well communicated to the entire team.
A tailored portfolio strategy by country is needed.
Most companies have a number of SKUs in their portfolio. It is important to analyze and customize the portfolio strategy by country because not all SKUs may be relevant. It is also important to have a cadence of SKU rollouts as launching all the SKUs at the same time may result in lack of individual product focus and a budget that is spread too thin.
It may seem like a no-brainer that the company’s marketing team should do the analysis and portfolio selection. However, many companies leave this work to the distributors in export markets since they lack personnel on the ground and at the center. Such an approach may work when the distributor has the capability to execute a detailed analysis that goes beyond pricing. However, many distributors do not have this capability, and asking them to do portfolio selection puts them in a difficult position. Therefore, as a practice, companies will be best served by not abdicating this responsibility. The distributors should be consulted for their input, but the category and consumer analysis leading to the portfolio selection is best done by the company.
David won against Goliath because he was smart and fast. He quickly assessed the weakness of Goliath and effectively worked with his limited resources to attack just that.
The product strategy itself must also be customized by country because the competition, consumer profile, habits, culture and purchasing power differ significantly across the globe. It is essential that the company define the target segment, the value proposition for the target segment, any legally approved claims to support the value proposition, the communication strategy and the creative messaging of that products’ strategy. This becomes especially important in markets where the competition significantly outspends in their brand support.
When a brand enters a country under a pay-as-you-go model, it typically does so with limited resources. In this scenario, a well-defined distribution strategy can be very effective in achieving the maximum weighted distribution with limited investment. Regardless, the distribution strategy and consumer communication strategy still need to be aligned to get the highest return on investment. This will be possible only when the strategy is clearly defined and documented.
A well-developed and well-documented strategy is essential for efficient and effective brand-building in international markets. David won against Goliath because he was smart and fast. He quickly assessed the weakness of Goliath and worked effectively with his limited resources to attack just that. This is what a new brand entering a country with a pay-as-you-go concept will need to do for success. There is no substitute for a sound and smart strategy.
Strategy related work does not stop when products are launched in a country. The process of reviewing and refining the strategy is ongoing and must be formally carried out at least once a year. In a highly competitive environment, a regularly updated strategy is essential.
The strategy defines what needs to be done and how it ought to be done. To execute the strategy well, companies must have a well-documented execution plan. The planning process is an important bridge between strategy and execution.
Just as a bridge needs to be strong and reliable, the planning should be comprehensive and detailed. The plan must detail at the task level, what needs to be done, who will do it, deadlines, any dependencies, and what the backup plan is. None of this is a revelation. However, many companies with teams stretched in existing markets often skip the step of creating detailed plans in new international markets. Yet, planning is needed most when resources are constrained, which requires a high degree of efficiency and effectiveness in execution.
Not having a well-documented plan—or worse yet, not having a plan at all —leads to failure. Moving from one action to another in an unplanned ad-hoc manner just does not work.
Once the plan is properly developed, ensuring that all stakeholders are aligned is also key. Every effort needs to be made to reach alignment without compromising on the effectiveness of the plan. If all stakeholders are not in agreement, the decision maker needs to make a decision so that the business can move on. The final plan needs to be communicated to all stakeholders (except the confidential elements of the plan) so that everyone is clear on the who, what, when and how.
We see execution as being made up of three key components: People, Reporting, Feedback.
Strategy and plans succeed only when they are well executed. Needle-moving execution is done by having the right people doing the right work. Critical factors include selecting the right team, ensuring they are appropriately trained, and supporting and motivating them to achieve their goals.
Companies with stretched resources often miss detailing the execution plan
What cannot be measured cannot be improved. Therefore, reporting is an important element of execution. Companies must establish Key Performance Indicators (KPIs) and develop a methodology for collecting and reporting them. Collecting data, deriving actionable insights, and acting on those insights are even more important when the company is in an international market with limited resources. The methodology, data sources and the granularity with which the data is available varies significantly across countries. In keeping with the pay-as-you-go principle for international expansion, the scope of data sources and KPIs can be progressively increased. Considering personnel resources are constrained for international markets, typically companies only monitor the number of containers sold to the distributors. This is an important number but cannot be the only number monitored because it is only an outcome of how well the performance has been on other KPIs which directly influence sales. These other KPIs are often where the magic happens.
Number of containers sold to the distributors is important, but it cannot be the only number monitored because it is only an outcome of how well the performance has been on other KPIs which directly influence sales. These other KPIs are often where the magic happens.
Important feedback on strategy and plans becomes available through execution. After launching products in a country, companies may find a complete validation of their strategy and plans, or their KPIs may indicate that their strategy and plans need a complete overhaul. In most cases, the reality will be somewhere in between.
The feedback received through the monitoring and reporting process must be used to review the strategy and plan and make course correction as required. However, companies must be careful not to judge too early. Sometimes initial signs turn out to be false indicators. Companies must leverage their experience and expertise to decide what actions the indicators merit. As an example, consider a case where a consumer messaging option looked strong and topped all other options tested. However, when rolling out the initial communication of this message, primarily through social media, the expected consumer demand did not come through. This should not automatically lead to the message being discarded. Social media takes time to move consumers, particularly when the spends are low. Instead the message should be adequately pressure tested to assess true consumer traction. This is not to suggest that specific initiatives should not be withdrawn if they are not working, but rather that they should be given ample time to demonstrate success before they are killed.
Building brands in local markets is a sustainable, scalable approach to international expansion, but this approach requires work by the company both from the center as well as locally on the ground. This work can become prohibitive for companies who do not have feet on the ground locally and rely solely on the distributor, or no personnel resource bandwidth at the center. In such cases, the business in a new country is either left to operate on its own, or the company decides to forego international growth opportunities and focuses only on existing markets thereby becoming overly dependent on existing markets. Neither of these is a desirable option.
With Omicus, companies have a profitable option as we enable you to optimally expand into international markets through brand-building without putting your own personnel on the ground, or without setting up a well-resourced exports team at the center. As your trusted partner for international expansion, Omicus is your expert and experienced team, both at the center and on the ground in countries. If you are serious about sustainable growth in your exports business Let’s get talking.
1. Lydia Gordon “Analyst Pulse: Economy, Standard, Premium or Luxury? Brand Perceptions Around the World”, Euromonitor International (blog), August 23, 2013, https://blog.euromonitor.com/analyst-pulse-economy-standard-premium-or-luxury-brand-perceptions-around-the-world/.