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Finding the Right Export
Agent or Distributor:
It's Like Finding a Needle in the Haystack
by Christine Harvey
See what errors you can spot as you read the following scenario. Look for
time delays, expenditure and lackadaisical approach.
How Not to Proceed
January—Month 1
In January, Colin Jones, who heads up his own company making food processing
equipment, decided to export to England. He told his sales director, John
Martin, to stop there on his way back from another overseas trip to get a
feel for the competition. He did that in May. After three days looking
around the market at competitive equipment and prices, he wrote up his
findings and told Colin Jones that he felt there was a market for them.
May--Month 5
Colin and John were happy that the market looked promising. Their next job
was to find an agent. They remembered an agent who approached them at an
exhibition last year, and so in July they wrote to him to see if he would be
willing to represent them. The agent wrote back with a positive response in
early September, so Colin and John flew over in October for discussions.
October--Month 10
They came home feeling optimistic. They hadn't agreed on an agency contract
in writing because the agent wanted to do a market survey, and John and
Colin needed to finalize their own prices, including delivery.
Four months passed and they heard nothing from the agent. Finally,
contacting him by telephone, they found out that he was no longer
interested. That occurred in February.
March--Month 15
By March, l5 months after their decision to break into the market, they
decided to broaden their net and examine several other agents before leaping
at another one. However, in April they received a cable from a small
contracting company referred by the first agent. This company said they
could acquire orders quickly and asked for several quotations. John and
Colin thought they had better have a firsthand look at the company and its
customers, but to save costs, only Bill flew over this time. They realized
that he could easily handle it on his own.
June--Month 17
Things looked promising, and they sent their first shipment over at cost to
break into the market in June. The first new customers were acquired, the
market was buoyant, and Colin made preparations to increase his production
capacity. That was in June.
December--Month 24
By December the story was different. They weren't hearing from the agent any
more. Orders had stopped. Colin managed to find out that the company had
changed into a different area of business and had not been servicing their
products properly. That wouldn't help their reputation. They sat back
reflecting on the time, energy, and money spent, and wondered where they had
gone wrong.
Summary:
• 24 months elapsed.
• Three plane tickets.
• Travel expenses.
• l5 working days of managerial time away from home base.
• High managerial planning time.
• Shipment at cost.
• No progress on market entry.
That's the experience of Colin Jones and John Martin. The story is
strikingly like those we hear from companies day in and day out.
What Went Wrong
Why is it that Colin and John didn't have more structure in their method of
finding a good agent? Perhaps it's the lack of seeing their incentive
clearly. If they had determined that the market could account for a certain
percentage growth in their company in 12 months, and had they set stage by
stage sales targets, would they have perhaps not let so much time pass
between communications?
Also, had their incentive been clear and their targets set, wouldn't they
have put more effort into looking at several agents and not simply gamble on
the first person they thought of, the one they met at a trade stand? Maybe,
maybe not.
Let's compare selecting an agent to hiring sales personnel. I'm always
amazed that companies spend so much time and effort recruiting salespeople
for their home base, and so little time and effort recruiting overseas
agents. Yet an overseas agent can do more to increase turnover by opening up
the market of a whole country than a salesperson can do at home in a single
territory.
When companies hire salespeople, they train them. They put together targets.
They watch over them. Yet when they take on agents, their attitude is less
committed. Then they ask why they don't get commitment back!
Use a Structured Approach
If you want to find the right agent you need to use a structured approach.
You can't gamble. You don't appoint agents you pick up at an exhibition
without checking their references any more than you would pick up
hitchhikers along the road and appoint them as your sales reps at home base.
The gamble may pay off once but, let's face it, the odds are against you.
How many agents do you need? The U.S. market, for example, is said to have
10 times the buying power of the U.K. That means that it's worth 10
countries the size of Britain. Yet many overseas companies see the U.S. as a
single market and give it comparatively little attention.
Several American companies we know have the same problem with Europe. It
seems far away and it's easy to think of it as one place. If you appoint an
agent for all of Europe, you'll find that the language, cultural differences
and distances make it difficult to sell across borders.
The way we advise companies to find agents is to use a structured approach.
You want to examine your options.
This time the options relate to representation. Will your agent be an
importer, a distributor, another manufacturer who will act as an agent, or
what? Ask yourself, "Who do they sell to now? What targets will they and we
aim for together? What training will we give? How often will we see them?
All these things are important in finding the right agent. Use a structured
approach, don't gamble. It's better to find out differences of opinion
before the relationship begins than later. Will all or part of that person's
time be allocated? How much time? Will the head of the company promote your
product or will one of the junior staff? Will you divide the advertising
budget between yourselves? How much? When and where will it be spent?
Perhaps it sounds like too much trouble. But successful companies operate
this way. They treat export with as much care, or more, than their own
market. And why not? The return can be proportionally greater!
How to Proceed
Here's a company that did it right. You'll see a striking difference in its
planning, its timing, and its management practices to the one above.
At the same time that Colin Jones decided to export to England, so did Andy
Smith. Andy's company made similar equipment and was located near Colin's.
January--Month 1
The month was January. Andy knew from his research that his products could
meet England’s requirements. If he could gain only 3% of the market he could
reach his growth objective. He called in his sales director, Mike
Northfield, to make a plan with deadlines for each stage. They listed their
goals as:
• Structured market entry
• Effective use of management time
• Ambitious increase in revenue--25% in 12 months
• Steady, controlled growth--100% in three years
Andy emphasized to Mike that he wanted every avenue of representation to be
explored before deciding what type of agent to choose. He wanted Mike to
look for companies with:
• Well established sales contacts in their field.
• Good reputation with users and suppliers.
• Technical and service capability.
These companies could be any of the following three:
• Agents or importers
• Distributors
• Compatible manufacturers who could act as agents
Mike went back to his desk and thought about every way he could use to
identify companies in these three categories. He made a list of all the
trade associations, government departments, end users, and his personal
contacts who might be able to help him.
By the third week in January he had sent letters to these people asking for
their recommendations on companies they felt were qualified to act as
agents--such as importers, distributors, and compatible manufacturers.
February--Month 2
By February he had learned of many companies in the three categories. He
contacted the heads of those companies by letter, stressing the benefits and
features of his products. He listed his sales objectives and suggested ways
his company could support their sales efforts if they became agents. He
asked them to respond before the first of March with details of their
company.
He took special effort to follow up each letter three days after the letter
arrived with a phone call to prove his seriousness and to further entice the
company. His second reason for calling was that he was able to glean his own
impressions of the company from his calls: the way the phone was answered,
the way messages were taken, the way his questions were answered. He knew
this was the way his future customers would be handled too.
April--Month 4
He listed the companies in priority order by what he had heard about them
and from them. In April, after confirming his plan with Andy, he contacted
the top six companies on his list to arrange to visit them from May 17 to
20.
May--Month 5
Before flying over, he and Andy made pricing decisions and on how long they
could hold the prices considering exchange rate fluctuations. If they
obtained orders they would buy currency forward, and so they included these
costs in their pricing policy.
They also included shipping door-to-door to make buying easy for the
customer. Mike made up price lists in U.K. sterling amounts, because he knew
people preferred to deal in their own currency. Also, he knew that having
the converted price lists with him would help him to keep his mind on the
people and the negotiations instead of the calculator.
He arranged his visits so as to see the least likely company first. This
would help him to become familiar with the industry and the way it operates
in the U.K. This would give him preparation for going into meetings with the
most likely candidates. It would also allow him to practice his own
presentation and to see how to refine his package to meet the overseas
needs. He remembered that the British are less direct in their approach so
he carefully planned to make his benefits and targets come across gradually
in his discussions.
The meetings went well and on the third day he came to a full working
agreement with one of the companies to import his product, and later to
manufacture it under license if the sales targets were reached. The
manufacturing option would also protect Andy and Mike if the exchange rate
went against them.
Mike made a second visit the following day to iron out the first order
details, the sales targets, the training, literature, and the dates that
each would carry out the actions. They put their joint commitments on paper.
The head of the company told Mike he was impressed with his efficiency. He
said he liked to deal with companies who were organized from the beginning
because they always performed better later.
Then he told Mike of another foreign supplier he'd dealt with in the past
who didn't keep to his commitments. He didn't want to get burned twice.
There was a lot of work involved in securing orders and it was a
disappointment to have suppliers let you down. He had almost refused to see
Mike, in fact, but Mike's efficiency and persistence throughout had told him
to take a second chance. Now he was glad he had. He was sure their working
relationship would be mutually profitable.
On the fourth evening Mike boarded the plane to go home with an agency
agreement in his pocket and satisfaction that his preparation had paid off.
In addition he had an order worth 15% of his first year's target. But the
order wasn't the end of the road. He knew Andy wanted steady, controlled
growth and he knew he had found the right company to support their efforts
for their three-year, 100% growth plan.
It had been an exhausting trip. It was a tempting thought to put all the
paperwork away during the flight and catch a little sleep, but he knew his
desk would be piled up with new demands on his first day back. He knew he'd
better write his follow-up report, letters, plan of action, and commitments
now while his notes were fresh in his mind.
He remembered hearing that the mind forgets 80% of what it hears after two
days. Even though he had clear notes, he decided he'd better do it now while
details were fresh in his mind. Then his follow-up points could be begun on
his first day back. That would move them closer to the 100% growth plan.
As his plane approached home, he reflected on what a good feeling it was to
work for a company that set specific growth plans. “When you make a
contribution here, you know exactly how it fits into the total plan," he
thought to himself. He knew Andy would be ecstatic with his results and give
him recognition for his achievement.
Summary:
• 5 months elapsed.
• 1 plane ticket.
• travel expenses.
• 4 working days of management time away from home base.
• Effective managerial planning time.
• Shipment with profit.
• Progress on market entry (order worth l5% of first year's growth
target).
That's the experience of Andy Smith and Mike Northfield.
During this session of our Develop Effective Sales seminars, we sometimes
have people say they wish they had a Mike Northfield working for them.
Others say they wish they had an Andy Smith as a boss! These kinds of people
do exist. We know them and work with them.
Fumi Nakagome in Japan is a case in point. She knows how important the
personal contact is to getting business. Her philosophy is, "Never write
when you can call, and never call when you can visit." She should know,
she's been a company President in Tokyo and has worked under three prime
ministers in Japan as adviser on various issues.
If we want to find the right agent, we have to get out there and look. We
have to visit agents and be sure we're making the right decision.
Finding the right agent is like finding a needle in the haystack, not
because they don't exist, but because companies don't know how to look for
them. They gamble on the first one that comes along rather than using a
structured approach, as Mike Northfield did. They take the easy road, only
to find out later that they've wasted their time, money, and effort.
Doing business successfully in an environment of uncertainty is almost
impossible. Get advice from others who have succeeded. Bob Northfield didn't
jump on a plane the minute Andy mentioned England. He contacted everyone he
thought of who could help. He did it quickly and effectively.
All the planning and preparation you can do ahead will pay off. This is true
of each and every country. Remember the two years wasted by Colin Jones and
Bill Martin. Don't let it happen to you.
Remember to succeed in
overseas markets:
Use a structured approach; don't gamble.
ACTION SHEET
Ideas for Development:
1. Calculate prices in foreign currency and consider options for holding
prices
despite currency fluctuation.
2. Research your product’s adaptability to the market place.
3. Research the market potential and competitors products.
4. Use a structured approach of setting targets, researching entry options,
getting referrals, and contacting companies before your visit.
5. Visit at least three, choose one and set targets and follow up
activities.
6. List other points here:
7.
Of the above ideas, which one is likely to yield the best results?
What percentage of sales (or performance) increase could realistically be
expected?
How long would it take: to develop the idea? to get results?
Who would have to be involved?
What date should we start?
What is the first step I should take?
Want to learn
more on this topic? Christine Harvey has written six books in 25 language
that cover many of the concepts found here.
You can get your own copy by
clicking here or visiting our eShop.
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