Marketing challenges in the new economy

Opening new export market requires a strategy, goals, objectives, market mapping, channel mapping, communication plan, etc. Competition a globalized world requires the most efficient communication plan. Often, small and medium size enterprises (SMEs) tend to use traditional media and distribution channel to address export market in the context of the new economy.

This article highlights some of the problems of the traditional distribuition channel and media for SMEs marketing innovative products, services or solutions. It also shows that the new economy provides the tools to address these problems.

First problem: Costs of inventory or acquisition of knowledge in the long tail
Machinery and equipment manufacturers sometime use distribution structure based on wholesales price, inventory and floor plan agreements made with financial institutions and retailers whereby retailers hold the inventory and incur most of the customer acquisition expenses.

In the traditional supply chain, machinery and equipment manufacturer sells products to the retailer at a fixed unit wholesale price. The retailer holds inventory and sells it to the customers at a fixed unit price. In this model the retailer both takes inventory risk and influences demand by exerting effort. For the retailer, if a product is out of stock, the sale is lost. On the other hand unsold inventory is carried over to the next period incurring holding cost. In this model, the retailer is the sole decision maker who decides on both the stocking quantity and the customer acquisition spending. Therefore the retailer has some power in the chain but he also bears all the inventory-related risk.

This distribution model is not efficient for innovative products, services and solutions specialty machinery and equipment manufacturers.

When inventory or knowledge acquisition costs are low, it may be profitable to sell specialized products, services or solutions. But when these costs are high, retailers focus on popular products letting aside specialized products.

Small retailers, they are generally not organized to implement regional promotion plans generating enough sales of specialty machinery and equipment. The lack of sales at the end of the year often proves the inefficiencies of the traditional distribution model for the specialty machinery and equipment.

As for the large retailers able to capture a major part of the supply chain profits they are usually not interested to carry inventory of specialty machinery and equipment and yet demand high profit margins. Large retailers who can reach large markets and territories are generally not interested to take the inventory or the knowledge acquisition costs and are asking for large margins reducing dramatically the benefits for the supplier.

And so, sales intermediaries are generally looking for 20% of products bringing 80% (1) of sales (see green section on the long tail graph) on small geographical markets, while specialty products, service or solution providers targets clients base located on large territories(see yellow section on the long tail graph).



The traditional supply chain is therefore not efficient for the distribution on 80% of the products representing only 20% of the sales on large territories but on a world market the sales for this 20% (the long tail) can be huge. Entrepreneurs and inventors often see the potential for their products, services and solutions on world markets but often use medias traditionally used to market the 20% of the popular products.

Second Problem: inefficiency of cold calls
In front of the difficulty to find a distributor for a specialty product, suppliers will assign technical sales representatives to make cold calls and participate to trade shows.
Ratios are different for each business and sales representative prospecting new clients but, let's just take the example of prospecting new clients for a specialty equipment of 50 000$.
In this scenario our technical sales rep. costs 30$/hours and works 35 hours a week (annual salary and benefits of 51 450$ and 1715 hours within 49 weeks per year).

In this scenario, technical sales rep would spend his 1715 hours as follow:

• Sales prospection on new markets: 20 hours
• Follow up with clients and quotations: 274 hours
• Business visits : 252 hours
• Trades shows: 100 hours
• Preparation of quotations: 60 hours
• Administration: 49 hours

On a weekly base, in average, it would mean approximately:

• Prospecting new markets: 20 hours
• Follow up with clients and quotations: 5,6 hours
• Business visits : 5.18 hours
• Trades shows: 2 hours
• Preparation of quotations: 1,22 hours
• Administration: 1 hour

As for the results our technical sales rep would typically spend 20 hours to search, get 6 prospects per week; 294 prospects in 49 weeks

From these 294 prospects, 72 (25% )will typically generate visits. From these visits, 15 (20%) will typically be interested to buy and will ask for a quotation in the short term.

In our example, 15 requests for quotation cost 32 400$ for prospecting and trade shows (980 hrs + 100hrs x 30$)

If the business has an historical conversion rate of request for quotation into sales of 30%, this will mean 5 contracts of 50 000 on new markets.

If directs costs (direct material and labor) for these equipments are 50%, the contribution to the fixed costs and profits will be 125 000$

Usually the sales director will have hire expectations of returns on investment for the company.

Third: Problems with trade shows
While large companies are going in average to 25 trades shows per year in the United States in order to get the effective frequency for branding strategy.(2) As trade shows are in fact traditional media requiring at least 4 exposures to have an impact on the audience on new markets.

Studies also show that between 70% and 80% of the leads in a trade show are not followed up.
The efficiency of trade shows are questionable for small businesses going to trade shows once in a while in various markets and especially for SMEs contracting out the their trade show campaign.

The trashow industry is in crisis (See: www.meetingindustrycrisiscenter.org/ ). It is also adapting to the realities of the new economy. (See: www.mpiweb.org/CMS/uploadedFiles/Research_and_Whitepapers/FutureWatch2009.pdf )

SMEs with innovative products need to consider trade shows as one aspect of the comunication plan on new market but not necessarily as the center piece of the export plan.

Third problem: Marketing resources for SMEs
In front of the inefficiencies of traditional supply chain, technical sales representative cold calls and trades shows for SMEs involved in new markets, SMEs will have generally do not have the resources to employ a full time marketing and sales manager able to compensate for these inefficiencies on new markets.

They do not have resources for:

• Push promotion plans reaching out to salary paid sales force;
• Pull promotion plans reaching out to large geographical territories;
• Advertising in traditional media to build their brand year after year in new markets.
  New marketing solutions are then required for the marketing of specialty products on a business to business export markets.

Solution: take the benefits of the new economy
Small and medium size businesses are facing challenges in the context of the new economy. One might see the new economy as a source of problems or as the source of solutions. The last point of view is the best. We need to understand the trends and adapt our marketing strategies accordingly.

• The new economy is a knowledge economy: in a knowledge economy, knowledge is a product, in knowledge-based economy, knowledge is a tool;
• The new economy is a digital economy: because of the changing usage patterns of Internet technologies, the cost of transactions has dropped so significantly a firm will tend to expand through outsourcing until the cost of carrying out an extra transaction on the open market become equal to the costs of organizing the same transaction within the firm;
• Virtualization: it started 50 years ago. These technologies give the capacity to manage resources starting from a central point and to share resources for better use. Virtualization generates major competitive advantages. In he past 10 years, virtualization technologies progressed a lot to interconnect;
• Molecularization: Large organizations are becoming fragmented into dynamic clusters of individuals.Inter networking: The most notable example of inter networking is the Internet ;
• Disintermediation: lower transportation costs, central warehousing, ERP, drop ship strategies and call centres facilitate direct sales from producers to users;
• Innovation: the conversion conversion of new ideas into benefits, whether social or economic, becomes the driver of the economy;
• Prosumption: firms using collaboration tools to filter content organize themselves to perform through the performance of a large number of individuals and develop opportunities worldwide;
• Immediacy Companies can no longer afford to concentrate on developing the domestic market first and then seek out foreign markets. The rapid technological diffusion now makes it unlikely that a company can rely on a technological competitive advantages for long.
• Globalization: integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology ;
• Convergence: Refers to the evolution of previously distinguishable digitalized information formats, services, applications, networks, and business models in ways that reduce or blend the distinctions. Convergence is driven by the rapid development of digital technology.

The new economy provides the capacity to:

• Reduce the costs of inventory or the cost of the acquisition of expertise on large geographical markets;
• Implement pull and push promotions on global markets compensating for the inefficiency of traditional distribution networks and traditional medias;
• Outsource the quest for request for quotations on new markets than to manage the business development (cold calling) and traditional media (trade shows, magazine) costs entirely inside the firm.

Industrial Affiliates:

• Networks manufacturers to professionals sending opportunities of requests for proposals on export markets
• Follows up and reports sales process to stakeholders.

New business opportunities are found efficiently through networks of highly specialized professionals located in several states.
Manufacturers and their distributors receive opportunities of requests for proposals and take care of the sales process. They acquire new customers they could hardly reach otherwise and pay affiliates only when sales or qualifying actions are completed. The break even of these external sales networks is often reached within two to four sales.
References
1Given a large enough availability of choice, a large population of customers, and negligible stocking and distribution costs, the selection and buying pattern of the population results in a power law distribution curve, or Pareto distribution. This suggests that a market with a high freedom of choice will create a certain degree of inequality by favoring the upper 20% of the items ("hits" or "head") against the other 80% ("non-hits" or "long tail"). This is known as the Pareto principle or 80–20 rule. The Long Tail concept has found a broad ground for application, research and experimentation. It is a common term in online business and the mass media, but also of importance in micro-finance (Grameen Bank, for example), user-driven innovation (Eric von Hippel), social network mechanisms (e.g., crowd sourcing, crowd casting, Peer-to-peer), economic models, and marketing (viral marketing). http://en.wikipedia.org/wiki/The_Long_Tail
2 The concept of effective frequency is simple: Too much advertising repetition leads to overkill and waste; too little and no results. http://www.imediaconnection.com/content/5899.asp
3 http://ezinearticles.com/?Why-You-Have-to-Urgently-Follow-Up-Your-Trade-Show-Leads&id=2026221
4 http://en.wikipedia.org/wiki/Knowledge_economies
5 Wikinomics : How Mass Collaboration Changes Everything, Don Tapscott, Anthony D William, 2007. http://en.wikipedia.org/wiki/Wikinomics
6 http://findarticles.com/p/articles/mi_hb3265/is_n3_v33/ai_n28631973/?tag=content;col1
7 http://www.iccwbo.org/uploadedFiles/Digital_convergence.pdf

Preparing a channel marketing plan

Affiliate marketing allows to engage commercial agents sending opportunities of requests for proposals to manufacturers, distributors or solution and service providers who take care of the sales process and the closing of the sale. Affiliates gets paid only against a qualifying action or a sale.

Industrial Affiliates provides affiliate marketing services on Canadian and US markets.

Affiliate marketing is part of the distribution channels. This seminar targets small and medium size entrepreneurs. This seminar can help to prepare a new distribution strategy.

This seminar includes the following topics:

• Establish an executive team to initiate the strategic process
• Market mapping
• Define Goals and Objectives
• Categorization of channels
• Channel Mapping
• Establish the foundation of the Marketing Channels
• Implement closed-loop system of communication
• Establish a communication plan

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  Communication with to stakeholders in the channel map

  
  

  Issue identification

  
  

  Knowledge processes

  
  

• Channel marketing
• Governance with Industrial Affiliates

Channel Management

Drive revenue

Metrics

Affiliate marketing is based on the basic rules of distribution of product and services: the key to success is to generate Awareness, Interest, Desire and Action (AIDA) to potential buyers of innovative products and services.

Affiliates do not create demand; they respond to the demand. This is why we need to clearly define the channel marketing strategy leading affiliates to send opportunities of requests for proposals.

For information

Tel: 450-689-6688
Toll Free: 1-877-789-6688
Email: info@industrialaffiliates.net

Engineering and natural science managers in the USA

Engineering and natural science managers represent a good potential of affiliation for companies providing environmental technologies. Here is a description of this employment category in the United States. As the median salary is around 100 000$, exporter can gage their performance based commission so they can represent a significant incentive for affiliation.

According to the United States bureau of Labor and Statistics,
http://stats.bls.gov/oco/ocos009.htm

Employment
Engineering and natural sciences managers held about 228,000 jobs in 2006. Manufacturing industries employed 38 percent of engineering and natural sciences managers. Manufacturing industries with the largest employment are those which produce computer and electronic equipment and those which produce transportation equipment, including aerospace products and parts. Another 31 percent worked in professional, scientific, and technical services industries, primarily for firms providing architectural, engineering, and related services and firms providing scientific research and development services. Other large employers include Federal, State, and local government agencies.

...

Earnings

Earnings for engineering and natural sciences managers vary by specialty and by level of responsibility. Median annual earnings of wage and salary engineering managers were $105,430 in May 2006. The middle 50 percent earned between $84,090 and $130,170. Median annual earnings in the industries employing the largest numbers of engineering managers were:

Semiconductor and other electronic component manufacturing $120,740
Federal executive branch 116,140
Navigational, measuring, electro medical, and control instruments manufacturing 115,150
Aerospace product and parts manufacturing 111,020
Engineering services 103,570

Median annual earnings of wage and salary natural sciences managers were $100,080 in May 2006. The middle 50 percent earned between $77,320 and $130,900. Median annual earnings in the industries employing the largest numbers of natural sciences managers were:

Research and development in the physical, engineering, and life sciences $120,780
Pharmaceutical and medicine manufacturing 111,070
Federal executive branch 96,100
Architectural, engineering, and related services 88,990
State government 65,570

In addition, engineering and natural sciences managers, especially those at higher levels, often receive more benefits—such as expense accounts, stock option plans, and bonuses—than do non managerial workers in their organizations
...

Nature of the Work

Engineering and natural sciences managers plan, coordinate, and direct research, design, and production activities. They may supervise engineers, scientists, and technicians, along with support personnel. These managers use their knowledge of engineering and natural sciences to oversee a variety of activities...

To perform effectively, these managers also must apply knowledge of administrative
procedures, such as budgeting, hiring, and supervision. ...

In addition, these managers use communication skills extensively. They spend a great deal of time coordinating the activities of their unit with those of other units or
organizations. They confer with higher levels of management; with financial,
production, marketing, and other managers; and with contractors and equipment
and materials suppliers.

Engineering managers may supervise people who design and develop machinery, products, systems, and processes. They might also direct and coordinate production, operations, quality assurance, testing, or maintenance in industrial plants. Many are plant engineers, who direct and coordinate the design, installation, operation, and maintenance of equipment and machinery in industrial plants. Others manage research and development teams that produce new products and processes or improve existing ones.

Natural sciences managers oversee the work of life and physical scientists, including
agricultural scientists, chemists, biologists, geologists, medical scientists, and physicists. These managers direct research and development projects and coordinate activities such as testing, quality control, and production. They may work on basic research projects or on commercial activities. Science managers sometimes conduct their own research in addition to managing the work of others.

...

Announcing phase 1 of the affiliate program

Pierre Dumas, president of Industrial Affiliates is pleased to announce the launch of Industrial Affiliates systems.

Phase 1 is the time to sign up General Agreements with manufacturing companies as well as to provide affordable marketing consultation services to recruit affiliates.

Planned for May 2009, phase 2 of the affiliate program will advertise technologies on the WEB as well as to implement an opportunity follow up system.

About Industrial Affiliates

Industrial Affiliates helps manufacturers to receive opportunities of requests for proposals from external sales force located on export markets. These services complements the sales efforts from manufacturers and their distributors. When an affiliate sends an opportunity of requests for proposal, manufacturer's sales manager takes control of the sales process. Manufacturer also controls at which stage of the sale process affiliates will get performance based commissions.

General Agreement

In the General Agreement, manufacturers and affiliates are required to subscribe to the guideline of OECD to multinational enterprises. They must also subscribe to the policies and practices of Industrial Affiliates network which are disclosed time to time by email and on Industrial Affiliates WEB site.

The General Agreement defines each party's role. Time to time, Manufacturers proceed to engagements with Industrial Affiliates and/or with affiliates.

Industrial Affiliates, manufacturers and affiliates are independent contractors and have no authority to obligate or bind the other in any respect except for the clause of this agreement.

Each party owns and shall retain all right, title and interest in its names, logos, trademarks, service marks, trade dress, copyrights and proprietary technology, including, without limitation, those names, logos, trademarks, service marks, trade dress, copyrights and proprietary technology currently used or which may be developed and/or used by it in the future.

Industrial Affiliates and/or affiliates do not have rights or responsibilities to deliver the product or service intended between manufacturer and its customers.

In no event shall either party be liable to the other party for any direct, indirect, special, exemplary, consequential or incidental damages, even if informed of the possibility of such damages.

Industrial Affiliates is not responsible for the fulfillment of engagements between manufacturers and affiliates.

The annual cost of the general agreement is 840$

Industrial Affiliates' role in the general agreement

Industrial Affiliates remains a third party who do not have rights and/or responsibility to deliver product and services intended in the transactions between Manufacturer and future Customers.

Industrial Affiliates

• Develops and maintains networks of affiliates;
• Develops the system composed of business relationships, agreements, web sites, advertising, lead reservation and sales process reporting system helping manufacturers to generate sales through Affiliates disclosing opportunities of requests for proposals;
• Proposes clusters reducing marketing costs to manufacturers
• Reserves the right to exclude from the system, any member who do not respects the guidelines of OECD or the policies and practices of the networks.

Manufacturer' roles in the general agreement

Manufacturer

• Holds the sole right and responsibility to

1. Determine in the product and service offered under his name in the system
2. Convert Affiliates sales leads into Request for Quotation (RFQ)
3. Convert RFQ into sales;

• Advertises accurate information such as description, prices, up to date pictures and texts in the System ;
• Promptly updates the system if and when the products and services are not available;
• Is responsible to deliver product and services posted in the system according to the terms agreed with customers;
• Can change, suspend or discontinue any aspect of an offer in the system with 24 hours prior notice ;
• Warrants that sales leads assigned for a product would be followed through the system would report or update information in the system the same working day including but not limited to:

1. Business opportunities reception receipt
2. RFQ date;
3. RFQ Commission payment date;
4. Amount of Commission for RFQ;
5. Sales Contract date;
6. Customer Purchase Order number ;
7. Purchase Order Sale amount ;
8. Payment Date of Sales Commission;
9. Sales Commission Amount ;
10. Machine/Equipment Delivery date;
11. Payment date;
12. Sales Commission date;
13. Final Payment Date

• Insures that products and services are conforming to all applicable laws and regulations;
• Maintains proper liability insurance coverage or the product and services covering Industrial Affiliates his employees, affiliates, suppliers, board members are covered in the liability insurance;
• Pays commissions within seven (7) days of the occurrence of the material facts defined in the Engagement (ex: date of RFQ or Delivery Date)

Termination of General Agreement and engagements

Either party can the General Agreement at any time, for any reason, provided that they provide at least seven days prior written notice of such termination to the other party.

The termination of the General Agreement would also terminate any outstanding Engagements.
However, all rights to payment, causes of action and any provisions which by their terms are intended to survive termination, would survive the termination of the Agreement.

Termination of an Engagement would not terminate the Agreement.

Engagement for consultation services

Engagements with consultants are optional and in addition to the General Agreement.

Manufacturers can engage marketing consultants to help prepare their sales plan. Service rates are agreed between parties prior to work.

Consultants engaged by manufacturers must subscribe to the OECD Guidelines, as well as to the network policies and practices disclosed and updated time to time on Industrial Affiliates WEB site.

Consultation services related to the affiliate networks generally include

• Marketing Services ;
• Sales Management Services ;
• Digital Information Management Services;
• Communication Services;
• Pre selection of affiliates.
  

Industrial Affialiates service rates are available on Industrial Affiliates WEB page « Begin »

Engagement for the use of the system

This engagement is supplemental to the General Agreement and will be implemented in phase 2.

It enables the parties to share fixed marketing costs between several manufacturers.

Industrial Affiliates

• Provides first line services to affiliates;
• Provides pre selection and affiliate selection systems;
• Provides WEB site displaying technologies and providing opportunity reservation system;
• Collect engagements taken between manufacturers and all affiliates recruited;
• Collects and reports information related to

1. Affiliates ;
2. Product and services offered by manufacturers looking for opportunities of request for proposals;
3. Material facts related to the sales process and commission sales process.

Service fees for the use of the system will be posted on Industrial Affiliates WEB site and can be changed at any time with 7 days prior notice.

Parties can terminate this engagement at any time without reasons with 7 days prior notice.

Industrial Affiliates innovates

Innovation is the conversion of new ideas into benefits. Phase 1 and Phase 2 are converting technologies of the new economy to increase networking and sales on export markets.

Millions of citizens are using social networks to interact. Industrial Affiliates is only adjusting business processes with WEB centric technologies that became pppular in the past five years to optimize the opportunities of requests for proposals.

Phase 1 is very affordable allowing manufactureres to start their affiliate networks

Helping economic development organizations to create jobs

The success of organization holds in large part to human resources

Industrial Affiliates helps regional economic partners to integrate a world class career center into their WEB site, taking care of employment needs in the region as well as recruiting external sales force for local businesses on export markets.

More sales, more jobs, more prosperity in the region

Regional Career WEB site
Regions can now implement a career WEB site that totally integrates to their WEB site with harmony. Career WEB sites can help businesses in region to benefit from professional recruiting tools . This gives job seekers access to professional search-and-apply tools from within the region economic development’s website — an enhancement that generates higher completion rates and better overall candidates for your open positions.


Better functionality
The system provides industry leading functionality to make sure regional career site is optimized for businesses. All job details are kept in one, easy-to manage location, which helps recruiters and hiring managers save time and increase productivity. Then, as candidates apply, their resumes become part of the regional career proprietary database, so they can be contacted in the future. The system also allows to search for passive candidates and forward their resumes to hiring managers in just one click.

Supporting Businesses on international markets
Industrial Affiliates Unique services brings remarkable benefits:
Increase sales through external sales force on export markets
Increased capacity to attract technical and scientific job seekers
Increased sales on export market en more employment

Main Benefits
Give job seekers professional search-and-apply tools in the regional careers website;
Manage all online candidates in one central location;
A hosted career site and a private resume database;
Allows to leverage world class technology and expertise to reap the maximum benefit.

This solution

• Provides a powerful way to recruit candidates;
• Promotes the region's brand image and awareness;
• Conforms to information privacy laws in Canada.
  

Conference held at REPEX was a success on March 30th.

The conference was held at Foreign Affairs and International Trade Canada in Montreal. The conference was also WEBcasted.

The conference was titled: How to start an export cluster composed of small businesses.

The main topics of the conference were:

• The growth of social networks in 2009;
• How to position the export cluster in the extended enterprise;
• Benefits of affiliate marketing for manufacturers on export markets;
• Benefits of starting a cluster for a business association;
• Partnership program which auto-finance the implementation of the portal;
• Benefits for the export consultant ;
• Benefits of export clusters on the economy.

The conference showed that the monetization of social networking entered a growth phase in the business world in 2009.

It showed the impressive opportunity that we have to access 70 millions resumes and world class affiliate selection systems as the foundations of our business.

Institutions VS Collaboration from Clay Shirky

Ted Conferences : “Institutions VS Collaboration”.

In this prescient 2005 talk, Clay Shirky shows how closed groups and companies will give way to looser networks where small contributors have big roles and fluid cooperation replaces rigid planning.