Marketing Mix (4Ps) in Export

Marketing mix is a popular tool in the service of marketers.

It allows for clear structuring of strategic tasks for entering new markets, launching a product or an entire product line, revising current market positioning, etc. Its advantages as a tool can be fully realized when developing an export project, since export is a specific variant of mastering a new market - a geographical one. Only this market is located outside the state border of the Russian Federation, and in the case of "pure" export - outside the single customs border of the EAEU (meaning the goods must cross the state borders of Russia, Armenia, Belarus, Kazakhstan, or Kyrgyzstan with a third country).

Let's sequentially consider the components of the marketing mix, taking into account the export component of the project.

Product

When developing an export project, the issue of product policy can become key. Cases where a product is fully ready for the export market without any adaptation are quite rare, especially if we are talking about "pure" export - outside the Customs Union.

Product adaptation for export includes two main aspects.

First, it's the refinement of the product considering market requirements. That is, the product must be ready for the demands of potential foreign consumers.

A fairly large group of products may not require such refinement. For example, this includes numerous raw materials, products of the agro-industrial sector, etc.: timber, coal, grain, flour, and so on.

However, the higher the level of processing and product differentiation, the more likely it is that a product familiar to consumers in Russia may not be attractive to a foreigner. For FMCG, different packaging, flavor nuances, additives might be required, not to mention a radical redesign of the label. For industrial goods, it's necessary to understand the specifics of technological processes abroad, the preferences of local decision-makers who have different established criteria for procurement and decision-making, different educational backgrounds, and so on.

All these factors require detailed study. In principle, two main options are possible here. Either the company finds a partner abroad who will assess the potential of the original product and be willing to work with the Russian company to "bring it up to standard" for export. Or the exporter takes the issue of market research upon itself, formulates conclusions - how ready the product is from the perspective of the foreign market's requirements, and which aspects require refinement.

The second aspect of adaptation is fulfilling the requirements of state (supranational) bodies that permit the product to be sold on the foreign state's market. This concerns the export of goods from Russia to a lesser extent, and the import into the territory of a third country to a greater extent.

The depth of this type of adaptation depends both on the product category and the country of potential export. It is always more difficult to overcome barriers (longer, more expensive, etc.) for some complex and dangerous categories of industrial goods, chemical raw materials, food products, children's goods. But the country is also important. For example, there are very high barriers for exporting a number of products to the People's Republic of China, the countries of the European Union (the plus here is that the barriers are unified - import into one country opens almost the entire European market), and the United States of America. In general, there is a pattern (although not a direct one) that the higher the level of socio-economic development of a country, the higher the administrative barriers for goods from third countries.

Knowledge of such barriers allows for calculating the project's economics. If a product requires expensive certification, licensing, falls under quotas, then often the minimum volume of profitable shipments reaches such figures that the company, in principle, refuses to work with this market.

All the above issues require resolution before the stage of active work with potential buyers. A potential exporter must have information on all basic parameters - what product the market is ready to consume, and how to overcome the barriers to entry. A quality marketing study or a partner whom the company is ready to trust as a guide to its interests in the foreign market will help here. However, if you have no experience in the market and are not internationally recognized as a supplier, finding such a partner is extremely difficult.

Market research (including barriers) can be conducted independently, outsourced, or utilize measures of state support for exporters. The more complex the market and the higher the level of product differentiation, the more important marketing analysis is as the basis for decision-making in the export project.

Price

When the product is fully developed for launch on the export market, it makes sense to move on to pricing policy.

Its development is a balance between the cost of the product for export shipment, considering all costs of physically moving the goods to the buyer, and competitive prices in the foreign market.

When a company clearly knows all the expenses within the export project, calculating the cost and the break-even point is quite simple. This is important for assessing the feasibility of entering the foreign market, at least with the current product options.

The second issue is analyzing prices in the foreign market. It is desirable to know not only the final consumer price but also the basic markups along the distribution chain, as well as the price of comparable goods "at the border".

To collect this data and form an effective price offer, one needs to turn to a number of sources.

Collecting information on final prices has become easier in the era of the Internet and automatic translators, especially for consumer goods. However, for countries with lower internet penetration, underdeveloped consumer culture, and rare languages, even this task can become non-trivial and require the assistance of companies that can organize and conduct a market census, make the necessary "price slices".

Prices for industrial goods are usually confidential or there is very little information about them. Here, it is difficult to conduct a qualitative assessment without insider information, which is not cheap. A visit to the country and communication with local market representatives might be required.

In addition to obtaining information through surveys in one form or another, it is important to use more objective data sources. This primarily includes customs statistics. Analyzing export and import data provides an understanding of the product's cost "at the border," which is extremely important for calibrating the price offer.

In certain situations, databases of exports from Russia to a third country might be sufficient. For example, when the share of Russian goods in that foreign market is high. Then one can use a relatively inexpensive database from Russian customs authorities and see at what cost the goods are being customs cleared, who the supplier is, and who the buyer is. This will allow not only refining the price offer but also forming a list of potential distributors of your products abroad.

More often, this information will be insufficient. Then one can purchase a database of a third country on import operations. In this case, you need to know reliable suppliers of such databases (these will be foreign, often Asian companies), be prepared for significantly higher costs compared to the first option. Furthermore, processing the databases will also require time and competence. However, you will have a fairly complete picture that will allow you to form an interesting price offer for the foreign buyer. Unfortunately, sometimes the result may be the conclusion that, given the current combination of cost factors, you cannot offer a competitive price in this foreign market. If you do fall within the range of "full cost is less than the competitive price," then you can proceed to work with sales channels.

Place (Sales Channels)

Information about sales channels is collected both during work on the product and during the analysis of competitive pricing. Logically, when adapting the product and forming the pricing policy, we roughly understand in which channels we will promote our goods, as this affects both its price for the consumer and certain parameters, especially regarding packaging, etc.

Thus, all this information should already be collected during the market research process, or, in rarer cases, through direct contacts with local market players who themselves have shown interest in working with your assortment. It needs to be structured, priorities chosen by types of channels and by the optimal length of the distribution chain - where a shorter link is possible, and where it is more effective to work through several links, starting from a direct importer and ending with small wholesale and retail.

The main question that arises in export projects regarding work with channels is the actual choice of specific companies that will act as connecting links between the exporter from the Russian side and foreign consumers. Direct sales are quite rarely possible. More often, this is the B2B segment, but only if administrative and market barriers are low. So, shipment to the end consumer is a great success, which is possible (if we don't take EAEU countries, of course) for expensive industrial goods exported to countries with low barriers for Russian products, for example, Tajikistan or Uzbekistan. Although even there, implementing direct supply is quite difficult due to country-specific business practices.

Choosing a foreign partner for implementing an export project requires special competencies and skills. It all starts with preparing a competent commercial proposal, which should be attractive for a foreign decision-maker both visually and in terms of translation quality.

Content is even more important, and it often "suffers," reducing the likelihood of concluding a contract. As a rule, Russian entrepreneurs, when going abroad and forming a commercial proposal for this purpose, pay a lot of attention to the product itself but very little to the model and terms of interaction. Such an approach can only work with rare direct sales, but for distributors and wholesalers, the answer to the question - what they will earn from the deal (and moreover, earn regularly) is always important, not what they will sell.

Therefore, in the commercial proposal, it is imperative to focus on how you are beneficial as a partner, making the terms as comfortable as possible for the foreign company. This implies disclosing such issues as delivery terms (Incoterms), payment terms, prices defined within a narrow range, logistical, financial, insurance, and other important aspects of interaction. For small and medium-sized business representatives this year, a free service (upon application) is available for preparing a commercial proposal with translation into a foreign language through regional export support infrastructure institutes.

When the market entry model is formed as an idea and visualized in the commercial proposal, one can proceed to the actual search for partners and conducting negotiations.

For this, it is important to know the profile of those we are looking for. Even if they contacted us independently before, this does not at all mean that a deal is possible, let alone that it will be maximally effective with this particular type of foreign counterparty.

The partner's profile is determined within the framework of marketing research of the foreign market. Quite often, companies put forward incorrect hypotheses about the counterparty's profile and then spend a lot of time trying to enter into negotiations with such organizations. For example, in practice, there was an instance where an FMCG manufacturer wanted to enter a European country directly into the marketplace and DIY channels, although for its product category, these companies work with imports only through local wholesalers. Moreover, it is important that the wholesale seller is registered not just in the territory of the European Union, but precisely in the country that was the geographical market of search. Logically, time would not be wasted if the company had conducted a marketing study of the EU country's market in advance.

As with commercial proposals, one can turn to the regional export support center for a free service for a Russian small business company to search for partners for organizing export supplies. For this, you need to specify the product (product assortment) and the foreign market. However, it is better if this choice is justified by research, as otherwise it is likely that the responsible executor will refuse such work - because the risk of not providing the service without understanding the product's demand in the market and the customer's ability to overcome entry barriers is very high.

For searching for partners and conducting initial negotiations, participation in international exhibitions and business missions can be useful. At the same time, participation in business missions is desirable to precede with partner searches, so that those foreign companies that have a high interest in cooperation participate in the event. In personal communication, it is always possible to discuss more "subtle" parameters of interaction, and partners reach this level after a certain prolonged communication, even if remote.

In any case, it is better to select several potential partners to subsequently make a more balanced decision on the optimal option. It is possible that during communication and negotiations, the vision of working in channels will be adjusted, questions of pricing and even product parameters will be clarified. At the same time, partnership is of particular importance for implementing promotion measures, as it is always more effective to engage in advertising activities on the territory of a foreign state, even for global brands.

Promotion

For many markets, for example, FMCG, promotion is important regardless of the geographical market. However, the peculiarities of the country's culture, including the specifics of consumption, communications between the producer and the consumer, influence promotion both in terms of the forms of advertising activity and their content. Other areas of promotion, for example, GR, carry even more country-specific features.

Launching products for export may require a fairly wide range of promotion activities in different sales channels; however, in some cases, for example, in the raw materials market, goods of investment demand, one can limit oneself to a small list of tools.

In any case, it will be useful to translate the website into the language(s) of business communication of the country where export expansion is planned and/or presentation materials. Sometimes it is advisable to create a website or landing page on a country-specific domain.

Also, to show the seriousness of intentions and integrity, visiting the foreign country where supplies are planned is desirable, both privately and as part of business missions or for participation in exhibitions, conferences, etc.

Actual advertising activity can be very diverse, considering the previously defined product(s), pricing policy, and priority promotion channels. As when developing a marketing mix for the domestic market, advertising activities should support the chosen market positioning model and be addressed to the target consumer group.

Implementing advertising campaigns, especially multi-format ones, with one's own efforts is rarely justified. The more "exotic" the country, the more difficult it is for in-house marketers to work it effectively, especially if the business does not have employees who have lived for a long time in the export country, understand the local mentality and language peculiarities. Outsourcing in this direction acts as the most adequate approach for solving advertising tasks more effectively.

Sometimes it is worth working through Russian companies specializing in a certain "geography," for example, China or Germany. This will likely be more expensive but less risky. Finding a partner abroad is also possible, but the question arises - is the business ready to control the process remotely? Although the choice of offers in this case is much larger, which allows saving resources and expanding opportunities. One way or another, Russian agencies that deal with promotion abroad, for the most part, still delegate a number of tasks to foreign contractors.

Storyboarding an export project using the marketing mix model allows for improving the quality of working out the task of entering a foreign market and finding the right answers to specific questions about the potential of the hypothetical possibility of exporting to a certain country with a positive economic effect.