Latin America Distribution Channel for Newbies

When I am at an event with colleagues that are not yet doing business in Latin America, I am often asked the same questions. This leads me to believe that these are the topics that most people interested in the Latin American channel would like to learn about. So I thought it would make an interesting article to answer these questions here for those that are new to our channel in this region of the world.

How big is the market?

Latin America is comprised of over 20 countries, which is home to approximately 550 million people. Because their buying power is not as high as it is in the USA or more developed countries, they are much more price sensitive. A rule of thumb to use from a manufacturer’s perspective is the 5% rule. The 5% rule is that sales of your product line will be approximately 5% of your revenue in the USA. Obviously this is not set in stone and some companies reach 10% and higher, however it is a quick barometer of what to expect in the region.

As for specific markets, here they are in descending order: Brazil, Mexico, Argentina, Colombia, Venezuela and Chile. These top six countries represent 80% – 85% of the total Latin American market, depending on who’s numbers you want to believe, with Brazil being the largest and representing approximately 45% of the entire Latin American market. All the other countries not in the top six will make up the remaining 15% – 20% of the total market.

Is there a technology gap?

Back in the late 80’s and early 90’s, there was somewhat of a technology lag in Latin America. While more mature markets in that time-frame were selling IBM ATs, Latin America was still buying IBM XTs (I realize I’m dating myself here but it helps make my point). This was due to a lag or gap in technology where the Latin America market just wasn’t aware of the newer technologies available. However, since the mid to late 90’s, Latin America is up to speed on the latest and greatest product offerings coming from the Americas, Europe and Asia. However, today in some countries we have a financial gap, and not a technological gap. Why a financial gap? It comes down to buying power. For example, if you have a bank branch manager that makes $12k per year and needs to order 500 LCD monitors for his branch, they will go with the smaller size LCD because of the difference in price. A US$20 difference per monitor on a 500 unit deal is almost equivalent to his salary for one year. In the USA and other mature markets, when the difference for an LCD monitor is US$20, most consumers go with the newer, larger models because US$20 doesn’t represent a significant amount of money.

Does this mean you will sell only older technology in this region? The answer is definitely not. The channel in Latin America is well-versed on the new technologies and the example above applies to certain countries that offer opportunities to move some product in your warehouse. However, by no means underestimate or treat customers in Latin America as technologically inferior as this is a sure fire way to get them to buy your competitor’s products.

Do customers expect credit terms?

The direct answer is YES. There are many large, well-established companies in the market and they do expect payment terms. Most will ask for 60 day terms using the reasoning that it takes much longer for the product to reach them, however the grand majority have net 30 day payment terms. Smaller companies may opt to pay cash, but you will still get some resistance to do business with you. Most suppliers pay for credit insurance to hedge their receivables from any large defaults on payment. There are also organizations that allow you to share credit information with others in the channel such as the NACM ( National Association of Credit Management ), which keeps close tabs on common customers and have a warning system should a customer fall behind on his payments with another NACM member.

Many suppliers entering the market usually start with cash terms and then offer small lines as the business grows with their partners and they feel more comfortable working with them.

Is it safe to travel to Latin America?

Traveling to Latin America is like traveling anywhere else in the world. If you are in a large city, whether it’s New York, Tokyo or Mumbai, there is going to be crime. So it pays to play it safe and not be alone wondering out in the streets or stand out too much from the crowd. Sporting expensive electronics, watches, handbags and jewelry is probably not a good idea. In some cities like Mexico City, taking a cab off the street is not recommended either. Either have a customer drive you, use a cab from the hotel, or have someone call a cab for you and they will ask for you by name when the designated cab gets there. After 20 plus years of travelling into the region, I have never had an incident thus far. Now I’ll probably get ripped off on my next trip for having written this last line!

Well, I hope these questions are questions you would have asked. I realize the answers are rather short and to the point, without too much explanation or room for grey areas, but for time’s sake, we have to keep it this way. Obviously these topics can be really delved into, but we’ll leave that for some other time.

Feel free to contact me with any specific questions or comments.

Channel Management Solutions to Challenges

In the IT industry, software publishing enterprises are the ideal market in need of channel services to boost sales revenues. Channel management solutions are necessary to facilitate the relationship between the software vendor and the channel partners. Channel managers are tasked with developing the partnership and streamlining the sales process by channels.

In channel management these tasks are essential:

• Handling relationships – There are generally three parties involved in channel sales: the vendor, reseller or partner and the customer. The margins, credit limits, product price list, terms, etc, must be set. Proper pricing is crucial. It must not be set too high or too low and neither should the margins that affect the final price consumers pay for. Aside from pricing issue, the products have to match the resellers. High value products for example need to be assigned to VARs or Value Added Resellers who have previous experience in selling these kinds of products.

Conflict management comes into play especially between partners. One of the most prevalent challengers in channel sales is too much competition. Sometimes even the vendor would pull the rug out from under a partner when it sees an opportunity to reap the profits for themselves. Stealing leads are frowned upon but not unheard of in the industry.

• Product management and order approval – When leads push through, then the vendor must have the capacity to deliver the product to the end users. Included in this task is the delivery of license key since the product is software applications. In international markets, like Asia or Europe, the prices on the software may differ to reflect the market. It is imperative that resellers be recruited from countries where the product is being sold because they would be more efficient in selling the product since they know the language and has presumably built their reputation locally.

• Payments processing – There must be standard operating procedure for generating invoices and handling payments. One of the biggest hurdles in channel sales is on time payments from customers. It is important to reconcile the accounts or else it is a loss for both the vendor and the partner.

• Report Generation – These are unavoidable tedious paper work for channel managers that consume valuable time. They are required however, so companies can gain valuable insight to how they are progressing as far as channel sales goes.

A Partner Relationship Management or PRM tool can provide solutions and help in with these tasks of channel management. PRM offer features that would make the job of channel management a lot easier:

• Set partner levels or tiers – Vendors with hundreds of different channel partners would be at a loss on how they can differentiate the low-performing resellers from the high-performing resellers. With a fully automated system, resellers’ performance are transparent and based on the information, resellers can be awarded silver, gold or platinum status.

• Training, support and marketing materials – With a comprehensive PRM channel management solution, partners will have a valuable resource for product information, and marketing materials to use in generating sales.

• Automated reports – Manual tallying of sales is eliminated because the report is automatically generated. Channel managers and resellers will be allowed to focus on a more important task which is selling.

• Channel management conflicts are averted because with features like lead registration, partners will avoid competition with each other for the same business.

Why Sports Marketing and Sponsorship Is Becoming Popular in Asia

Asia has no doubt now become a marketing playground for multinational brands and businesses to expand their niche beyond normal reach. Many companies have recognized that sports have an incredible potential to be turned into an influential and lucrative marketing tool for any brand’s growth and it certainly outshines traditional marketing efforts by reaching a mass which far outnumbers those of any other channels.

Brands are able to capture an unbridled passion with sports which it could not achieve through other platforms. A sports sponsorship can reach large numbers of people by bridging the divide between label and consumer, allowing people to engage with the sport or its star players on a more personal and emotional level. It is no longer an advertisement waiting to be skipped; it becomes the energy that ignites the sport. The brand will be seizing the prospect of lifetime loyalty with their consumers by investing in relationships rather than advertising which prove to be a more economical and cohesive approach to marketing.

For example, 192 million people tuned in to their television sets to watch Southeast Asia’s national football competition the 2010 AFF Suzuki Cup, and a total of 15 million people watched the two final leg games in record breaking numbers. The enormous viewership clutches the attention of millions of fans across the region, not to mention the sell-out crowd at the stadium, followers on social networking sites and many more viewers of its online broadcasts. A survey has shown that traditional above-the-line advertising at such level would cost significantly more while yielding smaller impressions and revenues.

Sponsorship opportunities will affect a company’s market segment by offering them the chance to develop awareness and devotion to the brand. The passion derived from the target market is what the brand relies on to achieve a positive sponsorship. By putting together their own brand values with that of the sport, companies are able to uphold its brand trust, effect buyers’ spending trends and better capitalize on customer relationship.

A compatible sponsorship will leave a strong impact on an audience and will likely rouse a surge in sales and profitability. Therefore, it isn’t all just about jumping on the bandwagon like everyone else but a careful selection process needs to take place beforehand to maximize the brand’s visibility and exposure in line with its core values and objectives. Sports marketing have revolutionized the way brands are being depicted to consumers. It pervades more advertising channels and cuts your costs, targets a broader and more focused group, and is definitely more effective than traditional marketing activities.