How is business in Pakistan these days? Could it be better? What strategies can be adopted to make it better? What does 2011 hold for its economy and your business?
Have a majority of Pakistan’s small to medium sized enterprises (SMEs) considered expanding directly into global markets in North America, EU, Asia? Either by finding distributors/wholesalers in these regions or by soliciting business directly from the end-user whether this is a company or individual consumer? Can these companies utilize direct and interactive marketing (DM) to expand beyond their borders? How can they do this and what are the most effective and affordable ways to do so? If they are already in global markets, how can DM be used to support and improve their efforts and results? Can DM be used to increase market share in their home market?
Pakistan SMEs are fortunate to have organizations like the Small and Medium Enterprises Development Authority (SMEDA) and the SME Bank. These organizations recognize the importance and the vast potential of SMEs. Working in conjunction with private and public agencies and associations and armed with the knowledge that they can expand their business themselves, should propel a percentage of Pakistan’s SMEs into the global arena.
In Pakistan, 93% of all business enterprises are listed as SMEs. That’s 93% of nearly 3.2 million businesses. Pakistan’s SMEs contribute +30% to the overall GDP and 25% to the country’s total export earnings.
Even if only 1% of Pakistan’s SMEs take the global direct approach, that’s almost 30,000 companies entering the global market. Perhaps a more realistic goal would be for 1/10 of 1 percent (0.001). That would still be nearly 3,000 companies! That’s good news for Pakistan’s economy and employment picture and to build Pakistan further as a global brand.
Can this be done effectively, efficiently and at low risk? Yes it can. Is there sufficient opportunity for solid return on investment (ROI)? For those businesses that can provide their goods/services overseas, Yes!
As a market example, the U.S. is the most “business and import-friendly” country in the world. US import value exceeds 95% of the GDP for all countries of the world combined. The U.S. makes it easy for non-residents to establish businesses here. There are highly targeted databases available on over 23 million businesses and on every household in the U.S. One U.S. data company offers over 300 demographic and lifestyle selections on every household in the U.S. Total US import values in 2009 were US$1.7 trillion dollars even with overall imports declining in that year. This resulted in generating US$30 billion in import duties and fees which makes the US Customs Bureau the third largest generator of revenue in the U.S. after the International Revenue Service (taxes) and the Social Security Administration (retirement/pension fund).
Let’s look at one market segment: textiles and apparel imports into the U.S. With only one exception- when textile and apparel imports fell by 2.0% in 2001, these imports have risen steadily since 1989-culminating in a total value growth of 249%. While imports declined in 2009 by 9%, a double digit increase occurred in 2010.
And to make it even more inviting, there are excellent companies within Pakistan that can provide the creative, marketing and tech services needed for a company to expand globally by going direct to the end-user.
Pakistan’s businesses should ask, “Are we taking a passive or active approach to our businesses?” Pakistan is not alone in the need to ask this. The global economic downturn has affected all markets. Advances in technology and reliance on the internet have both assisted business and threatened the very foundations of how many businesses function. Many, by necessity, are experimenting with new methods, diversifying, trying new things, adapting to new realities.
How do individual businesses maintain market share and increase their export business? What methods are used to ensure business increases? If the traditional models are functioning efficiently, that is excellent news. But in these difficult times, is this enough? Are there other methods to test? The global economic reality is that all businesses have to do more.
Should each SME in Pakistan consider taking a more direct approach to both global and domestic sales?
Consider, yes. Act upon it? Not always. Every SME’s business model and circumstances will differ. To increase domestic market share it will depend on if the goods/services offered lend themselves to a direct approach. Will DM prove responsive and be worth the investment, however small? If the goods/services can be marketed outside of one’s borders, and if management has the comfort level to implement a direct strategy and if the ROI is there, then a global direct strategy needs to be seriously considered. Staffing need not be an issue as much can be overseen by one or two people.
What is a direct approach and how can it be utilized and maximized to find more customers.
The direct approach involves determining as precisely as possible the target market-your potential customers and clients. This can be a direct sale to a customer-either an individual consumer (B2C) or a company (B2B). Or it can involve using DM to finding local agents/distributors or wholesalers abroad who will purchase your products and then sell them through their existing networks. The next step is choosing the best message and methods to reach the prospects directly. Can a direct sale take place with little introduction or is it imperative to introduce your company and educate the potential target as to the benefits of doing business with you? Usually an introduction is needed and credibility needs to be established. How to start: Begin by mining databases for best prospects, refining these lists and determining the best method(s) of contact.
How can this be accomplished?
o What is you desired result? Immediate sales, encouraging any type of contact with your company, asking the prospect respond to a survey or specific questions, securing a meeting for a presentation, promoting and raising the awareness of your company or brand within an industry sector, directing responders to your website or signing up for a newsletter/e-letter?
o Start with a review of your target market. Then find sources that can not only find the best databases but fully refine the search so nothing is wasted. One pays a certain amount per thousand records so refining the target universe saves money immediately and can further save on printing, lettershop, and postage costs if the preferred contact method is a postal campaign.
o If present, incorporate your internal house file of customers into the data mix. Use this information and transaction history to better identify and isolate like customers and clients from commercially available databases.
o Decide how your company needs to be positioned. What image best projects and promotes your brand or corporate identity? Is it price, quality, service, speed of delivery, reliability, industry reputation? Do any of these separate your company from your competition?
o What is the optimal contact strategy to secure the response desired? Is a single contact sufficient? Will it require a series of contacts? Is contact via one form of communication the best option? Or is an integrated campaign of two or more of the following a better option (postal + email + telephone+ social media)?
Due diligence may be required for any and all of the following to clarify: best markets, market size, revenue potential, competitive analysis, vendor sourcing, free and fee-based research and market entry assistance. Depending upon the target country, there may be a variety of free services available for market entry applicants, usually provided by local or national governmental agencies. These can be identified and navigated by local on-ground sources the SME knows or retains. Due diligence can be undertaken either by in-house resources or by contracting and retaining an appropriate consulting entity or by a combination of both.
What would be the initial investment in time, personnel and money?
Again, this depends upon the type of campaign and how much is possible to be undertaken by existing employees. Retaining outside expertise and consultancies is fully negotiable and based upon time/effort involved. Upfront fees may be able to be mitigated (but not eliminated) by including a commission on future sales. Renting and broadcasting an email campaign can be inexpensive as there are no postage, printing and paper costs. Whether it works will depend upon the offer and if the email is opened by the targeted recipient. How to differentiate your solicitation from the many junk and spam emails received is an important consideration. If it is opened, is the message one that conveys credibility and value enough to gain interest? Relying on website visibility is another possibility but this may require some investment in search engine optimization (SEO) to ensure that your company comes up in an online search.
What are the basic costs?
Costs depend upon the campaign and which geography one is targeting. Basic list prices for instance vary widely by region. U.S. data is by far the least expensive due to the large number of lists available, the highly competitive marketplace for brokering these lists and the sophistication of the technology involved which has made data a commodity. Examples: U.S. lists may have a range of US$50-$100/M (per one thousand names). European lists = $150-$250/M, Asian lists: $200-$350/M. Highly specialized lists will run higher in all markets. Postal campaigns need to factor-in printing and mailing costs. A tele-marketing campaign will have the long-distance phone charges to consider although there are many low-cost methods to utilize. Creative costs are to be considered for creating a mailing piece or any collateral material used to support the campaign. Much can be done electronically (paperless) and downloaded from a website.
Taking a direct approach requires faith in your product or service and seeing a potential market beyond one’s own borders. Market research should be conducted to confirm that there is a market. Prepare to be both patient and systematic. Success may come but perhaps not right away. The one true and unchanging tenet of direct marketing is to test. Then test some more. Even when successful, keep testing to improve both the response and the marketing materials being sent. Take the successful “control” package and test it against others. Test price points where applicable. The testing and refinement is ongoing and pays dividends. It is common in the U.S. for a company to receive a return $8 for every $1 invested in DM.
This is entirely dependent upon the type of strategy and subsequent acquisition campaign selected and how much collateral sales and marketing material must be created. It can be achieved in a relatively short period of time, perhaps 60-90 days at a basic level. ROI will be dependent upon how effective the campaign is and what the typical sales cycle is for a particular product or service.
What are the consequences of not experimenting with new sales methodologies-of continuing business as usual versus taking an aggressive direct approach?
Gradual loss of market share and slow or static growth. Factors for this can include: market saturation, attrition of customers/clients, competitors underselling and thus forcing your pricing (and profit margin) lower, losing market share to new firms implementing new technologies and marketing methods.
Utilizing a direct sales strategy for both domestic and global sales
Employing new sales acquisition methodologies is not limited to global campaigns but can and should be used to improve domestic sales as well. A successful domestic strategy within Pakistan can often be adapted for a global campaign. Conversely, a global campaign that proves responsive can be adjusted (tweaked) for use as a domestic campaign. Finding the trigger that generates a response is the key.
Building a personal network of contacts
Rent/license databases or using Business social media platforms for starters. Attend trade shows or conferences or acquiring attendee lists to these. Word-of mouth. Ask within your network of associates. Compile contacts from websites and Trade publications.
Developing a brand presence in a target country or region
A campaign to build brand awareness and acceptance through traditional (advertising) methods can be very costly. Using DM gives added exposure, familiarity and can educated prospects about your company and its services. Cost will depend upon which methods and media are used and what is required for each individual business model. The advantage to a direct approach is that it can be done inexpensively.
Creating a real or virtual office overseas
Either is possible. A virtual office can be a Post Office Box or a local telephone number that transfers directly to your office telephone or a dedicated line within your office in Pakistan. A real office need not involve signing a lease, furnishing an office suite and hiring staff. There are firms that rent office space and/or provide all necessary sales and office support services for a monthly fee. These are available in all major cities.
How a Pakistani citizen can form a business abroad
This will differ by country or region. Let’s take the U.S. again as an example:
A foreign national can form a US corporation. The corporation will be formed by an ‘incorporator’ which is often a company or a lawyer, who will then resign in favor of the shareholders (owners) of the corporation. The shareholders (owners) need not be identified or registered. The corporation will be registered with the Secretary of State, Division of Corporations of whatever state is chosen. Often the state chosen is one with favorable tax legislation. The shareholders can be individuals or other corporations, including foreign corporations. One person or a number of people can hold all corporate positions and titles: director, president, secretary and treasurer. That person or persons need not be residents of the United States and can conduct business from outside of the United States. It is required that the corporation always identify a “registered office” in the U.S. and a “registered agent” who must be a resident of that State.
o What are the types of corporations?
“C” corporation is responsible for the debts of the corporation, but not the individual shareholders. The net profits are taxed and the dividends are paid to the shareholders who may have to report the dividends as income.
“S” corporations have the same functions and benefits as “C” corporations, except that they can have no more than 35 shareholders. To qualify if not a U.S. citizen, have an E-2 investor visa, L-1 visa and B-2 tourist visa, and pay taxes in the U.S. “S” corporation profits are passed on to the shareholders and are not taxable to the corporation.
A Limited Liability Company (LLC) is a corporation with limited liability, similar to a “S” corporation, yet with several significant differences. One major difference is that it requires at least two persons to form an LLC. The owners need not be U.S. citizens or U.S. taxpayers. This is the easiest way to form a company.
o How much capital is required?
The minimum requirement is US$100.00 (one hundred dollars).This would work out for example, $1 value per share for 100 shares. The capital requirement may depend upon the type of company and its circumstances.
o Must the owner live in the United States?
No. A person can ask an incorporator to form the corporation without being in the U.S. The incorporator can sign the articles of incorporation. The president and secretary must sign the shares giving ownership to the shareholders. Later the shareholder can sign documents at the required annual meeting.
o Identification and tax registration
Social Security numbers are available only to U.S. citizens, Green Card holders or people holding a U.S. visa which allows them to legally work in the US. Others may apply for a Taxpayer ID Number from the Internal Revenue Service if they must file a U.S. tax return. The application must be signed by an officer of the new corporation. If that person does not have a Social Security Number, then a copy of the foreign passport must be attached to the application. If the corporation will sell products to the general public, it must also apply for a Sales Tax Number from the State Department of Revenue and collect sales tax. Businesses are also required to register with the city or town where the business is located and may be subject to local taxes.
Maximizing the Internet
Everyone with a website is a potential global player and can and should build an international brand and use the site to attract more customers. Creating a new website or adapting an existing one tailored to the eyes and customs of a global audience is essential. It can be created in Pakistan by one of the many talented design firms. But it will need a “local eye” from the target market or a global expert to add the visual comfort touches that will make it, and therefore your company, credible and impressive. Copy changes will be needed. Text written in paragraph form may have to be shortened to bullet points. Translation may be required, depending upon the target market(s). Even English may have to be adapted if being viewed by an American audience.
Using social networking to your advantage
Companies are still experimenting with ways to take advantage of the huge number of people using social networking sites to build brand awareness, establish acceptance of the product/service and spread the word via word-of-mouth marketing. Social networking for businesses goes beyond Facebook and Twitter to include the business sites such as Linked-in and Plaxo. Creating your own news or e-letter communication can also be considered.
Finding the best vendors/suppliers
The same methods one uses in one’s home market will often apply. Local trade associations, chambers of commerce, even governmental agencies can all assist. Word-of-mouth recommendations from individuals who have done this for their own businesses or offer consulting services are valuable.
In conclusion, companies and individual business owners everywhere need to take their sales directly to their existing and prospective customers. They need to expand their market to find new customers. This does not mean abandoning their tried and true models or supplanting these with new priorities. But it does mean adding and integrating new methodologies into their existing model. While it sounds like a contradiction, one can build upon the basic model while diversifying. It doesn’t have to be the foundation of your business. But it should become an integral part of it.