Export marketing to far away destinations is not an easy or guaranteed panacea for a lack domestic sales growth. Export marketing can be a very expensive process in terms of resource allocation so how do you know that you are exporting to the most attractive geographic markets?
How do you define, identify and select the most attractive exports markets? In this post I will share with you how, at Baker Marketing, we help our clients to select the most profitable export markets.
Our secret sauce involves a tool we have developed and given the very sexy name “Geographic Market Attractiveness Matrix”. We use this strategic planning tool for helping clients with both their domestic and export market planning and development.
The Geographic Market Attractiveness Matrix for export is based on the domestic version but contains more variables for consideration due to the added complexity of exporting. Both matrices are divided into three key analysis categories: potential for profit, potential to convert, and potential for longevity.
Potential for Export Profit
Under potential for profit, we take into account environmental or macro issues such as market entry costs like tariffs, insurances, legal costs and free trade agreements. The recently completed FTA agreements with China, Japan and Korea, serve to eliminate tariffs allowing more competitive retail pricing without negatively impacting on profit potential per unit. More micro or marketing related variables taken into account include market size as well as margin related costs such distribution.
The cost of any product and or packaging modifications required, as well as their impact on manufacturing costs, must also be accounted for when determining potential for profit. After taking into account all relevant factors, we allocate a score for comparison against other potential markets.
Potential to Convert
The potential to convert section of the geographic market attractiveness matrix takes into account the desires of the primary target market and how your products will be perceived. Market research methods such as competitor analysis and gap analysis can help to determine this, taking into account factors such as product differentiation and product appeal.
Price sensitivity can also play a role here in assessing potential to convert. The recent changes to company tax rates are designed to help more Australian exporters increase their price competitiveness, therefore increasing their potential for conversion. Conversion factors within a given segment obviously have a major impact on potential volume which in turn affects market attractiveness. A score is given for potential to convert.
Potential for Longevity
The third category for assessment in the matrix takes into account the potential for long term sales and profitability. Potential for longevity can be impacted by factors such as the age or ageing of the target market, the likelihood of competitive substitutes and other long term trends in areas such as health, education, media habits, technology and income.
A growing middle class in developing countries such as China, India and Russia for example, is having a significant impact on the potential for future export growth. A score is also given for potential for longevity.
Comparing Export Markets
Once the Geographic Market Attractiveness Matrix has been completed for two or more markets, with scores given for each of the three key attractiveness categories, we are then in a position to more objectively assess the relative attractiveness of different potential export markets. Resources can then be applied to those export markets that appear to represent the best opportunity for return.
If you would like more information on how Baker Marketing can help you with your export marketing, please contact Baker Marketing on (08) 8352 3091