I originally thought of titling this “The three secrets of successfully entering foreign markets.” I know it would be an attention getter and likely pull more eyeballs than usual. But I also know it is pretty cheesy … and I know how well – frighteningly so – it works when it comes to selling self-help and get-rich-quick books and courses online and on TV. So, no three secrets. But I will share three persistent truisms that we find are valid year after year.
For those with short internet-driven attention spans here they are:
- You must have a compelling, believable and defensible value proposition.
- Your value proposition must fit the market you are entering (Surprise! It doesn’t always.).
- You must be prepared to invest capital and hard work – in that order – or be the beneficiary of enormous luck.
A Compelling, Believable and Defensible Value Proposition
If it’s valuable to you, but it’s not valuable to enough other people, then aside from the scenery you are not going to enjoy taking your business abroad. The single biggest difficulty we experience assisting clients taking a product (or service) into a new market is the inability to state the 5 C’s – a clear, concise, current, compelling and credible statement of why their product will appeal. (Try writing one! It is not easy.)
There are many models and definitions of what constitutes a good value proposition. Most of them have their roots in the definition that Rosser Reeves wrote in “Reality in Advertising” in 1960 (Never heard of Rosser Reeves? How about Jon Hamm’s character on MadMen, Don Draper, which in part is based on the legendary Reeves himself?). Reeves coined the term USP (Unique Selling Proposition) stating that a product or service must meet three tests:
There must be a benefit for the buyer – legitimate, acknowledged, and acceptable.
It must be unique arising from a benefit or claim that the competition cannot match.
The number of “I’ll buy that!” votes in the market must be large enough to make a profit.
Market Fit
Markets are fickle things. Foreign markets seem temptingly similar to the home market save, perhaps, for a different language and currency. Oh, that it was that simple! Yet it is not. Not convinced? Consider these examples:
swquare pegsIf you are in the Food and Beverage business and want to bring your “light” beer to the US market you have likely picked the wrong time. Consumption of light beer in the US has been declining by 5% – 7% annually in recent years. Seems Americans are growing tired of the watery taste. The benefits of fewer calories and lower alcohol are no longer seen as benefits. Americans are moving more to robust, boutique beers, and appear
willing to pay a premium price for those they covet.
“Made inAmerica? is alive and well. If your USP is based on your product being from, say, New Zealand or Australia, you could have a challenge. It your offering has something to do with lamb or wool, you have a shot. If it is something else like, say, software, American buyers will be leery. They tend to view technological innovation as an American claim, and low cost manufactured good as bearing a “Made in China” label.
Apple’s iPhone. It has had great appeal in Western countries where budgets can afford the pricey offering. Yet in India where a dollar is a fortune and mobile use leads world per capita use, lower cost Android-based phones represent the better value.
Uniqueness
This is the hardest – and touchiest, at least when dealing with a founder – test to take. That a product is unique in the mind of the company that offers it does not imply that it will be viewed as unique in the mind of the market, or that it is without copycats. Uniqueness really implies two tests on its own:
No other competitor has exactly what you have, or can lay claim to a benefit – not necessarily an attribute – that you can. This is the easier of the two tests to satisfy. Now, here’s the hard one.
The thing that makes an offering unique matters to the market, i.e. it is a reason to buy!
Picasso was quite fortunate in this regard. As are the purveyors of French champagnes and Scottish whiskey. That your bubbly was bottled from grapes grown, harvested, pressed and fermented in the Champagne region of France is a big deal to many buyers. That your whisky was produced in Scotland is, likewise, important to buyers. Yet, if your claim is that your “champagne” or “Scotch whiskey” is made in New Jersey – that would certainly be unique – it would be highly doubtful that product would matter to enough buyers to make it worth the effort.
Profitability
This may sound so fundamental as to merit being glossed over, but it is not. A market that produces pleasant profits in one country can be a source of anxiety in another. Consider the Apple/Android example above: the US is a wonderful market … not so much the Indian market. Or consider the surprise of some US consumer good manufacturers who have learned that “big” packaging is a near certain way to keep your goods from getting on the shelves in many Asian markets.
The Lesson
A value proposition that plays well in foreign markets and is tested in advance to ensure that it fits and can fit profitably is a hallmark of firms that achieve success internationally.
Leave a Reply