As a technology professional or organization, expanding overseas offers great opportunities for growth. While technological considerations are important in such situations, the marketing strategy will also guide the expansion and may not be as easy for the individual/organization to prepare. For a marketing strategy, a good start is the consideration of market orientation, positioning strategy, country-of-origin effects, pricing models, and distribution channels.
Professionals know themselves and their organizations well. Therefore, it may feel natural to choose an approach to product development and marketing centered on themselves or their organization. This type of organization-centered approach would focus on the organization’s existing value proposition. Market orientation, however, generates a compelling value proposition from the ground up, using an understanding of the needs and desires of customers.
There are many different approaches to market orientation, which may differ in effectiveness based on the market, industry, and organization. One consideration is proactive versus responsive market orientation. Proactive market orientation is a focus on latent needs (the needs which customers don’t know they have), while responsive market orientation focuses on clearly communicated customer needs. In software systems consulting, communicated customer needs could be deployment pipeline problems, high defect densities, or system reliability issues. Meanwhile, latent needs might be trust in “the system”, industry reputation, or organizational cohesion.
Market orientation can start with:
Becoming involved with local professional events and organizations. How are they different from your country of origin? What can be learned about unique opportunities and threats in this market?
Learning the local language. Culture is deeply linked to language, and it’s often difficult to truly understand a local market without some knowledge of the local language.
Learning more about local brands and advertising - focus all of your energy on the local products and services. Being able to match your brand and advertising with the local context is extremely important for gaining a competitive advantage over other foreign competitors.
After becoming completely involved in an overseas market, the future plan for a compelling value proposition should begin to become clear. Positioning strategies are the practical demonstrations of that value proposition. Positioning involves shaping marketing communications for a target customer group in order to effectively communicate a value proposition. With overseas expansions, positioning can often be thought of as repositioning, as the firm will have the home market positioning strategy as a reference or a starting point to work from.
What’s important to understand in repositioning is the importance of culture in marketing impressions. While some people may find an advertisement empowering, motivating, and exciting, a different group of people may find that same advertisement arrogant, loud, and unsophisticated. There are a wide variety of reasons for these differences, including historical context, current belief systems, and political/economic environment. In any case, local culture has a considerable effect on resulting reactions to marketing communications.
As is to be expected, overseas expansions raise another question - how to handle country-of-origin effects. The country-of-origin effect is the impact of an organization’s geographic origins on customer perceptions. For countries and industries with a positive county-of-origin effect, such as France for wine and Japan for electronics, it may be valuable to use the country-of-origin effect to its maximum advantage. Other economies, particularly developing economies, may have a negative country-of-origin effect. Heavy investment in overseas operations may reduce or refine the country-of-origin effect, depending on marketing execution.
A strategy for country-of-origin effects should take into account the nature of customers. Do customers have a lot of motivation and knowledge in the purchasing decision? If so, they are more likely to use product/service features, specifications, and other more factual, precise attributes in the purchasing decision - regarding country-of-origin and other biases as less important. Additionally, are customers more analytical or holistic thinkers? Analytical thinkers tend to separate products and services from their context and focus on the specific product attributes. Meanwhile, holistic thinkers are more likely to focus on contextual considerations. Among Asian/Eastern economies, holistic thinking is relatively more dominant, while Western economies are relatively analytical in thinking. Applying this understanding to the example of a software services organization with a positive country-of-origin effect, it might be more valuable to maximize use of the country-of-origin effect in Eastern economies, as compared to Western economies.
In adapting services to an overseas economy, a significant challenge will be the development of a pricing strategy. Value-based pricing is a great framework for this strategy and is likely to outperform other pricing models, such as competitor-based or cost-plus. However, value-based pricing can be especially challenging.
Challenges to value-based pricing include being able to accurately assess value, being able to effectively communicate value, getting support from top management, matching the sales force with the pricing model, and resolving issues with market segmentation. The impact of these concerns can be lessened through quantitative research into the value proposition of the service and coordination/training within the organization. For the research, the most important question is how differentiated service capabilities impact customers in terms of money. For example, how does increased software system uptime impact the customer’s bottom line? If the value proposition can be quantified in terms of money, then the service price should be based on that number. Once a value-based price is established, it needs to be supported throughout the organization. This is particularly important for the sales force, who need to avoid an approach based on volume as well as pressures to discount the service.
Particularly in the case of products, but also for services, an effective distribution strategy will complete the plans for an overseas expansion. Services and digital products have more flexibility, but physical products can get unexpectedly involved in a “Distribution Trap”. The Distribution Trap refers to the huge power of big-box retailers like Walmart in the United States and other parts of the world. In these situations, product offerings can quickly become affected by mass marketization, commoditization, and a “race to the bottom” for pricing and margins. Further, manufacturers have very little control over how their product is sold in distributor’s stores. For digital products and service offerings, it’s still important to avoid situations where distribution channels show strong power inequalities.
Overseas expansion is an exciting, attractive opportunity in today’s global economy. While technical goods and services may be less reliant on marketing than other classes of goods, it’s still important to develop a basic marketing strategy before expansion. Even for small organizations with restricted resources, it is advisable to consider market orientation, product/service positioning strategy, country-of-origin effects, pricing models, and distribution approaches before taking a product or service to a new market. The marketing strategy will develop with time, but starting off with some basic research and planning will provide an important basis for future growth.