Yesterday´s sales methods equal inferior results

If your B2B sales continuously moves brilliantly forward, do not waste your time reading this blog. But at least I, who started my B2B career by selling electronics to various industries and continued with mobile networks, sit constantly at school. Many of the traditional truths, such as importance of customer business and purchasing process understanding, are still valid. But many things have changed and are changing. Customers are looking for information on websites and social media, buyers are becoming better informed than sellers. Sales efficiency is going down, although costs go up.

As a result, a straightforward addition of sales efforts seldom leads to company growth and profitability. Instead of just replicating old way-of-working, you should reconsider your sales methods and reinvent customer acquisition approach - also in the business world, winners take it all. This blog will focus on, in particular, why reducing sales complexity is vital for B2B firms and how this is done in practise. After reading you will have fresh ideas to boost your sales efficiency and tackle new customer segments.

Sales methods

Sales efforts required to get B2B deals vary enormously depending on sold products or services. Tens or even hundreds of selling company persons are involved in the selling process of nuclear power plants, mobile networks or luxury cruisers, the process will take months or years of calendar time and the cost can be easily millions or tens of millions of euros. Some products, again, can be sold online with self-service, without direct involvement of seller.

Sales methods can be roughly divided into three categories, according to new customer acquisition costs (CAC):

1. Self-service: Customers are attracted to company's web sites, by making use of, for example, search engine marketing and optimisation, content marketing and e-mails. Deals will be closed automatically, seller personnel do not have to participate, because the product is easy to understand and the value for customers is clear. Customer acquisition costs are mainly digital marketing costs, typically 30 to 200 € per new customer.
2. Inside sales: This model is built on top of the self-service model. Customers are nurtured towards deals by responding to queries and questions by e-mail, telephone and video chats, as well as by showing demos over the network and by using other digital tools. Besides dedicated sales persons, also technical experts may be involved to clarify the details of the product or its use. Typical CAC is 600 to 6000 € per new customer.
3. Field Sales: Applied in case of the most complicated purchasing processes, where the decision-making process involves several or even dozens of buyer representatives. Customers are met face to face, often numerous times. Sales will involve technical and other experts, and various customer pilots and other tools decreasing buyers´ uncertainty are common. New customer acquisition costs are typically more than ten thousand euros, and there is actually no upper limit for them.

Costs of selling through channel partners are between inside and field sales, but we are not going to discuss this further.

Sales method applicability

Organising and expansion of sales activities often fail, because it is forgotten that lifetime customer contribution need to exceed customer acquisition costs. And even this is not enough. The total contribution, i.e. total sales margin euros need to cover not only customer acquisition-related costs, but in addition R & D and administrative costs, depreciation, amortisation, interest expenses and income taxes - and, hopefully, there will be some profits left after that.

At sufficient level of accuracy, it is possible to define for each of the three sales methods required minimum customer contribution in euros, see the picture above. In each method, the green area shows acceptable contribution per customer, in the red area operations are not profitable. The line between green and red area is not carved in stone, as illustrated by the yellow zone between green and red areas.

At this stage, many people may raise their hands and say, that the above does not apply in their business, because the revenues are accumulated over a long period, and the first deal is only a spearhead. This is true, total customer contribution must include entire customer relationship lifecycle - in  a similar manner as customer acquisition costs need to cover costs over the entire lifecycle. But in case of business logic, where the profitability of a company is not so important, you may be able to ignore these laws. This often happens, for example, in startups; the idea is to make potential takeover candidates, with different kind of monetisation logic, more interested.

Sales development

In developing its sales activities a company thus has two basic recipes for success: to get more revenues from customers or reduce sales complexity, see the picture on the right. It is possible to get more revenues from customers by bringing more value to their business, by differentiating from competition and by avoiding tough competitive tendering. Although getting more revenues from customers is the ultimate must for sustainable long-term competitiveness, growth and profitability, it will not be discussed on more detail in this post.

By reducing sales complexity it is possible to switch to lower-cost ways to acquire customers; in practise face-to-face selling is replaced with inside selling, and self-service is used instead of inside sales. Some factors, however, make the simplification more challenging, e.g.:

• Evaluating of the product or service is difficult and it involves a lot of buyer's representatives
• The product or service is of vital importance; for example, if the selected product does not work, it may result in major economic or health loss
• The product or service is expensive, requires major changes in buying company practises or other systems
• The specification or contract of the product or service to be delivered is complex

If a company does not constantly seek to simplify its sales, it is not able to take advantage of the entire sales potential and it faces a serious threat to be outpaced by competitors. There are, however, a number of ways how companies willing to grow and renew can aim for a better market position through simplification:

• Building easiness to sell in product or service already in development phase: for example, by implementing product configuration so that it is supporting customers' processes
• Creating a business model that makes selling easier: for example, free or very low-cost pilots, or more cost-effective execution of field sales through channel partners
• Improvement of sales and marketing machinery: e.g. aggressively using digital marketing methods and tools for demand creation, utilisation of self-service and inside selling for deal-making, whenever possible

Utilisation of various selling methods and tools is not a simple yes / no decision. In practise, you should consider using the available options by product or service, by various stages of sales process, by market segment or as an internationalisation tool. For example, when one of my cooperation partners made a transition from using field sales to self-service enriched by light inside sales, it was able to target also SMEs, besides earlier served major corporation accounts. Similarly, mental barriers to internationalise have several times been decreased by making the first steps through inside sales, instead of building immediately own local presence.

Conclusions

Many companies and industries have already taken the path of continuous sales renewal, at the forefront are ICT and such successful companies as Oracle. Also, necessary tools for change and successful references can be found in plenty. For example, for B2B inside sales, both dedicated service platforms for building own operations and special companies offering inside sales as a service are available.

Because you've got this far, you might want to get better sales results. Do you find answers to your specific business situation by renewing your sales strategies or sales models, or do you have challenges with your sales process?

Try to avoid competitive tendering

In business to business (B2B) trade companies are looking for - and, in most cases are also achieving - undeniable advantages through competitive tendering. It makes it possible to systematically choose suppliers, get information about the options available in the market, evaluate supplier candidates' ability to understand client's requirements and make estimates of potential cooperation fluency. And the icing on the cake, competitive tendering also provides a quite reliable picture of the value of various options in relation to their price.

But ill-advised and performed tendering can be detrimental not only to the buyer and the selling company, but also to our entire economy.

Buyers or sellers do not need to powerlessly follow the challenges of competitive tendering world - with the right strategies it is even possible to improve competitiveness of a firm.

Buyer shall not get renewal impulses

Narrow-minded tendering easily solidifies buyer's development activities to focus on marginal product improvements and extensions. Instead of keeping eyes and ears open for new external ideas and solutions to make bolder innovation leaps, strict requirement definitions reduce the role of supplier partners as an implementer of buyer´s prevailing worldview.

A system integrator, for example, believed to know the future software needs so well that the implementation of major components could be effectively outsourced through competitive tendering. As a result, hourly charges of acquired work fell, but on the other hand, the life-cycle cost savings were not achieved. At the same time, the existing vendor partnerships, producing continuously new insights and innovations, were destroyed, affecting negatively company's competitiveness.

In particular in Finland, there is a pressing need for cooperation with supplier companies, instead of the rigid tendering principles. According to a research paper, companies in the country rely too heavily on internal know how and resources in generating new product ideas. Similarly, the companies invest more lazily than their international benchmarks in projects, which generate new businesses or entirely new, genuine innovations. And since customer experience improvement and customer engagement often occur with new business models, achieving higher margins often remains a dream.

Seller's growth and profitability challenges

In principle, competitive tendering gives a selling company an equal footing to compete with other sellers, and in general, competition makes tougher and stronger. The problem is that participation in competitive tendering is shaping a company in a way, that makes opportunities for profitable growth narrower and narrower:

• Detailed definition of the solution to be acquired, to make a comparison of the proposals easy, leads to price emphasis on the selection criteria
• For sellers, this means, in addition to thinning margins, also collapsing opportunities to stand out from the competition through innovation
• In the longer term, the development of competitiveness thus focuses on marginal product improvements, increasing operational efficiency and continuous cost-hunt 

The company gets stuck, therefore, in the vicious cycle of competitive tendering, see the picture below.

Vicious cycle of competitive tendering will destroy company growth and profitability. 

There are many companies in this vicious cycle, just now, small to large. A story of a component supplier, based on my own experiences, is illustrative: Customers complained about the prices and through competitive tendering compared them and the characteristics of our products with those of the competitors. As a result, we focused on adding new features to our products based on customer requirements. The competitors did the same, so customers did not see big differences in the solutions, and prices came under increasing pressure. We had to shave our cost structures. The story did not have a happy end...

Boost for the economy and companies

The vitality of Finland's economy and its enterprises is dependent on the diversity, dynamism and innovation capabilities of the ecosystem. One of the main drivers are new products, services and business models. But this is not enough, innovations also need customers. Especially for SMEs and startups it may be difficult to acquire far-away reference customers. And if you can not find nearby customers, who have the courage to look over the tendering practices to new innovations, you are missing another important growth driver. 

But there are a lot of things that can be done to improve the situation:

• Buyers can enhance the role of suppliers from being a mere implementer to becoming a true, active innovation partner
• Sellers can, through their own actions, affect buyers´ views before decisions on competitive tendering have been made, thereby increasing the weight of their own strengths in purchasing decisions - or thus even been able to completely avoid competitive tendering
• With targeted public incentives and measures in place in our domestic markets, there is a possibility to create more willingness to acquire and deploy innovations.

Find the most compelling export countries

One of the best ways to stimulate growth is successful market entry to new, international markets. But first you need to identify the most compelling markets - and these decisions are better to be based on the facts. I have also in my own career come across with internationalisation cases, where the key motivations were, for example, the language and cultural knowledge of decision-makers, coincidences or emerging romances.  It is of course possible to be successful just by counting on luck, but a more systematic approach will probably produce better results.

Here we shall go through methods to identify the most lucrative markets, introduce a tool for Finnish companies to facilitate the first steps of the job and walk you through an example of the use of the tool. The methods are suitable not only for international market expansion, but also when evaluating country priorities in new product, service or business model commercialisation.

Methods to identify the most compelling markets

Both company internationalisation researchers and experts of the sector appear to have broad consensus on the priority-setting and choice of international markets:

• First, select the markets worth taking a closer look, based on macro-economic variables of the markets
• Secondly, study the market potential for company's products in selected countries, and 
• Thirdly, estimate the sales potential of company's products in relation to required  investments

The main factors affecting the market selection are thus:

• Company related: e.g. the type of product or service, management characteristics, the size of the company, or experience in internationalisation issues
• Target market related: e.g. the attractiveness of the country or market, marketing infrastructures or competition
• Target market entry barrier related: e.g. country risk, customs and other barriers or physical and psychic distance

According to the model set out above, the made plans are indeed systematic but also mechanistic. They often lead to substantial investments, without the possibility, if necessary, to change the plans.

Of course, these things can be studied by means of desk studies, but a more in-depth view can only be found by having closer contacts with customers and markets. Traditionally, the tool has been own or outsourced market research, but its disadvantage is significant time, money and resources required. Globalisation of consumption and purchasing decisions, along with online methods, has created new, more cost-effective methods; international market selection can be made more iterative, avoiding too early choices that can easily lead to waste of resources.

Internationalisation Heat Map

Internationalisation Heat Map was developed as a tool for Finnish companies to easily and rapidly evaluate the attractiveness of entering various European markets. The tool encompasses all the European countries with the exception of mini countries, as well as some of the Balkan and Eastern European countries, where no reliable information is available.

Six elements were selected as the key factors of the Heat Map, with a user giving weight to each of them:

1. Market size: measured by the population of a country 
2. Purchasing power of the market: the measure is country's gross domestic product (GDP) per capita
3. Ease of doing business in a country: measured using a World Bank comparative study on barriers and incentives of doing business in different countries
4. Market openness: measured by using a comparative study by the International Chamber of Commerce on international trade openness in different countries
5. Physical distance from Finland: measured using distances of country capitals from Helsinki, Finland
6. Psychic distance from Finland: there are numerous, complex formulae developed to evaluate this, but here we use a good approximation of country's total trade (exports + imports) with Finland

The tool is used so that a user will assess the significance of each of the factors 1 to 6 from his or her business and internationalisation point of view, giving each factor a number value between 0 and 100. If the number is zero, then the factor is not taken into account in assessing the attractiveness of the country. Similarly, the number one hundred means that the factor is extremely important. Each factor should be evaluated individually, but a user gives each factor a weight based on what is important in company business. Each country gets an end result between zero and one hundred: the higher it is, the more lucrative the country is for market entry.

An example of Internationalisation Heat Map use

As an example, the tool is applied to analyse internationalisation plans of Ludus Helsinki. I was heavily involved in the business operations of the consumer product company aiming for rapid international expansion. Its products inspired children and young people to move, using a gaming-based service concept consisting of the Internet, software and dedicated devices.

 The most important factors of Ludus Helsinki internationalisation plans were market's purchasing power, ease of doing business in the country and country's psychic distance from Finland. The basic reasons behind this were
the facts that the product was quite expensive compared with its benchmarks and that it required a specific distribution and retail infrastructure. The size of the market and its openness were also important, but distance from Finland was not considered to be a very vital factor. The weighting of the various internationalisation factors is illustrated in the picture above.

The factor weighting produced the results of the chart on the right side. The most interesting export destinations seemed to be Germany, Sweden, Norway, Russia, the United Kingdom, the Netherlands and Denmark. The only surprise was Russia ending up so high. The importance of Russia, however, decreased significantly, when other important points for the Ludus Helsinki business were taken into account:

• Tablet and Smartphone penetration in the country
• The importance of non-competing physical activity for children and young people in the country
• Sophistication of using digital marketing methods and tools in the country

The results were also very consistent with the conclusions of Ludus Helsinki digital marketing efforts: highly ranked countries generated more customer interest and the distributors and retailers in these countries were also the keenest to start to sell the product.

The used tool can be found here. 

More growth with marketing automation

Finnish small and medium-sized businesses have been slow to take advantage of marketing automation. The seriousness of the situation will become clearer when we notice that a company's growth and profitability strongly correlate with the use of the new digital methods and tools. The technology itself is not the solution, but as a part of systematic renewal, it will help the company to stand out from its competitors. This blog will discuss the benefits and utilisation of marketing automation, especially from business-to-business (B2B) SMEs point of view.

Why marketing automation?

B2B companies, small and large ones, are facing the disruption brought by digital channels: since customers´ purchase processes more and more rely on web based information, ignoring traditional discussions with sales persons, it's much harder than before to reach them at the right time and with the right messages. In addition, customers have adopted global approach, they are looking for products and services well beyond domestic markets.
This will make room for marketing automation. It enables companies to get better visibility on what buyers really like and how they behave; thus it will be possible to boost the implementation of growth strategies, to increase sales by improving market share, to facilitate expansion to new international markets, to support the development of new products and business models or to enhance go-to-market programs and processes.

How marketing automation creates growth?

An American study found that 63% of the companies that are using marketing automation, grow faster than their competitors. Another research revealed that 79% of the top performers have utilised it for over 2 years. A study on Finnish B2B SMEs gave similar kind of results. Next chapters discuss in more detail how marketing automation supports some key growth strategy components.

Sales growth

Marketing automation increases sales, inter alia, through the following mechanisms:

• The results of marketing campaigns can be accurately tracked and thus campaign effectiveness is better: it is possible to get more results for the same money or the same results for less money. 
• The number and quality of customer leads grow: there will be more closed deals. 
• Business relationships with customers will get tighter and it is possible to identify changes in customer behaviour and needs: cross-selling and upselling opportunities with existing customers can be realised. 
• Sales and marketing cooperation intensifies: sales persons also market products and marketing persons also sell products. 

There is plenty of backing for the above. For example, a Forrester research found that B2B companies utilising marketing automation get considerably better results in their marketing campaigns and also their sales and marketing functions have much tighter cooperation.

International expansion

When expanding business into new market areas, marketing automation can ease the process, for example, in the following ways:

• It is possible to reliably assess already in the early stages of internationalisation planning, whether potential target country customers and distribution channels are really interested in the company's products: target country prioritisation and selection can be done faster, with lower costs, and the risks with selected alternatives are smaller. 
• Even before the business is launched, it is possible to get good insights on the needs and purchase processes of potential target country customers: necessary changes to offerings, as well as to marketing and sales channel processes can be done in a timely manner. 

To support this, a study on Finnish B2B SMEs revealed that digital marketing maturity clearly correlates with the relative size of international operations.

Support development of new products and business models

Marketing automation will bring more insights to new product and business model innovation and decrease uncertainties related to it. The corresponding mechanisms include e.g.:

• At an early stage, it is possible to obtain customer feedback, whether there is enough demand for a planned product or business model: return on investment of the development projects is higher, because they can either be stopped in time or the changes appreciated by customers can be built in. 
• It is possible to see at a sufficiently early stage, what customers need in order to take a product or business model into use and to then use it actively: expanding the core product with customer valued extensions, either by the company itself or with partners, will bring greater yields. 

The agile new development model has brought good results in the domain of digital services and startups and now it is rapidly spreading also to more traditional sectors.

Enhance go-to-market

Go-to-market of products or business models can be enhanced with marketing automation e.g. through the following ways:

• By finding the right ways to generate customer attention and interest, as well as by identifying the most suitable sales channels to customers: quantitatively and qualitatively enough customer leads, which results to more closed deals. 
• It is possible to find early enough marketing messages that resonate with customers and a positioning that stands out in the market: company products will get attention in the marketplace and the importance of price in purchase decisions will be reduced. 
• Marketing and sales functions cooperate effectively and aim at the same goals: sales revenues can be maximised.

What companies should do?

Utilisation of marketing automation is already in full speed also in European companies. The pioneers are technology, financial services, life sciences and energy, followed by, for example, telecommunications, manufacturing and professional services. In Finland, for example, the following small and medium-sized B2B companies are leading: Basware, Vaisala, Deltek, Metos, CRF Box, Nebula, Asiakastieto, Zeeland and SSH.

The starting point for efficient exploitation of marketing automation is the definition of company strategy for the renewal and growth; in other words, from which direction, by what means and resources, the company is trying to find a new way to prosper. Overlapping with this are company personnel and development of their knowledge, skills and attitudes, as well as implementation of processes, required by the new strategy. Only then it is the time for marketing automation as the technology and the solution, which enables and glues together the strategy, the people and their competences, and the processes.

When selecting a solution, the key is the vendor's ability to support the company's business; the key parameters include, for example, solution features, customer segments that a vendor is targeting, possible industry focus and pricing models. All these are compared in a review, which also lists Finnish company references that the key marketing automation vendors have.

Where to find assistance for Finnish SME internationalisation?

Many Finnish SMEs have a good market position in their existing markets and the customers appreciate their products, but these companies are still reluctant to go international. The reasons are many. It may be missing courage, not understanding the opportunities and requirements of new markets, not having the necessary expertise in-house or missing funding or resources. There are, however, means to overcome all these obstacles. A company is not alone, when figuring out the challenges of internationalisation - there are a number of sources available that can give advice and assistance.

Internationalisation assistance needed?

Systematic internationalisation can be divided into four phases, each of which requires different skill sets:

• Strategy: Why and in what way internationalisation serves company growth and other objectives
• Direction and capabilities: Requirements and prioritisation of target markets, as well as identification and development of required own competences
• Research and plans: Deeper investigation of target markets, creation of market entry plans
• Implementation of market entry: Starting and developing operations in selected new markets

In most cases, the steps are not taken in a serial manner, i.e. it is often necessary to return to the previous steps and iterate on the basis of the latest findings. It is therefore important that an internationally expanding company itself stays at the rider's bench whole time - enabled either through permanent staff or a temporary help closely integrated with the company's objectives.

Digitalisation has brought an enormous amount of different kinds of information within reach of a company going international, but here we focus on four sources that can provide advice and help for the Finnish SME:

• Finnish public sector agencies
• Internationalisation consultants
• Target country public agencies
• Target country local consultants

The role of the advisers at the various stages of the company internationalisation is assessed in the table below: the more pluses the cell house, the bigger the typical contribution in internationalisation activities. The estimate is based on the needs of the Finnish SME, but also startups and major companies can at least partially use this reasoning. This paper does not focus on the importance of external finance as an important potential enabler of internationalisation. Therefore, public sector financial aid for internationalisation is not reflected in the assessments of the table.

Finnish public sector internationalisation agencies

Internationalisation services of the Finnish public sector are centralised under Team Finland brand. A company can get help by contacting a regional contact person in Finland or a Team Finland coordinator in a target country. The network consists of 73 teams around the world and of 15 local teams in Finland. Individual services are produced by different units working for internationalisation, such as Finpro, Tekes, Finnvera, Finnfund, Finnpartnership, cultural and scientific institutes, MEK, ELY centres, the Finnish-Russian Chamber of Commerce and the Finnish-Swedish Chamber of Commerce. Services include, inter alia:

• Business idea coaching: Finpro offers companies expertise in international business and its challenges. Service provides feedback on company's strengths, weaknesses, opportunities and threats, as well as support for internationalisation issues. Free Of Charge.
• Internationalisation test: With Yritys-Suomi service of TEM, a company can assess and analyse its internationalisation capabilities. Free Of Charge.
• Business opportunities:  Concrete business opportunities throughout the world identified by the experts of Finpro. Free Of Charge.
• Team Finland Future Watch:  Reports on changes in the international markets, brought by Tekes. Free Of Charge.
• Networking with business and public actors: Finpro will advise how to obtain information about target markets and helps to network with public target market actors and Finnish companies already present in these markets. Free Of Charge.
• Export trade financing expertise: The objective of the Finnvera programme is to improve financing competences required by export activities. A basic programme is Free of Charge, Charges Are Applicable for extra sessions arranged by Finnvera training partners.
• Shipping handbook: FinPro's document, contains information from 190 countries on free trade agreements, import restrictions, required documentation and legalisation of documents, special certificates, product packaging and labelling, provisions laying down special conditions governing sending of samples as well as other goods. Charges Are Applicable.
• Advice to enter Russian market: Finnish-Russian Chamber of Commerce provides useful advice and concrete assistance to Russian business operations, at all stages of the planning. Charges Are Applicable.
• Advice to enter Swedish market: Finnish-Swedish Chamber of Commerce can advise on all matters relating operating in the Swedish markets, as well as consult companies to start exporting to Sweden. Advice is Free Of Charge, in consulting Charges Are Applicable.
• Advice to enter developing countries for the purpose of projects: Finnpartnership advices on issues related to developing country business activities. Free Of Charge.

Many cities and regions also provide internationalisation services. For instance, EnterpriseHelsinki is active in Helsinki and BusinessOulu in Oulu. Organisation for regional development organisation in Finland, SEKES, has a listing of regional players on its website.

These services are able to provide the basic knowledge both for planning internationalisation strategy and for analysing own capabilities, as well as for acquiring basic information on potential new markets. And because the services are, as a rule, free, they should also be used. On the other hand, public sector services provide little help for deeper, company-specific internationalisation activities, such as building a detailed strategy, closing the competence gaps or getting a deep understanding of new market opportunities. This is, of course, caused by the fact that the services provided are largely productised and generic, thus leaving very little time and resources for extensive company-specific assistance.

In addition, the contributions provided by network experts vary in quality and quantity, depending on personal skills, experience and service attitude. For example, I have sometimes been able to make experts of the network as an integral and high value-adding part of the team, sometimes their help equalled results that half an hour of Internet browsing would have given.

Internationalisation consultants

In the name of internationalisation consulting, a variety of services are offered: training, compiling of reports for international organisations, research of new markets, starting operations in new market areas, opening up sales channels to certain customer segments, marketing communications, strategy work, etc. Both small and big domestic players as well as international companies with their Finnish offices are present.

According to my experience, the big threat for SME is that a consultant focuses the project on his own areas of strength, not on the ones that would be the most important and useful for the paying company right now. It is, for example, dangerous to let consultant´s considerable target market experience lead to deep market studies, when internationalisation strategy and sufficiency of own competences are still in the making.

Another important consideration is that many times an SME business needs only one versatile and seasoned professional, not a bunch of constantly-changing consultants with very narrow areas of expertise. This ensures that the consultant is a solid part of hiring company operations and the company can really lead the process of internationalisation. Certain nuances, related to the organisation of work, are then manageable: for example, whether it is about consultancy or interim management cooperation, or whether it is the consultant working hands-on in the project or primarily transferring his know how to company employees.

The role of consultants is the largest in the creation of internationalisation strategy, in setting direction and in defining required capabilities, see the table above. Depending on the consultant's background, he can be - in parallel with local contributors - also an important factor in the thorough target market investigation and actual market entry.

Target country public agencies

Almost all countries have the desire to attract foreign companies to invest in the country. To this end, public sector all over the world have been busily setting up specialised agencies for this. In Finland, Invest in Finland is the name of the active public player, and the world association of agencies, Waipa, has produced a good listing of its counterparts in other countries.

The agencies that are assisting market entering companies can usually provide useful information about the target country, its market and competitive situation, market entry alternatives and setting up operations in the country. For example, GTAI, German Trade and Invest, offers mainly free services in the following areas:

• Information about Germany, its economy and business life
• Industry information, including market situation and news about recent developments
• Consulting services to create market entry strategies, to make evaluations in the country and to establish operations
• Guidance on the different market entry questions

An internationalising company should definitely check out, how target country public actors are able to assist. For the assessment and prioritisation of target markets, it is possible to get - and in most cases free of charge - important building blocks. Also, good advice on setting up local offices can be obtained. Depending on the country, more customised free advisory services may be available, in which case tailored information, contacts and services can be acquired. It should be noted, however, that willingness of agencies to help depends besides the abilities of individual experts also on the objectives of the market entering company. A big business always gets more personalised service, and planned product development or manufacturing activities always get a warmer reception than mere sales office ones.

Target country local consultants

When it's time to explore your potential target markets in greater depth, to set up a business in a new market or to expand an existing one, local consultants are often utilised. Local specialists, however, are not enough to get the business up and flying; the hiring company must ensure that the basis of internationalisation, including the role of international operations in the company´s growth strategy, initial prioritisation of target countries and trimming of the company for internationalisation, is solidly in place.

The scope of consultants´ work can vary, some examples given below:

• Market research and competitor analysis
• Establishment of a local company
• Identification of potential clients and creation of contacts with them
• Search of distribution channels and partners
• Financial, legal or environmental issues, marketing or HR 

In most countries, you will find plenty of willing local companies to assist in market entry, see, e.g. an extensive overview of various Market entry consultants in European countries, with detailed information about the contacts, served markets, services offered and industry focus. The Association of Finnish Entrepreneurs, Suomen Yrittäjät, has also an international network with Finnish-speaking contacts.

Probably the biggest pitfall for Finnish SMEs is the correct identification of local aid. For example, when I was once looking for a local consultant to tighten cooperation with potential customers, the selected person turned out to be the best in finding a suitable office space and in helping us to manoeuvre through local bureaucracies.

Internationalisation - a solution to get your troubles far away?

Internationalisation is often seen as a trick that drives company's troubles away. This is not the case, however. For example, if the choice of the first target countries, finding channel partners or optimum location for your own sales office are initially the key issues, essential homework has not been done. Then you need a lucky break. And although you need luck in the business world, you must make every effort to try to improve your odds.

A structured approach to internationalisation is connected to the company's objectives, strategy, competences and resources. In this case, it is not a question of tricks, but of evaluation, if it makes sense – and in what way - to aim for international markets. This post tackles the following core questions of internationalisation:

• Why to enter new international markets?
• Which are the key issues when planning internationalisation?
• How to build internationalisation in a systematic way?

These questions are relevant, regardless of whether a company is small or large, whether it is already making business in some foreign countries or is purely a domestic market or startup business. The post focuses on issues that are directly linked to revenue-generating market operations. Thus, for example, manufacturing or R&D resource driven foreign operations are not discussed here.

Why international markets

In most cases market expansion is driven by the reasons related to objectives or a business idea of a company, its products or customer relationships.

Probably the most common reason for internationalisation is the desire to grow. It might be too difficult to increase market share in the currently served markets, or extension of the product range is not considered lucrative enough. Operating across borders can also be a basic premise for the business; for example, many startups coming from smaller countries find their domestic markets far too small to support a profitable business.

Especially growth companies seek to aggressively increase the value of the company: e.g. to improve access to financing or to have better financing terms. Bigger potential markets and initial success in these markets will significantly raise the value of the company and its prestige among important stakeholders.

The most advanced and demanding customers greatly assist in creation of such product functionalities, which also a wider market and laggards will find useful later. So, for example, Swedish car manufacturers were for a long time deemed the pioneers in the area of security, so cooperating with them was good for success also elsewhere. Today, Germans are leaders in many vehicle technologies, so the market pulls keen supplier companies.

Many businesses have found that they cannot find customers for their products on the domestic market. The reason may be would-be customers´ lack of courage to adopt new solutions or business models enabled by them, or simply conservatism of an industry and its players. For example, a Finnish machinery component supplier, Visedo, were forced to seek first clients in Germany, Austria and France, because domestic players were not forward-looking enough to take the new solution.

Key issues in internationalisation planning

By identifying the business drivers of internationalisation, we can also evaluate globalisation activities conducted so far. They may turn out to be either a great platform to scale the business considerably or it might be best to forget them, because their value is null and void, or they would put the company in the wrong direction.

After this, we will look at how company business idea and strategy affect on global expansion. In a similar manner, we will study in more detail company's products and total offering to customers, its differentiation strategies on the market as well as its customer-facing strategies. This will be used to create an overview of the capabilities and resource gaps that need to be overcome before one can expect success in the new markets. 

Business concept and strategy

A company's business idea defines the target customers, its offering and how the offerings are produced and made available for customers' use. If a company is customer-centric, its target segments and their needs also strongly influence offering properties. When globalising the key is to understand how well the new market customer segments and their needs correspond to the ones in the existing market. Many companies, however, have a technology or product based strategy. This emphasis the need to find in the new markets customer segments and customers that find company technology or product features compelling and value generating.

As a result, any plans to internationalise raise the following questions:

• Is the business model in today's market well-tested and can it be replicated to new, international markets?
• Is there willingness and ability to change the current model and how much?

Most of the incumbent companies will end up on the fact that the way of working of the home market cannot and should not be directly copied into new markets. On the other hand, if the business is created global from scratch, as in the case of, e.g. cloud service or application startups, the biggest challenges will again be product, differentiation and customer interface related ones.

Product

Absolute requirements of the market, customer preferences and total offering required by customers are the key product related dimensions. The Internet and social media tools have brought tremendous agility and cost efficiency to the understanding of these issues.

The absolute requirements are usually easy to understand and find out. They include local government approvals and other compulsory localisations. The latter include, inter alia, translations of marketing and user documentation and support of local standards or practises. For example accounting programs require support of local regulations.

More challenging is to evaluate new customer preferences in target countries and their influence on product properties. Of course, there are self-evident things, such as the need to adapt sizing of clothing company collections when moving from Northern Europe to Southern Europe or South East Asia. When we move from technical characteristics to emotional likes and dislikes, local preferences start to dominate. For example, a children's outdoor clothing manufacturer, Reima, has discovered that in Russia, consumers prefer different colours in children´s winter clothes compared to Finland. Increasing global uniformity of values, practises and consumption have created very homologous, international segments - in these cases the need for local preference modifications is small. E.g. many Internet consumer service companies take advantage of this.

Also in new markets, customers usually expect to have a total solution. In many cases, it may significantly differ from the one in established markets. When complementing products or services require external partners, availability and access to them in target markets should be separately assessed.

Differentiation

It is important to be different from competitors, because without it, a company needs to typically compete on price. And because most of the competitors have the same customer value-adding product features, differentiation based on artificially created new product features will succeed rarely. Unless there is something new in the product or business model that clients really appreciate, the solution is to look at a company and product image - which again puts emphasis on company's positioning and branding.

Differentiation formulae of the domestic market is not necessarily transferable to the new target countries. For example, a clothing and textile design house, Marimekko, have a strong brand in Finland supported by a long history, distinctive, locally-luminous leading figures and unique collections with locally well-known designers. When company activities have become more globalised, it has been noted that the domestic brand concept is not necessarily bringing success in other markets.

It is essential to understand that a company and its products do not have to be widely known in the new market, as long as it is well-known in the target customer groups. Who, for example, knows Wärtsilä and its ship engines, if one is not belonging to their target customer groups? In addition to being able to create awareness of the product, it is important that the company's products have a reasonably good reputation and that the target customers are hungry for these products. When we go into a new market, a company usually starts from scratch: it is not known and the clients do not have a special longing for its products - on the other hand, it still has a very neutral reputation. It is worth considering how much, for example, current market references, globalised sourcing decisions and consumption habits, as well as international operations of existing clients could help in the development of the brand. And it is always possible to re-position the company completely, at least in the international markets.

Customer acquisition and retention

Although business idea and strategy, products and total offering as well as differentiation in the new markets would be okay, no success will come without being able to acquire and retain customers. Looking this another way: even the best systems, people and partnerships for demand creation, deal closing and customer loyalty do not bring results, if the previously discussed basics are not in good shape.

The essential steps of the customer relationship cycle include creating awareness among potential customers, building interest and willingness to buy, deal closing and customer retention. If a company is capable of differentiating itself in the market, it is already a good start. A model that has been developed and tested in the domestic markets and that is capable of generating enough demand and revenues, is a good basis for developing activities in the new markets, too.

The key is to understand to what extent the established market practises are suitable for the new markets: which of them can be utilised and what kind of capabilities and resources the company has to change the existing way of working. For example, use of media advertising, solution sales process renewal or web enabled customer service could be considered as corrective tools.

Entering new markets will be most often done with thin investment and expense structure. Fortunately, different types of Internet and social media based marketing, sales and customer relationship management tools provide cost-effective ways to get ahead. A more traditional approach is to build partnerships based marketing and sales activities: the danger is loosing touch of customers and the market, which, at worst, will soon destroy company's competitiveness.

Systematic internationalisation

After own motives and capabilities in relation to the company´s business objectives have been studied, the decision can be either to go forward or to focus on other business initiatives that are more lucrative or urgent.

If it is decided to continue, a preliminary assessment of capability and resource gaps in the internationalisation should be made. It is also important to determine whether the gaps should be filled with building the capabilities and resources in-house or whether partnerships would be the solution. For example, a company may decide to build sales, marketing and customer service capabilities in the new target countries by itself or it can rely on channel partners.

When still known gaps in the market information have been filled in, a detailed plan for the internationalisation can be made with priorities, timings and budget. At this stage, the target market and channel partner selection issues are already relevant. 

How to sell an innovative solution to conservative firms

I have many times come across a statement that company's customers are conservative and, therefore, selling them a new, innovative solution is difficult and slow. These customers include machinery industry, construction, services companies - and so on. This is partly true. But only partly - often company´s own legacy, ossified ideas and practises, is a major obstacle to commercialise new products and business models.

Industry after industry has seen its traditional business truths radically changing, driven and enabled by globalisation, digitalisation and other change forces. Also in disrupted industries, companies have complained about conservatism of practises and customers. And even though an industry sector would not be experiencing outright disruption, greater efficiency measures as well as marginal refinement of products and business models are not sufficient to ensure future success.

Current well-established way of working, with existing products, business models and customer approach need to be questioned when new solutions are brought onto the market. This post presents food for thought to consider ways, how to reduce obstacles to commercialise new, innovative solutions.

Sales process renewal

When a company develops a solution that will bring business benefits to customers in new ways or whose business model is different from usual, old recipes to conduct sales are no longer successful. A new solution can bring to customers a whole new range of benefits, which often in turn means that both buying process and its main influencers are changing. Thus it is up to the company, developing an innovative solution, to rethink its sales process.

Adoption of new solutions requires strategic considerations in client companies, which in turn takes decision-making higher than usual, often the senior management level. A vendor company must be able to influence these higher-level influencers much more deeply and using the language that they prefer. This calls for linking the benefits of a new solution to customers´ key business objectives. Supplier company´s top management commitment to and participation in sales work is also of utmost importance.

There are often parties in client companies that in the past have received less attention, but to whom the benefits of a new solution are important. For example, persons responsible for environmental affairs will surely appreciate solutions that help to reduce the environmental footprint of a client company or the one caused by its products. On the other hand, customers' financial officers may find business models that are based on costs proportional to income, instead of investments, very lucrative. In addition, e.g. business management and development, as well as sales and marketing management are more traditional, potential allies. It is essential to have at least one senior protagonist in a customer company, who can help to navigate client´s decision-making depths and shallows.

Just as important as finding allies, is to identify and neutralise potential opponents of a new solution. The key here is to understand the mechanisms how a solution changes a client company and thus identify the influencers, who may react negatively to change. Cooperation with protagonists makes this much easier.

Sales and marketing tools renewal

Finding right buyer contacts in customer companies is not enough. It is also worthy of developing suitable sales and marketing tools for innovative solutions. They are needed to handle reactions and emotions that relate to encountering new things, such as uncertainty, scepticism, ignorance, suspicion and fear. And because the issue is not simply communicating facts, it takes longer than usual to win customers. Here are some impetus to renew company toolbox.

Typically, more than half of the customers' buying process is over, before they are ready to meet with representatives of supplier candidates face to face. And in the case of new solutions, customer engagement needs to be started even before customers consciously initiate their buying process.

At the centre of this are digital sales and marketing tools, in particular inbound marketing. If at all possible, the target is to achieve thought leadership in areas that relate to a new solution and that are important to customers. This is done by presenting in-depth and well-justified information. The aim is not yet to sell a new solution, but to show company's in-depth understanding of the customers´ business environment challenges. Thus it will be possible for the customer base to adopt innovative features of the solution. Marketing and sales need to seamlessly and overlapping work together; when a customer demonstrates willingness to consider a new solution, it is time that inside sales and traditional field sales grab the baton.

Benefits justified by numbers are important to overcome customer doubts. Various modelling and simulation tools can be provided either free of charge or with a reasonable cost, acceptable to customers. Tools can be provided either via a web based service or as a standalone application. Web based tools are easier to link to other digital marketing activities. As with all aspects of digital content and tools, you should consider all of the key customer influential parties: for example, needs of financial officers and environmental people are very different.

A new, innovative solution is rarely accepted before experimental use, a pilot. Other clients´ pilots may of course be good reference cases, and in the best case they can also be utilised as part of content marketing activities.

Influencing through customers' customers

Customers' willingness to adopt a new, innovative solution can also be affected through their own clients. The basic idea then is that customers´ customers will appreciate and want the benefits that a new solution would make possible. In the best case, this may even mean that they specifically want a solution of the supplier company as a part of the overall solution they purchase. For example, a machine or device vendor may be able to convince its system supplier customer's customers that its new solution, utilising sensor and Big Data technologies, should be a part of the total supply. Consumer customers, on the other hand, appreciate for example Shimano bike parts, and Intel microprocessors, thus creating a strong pressure on bicycle and computer vendors to use these components.

Utilising customers´ customers requires two things:

• A company is able to understand the business of its customers´ customers and to determine the benefits that the company solution provides them
• A company must be able to communicate these benefits to customers´ customers

Digital tools, and in particular, inbound marketing, are an excellent and inexpensive way to reach end customers. The same type of tools can be utilised as in the case of actual customers; the content of course, needs to be adapted for a different target audience.

Partners in strengthening the messages

Partners typically complement a company 's offering and business model. In addition, they often have a significant role in overcoming customers' uncertainty and other obstacles to adopt a new solution. In order to successfully utilise partners, a business model must provide also them with enough stimuli to work actively together with the supplier company.

A good example of a complementary offering are services provided by partners: by agreeing on cooperation with an installation and commissioning company that is trusted by client companies, a machinery or equipment company can lower purchase threshold. Another option for this kind of company is to have a new solution as a part of a larger system offering, provided by a company well-known among customers. A third example, again, makes it easier for customers to accept a new solution by including elements of a component supplier, highly appreciated by customers.

Finally, a few words about second sources. Purchasing processes of many companies require second sources for key components or sub-assemblies. This is challenging for companies that use innovation as a means to differentiate themselves from other market solutions, aiming hereby to gain competitive advantage. However, customers need to be convinced that their business will not be greatly disturbed, even though a supplying company would face severe problems. Different types of contractual terms, such as escrow paragraphs, can give restricted security. Licensing a new product to other manufacturers or system suppliers is an example of other ways to solve the problem.

Utilising influencers

Especially in the early stages of the buying process, customer companies are looking for information from sources on which they rely. These sources are herein referred as influencers or advocates. The influencers may be individuals, consulting firms specialising in the industry, research firms, trade publications, etc. Their assessments, reports and opinions often have a major impact on which supplier companies and solutions customers are taking a closer scrutiny.

The most important thing when convincing advocates is to provide them with tools to increase their social capital: helping them to make their reputation better and increase their visibility. When information related to company's innovative solution is accompanied by new insights and views, it will have good chances to be accepted and further shared by influencers: resulting in increased customer awareness and appreciation.

Besides traditional mechanisms, such as face to face consultation, advocates can be efficiently and cost-effectively reached through the Internet and social media. In particular, inbound marketing tools make it possible to target right parties with right messages at the right time. Inbound marketing activities, as well as other activities to engage with influencers, must begin early enough. In practise, this means parallel execution with solution development.

If clients´ customers or partners are important for the commercialisation of a solution, similar type of measures as described above can be conducted to reach them.

Utilisation of pioneers and revolutionaries

Existing customers are known to be the most receptive ones for new solutions, due to close relationships between the two companies and their proven appreciation of the supplying company's solutions. But some customers are more innovative and faster than others. These customers should be identified, and sales and marketing efforts should be focused to them. Pioneer company references are then worth gold when tackling slower and more conservative customers.

If current customers do not find the courage to use a new solution, it is worth to look for industry customers, who are willing to rebel against prevailing ideas. These may have aggressive growth targets, desire to differentiate their offering and business model or they may strive to innovate using their broader ecosystem. As always, a company should not just wait to be contacted. It should identify interesting players and approach them with messages that fit with rebellions´ business objectives.

Revolutionaries that are industry outsiders are ultimately most open to new ideas. In the best case, a supplier company with an innovative solution is thus pulled to huge success - if things turn out to go badly, an outsider is excluded and forgotten.

Conclusions

This post is meant for companies that are developing - or planning to develop - new, innovative products and that are facing significant challenges to commercialise their solutions due to customer conservatism and inertia. The key conclusions are:

• Potential customer and industry conservatism is just an excuse for innovation laziness and poor results; a company should also be able to renew itself; besides new solutions, this means new approaches, methodologies and tools for commercialisation.
• To commercialise a new solution, a company needs to be active on the market early enough; the ultimate goal is to reach thought leadership in the discussions related to the new solution topic; digital media tools make this possible in a cost-effective manner.
• Development of a new solution and its commercialisation should be overlapping activities; market and customer commitment to a new solution is best achieved by listening to customer needs, by giving them the building blocks to first understand the value of a solution and by supporting them when they use this value in their business development.