Launching a product or a range of new products throughout the European Market can resemble a steep hill climb for any manufacturer wishing to sell his production to the old continent.In this first article we shall cover the example of a fictitious medium size company, with little experience in the fishing tackle market.
Cobiaco, Ltd.; a medium size company is based in Namibia and specialises in small parts for the automobile industry.
A group of staff that are regular fishermen have invented the Device: A small new machine for snelling hooks to nylon. Management, liking the idea have invested into the production of the Device, successful sales have been achieved in the domestic market where this inventive new product is being very well accepted.
It’s new, well designed, and many an experienced fisherman that has used it has expressed the belief that this item should be well accepted overseas, if the company could only find the proper export channels.
Believing in the potential, management has appointed a team of two staff, (the inventor of the Device and a sales rep, both of them fishermen) to prospect sales to the export market. Production capacity is not a problem and anyway, the company is looking for a stabilisation in its production through organic development in order to decrease the dependency from subcontracting work.
The export team decide that their first objective is to look for customers throughout Europe, a neighbouring market with large potential and language affinities.
They decide they need to exhibit the Device in a European trade show, and after some research on the internet, discover the existence of the only major European show: EFTTEX.
They therefore apply to exhibit at the next show to be held in June of the following year, in Prague, in the Czech Republic.
They contact the organizers of the show and are informed that they must first become members of EFTTA before they are allowed to exhibit and that membership must be accepted by the board members of the association. There follow some weeks of negotiation with the secretariat of the association, as they are an unknown company to all and new to the trade. Finally, by appealing directly to one of the board members, they manage to get support for their application and are entitled to pay up their membership fee and book a stand in order to exhibit. By that time, there aren’t many good spaces left in the show, but they manage to book a small booth in the backend of the exhibition hall.
The Cobiaco marketing team then design a fine looking stand, guaranteed to present the new Device in an impeccable manner.
Come June, and after sorting out the logistics and visas and shipping out their stand and product by courier, off they fly to Prague!
Fortunately, the logistics have functioned properly and on setup day, their boxes are waiting for them in their booth. The atmosphere is friendly, most people speak English and the small problems they encounter are rapidly solved by the show organisers.
During setup, a few exhibitors from other stands are snooping around the show, getting a first look at any novelties that might be of interest.
The Cobiaco export team have not really decided on how they intend to sell across Europe; their presence at this show is more of a learning process than a precise sales plan. Being newcomers to the Fishing Tackle Trade, they are not experienced in the European Market, have no contacts, but they do know one thing: Here is great potential! The EU is the largest commercial power in the world. Some 25 million anglers! If they are going to succeed, they must start here.
The team do not lack business acumen however and they have decided during dinner the night before that they would not make any commitments to anyone on the first day of the show. They would analyse that first day in the evening and only then, decide on their European export strategy.
They have to choose from various sales options:
1. They could nominate a company to take care of the sales of the Device throughout the whole of Europe. In order to be selected, that company would have to have sub-representations or subsidiaries or sales offices in all the major European markets. After all, the Device: An innovative hooks-to-nylon portable snelling machine is adapted to any market and all recreational fishermen use hooks and monofilament line.
This option represents a simple solution that would not require much head office administration but would put all their eggs into one basket.
Market pricing of the Device would be quite high due to the presence of three or even four intermediaries between manufacturer and final consumer. Marketing budgets would have to be approved between the two partners so as to ensure successful promotion of the product.
2. They can look for distributors in each European country, thus spreading their eggs in many different baskets.
The product could be more competitively priced in the markets due to the elimination of an intermediary. Logistical needs would involve shipping the Devices to multiple destinations and ensuring a good service. Multiple customers would generate an important number of invoices and a need for serious management of communication and receivables, increasing the workload on administration. Again, promotional budgets have to be agreed, this time for each country so as to ensure market recognition.
3. As their product is well designed and packaged, and logistics have been taken into account, they could subcontract distribution to a European logistics company and appoint commissioned sales reps in each country. How to handle invoicing, receivables and VAT issues would have to be resolved and would probably require the creation of a European subsidiary company of Cobiaco. A rather big step into the unknown! Commissioned sales reps are also highly protected in many European countries and the potential costs involved would have to be studied carefully. All European sales, administration and marketing costs would have to be supported by the European subsidiary, necessitating a serious commitment by the mother company.
The team has already concluded that option #3 is not workable at present and therefore decides to concentrate on choosing between options #1 and #2.
In a large European fishing tackle show it’s relatively easy to find a distributor for a small range or a unique product as long as the item can be easily identified by the potential buyers.
The problem is finding the right distributor!
There are many companies out there and it’s often difficult, for a newly exhibiting company, to choose a dynamic partner who will not just sit in his office with uncompetitive pricing, waiting for buyers to knock on the door.
The European market is so oversupplied nowadays that large dealers can receive visits from salesmen every day of the week. They have little time for new or less important suppliers. They are more than often alone in their shop and a lot of company time is wasted as they have to attend the salesmen while attending the general public. Unless you can afford a pan-European advertising campaign, it’s difficult to attract their attention through the media so you will need to make sure that your distributor has a good professional team of sales people, that have the experience and the motivation to walk the beat and pay regular sales calls to their retailers. You should also, if possible, attempt to collect some information about the distributor’s image in his market. You will want to make sure that the major dealers in the targeted market are ready to do business with your chosen distributor. What brands do they represent? A distributor with a portfolio of major brands will provide a structured sales force; but will he ensure enough commitment to the successful launch of the Device? There can be a big difference between the first impression of a company through its buyers in a show and the reality on the terrain.
The first day at the show is a success for Cobiaco. The Device is generating a lot of interest and some buyers even wanted to place orders immediately. At the end of an exhausting first day, our team are relaxing in a quiet area of their hotel’s bar, while going through their notes and sorting out business cards. They now have multiple contacts in all the main European countries and they even met some potential oversees buyers that became quite excited about the Device. Our team’s sales rep is however well aware that buyers often get excited during trade shows and that things tend to cool down once the buyers get home to the clutter of their desk and a busting email box.
They have informed the interested parties that no decisions would be made on the first day and re-convened meetings for the following show days. Attendance at those meetings will also confirm the true interest of the potential buyers.
They have plenty to discuss, they have received a couple of interesting proposals from possible pan-European companies and even discussed a possible worldwide exclusive agreement with a famous large international group.
After a quick phone conversation with the general manager of Cobiaco, they have agreed that the safest solution would seem to be the second option: The establishment of a network of national distributors in each country on an exclusive basis. The exclusive partnership in each country should help to build a strong relationship and create stability in the pricing of the Device. It will also favour the introduction of future new products. They also define a promotional budget proportional to the potential purchases of each country, keeping some funding for a larger reaching campaign in the only international trade magazine: Your own Tackle Trade World.
During that first day, they have also collected all the specialized media distributed throughout the show. This allows them to do some quick research on some of the potentials they will meet in the following days.
The next two days are as busy as the first with only time for a quick sandwich during a lunch hour meeting.
It’s Sunday afternoon around 15h30 and the team is still meeting with buyers and more are waiting around without an appointment. They suddenly hear a large smash, only to realize other booths are already folding up. A few more meetings and the show ends for them with a full notepad, contacts in no less than 34 countries and a load of leads to follow up as soon as they are home. They have also made 8 exclusive agreements and have another 4 in the pipeline.
The really important work will start from now: Shipping samples out in time for the start of the respective sales seasons and finalising details of all agreements. Planning production, issuing order confirmations, finalising marketing plans and combining advertising visuals. They also need to seriously increase the size of the instructions manual of the Device to allow for the printing of the 23 official languages of the EU.
They also have some new ideas for new product: As seasoned business people, they know that the commercial life of the Device will always be limited and that there is a lot of hungry competition out there.
They will need to stay lean and sharp if they are to make sustainable development of their export sales.
Louis Tchertoff 2007-02-06