Export News, October 2011
Marketing is often seen as a creative pursuit, all about dreaming up left-field ideas to export more of your product. This is especially so in our innovation-based industries.
Good export marketing is actually more about being thoroughly-researched, planned, process-oriented and measurable. This is backed by a study of the sales and marketing activities of New Zealand’s hi-tech companies, released in early October.
Market Measures is an annual survey that assesses all aspects of how innovation-based businesses take their products to domestic and international markets. Produced by Concentrate, in conjunction with fellow Kiwi tech marketing company Swaytech, Market Measures is sponsored by business advisers PwC.
The ‘secret sauce’
While the study gathered a broad range of data, the most exciting insights it offers are what marketing ingredients are likely to produce high growth. By correlating a set of marketing variables against the companies growing the fastest, four clear themes emerged.
The first is focus. Companies that grew the fastest were much more likely to have a lower number of core products and services, sold into a lower number of industries than the average (25% less products and 35% less industries). They could concentrate limited resources on a fixed market opportunity, gaining more intensity with their sales and marketing.
Second is market knowledge. Companies that rated themselves strongly on the ability to research and learn key aspects of their target markets, tended to have higher growth figures. Having clarity around the markets they were entering enabled these companies to make better decisions about key issues like how to price, who to partner with and what kind of buyers to target.
Partnering is the third theme. High growth was associated with using a partner in both local and export markets, interesting given that overall only a minority of respondents used distribution channels.
Last is promotion. Basically, any promotion is good promotion. All promotional activities tended to be associated with good growth, with a couple of particularly effective areas: spending on public relations, direct calling programmes (e.g. telemarketing) and using social media effectively, especially having a blog and using social professional networks (such as LinkedIn).
Failing at scaling
So who participated in this study? 158 companies completed the online survey, across tech sectors including software product development, IT design, consulting and development services, electronic devices and equipment (76% of respondents).
Auckland, Canterbury and Wellington were the most common locations (94% of respondents), and companies included start-ups through to established companies.
Turnover and age statistics suggest we continue to struggle with building international technology businesses of scale and substance. Only 15% of companies earn over $10 million with a long tail of companies earning under $1 million (38%).
There were also some real positives to come from the survey. Turnover increased by an average of 48% across the board, up 8% from the previous year, and exports were also up 8%, with 85% of all companies selling offshore.
Expenditure on sales and marketing (staff costs and direct expenses) has softened a little, likely to be a lagging effect of the global financial meltdown that hit many markets in 2009 and 2010. It remains broadly consistent with international benchmarks.
The land of missed opportunity?
New Zealand has a wealth of smart technologists exporting great innovations, but the study showed some significant constraints to realise the immense potential offered by its technology sector to earn foreign exchange.
Companies cited the difficulties of finding sufficient capital and appropriately skilled and qualified staff as major impediments to their sales and marketing.
There was an over-reliance on selling directly with an in-market presence, rather than use channels. Only 16% were selling indirectly, which is concerning given high growth was associated with effectively using channels to market.
Reinforcing the perception that our tech firms are talented innovators but lack go-to-market skills, was companies weak self-rating of their capability around promotion and sales.
A final constraint was the fact many of our tech exporters were focussed on tough, slow markets such as health and community services, utilities and government administration and defence. And although companies like Orion Health or Rakon have done exceptional well in these sectors, there is surely an opportunity to promote our technology into other industry segments, such as agriculture, where the New Zealand ‘brand’ would add real value.
The generation gap
The survey charted differences in the ways companies of different stages of growth approached their sales and marketing. Companies self-categorised themselves into start-ups, early growth and established.
The main insights across these stages were that start-ups were good at product development, but struggled to attracted capital; early growth companies excelled at attracting staff, but were constrained by a lack of cash; and established companies tended to be strong on managing their finances, but were still seeking staff and additional capital.
Pricing confidence clearly increased as the companies matured, with only 2% of start-ups commanding a premium price positioning, as opposed to early growth (10%) and established companies (22%).
Companies overall tended to price below their competitors, even though they tried to position their product as superior.
Companies at whatever stage of the lifecycle were heavily export oriented, targeting Australia, USA and the UK in the main. Start-ups were more likely to sell into Asia, which is not a traditional target for our technology exports, even though they rate as strong trading partners overall for New Zealand.
In terms of what they perceived to be the most effective promotional activities: website, collateral, and industry events rated highest across all companies. Advertising, sponsorship and telemarketing rated lowest.
Focussing on sales support type promotion (events, collateral, online) was common across all companies, with start-ups more likely to use social media. The least was invested in telemarketing, sponsorship and product reviews.
A key insight is that while promotion correlates with growth, it has to be done in the context of solid marketing strategy. With a tight focus on a market you know well while employing channel partners, makes promotion the icing on the exporting cake.