The Press, May 2005
Scribe, The Datsuns, Shihad, D4, Hayley Westenra, Adeaze, Goldenhorse, Brooke Fraser, P-Money. New Zealand Music Month is highlighting both the international success and amazing diversity of our artists. That success will be due in large part to their talent, but also to the ability of their management to find the right channels to reach the right audience. Hayley Westenra's agent doesn't target heavy-metal music radio or TV stations. Scribe's agent wouldn't have too many country and western record labels on his call list. The same focus isn't always evident when it comes to exporting other less glamorous New Zealand products like technology.
Cracking the US, European or Asian markets is a huge challenge for any budding New Zealand exporter. Using New Zealand dollar cashflow to fund a direct international sales force is daunting. An obvious alternative is developing channel partners, companies who can resell or distribute your product within targeted export markets. But contrary to the belief of some budding exporters this is not the easy solution - in fact doing it effectively can be harder than simply selling direct.
It's not about securing resellers and sitting back and watching the money roll in. The fundamentals of marketing exist whether you are selling directly or indirectly. Unless you understand the needs of the ultimate user of your product, and determine which of these have the greatest need and therefore are likely to the most profitable to target, how can you even know which resellers will be effective?
"Markets dictate strategy, strategy dictates organisation," says William Fath in "How to Develop and Manage Successful Distributor Channels in World Markets." If you understand your market then you will be able to determine whether direct or indirect sales, or a mixture of both, is the most appropriate strategy. For example, if you have a product that is usually highly customised, a channel strategy may be less effective than approaching and managing customers directly.
Once you've decided on a channel approach, selecting partners is the next challenge. In most new markets you enter it is a relatively simple exercise to locate and even sign up new business partners. It is infinitely more difficult to get them producing ongoing, profitable revenue for you. A partner is just an extension of your company, so you should give as much thought and attention to recruiting partners as you would to finding and looking after key staff.
You can't even begin to know where to look until you know what market you are targeting. For example, if you have worked out that you have a software product that is particularly suited to the needs of commercial farms in the South-West of the United States, then you can start looking for partners with a good reach and reputation in that market. They don't need to be software resellers - it could be suppliers of agricultural machinery looking to recruit new customers by offering an added value service. Unless you look at it from the end-customers point of view it is hard to know.
Once you have determined your strategy and recruited your partners comes the tough bit - making them successful. "It's not about the product. It is about the link to the channel business model and believable projections about future business performance. The product is just a case study that makes the business discussion specific and relevant." says Scott Karren in "The Channel Executive's Bible". For example, MacDonald's Corp doesn't just sell the benefits of its hamburgers and fries to potential franchisees. It focuses on the proven system it has for efficiently producing fast food to a consistent standard, the proven training systems, and of course their powerful brand awareness.
"Throw away most of the collateral created about the product and start over with how your channel can optimize business performance," says Scott Karren. Some companies make the mistake of seeing the channel as simply as a conduit for selling their product, not as a customer in their own right. The needs and interests are quite different.
Many companies targeting resellers will espouse the many benefits of their products and what it can do for its users. Although your reseller needs to know this, the channel partners' motivation is not solving the problem the product solves, but solving their own problems - securing new customers, increasing revenue from existing customers, raising awareness of their brand.
Like the musical stars we're celebrating this month, success isn't due just to the undoubted quality of their product. Without finding the right channels to their market what number of customers could they expect? As Scribe would say "Not many, if any."