Home            

Resume         

White Papers

Presentations

The services delivery is described best as a definite solution to a definite set of problems for a particular group of people at a set period in time. It is more complex than a product delivery, as no one service is the same as another, being composed of a mixture of product (tangibility) and customization (intangibility). The intangible component means that the marketing, sales and delivery processes are far more customer-focused than those of a product-based cycle. A services solution requires coordinated interaction between the selling company who provides the intangible component and the end customer, to ensure that the final deliverable completely satisfies each customer's individual requirements.

There are several discrete elements, unique to a services solution, that differentiate it from a product solution:

Each of the above makes the services marketing/sales cycle more difficult to estimate and control, as they influence the planning process and the strategies for implementation of the plan, delivery of the service and post-implementation support. They also impact resource allocation, organizational focus and monitoring of progress, and they provide the catalysts that differentiate a successful services campaign from an unsuccessful one.

Finally, it is difficult to monitor and react to competitive activities, in terms of pricing and service differentiation, due to the above factors. Whilst a manufacturer has to simply 'look on the shelf' to determine the key marketing characteristics of other products, the services marketer has to resort to much more subversive and convoluted practices to obtain competitive information.

The exporting of services introduces extra dimensions of complexity. At a cursory level, the services export cycle appears to be not too dissimilar from that of a product. It typically commences when a company delivers a solution that satisfies a local niche opportunity, and in doing so, it gains recognition as having, or perceives that it has, expertise that can potentially be sold to overseas markets.

Although company size and management commitment to exporting are the two most important variables in both services and manufacturing exporting, there are many other factors that differentiate the two: these are best illustrated by using a commodity product marketing process as a contrast. An off-the-shelf product, especially one that is unique, likely to be easily accepted and therefore potentially in high demand, usually has a short ramp up cycle, has well-defined promotion channels and will have lower start-up and ongoing administration costs. It is a fairly straightforward exercise to set up country-specific distribution outlets, and once established, the marketing process becomes little more than an extension to the production chain. With services marketing, the sales cycle is 10-20 times greater, with cycles of 12 months or more the norm rather than the exception. In addition, product awareness must be achieved by direct representation, rather than by bulk media advertising and independent distribution outlets, and product/industry expertise (at least initially) must come from within the existing company infrastructure.

In addition to the tasks associated with the marketing of a commodity-style product, the export services marketer also has to consider:

The uncertainty of the service offering therefore creates extra pressure on the service company's marketing department to produce detailed and accurate market research in order to reduce the risk of failure. The company may be further challenged by its inability to perform meaningful test marketing due to diversity of the service offering.

International services marketing is further complicated by foreign government interference, language barriers and cultural differences. The potential market is usually smaller in size and may be restricted to a vertical industry sector, which tends to narrow the available opportunities in any one country, providing the temptation for the exporter to simultaneously expand their activities into multiple countries. However, supporting multiple countries increases sales and support costs and makes it difficult for the company's executive management to maintain focus. This, and the fact that it is easier to export manufactured product than services, may be the primary reasons why service companies generally focus on fewer countries than manufacturing companies.

External representation is also difficult, as an overseas representative must not only understand its role in delivering the service component of the solution, it must also be able to relate to the culture and philosophy of the originating company. There are many who are of the opinion that the main reason that exporting companies fail is due to incompatibility of business cultures in overseas alliances. A recent study of computer software exporters found that only a few companies surveyed had established overseas subsidiaries, joint ventures and partnerships. Those that had set up overseas operations reported that they were mainly sales and marketing outlets, rather than implementation and support infrastructures. The study presented three main reasons:

1. Unwillingness to release intellectual capacity to companies who may be potential competitors;
   
   
2. The need to provide extensive support during the implementation and post implementation cycles required close interaction between the knowledge base within the seller and the buyer's employees;
   
   
3. The nature of the service meant that the life cycle was 2-3 years and the sales expectation of the service was 2-3 per country, i.e., not enough time nor economically feasible to train up a distributor.

A possible alternative is to isolate the operational non-strategic components of the service, for example, project management, equipment selection and end user training, and outsource this to a respected in-country systems integrator. This means that the company's intellectual property is retained and the sales cycle remains under its full control. Many companies adopt this strategy, and use several integrators, sometimes within the same country, selecting them on a 'horses for courses' basis.

The services delivery process also creates some unique problems that tend to impact service quality and delivery timeframes, including:

Many exporting services companies experience severe cash flow problems caused mainly by underestimating the cost and length of sales cycles and overestimating revenue and profits. The end result of these miscalculations is manifested by a failure to establish a profitable foothold, and many are forced by cash and/or funding shortages to curtail their activities, or abandon them completely. Those that have experienced some success have encountered post-sale problems, for example, project overruns due to end-user inexperience, unexpected costs and conflict in delivery versus expectations due to cultural differences in interpretation.

Despite all of these issues and problems, the services sector is generally recognized as the fastest growing in the world market, primarily due to the shift in the manufacturing industry towards low-wage economy and the promise of larger profit margins. Curiously, there has been very little research performed in this area, the majority of studies concentrating upon the manufacturing sector. The research that has been performed is at best sporadic and lacking in specific detail. This is partly due to the complexity of the services market, and partly due to the wide variation in the intangible component of the services delivery. However, this lack of empirical information has not deterred the world's multinationals, as a recent Gartner Group report estimated that over half of them would be involved in exporting services by 2001.

It can be concluded from the above that there is no established blueprint for the development of a successful services export campaign. Indeed, the diversity of the services marketplace dictates that the services marketing and sales campaign will vary markedly from one service category to another. However, here are some generic guidelines that can be followed by an intending exporter that will help to alleviate the inevitable stress on company resources when expanding into overseas markets. None of these recommendations could be described as rocket science, but if followed will dramatically improve a company's chances of achieving its export objectives.

Expect problems. Try to anticipate them and plan to mitigate their impact.