Key Elements of an Effective International Sales Strategy – Part II
The Care and Feeding of Your Reseller

While there are multiple methods of selling software internationally, the use of resellers provides a very effective means of penetrating, maintaining and expanding an overseas presence in key target markets. Choosing an effective reseller, carefully assigning realistic objectives and responsibilities, and managing expectations will be critical to ensuring a successful relationship. But even after a company has made the critical decision of whom to do business with, there is still the task of maintaining the effectiveness of your distribution network.

For example, having established a partnership with one or many distributors, there is always the possibility that a reseller will fail to generate anticipated sales. Thus it is necessary to examine the most effective strategies for maximizing international sales, from your perspective and that of your reseller.

Harald Horgen (president of the York Group) and Oystein Konsmo (U.S. managing partner at the York Group - www.theyorkgroup.com/Int_Expansion.pdf) provide a valuable foundation for understanding the relationship between growing technology companies and their distributors and sales network. Horgen and Konsmo outline a broad set of concerns and appropriate strategies for maximizing the vendor-reseller partnership.

Preparing yourself as a vendor

Many companies fail to adequately prepare themselves for international business prior to engaging a reseller. This is a critical mistake. Resellers want to partner with companies that are committed to international business and have effectively demonstrated that commitment by establishing a realistic export strategy.

As a vendor you should have already taken steps to understand the processes and procedures that will affect your sales in a given area. Establish pricing policies and order procedures along with technical support information prior to engaging a distributor. In addition, consider whether your product and sales strategies need to be modified for local markets. These basic preparations highlight the importance of export to your company and will reassure the reseller that you are a company that is committed to its international sales.

Understanding and minimizing risk

Any time a distributor agrees to do business with a firm, it is accepting a given amount of risk. By analyzing how the reseller evaluates its risk, you can help to minimize that risk and provide incentives for the reseller to value your partnership.

Reseller risks can be broken down into three general levels. The first level of risk is quite simple: The reseller must invest in the sales and marketing of your product. If the product succeeds, the reseller will make a return on the product; if the product fails, however, the reseller will have lost its initial investment. This is a risk all distributors accept, and are essentially paid to accept.

Second, a reseller faces the “exit” risk. This risk is based on the possibility that your product becomes extremely successful and, as the vendor, you then choose to set up a direct operation or sell out to a larger corporation. In either case, the reseller would miss out on the most profitable years of a partnership (3-5). To minimize this risk, a reseller will want to see a commitment on behalf of the vendor to the reseller, and will want a basic level of assurance that the partnership will be preserved.

Finally, a reseller faces the “vendor” risk, since not all vendors are “created equal.” Some vendors are poorly managed and ill-prepared to engage in international sales. This means that a reseller should be willing to invest only in a firm that it reasonably believes is well-prepared for exporting, will sustain its partnership with the reseller, and has a sound business plan to ensure its own longevity.

Maximizing sales

Remember that resellers and distributors will have a multitude of products, but up to 90 percent of their products will come from a select set “core” products. Making your product one of a reseller’s core products requires significant changes in the resellers’ internal business processes.

Overcoming the inertia of a reseller’s current strategy can be challenging, but there are a few strategies that can help. For example, in addition to being well-prepared, vendors should make connections with the reseller’s salespeople. They are the ones who can actually push your product in a new market. Given that they probably rely on commission, at least in part, you need to convince them to spend more time selling your product than others. Remember that every other item your reseller sells is your competition, and, given that the reseller has a finite amount of resources to put into sales, time spent selling other products diminishes the time spent on yours. Consequently, being able to effectively influence the sales staff is critical in developing a truly effective partnership with a reseller.

To help the reseller in its effort to promote sales, it is vital that you provide a “path of least resistance” for marketing support. By making it easy for a reseller to receive support through each step of the process, you can develop a positive rapport and incentive for the reseller to make your product part of its central business plan.

Moreover, just as you provide assistance to the reseller, require that it reciprocate by keeping you well-informed. For example, request annual marketing and sales reports so that you can analyze and document your product’s progress in the hands of the reseller. As you do, however, keep in mind there are local factors that may influence sales. If sales drop in a given period, determine whether the downturn is due to local market conditions and trends or the reseller’s error. With these considerations in mind, you can promote your product effectively and help to ensure that you are maximizing its potential.

Maintaining the vendor-reseller relationship

Once you have a well-established partnership with a reseller, it is important to continue to promote your product and maintain that relationship. One of the best ways to do this is to have local support--“feet on the street”--to help provide local partner management and continuous reciprocal assistance. Having someone local for the reseller to work with gives both of you an easy means of solidifying and expanding the partnership and, most important, your sales.

Remember that selecting a reseller is a two-way street. As a vendor, you are seeking a reliable reseller that will provide the necessary marketing and local assistance to guarantee sales. For its part, the reseller is seeking a vendor that is committed to international sales and has a well-established strategy for achieving those sales. Only by doing the research ahead of time can a vendor find effective resellers and distributors and ensure that they want to promote and invest in the vendor’s product. Through a consideration of resellers’ needs, the vendor can identify a strategy to maximize sales and ensure a reliable partnership.

This article was produced in collaboration within Ryan Brutger, an intern at the Portland U.S. Export Assistance Center and student at Lewis & Clark College in Portland.

About the author

Scott Goddin is director of the Portland U.S. Export Assistance Center (www.buyusa.gov/oregon) and has been working in international trade with the U.S. Department of Commerce for more than 20 years. He works with Oregon and Southwest Washington high-technology companies to develop international markets, specifically helping them to design market-entry strategies; find and evaluate distributors, VARs or agents; evaluate product or service delivery methods; and “internationalize” their companies.

Goddin has served as a U.S. trade negotiator working on Asian market access and standards issues for U.S. high-tech and communications companies and intellectual property rights issues in Korea, Taiwan and China. Goddin also has served in temporary assignments as a commercial attaché at American Embassies in Seoul, Taipei and Nairobi and has managed the office in Portland supporting local Oregon firms since 1997. You can learn more about export assistance www.export.gov. or contact Goddin directly at scott.goddin@mail.doc.gov.