AFTER-SALES SERVICE
Three factors are critical to the success of any export
sales effort: quality, price, and service. Quality and
price are dealt with in other chapters. Service should be
an integral part of any company's export strategy from the
start. Properly handled, service can be a foundation for
growth. Ignored or left to chance, it can cause an export
effort to fail.
Service is the prompt delivery of the product. It is
courteous sales personnel. It is a localized user manual or
service manual. It is ready access to a service facility.
It is knowledgeable, cost-effective maintenance, repair, or
replacement. Service is location. Service is dealer
support.
Service varies by the product type, the quality of the
product, the price of the product, and the distribution
channel employed. For export products that require no
service -- such as food products, some consumer goods, and
commercial disposables -- the issue is resolved once
distribution channels, quality criteria, and return
policies have been identified.
On the other hand, the characteristics of consumer durables
and some consumables demand that service be available. For
such products, service is a feature expected by the
consumer. In fact, foreign buyers of industrial goods
typically place service at the forefront of the criteria
they evaluate when making a purchase decision.
All foreign markets are sophisticated, and each has its own
expectations of suppliers and vendors. U.S. manufacturers
or distributors must therefore ensure that their service
performance is comparable to that of the predominant
competitors in the market. This level of performance is an
important determinant in ensuring a reasonable competitive
position, given the other factors of product quality,
price, promotion, and delivery.
An exporting firm's strategy and market entry decision may
dictate that it does not provide after-sale service. It may
determine that its export objective is the single or
multiple opportunistic entry into export markets. Although
this approach may work in the short term, subsequent
product offerings will be less successful as buyers recall
the failure to provide expected levels of service. As a
result, market development and sales expenditures may
result in one-time sales. Instead of saving money by
cutting back on service, the company will see lower profits
(because expenses are not spread over longer production
runs), ongoing sales programs, and multiple sales to
developed buyers.
SERVICE DELIVERY OPTIONS
Service is an important factor in the initial export sale
and ongoing success of products in foreign markets. U.S.
firms have many options for the delivery of service to
foreign buyers.
A high-cost option -- and the most inconvenient for the
foreign retail, wholesale, commercial, or industrial buyer
-- is for the product to be returned to the manufacturing
or distribution facility in the United States for service
or repair. The buyer incurs a high cost and loses the use
of the product for an extended period, while the seller
must incur the export cost of the same product a second
time to return it. Fortunately, there are practical,
cost-effective alternatives to this approach.
If the selected export distribution channel is a joint
venture or other partnership arrangement, the overseas
partner may have a service or repair capability in the
markets to be penetrated. An exporting firm's negotiations
and agreements with its partner should include explicit
provisions for repairs, maintenance, and warranty service.
The cost of providing this service should be negotiated
into the agreement.
For goods sold at retail outlets, a preferred service
option is to identify and use local service facilities.
Doing so requires front-end expenses to identify and train
local service outlets, but such costs are more than repaid
in the long run.
An excellent case study on this issue involves a foreign
firm's service approach to the U.S. market. A leading
Canadian manufacturer of consumer personal care items uses
U.S. distributors and sales representatives to generate
purchases by large and small retailers across the United
States. The products are purchased at retail by individual
consumers. The Canadian firm contracted with local
consumer electronic repair facilities in leading U.S.
cities to provide service or replacement for its product
line. Consequently, the manufacturer can include a
certificate with each product listing "authorized" local
warranty and service centers.
There are administrative, training, and supervisory
overhead costs associated with such a warranty and service
program. The benefit, however, is that the company is now
perceived to be a local company that competes on equal
footing with domestic U.S. manufacturers. U.S. exporters
should keep this example in mind when entering foreign
markets.
Exporting a product into commercial or industrial markets
may dictate a different approach. For the many U.S.
companies that sell through distributors, selection of a
representative to serve a region, a nation, or a market
should be based not only on the distributing company's
ability to sell effectively but also on its ability and
willingness to service the product.
Assessing that ability to service requires that the
exporter ask questions about existing service facilities;
about the types, models, and age of existing service
equipment; about training practices for service personnel;
and about the firm's experience in servicing similar
products.
If the product being exported is to be sold directly to end
users, service and timely performance are critical to
success. The nature of the product may require delivery of
on-site service to the buyer within very specific time
parameters. These are negotiable issues for which the U.S.
exporter must be prepared. Such on-site service may be
available from service organizations in the buyer's
country; or the exporting company may have to send
personnel to the site to provide service. The sales
contract should anticipate a reasonable level of on-site
service and should include the associated costs. Existing
performance and service history can serve as a guide for
estimating service and warranty requirements on export
sales, and sales can be costed accordingly. This practice
is accepted among small and large exporters alike.
At some level of export activity, it may become
cost-effective for a U.S. company to establish its own
branch or subsidiary operation in the foreign market. The
branch or subsidiary may be a one-person operation or a
more extensive facility staffed with sales, administration,
service, and other personnel, most of whom are nationals in
the market. This high-cost option enables the exporter to
ensure sales and service quality, provided that personnel
are trained in sales, products, and service on an ongoing
basis. The benefits of this option include the control it
gives to the exporter and the ability to serve multiple
markets in a single region.
Manufacturers of similar or related products may find it
cost-effective to consolidate service, training, and
support in each export market. Service can be delivered by
U.S.-based personnel, a foreign facility under contract, or
a jointly owned foreign-based service facility. Despite
its cost benefits, this option raises a number of issues.
Such joint activity may be interpreted as being in
restraint of trade or otherwise market controlling or
monopolistic. Exporters that are considering it should
therefore obtain competent legal counsel when developing
this joint operating arrangement. Exporters may wish to
consider obtaining an export trade certificate of review,
which provides limited immunity from U.S. antitrust laws.
LEGAL CONSIDERATIONS
Service is a very important part of many types of
representation agreements. For better or worse, the quality
of service in a country or region affects the U.S.
manufacturer's reputation there.
Quality of service also affects the intellectual property
rights of the manufacturer. A trademark is a mark of
source, with associated quality and performance. If quality
control is not maintained, the manufacturer can lose its
rights to the product, because one can argue that, within
that foreign market, the manufacturer has abandoned the
trademark to the distributor.
It is, therefore, imperative that agreements with a
representative be specific about the form of the repair or
service facility, the number of people on the staff,
inspection provisions, training programs, and payment of
costs associated with maintaining a suitable facility. The
depth or breadth of a warranty in a given country or region
should be tied to the service facility to which the
manufacturer has access in that market; it is important to
promise only what can be delivered.
Another part of the representative agreement may detail the
training the exporter will provide to its foreign
representative. This detail can include frequency of
training, who must be trained, where the training is
provided, and which party absorbs travel and per diem
costs.
NEW SALES OPPORTUNITIES ADN IMPROVED CUSTOMER RELATIONS
Foreign buyers of U.S.-manufactured products typically have
limited contact with the manufacturer or its personnel. The
foreign service facility is, in fact, one of the major
contact points between the exporter and the buyer. To a
great extent, the U.S. manufacturer's reputation is made by
the overseas service facility.
The service experience can be a positive and reinforcing
sales and service encounter. It can also be an excellent
sales opportunity if the service personnel are trained to
take advantage of the situation. Service personnel can
help the customer make life cycle decisions regarding the
efficient operation of the product, how to update it for
more and longer cost-effective operation, and when to
replace it as the task expands or changes. Each service
contact is an opportunity to educate the customer and
expand the exporter's sales opportunities.
Service is also an important aspect of selling solutions
and benefits rather than product features. More than one
leading U.S. industrial products exporter sells its
products as a "tool to do the job" rather than as a "truck"
or a "cutting machine" or "software." Service capability
enables customers to complete their jobs more efficiently
with the exporter's "tool." Training service managers and
personnel in this type of thinking vitalizes service
facilities and generates new sales opportunities.
Each foreign market offers a unique opportunity for the
U.S. exporter. Care and attention to the development of
in-country sales and distribution capabilities is
paramount. Delivery of after-sales service is critical to
the near- and long-term success of the U.S. company's
efforts in any market.
Senior personnel should commit to a program of regular
travel to each foreign market to meet with the company's
representatives, clients, and others who are important to
the success of the firm in that market. Among those
persons would be the commercial officer at the US&FCS post
and representatives of the American chamber of commerce and
the local chamber of commerce or business association.
The benefits of such a program are twofold. First,
executive management learns more about the foreign
marketplace and the firm's capabilities. Second, the
in-country representative appreciates the attention and
understands the importance of the foreign market in the
exporter's long-term plans. As a result, such visits help
build a strong, productive relationship.
