These may be troubled times, but that’s no reason to shy away from doing everything you can to maintain your market share, writes Ian Murray.
People who know that I have a background in marketing with major international companies often ask me, “Why do you have to have to advertise that product, when everyone knows about it?” The fact is, brands need constant promotion to maintain market share.
When one considers for a moment how much it costs to develop and launch a new product, how long it takes to turn a profit, and the investment made to gain market leadership, it’s not hard to see why large marketers rarely pull back from the advertising and promotion roundabout. It’s simply part of the game: maintain market share at any cost and, if you are market leader, stay there and beat competition into the ground.
Interestingly enough, it remains much the same even when things get tough. Markets might decline, but share and market leadership must be maintained in good times and bad.
But can the same be said for export markets? The sheer cost of getting into overseas markets is horrendous and servicing them is costly, so maintaining your position even in a declining market is just as important. The questions are: how tough is it? And: what should I do?
Two recent studies undertaken by the Australian Institute of Export reconfirms it is getting tougher, and financing exports is becoming harder. The preliminary results of the most recent study confirms that manufacturing exports are being hit the hardest followed by agriculture. Across the board, forward orders are down by as much as 30 percent, and companies seem to be avoiding the Americas and Africa. On a positive note, most sales continue to go to Asia and there appears little interest in avoiding these markets. While some companies are pulling back their marketing spend, many seem to be continuing marketing pressure despite the shortfall in the Export Market Development Grants scheme.
Also important is the impact of any dampening of local demand, which in many cases funds international sales. Significant export sales are driven by participation in international supply chains that are rapidly declining, and there has been a reduction in demand in the not highly publicised, but very important intercompany export business.
At the same time, our markets are very heavily driven by Asian demand, our dollar makes Australia very competitive in many markets, and we have a very professional well regulated export finance and insurance industry. So what does one do when the going gets tough?
First and foremost, don’t give up. Major marketers don’t give hard earned market share away easily even in declining markets, and nor should we in export markets. In saying that, it’s in times like these that require sound business thinking and far greater emphasis on minimising risk.
Australian exporters have at their disposal some very effective agencies and private sector organisations that can provide sound advice on market risk, market dynamics, and finance and business risk. Austrade, with representative offices in all major export destinations, can provide valuable market and market sector information; the Export Finance and Insurance Corporation (EFIC) and credit insurance providers are regularly updating country risk data. Banks too can assist with information and products designed to assist exporters with managing risk.
It’s probably not a bad time to make sure that you fully understand the export process and take more control over the management of your export business. When times are good, outsourcing is very attractive and things like credit insurance seem to be less important. When times are tough, control, like cash, is king.
And, as we saw in the Asian crisis, opportunities come alive too when things are tough. Australian companies are good niche players and have wide experience in managing business in a soundly regulated market—and more regulation is on its way.
In short, don’t run from hard earned markets. Sound hands-on risk management, good planning and advice strong marketing and an effective knowledge of the process will always see you through.
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