Export News, July 2011

On the global stage New Zealand is synonymous with grass chewing cows and beautiful landscapes. Is that all we stand for as an export nation? Can we realise our national dream of being known as an exporter of innovation also?

Technology exports lag only dairy and tourism, according to the 2010 Technology Investor Network and Ernst and Young. By learning some marketing lessons from those other two sectors, maybe the geeks could overtake their counterparts.

As a tourism destination, New Zealand competes with hundreds of other countries, and we are further away and more expensive than many.

But we have been able to build a strongly differentiated position, or brand, in the minds of international travellers. The world renowned Anholt GMI Brand Index ranks us top 10 in nation brands.

It has been a success because Tourism New Zealand has told a simple story – “100% pure” – well, and it has been matched by the experience visitors enjoy.

Technology companies don’t always get this right. They get so far because they are passionate and knowledgeable about the technology, but that only works for part of the market. But continuing to market that way to larger and more profitable audiences is ineffective and usually results in them losing market share to more savvy competitors.

Christchurch-based smart energy company Energy Mad have done a good job of differentiating themselves against big, tough international competitors.

One brilliant element of their Mad marketing has been creating what they call ‘business cases’ for customers. Energy Mad’s ability to create these business cases is more important than their ability to make clever light bulbs in their big Chinese factory.

If being smart at making light bulbs was all they could do, it wouldn’t have been enough to so comprehensively defeat huge companies like Philips or Osram. Energy Mad have grasped the elusive marketing truth that business success is not about what you produce, but what you deliver for the customer.

In the Energy Mad Men’s case it was their ability to create value not only for the end customer in the form of cheaper-to-power bulbs, but creating wins for the links in the chain of supply.

For the power companies that help push their Ecobulbs, Energy Mad offers a way of reducing the amount of costly energy they need to generate, as well as enhancing their reputation with customers.

For retailers like supermarkets and service stations, Energy Mad helps them run very effective marketing campaigns focussed on the Ecobulbs that deliver more consumers through their doors.

Dairy is the other Kiwi export juggernaut, and a key marketing lesson from that sector is their enormous distribution capabilities.

Fonterra, and its predecessor the New Zealand Dairy Board, have an incredible global network through which to sell its product. From the time the United Kingdom joined the European community in 1973 and reduced our access, the government-run Dairy Board began building new markets.

By the 1980s they had subsidiaries in 19 countries, building to 80 by 1995 and making it the world’s largest dairy distribution network. Today Fonterra has a presence in 140 countries.

Fonterra has a huge network of distributors, but also partnerships with giant companies in key regions across the globe. Arla Foods in Europe, a joint venture with Nestle in North and South America, another with the Dairy Farmers of America, and a partnership with Clover Industries in Africa.

This channel for processing, packaging and selling product, as much as the hard work and smarts of our farmers, has contributed to the success of New Zealand dairy.

The internet does give all Kiwi companies, especially from the hi-tech field, an ability to promote and sell their products offshore. But a lot of products must still be sold with real partners in country who can promote, sell, implement and support.

What the dairy industry has learned, and is sometimes underestimated by the tech companies, is that the task of getting a product to market is complicated and requires a huge effort. It is at least as complex as developing the product in the first place, if not more.

One innovation based company that has succeeding in building effective channels to market is Fisher and Paykel Healthcare (FPH).

FPH is one of our premier technology exporters and an exemplar for many other companies on how to market their innovations. They pushed past the $500 million in annual revenue mark in the 2010 financial year.

The company began life as a division of the bigger Fisher and Paykel company in the 1960s. The organisation wanted to apply some of its manufacturing expertise to a market outside whiteware. They chose products that would help hospital patients, including premature infants, with their breathing.

FPH’s products are world class, but they have to compete against some large and well-funded competitors.

Compared to typical a New Zealand technology exporter, FPH’s sales model is where they really stand out. FPH have a huge distribution capability. They sell directly to hospitals and home care dealers, have over 100 distributors, and also supply components to other manufacturers of respiratory devices. This enormous reach means FPH products are used by patients in 120 countries.

A secret to their success has been investing in their own network of staff in key markets, selling directly and working closely with distributions. 500 FPH staff work in 30 countries. Too often companies make the mistake of establishing distribution networks and thinking the job is done.

Any successful distribution relationship takes a huge amount of time and effort invested from the manufacturer to make it work – deals are easy to sign but very hard to make work.

Technology entrepreneurs could take a lesson from the infamous Segway: launched nine years ago, but yet to record the number of sales originally forecast for the first nine months, according to Economist Magazine.

It was, and is, a stunning piece of technology, but it simply didn’t fit into the lives of the customers it was aimed at – people battling the busy streets of large cities. As the Economist concluded “there is a big difference between coming up with an idea and making it happen.”

Our technology companies are great at coming up with ideas, but where they could take some lessons from their tourism and dairy counterparts is on the ‘making it happen.’

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