International joint ventures formed by manufacturing concerns, and the failure rates of these companies, have been well-documented over the years. The pioneering efforts of telecommunications service providers from developed countries, which have formed joint ventures to provide both goods and services in emerging markets, have been less well-documented.
This article argues that partner agreement on strategic marketing discipline will help ensure profitable growth, whether the joint venture has come together to offer narrowband wireless, broadband wireless, local, long-distance or Internet services.
Like all international joint ventures, service provider partners have common upfront goals. Sophisticated business plans and market research are completed, and the best local and international talent is recruited. But few partners seem prepared for the confrontations raised by day-to-day marketing warfare once the service has been rolled out. Partners who have had to deal with financial, operational and regulatory issues, which would have daunted many a consumer packaged-goods manufacturer, fumble the ball in the marketing end zone.
Marketing challenges
Why does the marketing area specifically need an ongoing framework of strategic planning in order to ensure cooperation and avoid confrontation? Joint-venture participants bring with them a culture, mind-set and experience from their own markets. In the dynamic and somewhat subjective field of marketing decision-making, the differing cultural perceptions and market experience of the partners can result in conflict when revenue or subscriber targets are not met.
The size of the partners may result in different processes and approaches to the marketing discipline. The industry life cycle and characteristics of the product/service may be quite different in the partner countries. Distribution, positioning and product choices will differ between developed countries and emerging markets. Marketing is an information-intensive discipline, and the treatment of information may differ. One partner’s culture may be based on openness and `telling.’ The other partner may be accustomed to hoarding information and answering only when asked specific questions.
Difficulties in gaining reliable local information may require creative solutions and altered decision processes.
The good news is that profitable market decisions can be achieved through joint use of the international partner’s category experience and tactical skill, and the local partner’s market knowledge and execution experience.
Local in-country managers invariably ask me, “How much international experience is really valid in my market?” Based on my work with many joint ventures, I have found that about 70 percent of international category marketing `rules’ can apply. But the final 30 percent will make all the difference to success or failure, and that is made up of expert knowledge of the local market. A strategic market framework is the glue that binds the valuable experience of each group into a cohesive action plan.
A strategic focus
Generally the efforts of local managers, who may have a high degree of marketing skill but are often deficient in their knowledge of telecom, are supplemented with internal consultants from the international company. These experts are a godsend in their tactical areas, but often do not have an overall strategic focus. Soon, local opinions come into conflict with international experience.
These problems can be exacerbated by perspectives that differ greatly due to size. Joint-venture organizations often are much smaller than either their international or local partner investors. The optimal organization, which is lean, mean and market facing, may be foreign to one or both of the partners.
A strategic marketing framework helps partners develop a common language for defining market risks and opportunities, as well as processes for identifying and tracking strategies and tactics. Common goals and objectives are the starting point, as strategic decisions must be tied to these.
An analysis of the realities of local market needs and segmentation options is a must, as well as an honest evaluation of the strengths and weaknesses of the joint venture, vis-a-vis the competition. Within this context, specific objectives and strategies should be developed for distribution, sales, advertising, positioning, pricing and product/service offerings.
In each area, the partners should itemize the tactics needed to achieve the strategies and objectives.
Finally, firm deadlines should be assigned, along with accountability for meeting the various objectives tactically.
This approach brings together the skill sets of the partners in a formal way, and provides a neutral ground on which the skills can be displayed. It has been shown that extensive communication of key messages is one of the most critical elements in integrating joint-venture management teams. The framework discussed here assists in organizational integration through enhancing opportunities to communicate goals and objectives, while providing processes to achieve them.
Bringing focus to marketing departments
As the examples below show, both local partners and international partners sometimes need a strategic context or focus to help drive profitable decisions in uncertain markets.
Distribution
Strategic focus on the product life cycle stage in the local market, as well as product usage, is important for partners to consider when making distribution decisions. Often customer-service considerations cannot be separated from distribution decisions. An international wireless partner accustomed to mature market retail sales strategies, for example, would take into account the customer training and `hand holding,’ which might have to occur in a country where the category is still in the early-adopter or growth phase.
In one joint venture, the new foreign partner sought to disband a `Mary Kay’ type sales force and depend on its more traditional distributors. The new partner pointed out with some truth that there was little long-term dedication to the company and that the force was hard to control. The local partner felt, with equal justification, that the ladies had played a large role in building the current client base.
Before taking action, the partners were asked to cross reference the usage and churn levels of the customer base with the selling channel. They found that the usage levels of customers of the nontraditional part-time sales force were much higher than the those of distributors’ customers, and the churn level much lower. The ladies had taken the time to train and motivate their customers to use the product. Many distributors were found to be negligent in dealing with customer questions and uncertainties.
The strategic focus on minutes of use and churn underlined the importance of training to the local partner, and reminded the international partner that the level of product knowledge in the country was generally low. Additional training was instituted in distributor companies, and compensation was tied to customer churn. The part-time sales force, with some degree of formalization, was allowed to continue.
Corporate sales
The slow ramp up of sales to corporate accounts is often a disappointment to international and local partners alike. Whether wireless, data or Internet, numerous decision makers must understand the benefits.
There are invariably many obstacles to overcome and the corporate counselor is selling skills that are hard enough to come by in developed countries and are rare in developing economies. International partners find that the term `relationship marketing’ takes on a whole new meaning in countries where sales people are chosen, and sales are made, depending on who you know rather than how you sell.
Luckily, the combination of lo
cal partner contacts and international partner major-account sales experience, if both respected, can combine
to provide winning vertical marketing sales. Emerging economy telecom and information technology managers are hungry for case studies and benchmarks. These also can be used as training vehicles to enhance the account management skills of the corporate sales force.
Customer service
This is an area where the international partner is usually well positioned to bring experience, metrics and training skills as well as knowledge of the bottom-line benefits that accrue from good customer service. Initially, however, the investment may be a hard sell to local partners and to a management team scrambling to meet customer demand for service. In this scenario, customer retention and customer service may be seen as long-term, rather than short-term considerations.
Since good customer service starts at the point of sale, a high level of sales and high customer retention are often closely related. In many markets, up to 40 percent of sales in the first few years of the product life cycle come from word-of-mouth references. If employees in the sales and distribution channels are trained in good customer-service practices, they invariably experience a higher level of cost-effective sales as well as contribute to the downstream revenue retention capabilities of the joint venture.
One successful joint venture had early squabbles about the size and cost of the customer-service department recommended by the international partner. Moreover, the department, even at the size on which the foreign partner had insisted, was swamped. In time it was discovered the customer service department was saving the company a great number of service cancellations, as well as losses to the competition. Customer-service representatives were performing the training function, which the sales channels, swamped by demand, had been unable or unwilling to complete. They also were trying to salvage the corporate image.
The management team realized its expensive advertising positioning (against the lack of service offered by the incumbent telephone company) was being undone at the point of sale. When the company considered the short-term payback in corporate image enhancement and the longer-term contribution to the bottom line through churn prevention, it began to consider the investment in customer service in a different light. The communications budget was revectored to provide more money to channel training and customer-service activities, and the international partner had a success story to use in its other investments worldwide.
Advertising
Advertising creative and execution is an area where international partners should and do back off. However, it is also an area where the foreign partner’s experience with advertising at different stages of the product life cycle, as well as tactical knowledge of successful promotional campaigns, can be useful.
A cellular company in an emerging economy positioned its service exclusively to the highest socioeconomic levels of the country. International investors, company executives and their friends, who were all early adopters, were pleased with the glamorous campaigns and pull distribution strategy. The ads of the competition were felt to be dull and didactic.
The success of the campaign was short term. Although the brand top-of-mind recall was outstanding, profits were faltering. Research was obtained from the competition, which showed a high proportion of business users in the competitor’s installed based. Further research and `mystery shopping’ showed the competition had successfully rolled out a push campaign targeted to the needs of small- and medium-sized business communications. A review of information filed with the Ministry of Communications indicated the competitor had pulled ahead in market share, and its average customer minutes of use was higher as well.
Based on this framework of competitive and market information, the company realized its advertising and distribution strategies were not consistent with the relatively early stage in the product life cycle. They were able to leverage their investment in brand awareness and image as they created more targeted distribution, promotion and communications strategies.
Pricing decisions
Pricing is a primary source of acrimony in joint ventures, as once prices are slashed there is little leeway to raise them again. Even when partners concur, the application of sound strategic marketing principles can serve to increase profits.
In one new joint venture, the national partner’s background was in a mature product line where price competition was key. The international partner, coming from a market where the telecom product was also mature, did not object to a policy that led to price wars with the competition without a significant increase in installed base.
Research with the sales and distribution channels, as well as focus groups with attractive vertical markets, revealed that prospective business customers were indifferent to price competition because they did not understand how the product could benefit their industry. Once the company understood the barriers to product acceptance and the lesser importance of price in the purchase decision, the partners were able to develop profitable positioning and pricing packages.
Product choice
The international joint venture often brings many benefits for the smaller partner in the product area, as large international partners have access to the latest technology as well as purchasing economies of scale. A joint strategic focus on the segments that will use specific products still will be valuable, as experience teaches us that emerging economies invariably leap frog technology and may, as well, differ in their use of it.
As an example, there will undoubtedly be high usage of mobile Internet devices in developing countries for two reasons:
First, there is a lower penetration of traditional computers, especially outside of the workplace. In addition, people in these countries historically have used wireless as wireline replacement to make up for inadequate infrastructure. They are, therefore, more comfortable with a wider array of usage scenarios than many of their counterparts in developed countries.
Product choice and positioning are areas where joint-venture partners can benefit from close collaboration as well as a formal framework of market analysis.
A framework for analysis and the discipline to work through the processes together can mitigate many of the pitfalls encountered in the dynamic international marketing arena. Through these methods, partners can achieve a primary goal of living `profitably ever after.’
Lana Phair-Sutherland is a telecommunications marketing consultant who has been working with international joint ventures since 1989. She may be reached at psconsulting@compuserve.com or www.phair-sutherland.com.