After-Sales Service

Three factors are critical to the success of any export

sales effort:  quality, price, and service. Quality and

price are dealt with in other chapters. Service should be

an integral part of any company's export strategy from the

start. Properly handled, service can be a foundation for

growth. Ignored or left to chance, it can cause an export

effort to fail.

Service is the prompt delivery of the product. It is

courteous sales personnel. It is a localized user manual or

service manual. It is ready access to a service facility.

It is knowledgeable, cost-effective maintenance, repair, or

replacement. Service is location. Service is dealer

support.

Service varies by the product type, the quality of the

product, the price of the product, and the distribution

channel employed. For export products that require no

service -- such as food products, some consumer goods, and

commercial disposables -- the issue is resolved once

distribution channels, quality criteria, and return

policies have been identified.

On the other hand, the characteristics of consumer durables

and some consumables demand that service be available. For

such products, service is a feature expected by the

consumer. In fact, foreign buyers of industrial goods

typically place service at the forefront of the criteria

they evaluate when making a purchase decision.

All foreign markets are sophisticated, and each has its own

expectations of suppliers and vendors. U.S. manufacturers

or distributors must therefore ensure that their service

performance is comparable to that of the predominant

competitors in the market. This level of performance is an

important determinant in ensuring a reasonable competitive

position, given the other factors of product quality,

price, promotion, and delivery.

An exporting firm's strategy and market entry decision may

dictate that it does not provide after-sale service. It may

determine that its export objective is the single or

multiple opportunistic entry into export markets. Although

this approach may work in the short term, subsequent

product offerings will be less successful as buyers recall

the failure to provide expected levels of service. As a

result, market development and sales expenditures may

result in one-time sales. Instead of saving money by

cutting back on service, the company will see lower profits

(because expenses are not spread over longer production

runs), ongoing sales programs, and multiple sales to

developed buyers.

SERVICE DELIVERY OPTIONS

Service is an important factor in the initial export sale

and ongoing success of products in foreign markets. U.S.

firms have many options for the delivery of service to

foreign buyers.

A high-cost option -- and the most inconvenient for the

foreign retail, wholesale, commercial, or industrial buyer

-- is for the product to be returned to the manufacturing

or distribution facility in the United States for service

or repair. The buyer incurs a high cost and loses the use

of the product for an extended period, while the seller

must incur the export cost of the same product a second

time to return it.  Fortunately, there are practical,

cost-effective alternatives to this approach.

If the selected export distribution channel is a joint

venture or other partnership arrangement, the overseas

partner may have a service or repair capability in the

markets to be penetrated. An exporting firm's negotiations

and agreements with its partner should include explicit

provisions for repairs, maintenance, and warranty service.

The cost of providing this service should be negotiated

into the agreement.

For goods sold at retail outlets, a preferred service

option is to identify and use local service facilities.

Doing so requires front-end expenses to identify and train

local service outlets, but such costs are more than repaid

in the long run.

An excellent case study on this issue involves a foreign

firm's service approach to the U.S. market. A leading

Canadian manufacturer of consumer personal care items uses

U.S. distributors and sales representatives to generate

purchases by large and small retailers across the United

States. The products are purchased at retail by individual

consumers.  The Canadian firm contracted with local

consumer electronic repair facilities in leading U.S.

cities to provide service or replacement for its product

line. Consequently, the manufacturer can include a

certificate with each product listing "authorized" local

warranty and service centers.

There are administrative, training, and supervisory

overhead costs associated with such a warranty and service

program. The benefit, however, is that the company is now

perceived to be a local company that competes on equal

footing with domestic U.S. manufacturers. U.S.  exporters

should keep this example in mind when entering foreign

markets.

Exporting a product into commercial or industrial markets

may dictate a different approach. For the many U.S.

companies that sell through distributors, selection of a

representative to serve a region, a nation, or a market

should be based not only on the distributing company's

ability to sell effectively but also on its ability and

willingness to service the product.

Assessing that ability to service requires that the

exporter ask questions about existing service facilities;

about the types, models, and age of existing service

equipment; about training practices for service personnel;

and about the firm's experience in servicing similar

products.

If the product being exported is to be sold directly to end

users, service and timely performance are critical to

success. The nature of the product may require delivery of

on-site service to the buyer within very specific time

parameters. These are negotiable issues for which the U.S.

exporter must be prepared. Such on-site service may be

available from service organizations in the buyer's

country; or the exporting company may have to send

personnel to the site to provide service. The sales

contract should anticipate a reasonable level of on-site

service and should include the associated costs. Existing

performance and service history can serve as a guide for

estimating service and warranty requirements on export

sales, and sales can be costed accordingly. This practice

is accepted among small and large exporters alike.

At some level of export activity, it may become

cost-effective for a U.S. company to establish its own

branch or subsidiary operation in the foreign market. The

branch or subsidiary may be a one-person operation or a

more extensive facility staffed with sales, administration,

service, and other personnel, most of whom are nationals in

the market.  This high-cost option enables the exporter to

ensure sales and service quality, provided that personnel

are trained in sales, products, and service on an ongoing

basis. The benefits of this option include the control it

gives to the exporter and the ability to serve multiple

markets in a single region.

Manufacturers of similar or related products may find it

cost-effective to consolidate service, training, and

support in each export market.  Service can be delivered by

U.S.-based personnel, a foreign facility under contract, or

a jointly owned foreign-based service facility.  Despite

its cost benefits, this option raises a number of issues.

Such joint activity may be interpreted as being in

restraint of trade or otherwise market controlling or

monopolistic. Exporters that are considering it should

therefore obtain competent legal counsel when developing

this joint operating arrangement. Exporters may wish to

consider obtaining an export trade certificate of review,

which provides limited immunity from U.S. antitrust laws.

LEGAL CONSIDERATIONS

Service is a very important part of many types of

representation agreements. For better or worse, the quality

of service in a country or region affects the U.S.

manufacturer's reputation there.

Quality of service also affects the intellectual property

rights of the manufacturer. A trademark is a mark of

source, with associated quality and performance. If quality

control is not maintained, the manufacturer can lose its

rights to the product, because one can argue that, within

that foreign market, the manufacturer has abandoned the

trademark to the distributor.

It is, therefore, imperative that agreements with a

representative be specific about the form of the repair or

service facility, the number of people on the staff,

inspection provisions, training programs, and payment of

costs associated with maintaining a suitable facility. The

depth or breadth of a warranty in a given country or region

should be tied to the service facility to which the

manufacturer has access in that market; it is important to

promise only what can be delivered.

Another part of the representative agreement may detail the

training the exporter will provide to its foreign

representative. This detail can include frequency of

training, who must be trained, where the training is

provided, and which party absorbs travel and per diem

costs.

NEW SALES OPPORTUNITIES ADN IMPROVED CUSTOMER RELATIONS

Foreign buyers of U.S.-manufactured products typically have

limited contact with the manufacturer or its personnel. The

foreign service facility is, in fact, one of the major

contact points between the exporter and the buyer. To a

great extent, the U.S. manufacturer's reputation is made by

the overseas service facility.

The service experience can be a positive and reinforcing

sales and service encounter. It can also be an excellent

sales opportunity if the service personnel are trained to

take advantage of the situation.  Service personnel can

help the customer make life cycle decisions regarding the

efficient operation of the product, how to update it for

more and longer cost-effective operation, and when to

replace it as the task expands or changes. Each service

contact is an opportunity to educate the customer and

expand the exporter's sales opportunities.

Service is also an important aspect of selling solutions

and benefits rather than product features. More than one

leading U.S. industrial products exporter sells its

products as a "tool to do the job" rather than as a "truck"

or a "cutting machine" or "software." Service capability

enables customers to complete their jobs more efficiently

with the exporter's "tool." Training service managers and

personnel in this type of thinking vitalizes service

facilities and generates new sales opportunities.

Each foreign market offers a unique opportunity for the

U.S. exporter.  Care and attention to the development of

in-country sales and distribution capabilities is

paramount. Delivery of after-sales service is critical to

the near- and long-term success of the U.S. company's

efforts in any market.

Senior personnel should commit to a program of regular

travel to each foreign market to meet with the company's

representatives, clients, and others who are important to

the success of the firm in that market.  Among those

persons would be the commercial officer at the US&FCS post

and representatives of the American chamber of commerce and

the local chamber of commerce or business association.

The benefits of such a program are twofold. First,

executive management learns more about the foreign

marketplace and the firm's capabilities.  Second, the

in-country representative appreciates the attention and

understands the importance of the foreign market in the

exporter's long-term plans. As a result, such visits help

build a strong, productive relationship.