12: Negotiating and quoting in exports
12: Negotiating and quoting in exports
Once you have done all of your planning and preparation and put together an export strategy and plan, you need to begin implementing this plan. The plan has many facets to it and one of these is to approach your customers, convince them to buy from you, negotiate a deal and price that that they find acceptable, and present them with a quote (usually in the form of a proforma invoice) which hopefully they will accept. This represents the start to the actual export transaction and represents the selling process, involving negotiating with and quoting to customers.
The selling process
It sounds easy, but the negotiating and quoting process is the key to the success of your export endeavours. As with any business, success is based on closing sales. Without sales, there is no business. All of the market research done, advertising undertaken, e-mails sent, buyers approached, or trade fairs attended is worth nothing if you cannot close the sale. There is much theory written and models proposed about the selling process, but in this section we try to put forward as practical an approach as possible.
In the selling approach we propose, there are eight steps. These are:
- Deciding who will do the selling?
- Prospecting for buyers
- Doing a preapproach
- Approaching the buyer
- Making the presentation
- Overcoming objections
- Closing the sale
- Following up
The process outlined above is not strictly linear. It is more like a spiral, each step feeding back and influencing the others as the process overall moves forward toward the close (assuming you do it right). The salesperson knows that selling is a process of evaluation and reevaluation - both for the salesperson and for the prospective customer.
1. Deciding who will do the selling?
The first step in the selling process is deciding on who will do the selling. For smaller export companies, it will probably be the owner, managing director, or marketing/sales manager (where one exists) that will do the actual selling. In bigger companies that have an export department, it will probably be the export manager, but in very large companies with extensive export operations, they may employ a professional sales force in one or more countries that undertake the selling process in the countries they are responsible for.
Smaller companies should take care who they assign to the selling task. The owner often believes that he/she is the best person to do this task; after all, they own the company. There is also something attractive about the idea of flying around the world and being a global sales person. They owner believes that it is his/her privilege to take responsibility of this task. However, the owner, local marketing manager or sales manager may not have the best personality for dealing with foreign buyers. Bear in mind that this person may be dealing with buyers that speak a different language and that come from a different culture. While the owner's/manager's personality may be well-suited to the local market, it may not be appropriate for the foreign market.
Clearly, it is not easy to tell someone (or even for the owner to decide this about him/herself) that they are not the right person to undertake the firm's foreign selling activities. But it may be necessary to bring the persons under consideration around the table and to discuss the task and challenges with them and to come to a collaborative agreement as to who will do the job. If you are the owner, you need to think carefully about yourself and whether you are right for the job. If you are not, then it would be best to give the task to the best person.
Consider a sales team
Even if you are a relatively small firm, you may still want to consider forming a small export sales team, perhaps with your marketing/sales manager and/or a company technical expert (an engineer, for example). For those owners that are determined to be part of the export sales process, doing it as a team is a good option. Firstly, you can select staff to support you that are good in areas that you are no. For example, they may be technically more knowledgeable than you, or they may be better at selling than you, or they be able to speak a language (such as German) that you could put to use in your selling efforts, or they may have a more suitable personality for selling in foreign cultures.
Secondly, working as a team is often a good sales strategy, as it allows you the opportunity to share the selling duties, concentrate on different aspects of the selling process, or allow yourselves a chance to discuss and confirm your feelings about a new development or aspect of the sales proposition.
For larger companies, approaching the export sales task as a team is strongly recommended. Contracts are often large and complex enough to justify a team approach.
2. Prospecting the buyers
Prospecting is the process of gathering a list of potential customers or buyers. After all, before you can approach a particular buyer, you need to know who the buyer is. Generally you will identify your list of buyers at the same time as undertaking your export marketing research. Indeed, one of the objectives of your research effort should be to come up with a list of potential buyers.
But compiling a list of buyers is not enough. You still need 'qualified' these buyers, which means that they need to be assessed to see if there is business potential, otherwise you could be wasting your time. In order to qualify your foreign prospects, you need to:
- Focus on the needs of the customer
- Determine which products or services you produce best meet their needs
- In order to save time, rank the prospects and leave out those that are least likely to buy from you (and obviously start with those with the most potential)
Buyers versus end-users
It is worth considering that your buyer may not be the end user of your product. For example, if you sell children's toys, the end user may be the child that uses your product and the parent that buys the toy, but your customer may be an import agent or wholesaler of toys in the target market you have selected. You may believe that the end user will really want your product or find it useful, but your first task will be to convince the buyer that the product is not only suitable for the end user, but is also a good product for the buyer to purchase as part of his/her firm's product selection. You need to be aware that the buyer may have other objectives and considerations that have nothing to do with the end user. For example, the buyer may be looking for products that complement his/her current range of products or that allow the firm to enter a new market segment. It is important, therefore, that you explore what it is that drives the buyer's purchasing activities.
3. Doing your preapproach
At this point you now have compiled a list of qualified buyers (perhaps five to ten firms or even more) that you think are likely buyers of your firm's products. The next step is to prepare your approach to these companies. To do this, you will attempt to identify possible problems in the customer's firm where your product could provide a solution. At this stage you would also consider various selling objectives which take into account the marketing environment and the specific situation of the customer's firm.
But you are far away from the potential buyer; where will you get the information to prepare your preapproach strategy? Well, the Internet is a good place to start. Most companies today have a website and the website may reveal a lot about the firm that will help you decide how best to approach them. If there is a South African trade representative in the country in question, you may want to approach your representative and ask them to obtain company brochures and any other relevant information from the firm. You might ask the same of the local chamber of commerce in the city where the buyer is located. Alternatively, you could try accessing buyers' directories which you could obtain from your trade representative, or the foreign trade mission in South Africa, or from the chamber of commerce, or from the Internet. You might just want to phone the company and ask them to send you this information.
4. Approaching the buyer
This step can be further divided into two parts:
a) Making the appointment
The first is to make an appointment with the buyer. Most foreign buyers will be interested in meeting with foreign suppliers, even if only out of curiosity's sake, but you still need to take care as to how you phrase your introduction. Your introduction will also depend on what medium you use (fax, e-mail, letter or telephone). For example, you might briefly introduce your firm as an established and competitive supplier of the product in question that is looking at expanding into the country in question. You would continue by adding that you would like to meet with the buyer to discuss your endeavours and to present your self, your firm and its products to the buyer. At this point, you may find that the buyer declines the appointment because of some or other circumstance (for example, they have their own vertical suppliers) and this may save you considerable wasted effort. At this point, you might be bold enough to ask the buyer who else he/she suggests you could approach. If the buyer agrees to meet with you, try to make a firm appointment. When you make this appointment, give yourself enough time to get to the venue. Don't waste his/her time getting directions (you can rather use a taxi to get you there). You may want to check with the buyer if you can discuss business with him in English or whether an interpreter is necessary. If he/she suggests an interpreter, then you will need to arrange one. The value of an interpreter is that it reduces misunderstanding and makes it possible to get feedback on what is being said by the buyer to any of his/her underlings during the meeting - but you will need to ensure that the interpreter is prepared to keep track of these comments.
To save time at the time of the actual meeting, send some information before you visit, perhaps even at the time you make the appointment or sometime before you visit. Indeed, you could break this up into two parts; provide a short introduction to your firm, stating the objectives of your visit at the time of making the appointment, followed by more in-depth information about your firm and its products which you send to the buyer after you have confirmed the appointment but before the actual meeting. In this second communication, you may want to set some objectives for the sales call. What is the purpose of the call? What outcome is desirable before you leave? In so doing, you increase your company's presence in the buyer's mind. This information should be aimed at wetting the prospect's appetite.
b) The appointment itself
The second part of the approach is actually calling on the buyer. This is perhaps the toughest part of the selling process. It involves introducing yourself and making a "connection" with the buyer. Here you need to be very careful, as different cultures deal with business introductions differently. Read up on how the business etiquette in the country you are visiting. Make sure that you are on time - this is very important in many cultures (even if the buyer arrives late, this does not matter).
A good firm handshake is always a good start and bow if this is appropriate in the country you are visiting. Greeting the buyer in his home language is also a sign of respect (at which point you would of course switch back to English). Thank the buyer for giving you the time to meet with him/her. A business card (preferably in the language of the country you are visiting in addition to English) is essential and this will usually be swapped early on in the meeting. Dress appropriately - (a suit and tie or jacket and tie works in most countries). Be circumspect about giving gifts and get advice about gifts beforehand. Also be careful about using humour. What is funny to you, may not be amusing to the buyer; instead, try to be sincere and friendly.
In some countries the conversation will start with non-business related issues (how is your trip going, what do you think of the buyer's country/city, how are things in South Africa, etc.). Do not try and rush through this stage as you may put off the buyer. In other countries (such as Germany, for example), the buyer may get down to business immediately. If you are unsure what to do, do not rush into it but instead let the buyer take the lead. If the buyer talks about non-business matters, keep to this line of conversation until he/she changes the topic.
Once you get to the business issues, your challenge will be to arouse the buyer's interest while you also learn about his/her firm's needs and buying circumstances. At the start of your business discussion, state the purpose of your call so that time with the client is maximised and also to demonstrate to the client that you are not wasting his or her time. Be careful, however, of being prescriptive - you may offend the buyer.
During this stage you would also try and learn more about the buyer him/herself in order to establish a bond with him/her. Unfortunately, there is often very little time to do this in, while many factors may interfere with the process (e.g. the buyer may be interrupted by a phone call or he/she may be concerned about an up-coming meeting and his/her attention may wander). You, as the seller, will want to isolate key issues and will want to explore how willing the buyer is to consider your products and proposals. In a sense you will be agreeing to how the negotiations will proceed; will they be competitive or cooperative or collaborative?
Make sure that you've done some homework before meeting your prospect. This will show that you are committed in the eyes of your customer. Keep a set of samples at hand (where appropriate), and make sure that they are in very good condition.
Evaluating the customer's needs and buying situation
At this point, you will want to obtain some facts and figures related to the needs of the buyer, so that you can determine whether you can satisfy these needs. You will also want to inform your buyer about your products and deal with any concerns the buyer may have about your firm and its products. With some products you may not be able to present a final proposition to the buyer because you still need to make some calculations back at your office. In these instances, tell the buyer what you plan to do and stick to this schedule.
5. Making a presentation
In the selling process, there will be a time when you present your company and its products to the buyer - this is what the meeting is all about. Be careful about leaving before having done this presentation. Sometimes you may have only a few minutes to do this and you will only be able to do this verbally; on other occasions you may have an hour or more to deliver your presentation and you will be able to support your verbal presentation with slides, graphics, photographs and even videos.
Whether you have a very short time or a long time to do your presentation, you should always something to leave behind for the buyer to ponder after you have left. In the past this would have been a paper-based presentation, perhaps comprising a company brochure, a product catalogue and a letter of introduction. Today, it is becoming increasingly important to leave behind a CD containing digital copies of these documents, as well as a short video (or Flash) presentation of a few minutes that describes your company and the products it has to offer. All of this supporting information should be available on your website as well (indeed, the website is arguably more important that the CD).
Some additional tips for your presentation:
- Be enthusiastic about your product or service. If you are not excited about it, do not expect your prospect to get excited.
- Focus on the real benefits of the product or service to the specific needs of your client, rather than listing endless lists of features.
- Try to be relaxed during the meeting, and put your client at ease.
- Let the client do at least 80% of the talking. This will give you invaluable information on your client's needs.
- Remember to ask plenty of questions. Use both open-ended questions and 'yes' or 'no' questions. This way you can dictate the direction of the conversation.
- Never be too afraid to ask for the business straight off, but do so with respect.
Stages of presentation
Your presentation (whether a short five minute one or a longer hour presentation or even a digital or hardcopy presentation) should strive to achieve five things:
- Attention: Get the buyer's attention
- Interest: Get the buyer interested in what you have to
- Desire: Get the buyer to want what you have to offer
- Conviction: Get the buyer to believe that your offer is a good one for his firm
- Action: Get the buyer to sign an agreement/contract
The first two steps will in most cases be easy to achieve. The fact that you have travelled far afield to visit the buyer will probably ensure his/her attention and interest. If, however, you are selling something that the buyer does not believe that you or your country is a recognised seller of (such as selling brandy to France), then you may still have to focus on these two steps.
The last three steps will possibly more difficult to achieve in foreign markets because of the distance involved and the question mark on matters such as reliability and complexity of supply, the costs involved, the uncertainty about service, etc.
6. Overcoming objections
In almost all sales presentations, local and foreign, the buyer will have certain reservations about the company, the products and entering into an agreement with your company. In the foreign sales environment, overcoming these objections is even more difficult because of the complexity of the foreign communications and cultures involved. Some objections may prove too difficult to handle, and sometimes the buyer may just take a dislike to you (also known as "the hidden objection").
Approaches for handling objections
Objection handling is the way in which salespeople tackle obstacles put in their way by clients. Here are some approaches for overcoming objections:
- Firstly, try to anticipate objections before they arise.
- Do not allow objections to grow into an argument.
- Objections often have merit, especially from the buyer's point of view. If necessary, acknowledge the objections, provide some simply counter arguments in an amicable and friendly way and then move on. Do not simply ignore or wave the objections away.
- Do not follow a confrontational approach and try and be more superior than the buyer - show respect.
- The 'yes but' technique allows you to accept the objection and then to divert it. For example, a client may say that they do not like a particular colour, to which you may counter 'Yes but the product is also available in many other colours.'
- Ask 'why' the client feels the way that they do.
- 'Restate' the objection and put it back into the client's lap. For example, the client may say, 'I don't think the product will work in this country,' to which you could respond, "Is it that you don't think the product will work in this country because of the different power supplies being used?', generating the response "No, we have different national standards compared with South Africa; and we have tried it before". You may be able to counter with the comment that you have no adapted the product to meet their national standards authority and that you have received national certification for the product.
- The sales person could also tactfully and respectfully contradict the client, but you need to be very careful how you do this.
7. Closing the sale
This the most important stage of the selling process and often salespeople leave without ever successfully closing a deal. It is at this point where you need to employ an affective means of bringing the buyer to a decision. In the foreign environment where you are not familiar with the culture and language, it may be very difficult for you to gauge when to try and close the sale. If you do it too soon, the buyer may feel that you are being too 'pushy' and may withdraw from the discussion. Leave it too long and the buyer may get bored and frustrated with your presentation with the same ultimate effect.
It would wise to ask advice on what the cultural norms are and what signals to look out for. If there is a DTI trade representative in the country, ask them what to do. You may also wish to read up on the business etiquette in that country. At the very least, you should acknowledge that you are not familiar with their culture, and that you do not want to show disrespect, but that you want to know whether the buyer is interested in what you have to offer and whether he/she has any questions or queries that can answer. Done in a polite and respectful way, this could help break the ice and bring the negotiations to a successful conclusion.
It is also during the closing stage (but often also beforehand) that you will enter into negotiations with the buyer. Negotiations involve a to and fro interaction between yourself and the buyer about various aspects of the deal (such as price, delivery times, specifications, quality, quantity, ability to deliver, delivery dates, etc.). The negotiation process is an important part of the selling process.
Some tips for closing the deal:
- Just ask for the business! - 'Please may I take an order?' This often works well.
- Look for buying signals (i.e. body language or comments made by the client that they want to place an order). For example, asking about availability, asking for details such as discounts, or asking for you to go over something again to clarify.
- Just stop talking, and let the client say 'yes.' Again, this again works well.
- The 'summary close' allows the salesperson to summarise everything that the client needs, based upon the discussions during the call. For example, 'You need 12 000 items of product X in blue, packaged as we discussed, and delivered in Hamburg by the end of February' Then ask for the order.
- The 'alternative close' does not give the client the opportunity to say no, but forces them towards a yes. For example 'Do you want product X in blue or red?' Cheeky, but effective.
It is important to realise that closing the sale is really about getting the buyer to agree to buy from you. The first step is really simply a verbal agreement to the parameters of the order that the two of you have discussed the past hour or so.
To begin with, in most instances it is unlikely that the buyer will agree to the order immediately. The buyer more likely will want (a) specifications both in terms of capacity and price that you may still need to confirm back home, (b) some time to think about the order (in some countries such as Japan, it may take many, many visits and several years of interaction, negotiation and discussion before you ever receive an order), (c) a formal quotation on which to make the decision.
A few flamboyant exporters may tell you that you should not walk out of the buyer's office without a signed order form, but it is seldom as easy as this. Because of the many cultural and language differences, a single order form is unlikely to suffice in all instances. The requirements between buyers may also vary drastically especially as you move from country to country. Finally, most export orders are confirmed on the basis of a quotation, which usually takes the form of a proforma invoice.
In many instances, the actual closing of the sale often takes place away from the original meeting and forms part of the follow-up process that is key in the export selling process.
8. Following up the sale
As we said above, the follow-up is an important part of selling process especially in export markets. Depending on whether the agreement was signed at the time of the sales presentation, you will either want to (a) thank the buyer for his time and custom, and assure him of your attention to the supply of the goods sold, or (b) thank him for the meeting and provide a proforma invoice that covers all of the issues that the buyer asked you to address (these may have had to do with quality, quantity, price, colour, specifications, delivery dates, insurance, freight, etc.). We deal with the preparation of the proforma invoice in the section on quoting for exports.
Adapted from http://www.marketingteacher.com/Lessons/lesson_personal_selling.htm