10 Key Questions to Ask Before Selling Internationally
As talk in political circles turns to trade deficits, tariffs, sales inequalities, international trade agreements, and the like, many U.S. companies are finding themselves wondering whether now is a good time to expand internationally.
They might have succeeded in selling their products and services in the domestic market, and now they want to expand their sales efforts into international ones. This is no small undertaking and should not be done without careful planning and consideration.
After all, there’s a lesson to be learned from the Home Depot’s failed attempt to set up shop in China. Soon after expanding into the Asian nation a few years ago, the big-box retailer closed most of its home improvement superstores there when it realized that the culture in China is more “do it for me” and less “do it yourself.”
Retailers often don’t realize how complex things are in places like China, where there are more than 1.3 billion people and dozens of subcultures, or in Europe, where dozens of countries with very different cultures make up one continent.
Before companies make the decision to start selling abroad or to broaden their international presence, experts suggest they seek to answer the following 10 basic questions first.
1. DO YOU KNOW YOUR CUSTOMERS?
“It’s difficult to develop a growth strategy if you don’t know who your customers are,” says Tiffani Bova, global customer growth and innovation evangelist at Salesforce.com.
For this, she and other experts recommend a good CRM system that enables you to segment audiences and perform analytics that can give you the demographic characteristics you need.
But the need extends beyond basic demographic information, such as where buyers live, where they work, how old they are, or what their gender is. Companies will do well to go beyond that to really determine what makes their buyers tick—and buy. If they know, for instance, that most of their customers tend to buy their products in the spring, it could help them to orchestrate sales campaigns and selling efforts for optimal results.
2. DO YOU UNDERSTAND YOUR INTERNAL SALES CULTURE?
“Take the time to understand your own sales culture within the sales cycle,” says Nicola Payne, a training consultant at Commisceo Global, a provider of cross-cultural and intercultural training courses. “Sit down with your sales peers and discuss all stages of the cycle. What do you do and why? What are the values driving these preferences or approaches? Think about the kinds of materials you consider important and why. By understanding how you operate, you are more open to appreciating where differences might be when working internationally with other cultures.”
3. DO YOU EVEN NEED TO EXPAND?
“Companies that want to expand into international markets should ask themselves whether they have saturated their existing markets enough to expand the business,” Bova says.
Key to this is assessing whether you have totally tapped out your existing domestic market and must grow your market elsewhere.
4. DO YOU UNDERSTAND THE INTERNATIONAL ENVIRONMENTS IN WHICH YOU WANT TO SELL?
Companies cognizant of their existing customers—their characteristics and buying habits—should be able to carry this information forward to identify potential customers with similar characteristics and needs in target locations abroad.
However, the cultural context in these target markets might necessitate modifying how you approach your potential new consumers. Experts suggest identifying which cultural values might be important. How are decisions made? Is group consensus important? What kind of communication preferences might people have? Is there a dominant religion, and how might it affect business dealings?
Then experts recommend taking the time to review the sales cycle that you prepared with your team. When engaging with your target country, where might the differences lie within the sales cycle? Where values differ, what might you need to do differently?
“Successful companies are flexible companies,” Payne says. “They understand that the sales process in their home location does not necessarily reflect the way in which sales are carried out in their target countries. They take the time to understand the way in which the sales process plays out in different markets and then use this understanding to plan their approach, materials, resources, and budgets.
“The individual sales team members of such internationally savvy companies expect to change their approach based on the markets in which they are working,” Payne continues. “The most common and damaging mistake is for a company to enter a new international market with the attitude that the way they do sales at home applies elsewhere.”
As an example, she points to a client of hers that had hoped to sell products to a buyer in the United Arab Emirates, yet completely destroyed any opportunity of making a sale at the outset by trying to rush to closure. In the emirates, relationships are essential. Customers don’t typically do business with people with whom they don’t have a relationship or with people that they do not trust, she says.
5. WILL YOU NEED TO ALTER YOUR APPROACH TO ACCOUNT FOR THESE DIFFERENCES?
“If you’re trying to grow internationally, make sure you have some understanding of each country’s customer base first,” Bova emphasizes. “Then take the time to understand the cultural and regional characteristics of those markets, because words, terms, and positioning don’t always translate, and it’s important to be culturally respectful.”
6. WILL YOU NEED TO ALTER YOUR PRODUCTS OR SERVICES TO ACCOUNT FOR CULTURAL DIFFERENCES?
The Home Depot example floats perfectly into this discussion. It shows that expanding to foreign markets might require companies to amend their product and service offerings as well as their selling efforts—or, in the end, to abandon markets altogether.
“One big mistake that companies make is failing to localize the products or services being sold,” says Mike Schultz, president of RAIN Group, a sales training consultancy. “Although Product A may sell well in some countries, it may not in others.”
7. ARE YOU MAKING THE BEST ALIGNMENTS FOR YOUR PRODUCTS AND SERVICES?
“Align with products and businesses in international markets that are complementary with your own products,” Bova says. “For example, if you sell tires, it might be advantageous to partner with a company that sells cars.”
Key to finding the right complementary products or services is that thorough understanding of your customers and their buying habits—and the types of products or services they tend to buy at the same time they purchase your products or services.
8. DO YOU HAVE THE CAPACITY TO SELL INTERNATIONALLY?
“Many times, companies’ eyes are bigger than their stomachs, especially when it comes to service,” Schultz warns. “Companies can get into trouble by trying to sell too much too fast. This can make it hard to make product or service performance repeatable.”
When the service isn’t repeatable, and the products aren’t of a consistent quality and performance, consumer confidence erodes, especially in markets that are highly reliant on trust. This can be a recipe for failure.
To avoid that outcome, companies contemplating international expansion should take a hard look at their supply chains and supplier networks. Are they robust and agile enough to respond to unexpected peak demands for products and services in new international markets? Can products be uniformly produced at a consistent level of quality and performance during peak demand periods when orders are rushed? Are there backup suppliers that can be called upon if needed? What about local service? Do you have thoroughly trained groups of product and service technicians on board in all of the countries where you’re selling?
9. IS IT BETTER TO SELL DIRECT OR TO USE AN INTERMEDIARY BUSINESS PARTNER?
Once the decision is made to expand internationally, companies need to work through the mechanics of how the sales process will operate.
Do you attempt to establish your own office in each new country and sell directly to its consumers? Or is it better to find reputable business partners that already have a local presence and cultural awareness in the target country?
At first blush it might seem better to sell direct, because you could potentially retain a higher profit margin and maintain direct control over customer relationships. If you are in an industry sector like technology, there is also the added fear that some of your intellectual property could be lost in a country that doesn’t have the same patent protections as the United States; business partners might try to replicate your intellectual property into their own product versions or transfer the information to other companies with which it partners.
“Your decision to either sell directly or through a business partner often depends on the country you want to operate in,” Payne advises. “There are no set rules, and by understanding how things are done in the target country, it should become evident whether an intermediary is required.”
Having an intermediary might be particularly helpful for companies new to an international market, she adds, noting that it “ensures there is someone positioned locally with an understanding of the regulatory environment, the know-how to target and recruit appropriately skilled local personnel, and, often, access to an existing network of potential buyers.”
Schultz throws another element into the mix. “Part of that decision is knowing your risk tolerance,” he says. “If you want to establish 10 offices in 10 different cities with 10 different salespersons at $300,000 each heading them up, you need $3 million in sales to cover the investment. What if five of your 10 offices fail? This is one reason why many companies opt to find dependable business partners that already understand the characteristics, cultures, and customers in the new international markets they are contemplating.”
10. WHERE DO YOU FIND THE RIGHT INTERNATIONAL BUSINESS PARTNERS?
“Developing sound business partnerships in different countries requires a great deal of care and feeding, as does developing individuals in your organizations to work in international markets,” Schultz states. “You have to devote a lot of energy to developing both people and partners. This includes hand-holding, training, and implementation.”
Bova agrees. “Sometimes, companies think the best thing to do is to partner with the largest business partner. This is a fallacy. Instead, you need to be asking questions like how well will a prospective partner be able to work with your customer persona in a given country. Most business partners have skills in sales and marketing, but what about other areas, such as service and supply chain management? In all cases, it takes time to develop business partnerships. If you don’t take the time to get to know and select a sound business partner, your decision can come back to haunt you.”
This was the lesson a large U.S. technology company learned the hard way not too long ago. It wanted to enter the Japanese market quickly and jumped at the first partner that came across as affable and very knowledgeable. When the business partner was later shown to lack the service expertise needed to support the product, the U.S. company compromised its reputation by association.
“This is an important lesson,” Schultz says. “Don’t fall in love with someone too fast. The most difficult thing to do is to tell the difference between the real deal and an articulate phony. With the latter, you only find out six months later that it’s not the right person.”
So which qualities make up an excellent international business partner?
“The qualities we look for in an international business partner are passion, energy, and enthusiasm to grow the business,” Schultz says. “The partner must have smarts in your industry and be able to sell. We take our time to vet different partners and individuals to ensure that we are all a good fit.”
A FINAL WORD OF ADVICE
Companies and individuals are going to vary in the way they approach selling to international markets, but addressing these 10 key questions will get you on the right path.
In the end, the best advice anyone can give is to choose your international markets carefully. “You might know 12 or 15 different countries where you’d like to set up, or there might be one or two markets that you’d really like to enter first,” Schultz says. “When we first began to move into international markets, we targeted the markets we thought were the best, but we also realized that it really didn’t matter which market came first. We knew we were going to choose the right people for our business partners. Our first markets were those where we felt we had the high-quality business partnerships that we wanted.”
Mary Shacklett is a freelance writer and president of Transworld Data, a technology analytics, market research, and consulting firm. She can be reached at mshacklett@twdtransworld.com.