Marketing Globally – The Pre-launch Checklist
By Scott Goddin, Portland US Export Assistance Center
As software firms manage their businesses in an increasingly interconnected world, the challenge and opportunity of selling internationally presents itself as soon as they establish a web page. Companies need to plan early in their business strategy if, when and how to “go international.” Luckily, the business model applicable to software sales provides a broader range of flexibility than that available in other sectors.
A key component of a successful international strategy is an internal evaluation of a firm’s commitment and capabilities to support the significant efforts required. A great marketing staff cannot succeed without engineers who can tweak code to foreign requirements; finance and accounting personnel who understand foreign payments, currency and tax issues; a legal staff knowledgeable about intellectual property issues and contracts; and management commitment to grow the firm through sales in international markets. This article will be the first in a series prepared by members of the SAO International Marketing SIG to discuss key issues, considerations and strategies in approaching global markets. This analysis is drawn largely from an interview with Scott Drushella, international marketing consultant and chair of the SIG.
Why go international?
The question may seem obvious, but it is the driving force behind the changes that will be required for a successful international effort. International markets can diversify revenue sources and alleviate dependence the domestic market and its economic cycle. Firms can leverage existing technology and products to grow sales and gain competitive advantage by offering solutions to existing customers and new prospects who have international operations or who are also looking to grow internationally. Developing and marketing a product internationally will help a company identify and meet customer needs at a quicker, more competitive pace. This is reflected in equity markets, as firms with international operations typically have higher valuations than solely domestic-focused companies.
What are the key success factors for an international effort?
Whether a whim of the CEO, response to a key customer or ambitious initiative by marketing, a successful international effort will require buy-in and commitment from the top – a realization that international is a long term venture and the importance of sticking with it. A quick rule of thumb is that management should anticipate committing a minimum of 10% of their time to international efforts. US companies are renowned for entering markets and then, if things don't work out, leaving in a short time period. It's a negative reputation to have and will be used against you by local competitors.
Companies should anticipate that there will be additional costs in early stages of a marketing effort and that these must be budgeted for and supported. Costs will be associated with localizing a product to accommodate differences in non-US markets. Products often have to be adapted to local requirements to be successful. Language, culture and business practice differences exist and changes (and investments) must be anticipated related to sales channels, after-sales service and support. New customer relationships can be a challenge and a learning experience. Companies must be willing to commit to these decisions.
Management commitment will best be implemented in a comprehensive planning process that will attempt to address the full impact – financial, resource requirements, changes within the company, etc. – required of the international effort. The business and operational plan should include an internal evaluation of present capabilities and future needs to be developed involving all segments of the company. The model should be “plan, prepare and implement” not “fire, aim and ready.”
What are the variables that most affect an international ROI?
As firms review their internal capabilities and checklist, it is appropriate to address core company functions vs. international issues that can be handled externally. Issues as diverse as legal advice and shipping may best be handled outside the firm, but need to be recognized as a key part of the overall effort.
Those factors which will most impact international ROI include:
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Technical factors. Is the product architected (more commonly referred to as internationalized) for non-US markets? If the product was written in the past five years, it probably is, but if the code is older than that it’s possible that it will require changes. If unsure, an internationalization audit of the code should be undertaken. Depending on the market, there will likely have to be product changes to meet local requirements and conditions (called localization).
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Distribution strategy. Typically software is sold internationally through an independent software reseller or partner channel. If the current distribution model in the domestic market is through a channel, then there is an understanding of how to find, train, manage and support this type of distribution method. If the domestic model is direct sales, then there is a learning curve (and investment) to understand how to develop an effective channel.
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Marketing & Support. The need and importance of corporate and product branding, and the strategy for corporate lead generating campaigns vs. partner-led and -funded campaigns can have a critical impact on market introduction and success. Support issues include corporate-provided support vs. local-partner support; this responsibility will require strategic decisions and planning.
The point is to have all parts of the company positioned to handle new responsibilities associated with international sales.
How long will it take and how much will it cost to expand internationally?
There are a lot of variables that can have significant cost impacts but a rule of thumb is $10,000 per country on the low side and $50,000 per country on the upper end. Lots of factors play into this, but if everything were to go smoothly, a regular revenue stream could be expected in 3-6 months. More realistically, you shouldn't budget revenue to occur in less than 12 months. International success is measured by percent of total revenue coming from international. A minimum success level would be considered 20-25% ramped up over time.
Conclusion
The key to success will be commitment planning and preparation. International sales will be profitable and challenging, but should not be approached in a haphazard, “learn on the fly” manner. Conducting a thorough internal evaluation of your company’s strengths and weaknesses will be the best place to start. External resources from marketing consultants to the state and federal government also exist to assist you in this initial (and subsequent) efforts. Consider their use as a critical part of your planning effort.
The resources of the International SIG are readily available and we welcome your inquiries on specific issues of interest.
About the author
Scott Goddin is director of the Portland US Export Assistance Center (www.buyusa.gov/oregon) and has been working in international trade with the US Department of Commerce for more than 20 years. He works with Oregon and Southwest Washington high-technology companies to develop international markets, specifically helping them to design market-entry strategies; find and evaluate distributors, VARs or agents; evaluate product or service delivery methods; and “internationalize” their companies.
Goddin has served as a US trade negotiator working on Asian market access and standards issues for US high-tech and communications companies and intellectual property rights issues in Korea, Taiwan and China. Goddin also has served in temporary assignments as a commercial attaché at American Embassies in Seoul, Taipei and Nairobi and has managed the office in Portland supporting local Oregon firms since 1997. You can learn more about export assistance at www.export.gov or contact Goddin directly at scott.goddin@mail.doc.gov.
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