Congratulations, your overseas venture is booming and delivering profits. Your next step might be contemplating product expansion. In this article, I help you decide if you should create an entirely new product for an overseas market.
Here’s how the scenario plays out: You are selling mops like gangbusters in Ireland. You have been working with the same customer for five years and to date, they have purchased $2.3 million worth of mops from your business. Hurray! That’s an amazing accomplishment. Not only has the overseas business been profitable, it offsets local seasonal low points in the year and accounts for 10 percent of your total aggregate business revenues.
As an added benefit, you absolutely look forward to your trip to Ireland every year to meet with your customer, see how things are going, strategize on next steps, and do a little shopping and sightseeing at the same time. Nothing beats working with a customer you genuinely like and trust and achieving success in a marketplace you take delight in visiting.
Then the customer drops the big question. The mops are selling like hotcakes. Why don’t you develop another product for us to import and market in Ireland?
You whirl the question around in your head a zillion times contemplating how big a deal this really is for you and your business and, yet, without missing a beat, say, “Absolutely. Let’s do it.”
What I just gave you is a typical scenario in how a brand new product is born in the export marketplace. If you had blinders on while running your business, you wouldn’t bother to look at this. But based on the likability factor of the customer and the market coupled with the upside potential for greater business, how could you refuse?
Now, the next steps, or questions you must address, are as follows:
- Will you create a brand new product or tweak an existing one?
- If you create a brand new product--perhaps brooms (as shown)--how will you finance it?
- What are the legal implications to developing a new brand for Ireland?
- Are there any barriers to entry in Ireland on brooms?
- Will your production facility have the capacity to produce brooms without cannibalizing existing business?
- Do you have the people power to pull this off?
- How will you know if the product you decide to make is in demand in Ireland?
- Will you use your own brand on the broom label or develop a private label specifically tailored to the needs of your customer?
- Will you be able to sell this new or tweaked product locally to achieve economies of scale in production?
- Will your Irish client be able to sell the brooms through his existing customer pipeline and distribution channels?
- Are you asking your customer to invest in the development of the new product, to commit to importing a certain volume over a specified period of time or to both?
- Should you consider sourcing the product elsewhere so as not to burden your company’s resources too much?
After you answer all these questions, you are in a stronger position to work with your customer in developing a product to his liking and move forward on building a greater market presence in Ireland.
One final word of caution: Your mops sold successfully in Ireland; that doesn’t mean brooms will. Take a conservative approach with respect to developing a brand new product for an overseas market--even one where you’ve had some success--because about 60 percent of newly introduced products are withdrawn from export markets within one year. Without testing this product at home first, as you were able to with mops, you have a higher risk factor right out of the gate. Keep that in mind as you branch out.
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