International Sales Channel: Models, Partner Selection and Profiling
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The document discusses various distribution channel models for selling products internationally, including remotely, representatives, agents, distributors, employees, offices, subsidiaries, joint ventures, and acquisitions. It emphasizes the importance of carefully selecting distribution partners that are a cultural fit and will dedicate sales resources to promoting the products. Companies should have a business model that outlines the market opportunity and customer lifetime value to convince potential partners to invest in sales. Building a successful international sales channel requires a proactive effort rather than leaving it to chance.
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International Sales Channel: Models, Partner Selection and Profiling
- 1. PMMI Annual Meeting 30 October, 2013
- 5. Let‟s jump right into distribution NO!! www.ConsiliumGlobalBusinessAdvisors.com
- 8. Easy……………………………………………..Project 1 1. Sell remotely (internet, skype, email, etc.) www.ConsiliumGlobalBusinessAdvisors.com
- 9. Easy……………………………………………..Project 1 2 1. Sell remotely (internet, skype, email, etc.) 2. Reps (no resale) www.ConsiliumGlobalBusinessAdvisors.com
- 10. Easy……………………………………………..Project 1 2 3 1. Sell remotely (internet, skype, email, etc.) 2. Reps (no resale) 3. Agent (no resale, but they have some authority) www.ConsiliumGlobalBusinessAdvisors.com
- 11. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) www.ConsiliumGlobalBusinessAdvisors.com
- 12. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. 5. 5 Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) Employee (leased or direct) www.ConsiliumGlobalBusinessAdvisors.com
- 14. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. 5. 5 Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) Employee (leased or direct) www.ConsiliumGlobalBusinessAdvisors.com
- 15. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. 5. 6. 5 6 Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) Employee (leased or direct) Office www.ConsiliumGlobalBusinessAdvisors.com
- 16. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. 5. 6. 7. 5 6 7 Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) Employee (leased or direct) Office Subsidiary www.ConsiliumGlobalBusinessAdvisors.com
- 17. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. 5. 6. 7. 8. 5 6 7 8 Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) Employee (leased or direct) Office Subsidiary JV (joint venture) www.ConsiliumGlobalBusinessAdvisors.com
- 18. Easy……………………………………………..Project 1 2 3 4 1. 2. 3. 4. 5. 6. 7. 8. 9. 5 6 7 8 9 Sell remotely (internet, skype, email, etc.) Reps (no resale) Agent (no resale, but they have some authority) Distributor (possibly various levels) Employee (leased or direct) Office Subsidiary JV (joint venture) Acquisition www.ConsiliumGlobalBusinessAdvisors.com
- 20. Telling the legitimate “partners” from the “dogs” isn‟t so easy! www.ConsiliumGlobalBusinessAdvisors.com
- 21. Telling the legitimate “partners” from the “dogs” isn‟t so easy! www.ConsiliumGlobalBusinessAdvisors.com
- 22. Exclusive agreements HR complications IP exposure (trademarks) Fraud FCPA Leaving money on table Provide competitive fodder www.ConsiliumGlobalBusinessAdvisors.com
- 23. Have a clear “ideal profile” Cultural (not country, but business approach) fit is critical Embrace folks that will invest in travel to your facility for training The right match will welcome your frequent travel for joint sales calls (and you will drive activity, learn about the market, teach them product and how to sell it, etc.) Understand and sell how your product will be important enough to them to replace another www.ConsiliumGlobalBusinessAdvisors.com
- 24. If distribution or agent/rep Trade shows and delegations US Department of Commerce “Gold Key Service” Find great customer projects (e.g. multinationals) and then ask them who they would want to buy it from. Approaching a strong local distributor with a ready order makes it easy Don‟t find them by accident. Know what markets you are pursuing, what model you plan to use, what ideal profile elements are not open to compromise and what has worked for you in the past. Your success depends on these folks – do you hire employees just because they approach you with an email inquiry!!?? www.ConsiliumGlobalBusinessAdvisors.com
- 25. assuming distribution/rep Have locally vetted contracts for any sort of engagement Never agree to exclusivity (you can function that way, for some time, but make it clear it is „at will‟) Expect dedicated sales resources Always seek to upgrade (like GE employee management) Most markets require multiple distributors www.ConsiliumGlobalBusinessAdvisors.com
- 27. The right channel partners won‟t be waiting around to sell your products. They‟ll need to be sold. You should have a business model: • Understands local market opportunity • Explains how your product compliments their others • Outlines lifetime value of a customer • Includes reasonable sales projections and investment obligations over two years • Explains your ideal partner profile • Asks them to outline how they will sell (committed reps, other products dropped, projections, etc.) www.ConsiliumGlobalBusinessAdvisors.com
- 28. Sales Channel cannot be built by accident – it requires a deliberate and proactive effort www.ConsiliumGlobalBusinessAdvisors.com
- 29. Whitepaper – Six Critical Phases of Channel Management eBook – Channel Model Selection Considerations Infographic – Channel Management Video – Global Channel Management Checklist – International Channel Management All rolled up into an International Channel Management toolkit available for download here www.ConsiliumGlobalBusinessAdvisors.com
- 30. One element of an integrated global business development approach. www.ConsiliumGlobalBusinessAdvisors.com
- 31. www.PMMIBizDev.com Ed Marsh Principal Consilium Global Business Advisors M +1 978 238 9898 em@cgbadv.com www.ConsiliumGlobalBusinessAdvisors.com www.ConsiliumGlobalBusinessAdvisors.com
Editor's Notes
- Good afternoon. Thanks for sticking around and not booking that early flight. But after all, PMMI has put together such a great meeting, why would you want to leave early? Is everyone getting as much out of it as I am? And what an amazing tour yesterday.I want to create some context for this discussion. By asking a couple whys.This is a pretty analytical group –engineering minds that find cool machine solutions to complex problems. really focused on drilling down into operational details. ERP systems, lean manufacturing, supply chain management – all these big topics get focused on…whole functions in businesses get “re-engineered” and generally what happens to business development? A couple tweeks around the edges, a website a few years ago, a few more cold calls - why is that different?It’s really appropriate that we down to the end talking about export - It’s a perfect parallel for how most companies approach it. Once everything else is set, if there’s any time or energy left over, then maybe we’ll look at the other 95% of the worlds consumers – why? Perceived risks?Chatting with one of the innovative trade publishers from this industry yesterday I learned that it’s not uncommon that some of you folks out there will develop effective lead gen programs with them, and then instruct them to only forward doemstic leads – to simply discard the rest. Why? You’re only half serious about wanting to grow?What did you think about IC-DISC? Pretty cool right? Why haven’t your heard of it before? Actually I’ve mentioned it a couple times at these meetings – remember, reduce your taxes on export sales? But it depends on mindset. And as long as we’re talking about it, let’s rehearse the conversation you’re going to have with your accountant when you get home. You’ll call them up, say I just learned about this really cool IC Disc thing that could save me almost 50% on federal income taxes on export sales. This person who hasn’t told you about it for the last 5 years is faced with a choice of telling you they didn’t know and that cost you money – or that they forgot and that cost you money. What are they going to tell you? But the fact is, in most cases they don’t know – after all, export is just different….why?Reflecting back on Tom Koulopoulos’ talk yesterday my guess is most of you remember what he said is the second biggest trend for you to think about – personalization. But how many of you remember the biggest? The globalization of consumption. He mentioned 5.8B mobile phones – I’e seen a stat that more people on earth have mobile phones than toothbrushes. That could be really scary or really exciting depending on how you look at it – but the point is that consumption drives your businesses – and whole new groups of people suddenly able to buy a can of coke, bag of chips, tube of shampoo, etc. are creating a demand for your products….and it’s not here in Minneapolis.
- Distribution tends to be the default approach for many packaging machinery manufacturers. And for good reasons not the least of which is the embedded solution to remote technical support.But it’s not the only channel option available. And the others deserve consideration. You can use different channel models in different markets. You need to make conscious decision, not one by defaultFrom easy/low risk and quick to implement to bigger projects you options include
- You can look at these options along a continuum. For simplicity I’ll outline it as easy to a big “project” but in parallel it includes your legal exposure, cost, responsibility, authority and return
- This is the one that everyone does, and then shakes their head when leads come in. It’s almost a disruption to regular business. But it’s viable, particularly if you tend to have standard products.
- This is the other one that almost everyone already does. Just as you have end users that contact you, there are also reps that pop up with projects. They tend to be opportunistic. They are your eyes and ears on the ground, they can’t make binding commitments on your behalf, and they are paid a commission once you are paid in full.
- This is often misunderstood. It’s much like a rep, but referring to someone as an agent can, in specific legal lexicon, sometimes create exposure for you. In certain instances they can make binding commitments on your behalf. From a transactional perspective it’s similar to a rep
- Everyone is amply familiar with this one. What some folks don’t formalize, though, is a structure of different levels of responsibility and discount. For instance simply buying and reselling may be a silver level. Having trained technical service staff with an inventory of spare parts a gold level and stocking for quick local delivery platinum. Discount should correlate to level of commitment/responsibility as well as performance
- This could be as simple as a single sales person. But I’m big fan of country managers particularly in some of the BRICs where geographic size, population and heterogeneity of the market require multiple channel partners and a degree of cultural familiarity which you can’t have.
- But you can quickly get into a mess with ideosynchrasies of local rules and requirements. Employee for life, sakc of rice each month, 13 month pay years, etc. At the very least you need local assistance (attorney, CA etc.) to set this up correctly. Or better yet use a virtual employment shell – I can give you details on one if you are interested. The person is an employee of the other local company, but works full time on your behalf as your employee
- Sometimes you need to plant the flag (company and/or country) and maybe have a showroom or at least demonstration of commitment to a market. You may or may not need a local legal entity to do this depending on the location. There’s obvioiusly cost to this
- When you need a local legal entity, then your office becomes a subsidiary. Now certain markets have stipulations regarding the amount of foreign ownership, holding of real property, collection of taxes, etc. Costs include initial formation, ongoing accounting, legal, overhead, staff, etc.
- now there are certain markets that are tough nuts to crack. Cultural issues (length of time to form trusting relationships, business style) and commercial issues (tariff barriers, convertibility of currency/currency controls) mean that to sell there you really have to be established. But you’re not interested in a long process to do that. You can’t subsidize it for a protracted period. So a JV may be a great option. If you have a particularly strong distribution or maybe a manufacturing/assembly partner, this could be a great approach. It doesn’t have to cost a huge amount and can open up dedicated access to a large sales channel, immediate market credibility and potentially an avenue to circumvent punitive tariffs (think BRAZIL)
- This is certainly the biggest project. All of the issues of M&A that cause problems for companies domestically apply, along with others. Black vs. white accounting books, inherited FCPA,, environmental or other liability, culture clash, etc. are all real challenges. At the same time emerging markets offer some great opportunities and there’s an industry around M&A advisory in the space even specifically under $10MM. So don’t assume that it’s not feasible. It can make you an instant player – and generate immediate growth vs the traditional routes that take time to build growth organically.
- After all, they tend to look similar. You know the unsolicited emails you get about big projects, someones cousin who is MD of such and such a company, etc. It seems almost every potential international rep is cut from the same mold – at least superficially. But it’s about more than picking the best – it’s also about avoiding mistakes.
- And the cost of selecting a dog is high. Opportunity cost (missed sales while you mess around) – wasted energy – countless worthless quotes and draw on engineering resources – actual out of pocket costs traveling – legal costs, etc. And while we’re on the topic, there are other potentially significant risks to consider and mitigate.
- you end up locked out by being locked inin case of a "rep" with an agreement that doesn't address local law, you might have an employee wihtout knowing ittrademarks are a huge exposure - explain howyou can end up ripped offfcpa is often overlooked by companies (explain)
- Now it’s my pleasure to introduce Chris Mott – chris brings a really important piece to this conversation. Because after all you can go through all the steps correctly to find the perfect channel model and partner, but at the end of the day they have to be able to sell. And sales skills, which are tough enough to assess and manage across the US, are even more so globally. He’s got experience working with sales teams all over the US and in many international locations – both direct and channel