When It Comes
to Strategy Don't Listen to the "Experts"
I would like to
address much of this NEWSFLASH to a firndamental issue: what is
the best strategic approach to direct marketing overseas?
Unfortunately there is a widespread misconception amongst U.S.
direct marketers in particular, and the associations, groups and
individuals who advise them, that the best and only way to go
international is on a country-by-country basis.
Recently, amidst
some fanfare, the Direct Mail Advisory Board of the Universal
Postal Union (UPU) launched a 300 page "Direct Mail Guide"
and a corresponding website containing information on "the
state of direct marketing in over 189 countries". Supplementing
this is an interactive CD-ROM "lDMAPS" developed by
the International Business Unit of the U.S. Postal Service (in
association with the UPU's Direct Mail Advisory Board), which
provides "statistical data" for the same 189 countries.
These "tools"
are said to "focus on economics, demographics, technology
information, postal infrastructure, culture and international
commerce within 189 countries", allowing direct marketers
to "analyze a country's market potential and current trends".
Misplaced Initiative
I believe that
this initiative, and others like them, do an enormous disservice
to the international direct marketing industry.
Why? Because they
serve to focus the attention of less experienced direct marketers
on the totally erroneous view that they must first select likely
individual markets overseas, and then invest locally in those
markets in order to succeed.
Of course, there
are direct marketing companies who, because of the nature of their
business or sales volumes, can only operate on a local basis in
larger markets - such as Viking Office Supplies, Reader's Digest,
International Master Publishers, Franklin Mint, Lands' End and
many others.
These companies
invest locally, by renting offices, hiring staff, competing locally,
complying with local laws and paying taxes. This is better described
as overseas investment in individual markets - not "cross-border
direct marketing" - and often these marketers take years
to turn the corner and make a profit.
There are probably
up to 30 industrialized countries where such a local, onshore,
DM strategy is feasible. However, it's an expensive way to go
and it usually requires considerable financing and a long- term
business plan depending on the size of the market.
I simply cannot
understand why U.S. direct marketers and their advisers, focus
entirely on this country-by-country strategy when, as every experienced
marketer knows, there is another, much more rewarding and much
less expensive way to go, about which there seems to be a conspiracy
of silence. The reason for silence about this alternative strategy
is that most "international DM consultants" don't seem
to know about it, they certainly don't think about it (because
nearly all have vested interests in particular overseas markets
which they represent) - so they have nothing whatsoever to say...
Test International Markets First
Using an Offshore Strategy
This alternative strategy
is to acquire subscribers, customers, members and donors by mailing
from headquarters, across several regional or global markets, using
regional and global multinational lists, receiving response offshore (eg. your headquarters) and processing
and fulfilling from there. No special investment is required, over and above your marketing costs, and
your risks are minimal compared with investing locally in individual countries.
The fact is this:
individuals and businessmen on multinational lists are there because
they have responded to an international offer from offshore previously.
It is inevitable that on average they will respond better than those whose names appear only on local lists.
A good example of
this is a U.S. catalog of catalogs called SHOP-THE-WORLD-BY-MAIL
who mailed many hundreds of multinational and local lists during their
first three years in the international market. As Gail Baird, the owner of this company, never ceases
to remind me whenever we have met since: "James, do you remember,
NOT ONE local list worked!"
This was entirely
and implacably true at the time even though scores of excellent
local lists were tested. Nowadays, there are local lists that do work for international
offers from offshore in some countries, but it's always a risk.
Mailing
from Offshore is the ONLY Strategy for up to 159 Smaller Countries
Where There is Little or No Local DM Infrastructure and Simply No Local Lists
There are over 15
million good responding names on multinational lists out there
so the universe is not inconsiderable. The strategy is simple
(as every experienced mailer knows): you mail from offshore "creaming
off" the larger countries using multinational and regional
lists with names in those countries, and at the same time you
use the same lists and mail into up to 159 smaller countries where
there is no alternative because of little or no local DM infrastructure
and no local lists (except for the telephone directory).
Mailers soon discover
that those relatively unspoilt smaller countries (globally and
regionally) generate significantly higher average response rates than larger
countries. National Geographic (amongst others) have declared publicly that they receive a 200% - 300%
lift in response from smaller countries compared with larger countries.
There are reasons
for this. The mail gets fully delivered in most smaller countries
(not always the case these days in larger countries). There are no local, competitive
offers in smaller countries. Individuals in smaller countries
are more willing to charge their credit cards for U.S. dollar
offers and respond and send payment offshore (because they have
no alternative).
I could go on about
the offshore marketing strategy, but at the end of the day, there's
only one thing any mailer can do and that is TEST.
Adapt your local
control package, contact an international list broker who knows
the multinational lists and countries that perform best, and JUST
MAIL.
The risks are minimal,
because your investment is paltry, and the result could be a lot
more than a pleasant surprise with significant roll-out potential.
Your strategy would
then be to continue to test more lists and more countries (the
list/country combination is key) and to carefully monitor response
by country within list (some mailers make the serious mistake
of not doing so).
You will soon discover
that some large countries deliver response rates which are consistently
above average. At this point (AND NOT BEFORE) you can study the possibility
of a local approach into that country from onshore rather than offshore.
It's
the Least Expensive and Most Certain Way to Go
This is me least
expensive and most certain way to test a product and an offer
in the international market. Selecting individual markets (especially
the largest and richest ones) before testing multinationally across
many markets from your headquarters, is a recipe for disaster
and is a misconceived strategy littered with the dead bodies of
mailers who have tried and failed. (With the greatest respect,
U.S.P.S. Intemational Business Unit and UPU Direct Mail Advisory
Board, please note).
Personally, I have
been mailing internationally since 1976. I couldn't care less
(and never have) about the local economy, the demographics or
technology infrastructure - or anything else - in any local market. If you take a global view, only one thing matters, and
one thing alone: do you get a satisfactory response rate up front? And do you receive a satisfactory conversion
at the back end so you can build long-term business relationships
with individuals in those countries - even if you're operating
and fulfilling from offshore?
Choosing markets
to enter is not a matter for research or conjecture. JUST MAIL
risk free from offshore and you'll soon find ont what to do and
where - from the results you do (or do not) - get!
If you hold any
lingering doubts about whether to test this Strategy have a word
with one of its international English language periodical publishers
- Time, Newsweek, National Geographic, Fortune, BusinessWeek,
Economist, Harvard Business Review ... and many others. They have
pursued this Strategy successfully for decades. You will not
be a pioneer.
* * * * *
The
Costs of Getting Paid
Most mailers I know
(includmg myself) provide a U.S. dollar payment option on their
order forms and strongly encourage responders to charge their
international credit cards. Its simple and it means customers
can order more easily by fax (which 65% or more prefer to do rather
than wait upon the vagaries of the international postal system).
Generally the higher
your average order value (US$250 and up) the more likely responders
will choose to charge their credit card. One of my companies has
an average order value of US$375 and 95% of customers choose to
charge their cards.
For average order
values below US$100, we find that only 60% - 70% of customers
will charge their
cards.
Others will send
a U.S. dollar bank draft. If this is drawn on a U.S. bank the
cost of clearance is low. If it's drawn on a foreign bank in the
responders country, you could have to pay clearance charges of
US$20 or more (so you're better off requiring them to send
US$ bank drafts drawn on a U.S. bank or sterling bank drafts drawn on a U.K. bank).
The big question is whether
to offer a local currency payment option.
I have found with
global mailings over the years this is too much of a hassle. From
smaller countries, local currency cheques can take 3 - 4 months
to actually clear and ultimately a lot of them never do.
Of course, if you're
mailing in large volumes within any one country you do lift response
significantly ifyou offer the option to pay the equivalent to
the U.S. dollar amount in local currency (quoting a local currency
amount), though most mailers inflate the local currency amount
by five percent or more, to cover against exchange fluctuations.
Some mailers open
local bank accounts through which to clear such cheques. However,
in some countries this is deemed to be doing business in that
country and you may be exposed to local taxes.
The worst thing
you can do is to clear foreign currency cheques through your own
local bank in your own country which can result in bank charges
of up to US$50 and more per cheque and you may have to wait 4-
6 weeks for those cheques to clear.
The smartest move
is to use one of the foreign cheque clearing services which specialize
in international mail-order. They will charge you US$0.50 - more
or less - per cheque cleared depending on the currency and your
volumes in that currency.
There are three reliable cheque
clearing services you can contact in order to compare their terms
and conditions, and I recommend you do so:
- Pacnet Services Ltd.
Tel: +1 (604) 689 0399 Fax: +1 (604) 689 0311
405 595 Howe Street
Vancouver, BC
Canada V6C 2T5
Email: Rosarme@pacnetservices.com
Web: www.pacnetservices.com
- Enropean Bank
International Building
P.O. Box 45
Kumul Highway
Port Vila,Vanuatu
Tel: 678 23410
Fax: 678 23405
Email: Client Email Processor <Security@vila.net>
- GlobalCollect
Polarisavenue 17
2132 JH Hoofddorp
The Netherlands
Tel:+31 20 500 8600
Fax:+31 20 500 9500
Web: www.tnt.com
Globally the international currency in which the marketplace tends
to think and evaluate is still the U.S. dollar.
At some point next year, however, once the Euro has settled down
as a day-to-day currency in the twelve Euro Member States, you may be better offquoting Euro prices
for that portion of your global mailing. As usual, and as always,
plan to test first before rolling out.
