Exports: what comes first, the product or the market?

According to marketing theory you first ascertain a consumer want or need and then create a product to fill it. In exporting, it's more common to start from the product and – to select a product or group of products and begin to identify markets.

Starting with the Product

If you take the route of selecting products and then looking for potential customers, you should choose products with which you are familiar and that foreign businesses and governments may want to, and be able to, import. A new product, or one that your country makes better or cheaper than the importing country can, is a good bet*. Import control regulations, an important consideration, are generally less strict for consumer necessities and industrial goods than for consumer luxuries.

To which foreign countries, if any, is the product you are interested in being imported? Check international trade statistics, or contact the product specialist at the corresponding Departments of Commerce. Many trade associations also have international specialists or officers who know something about export activity and potential.

You will want to build a line of related products, from one to ten manufacturers, in order to make larger sales to the same customers.

Product Modification. In most cases, American products face the same kinds of obstacles abroad that foreign products face here. They often fail to meet consumer preferences or legal requirements, but American manufacturers are reluctant to make product modifications unless you can persuade them that the time and expense are justified by potential export profits.

Products such as pharmaceuticals must usually be tested by foreign government laboratories even though they satisfy all American requirements. This is true even in the least developed countries where medical laboratories may be inadequate. Several countries require instructions and information on packages to be written in the local language, and many prohibit the sale of mechanical and electrical products unless spare parts and service facilities are available locally.*

Even simple products, such as cigarettes and toothpaste, may have to be modified to suit foreign consumers. For example, packages may have to be made smaller or coloured differently. There are entire books that describe blunders, mostly lack of adaptation*, made by large American firms in introducing products for sale in foreign countries.

Testing Product Ideas. An inexpensive way to test a product is to solicit the opinions of several people in the USA who are natives of the potential market countries*. This won't tell you for sure that a product will sell abroad, but it may reveal characteristics that should be changed. Sometimes there is no need to change the product itself, but only its name or package or what is said about it. Refrigerators can be (and are) sold in Alaska (to keep food from freezing in the winter) and snowplows* in the Middle East (to clear away sand).

When you have selected a product, identified the countries where you may be able to sell it, checked it for conformity with the laws of those countries, and tested it with nationals from those countries, there is little more that can be done in the United States. You will then have to expose the product to foreign markets by going yourself, by hiring a foreign market research firm, or by locating foreign agents and distributors and sending them samples. You may be able to find representatives abroad who will get a lot of valuable information for you with your only cost being samples. In the process you may make actual sales, which of course is the most valid test of all.

Starting with the Market

Suppose, on the other hand, you decide to start with foreign demand and locate suppliers. From Trade Channel and other publications, or by placing advertisements in foreign journals such as The Straits Times (a newspaper of Singapore and Malaysia), you can identify specific needs of foreign importers. Another way to find needs is to subscribe to publications of the U.S. Agency for International Development, United Nations Development Program, World Bank, and the regional development banks. Their newsletters list products that are needed overseas, the purchase of which is financed by international grants or loans.

When you have information about an item needed abroad, and think you can be the supplier, you should first contact the importer. Tell the importer you have his request, are preparing your quotation, and ask any questions that will give you useful information. This simple step also tells the foreign importer that you exist so he won't be completely unfamiliar with you and your company's name.

Lining Up Suppliers. Next you must identify potential suppliers of the product or products in question. There are many directories of manufacturers in the United States, the most comprehensive of which is the Thomas Register of American Manufacturers (available in nearly every library). In this series of books you can find companies that are able to supply the needed item(s) with their locations, telephone numbers, and approximate sizes. You should contact four or five for each product.

By letter or by phone, your story will be essentially the same: "I'm with an exporting company located in . I have an inquiry for (chalkboards) from (Guatemala). Are you interested in having me quote on your products?"* Of course you don't say who the customer is, because the manufacturing firm may then contact the customer directly.

If your communication is by letter it should be addressed to "Export Sales Manager." If by phone you will need to speak with someone in the Export Sales Department or, if there is none, the Sales or Marketing Department. If the person is interested in having you quote on his products, you should ask for two copies of the company's catalog and export price list. Many firms have established export prices that are lower than domestic selling prices for several reasons, including hard competition in world markets. You should also discuss whether you will work as a merchant or an agent in your relationship with each manufacturer. Some firms will not let you work as a merchant because they will want to arrange for the international shipping. That way they can be sure you won't buy the product for one country and then sell it to a country in which the firm is already represented, or even sell it in the United States to the detriment of the firm's established distributors*. Also, if the transaction is quite large, you may have to work as an agent to avoid paying for the merchandise or international freight.

Some manufacturers will not be interested in exporting. They may be willing to cooperate if you plan to work as a merchant and take care of the export details, but not if they have those responsibilities, which will be theirs if you are just an agent. Other firms will not let you quote on their products at all, or will give you only certain products or specify only certain countries you can export to. For example, Lee and Levis* are already represented in most of the world. Your quotations on their products may be limited to Chad, Afghanistan, and a few other countries in which it is very hard to sell American goods. In some cases, you may have to deal with a producer's exclusive export agent or even with a wholesaler.

The manufacturer's export prices may already have your commission or profit margin built in. If not, you will have to add it on. In some cases, you can increase your earnings by getting export prices with built-in commissions or margins and then charging your customers a bit extra. In effect, you will be paid double. The manufacturer's prices may be "FOB factory" or they may include transportation to a port or airport. In either case you will probably have to add all costs to the destination in order to deliver a quotation that will let the importer compare his cost from you with his cost from other suppliers around the world. Finally, you will need to send your price quotation and catalog pages to the importer, along with a letter explaining the benefits of buying from you.

Protecting Your Interest. If the foreign importer is a private company, it may try to contact your supplier directly to eliminate your commission or profit*. You can try to protect yourself against this by sending only photocopies of catalog pages with the manufacturer's identification removed, but it is better to have a written agreement with the manufacturer. He should promise that if his (chalkboards) are sold to your customer in (Guatemala) within a specified number of days, you will be compensated. This kind of written agreement from an honest firm will give you a high degree of protection.