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Service Exports: A Dynamic Export Option

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Service Exports: A Dynamic Export Option

Export a service versus a product

©Laurel Delaney 2011, licensed to About.com Inc.

The United States is a global winner in service exports -- our service sectors are creating overseas jobs at a rate three times faster than that of the manufacturing sectors! And these jobs are not just ordinary blue-collar positions. They are white-collar services that involve high skills and high technology -- and high growth. Refer to the U.S. International Trade in Goods and Services for current trade data.

Exporting a service attracts customers because the service usually offers original knowledge -- and knowledge these days is power. People are starting new ventures every day, purely on the basis of a business model offering superior know-how and great ideas. Disseminating that knowledge aggressively and at a profit worldwide is a winning formula for global success. With technology advancing at lightning speed and worldwide communications becoming faster and easier with every passing day, now is an ideal time to consider this business avenue.

How Technology Drives the Economy

Right now, a variety of technology-based industries, including communications, software development and health care management, are booming. Take a look at the stocks traded on the NASDAQ or NYSE -- you'll spot the longtime movers and shakers in these industries typically growing at a rate of 25% or more per year, with the young upstarts right on their heels. The good news for the prospective service exporter is that there is a strong correlation between technological advancements and the growing importance of knowledge. The more technology becomes available, the greater our need to learn how to use it and capitalize on it, fast. Time is of the essence if you want to stay at the cutting edge of your industry, and with current technology, particularly in the field of communications, not only can you count on being able to contact clients and colleagues worldwide in a matter of seconds, but you can also bet that it will cost you only pennies.

Exporting a Product Versus Exporting a Service: Is There a Difference?

Exporting a product -- one that you can see, hold, easily assign a monetary value to, and transport from point A to point B is not that complicated. Exporting a service requires a somewhat different approach. For a quick rundown of the differences between a product and a service that affect the export process, refer to the illustration above but here are four obvious ones:

Product Versus Service

Tangible vs. Intangible

Visible vs. Invisible

Measurable vs. Immeasurable

High perceived value vs. Low perceived value

You cannot see or touch a service -- and you often cannot assess its true value until after you have used it and discovered all the resulting benefits. Service is in many ways a tougher sell than a product, either at home or abroad. Each of the listed differences above creates a marketing challenge for the service exporter, perhaps the most crucial being the need to convince a distant customer to buy your service sight unseen and without any real idea of how they will benefit. This is why a service business depends first and foremost on people. Of course, when you export a product, you are relying on a whole string of people to do their jobs -- banks to help you get paid, freight forwarders to move your goods, local distributors to get your product on store shelves -- but exporting a service demands a special emphasis on human interaction, both at home and abroad.

People Power Drives Your Service Exports

Selling a service requires even more people power than successful product sales. When you export a product, you offer it, clinch your sale, follow through and trouble-shoot as needed. Then, once the product is in your customer's hands, they oversee sales in their geographic territory and contact you to order more product when they sell out. There is little need for communication between buyer and seller once the product is in the distribution pipeline and moving as it should.

By contrast, a service requires direct interaction with your customer (for example, email or Skype), not just initially but for the duration of the service contract. And for some services, of course, the quality of your interaction with your customer is exactly what they're paying for. This is why people with superior communication skills, diplomacy and -- this can't be emphasized enough -- acute cultural awareness are the single greatest asset for delivering a quality service export.

Which Services Are Best for Export?

As with a product, if your service is a success locally, it is a likely candidate for successful marketing elsewhere -- but you'll need to do appropriate research to choose the most likely new market. (Also, just as with your product export, check beforehand with the Export Administration Regulations (EAR) and the U.S. Bureau of Export Administration (BXA) to find out if you need an export license to perform your service abroad.) Your service should, of course, be relatively unique and difficult to come by in your target market. Highly skilled and specialized services (e.g., consultants, export intermediary services, health care and information management technology) offer infinite export opportunities. Services like a pre-haircut shampoo at the beauty shop and a last-minute shoeshine at the airport, for example, are essential, but they are unlikely candidates for export because the skill level required to do them is not high enough, plus the services themselves lack novelty. It's all too easy for local operators to duplicate these services, so why should customers seek them beyond their own borders?

Once you line up a service export, how do you get paid? Many folks use a wire transfer of funds from one bank account to another (be sure to include all appropriate bank information such as the name of the account holder, name of bank, address, routing and Swift account numbers). Another way to get paid is to use PayPal. With a network of more than 190 countries and regions, PayPal deals in multiple currencies. They charge a nominal service fee on each transaction (be sure to inquire in advance) yet the convenience of a guaranteed payment is worth it provided you are not dealing in millions of dollars with your service export. In that case, it can add up.

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