Attracting more customers has always been a priority for export businesses, however as the old adage ‘quality over quantity’ goes – ensuring these customers are of high-value can be challenging.
High-value customers are often thought to be those who are willing to pay a good price, on time, and can provide a predictable flow of orders, making it easier for a business to work with. Additionally, a customer who is successful, with a good profile in their region and industry, can give a brand more credibility and thus attract more customers.
Following on the ground conversations and anecdotal feedback from both businesses in Europe and the Pacific Islands, Pacific Trade Invest Europe Trade Commissioner, Jodie Stewart, says that a common sentiment expressed by Pacific Islands businesses is that they aren’t paid high-enough prices in export, often leading them to decide to discontinue their export efforts.
“Many of our Pacific businesses struggle to secure high export prices, leaving them disheartened with their export efforts. Often this is simply because they are dealing with low-value customers. High-value B2B customers may not come to Pacific Island brands so easily. After all, they know their value and so do many competitors.”
Undoubtedly, export is not for every Pacific Island business. Stewart says that a major consideration should be the many costs that can ultimately become layered into the sales process – the most glaring of which is freight, a factor that has dramatically increased since COVID.
“There are many costs associated with export. While freight is the most prominent, there is also the modification of packaging and increased paperwork (including the time involved) to consider. While Pacific Trade Invest is here to help with this, it can take effort and resources to become established in foreign markets.”
Stewart goes on to say that for those Pacific Island businesses that are performing well locally, there are good reasons to consider export.
“If a business is performing well locally, there are many benefits to export including increased sales, the ability to build scale and, through that, increased profits. Before considering export however, Pacific businesses must conduct feasibility studies into whether their products are suited to overseas markets – and if so, which ones. If there is a perceived opportunity, then other important factors such as the competitor set are also immensely crucial to understand.”
In situations where a business finds that market entry is favourable and a comprehensive export plan has been created to guide a business’s approach, why is it that some Pacific Island businesses are successful in exporting while others are not? Stewart says that there is no single answer to this.
“Whilst there is no single way to ascertain why some businesses see exporting success and others do not, we can use the economic principles of ‘price takers’ and ‘price makers’ to begin our understanding.
“Being a price taker is an unfavourable position to be in as the business must accept the prevailing market price. A price taker lacks enough market power to influence the prices of their goods. It is reasonable to expect that those exporters who find themselves in this position will ultimately decide to withdraw from export activity.
“A price maker is the opposite. This is essentially a business that is able to enjoy a degree of pricing power because customers in foreign markets really want their products.
Stewart says that the final point of differentiation that can set a business apart from competitors in an otherwise similar environment, is its customer service. This element can, in turn, further assist with the attraction of high-value clients.
“Of course, while there are supply versus demand and other factors at play, we can see examples of Pacific exporters who have similar products and face similar market conditions, yet for one business international export is lucrative and for the other it is not. It is not that the successful exporter has discovered a magic bullet; generally their approach can be defined by the way they service their customers.”
“If Pacific Island businesses want to be competitive in export markets, we must meet and, when possible, exceed client expectations. Responding to requests in a timely manner is good practice. This counts for more in foreign markets than it does in the Pacific Islands. Many international customers will consider the time a business takes to respond to be indicative of how valuable it considers their business. This does not mean they want to see an imbalance in the relationship, but they may form an impression that the exporting business has other clients or priorities that are deemed more important than they are.
“Not responding at all is the worst possible scenario. This can sometimes happen around a commercial negotiation. A potential customer might be proposing a price that the Pacific Island business doesn’t want to accept or expect delivery by a date that the business cannot commit to. The worst that can happen in either case is inaction. It is crucial to keep the lines of communication open. When we aren’t “at the table”, we don’t have a chance to negotiate a favourable outcome or help the other party to better understand our costs.”
“Not responding quickly or when the pressure is on, not responding at all, are two areas of business practice that some Pacific Islands businesses could seek to improve. While we don’t want businesses to lose their “Pacific-ness” – as indeed this is part of the attraction that initially draws international businesses to our products and services – we do need to present as attentive and responsive to clients.”
Stewart says that businesses who provide excellent customer service consistently, while also providing quality products in a timely manner, have the propensity to develop high-value client relationships.
“Over time, satisfied customers will typically pay more, as this reliability means they can then focus on their own core business. Exporters who are reaching and exceeding expectations of their clients have the most chance of putting themselves into a price maker position. Businesses not only evaluate the quality of the products they purchase and how this affects their reputation in their own markets, but also the ease of doing business.
“In export, meeting specifications at an acceptable price and in compliance with market entry regulations are ‘table stakes’. Beyond that, developing high-value customers through providing good service can lead to lifelong loyalty, as well as attracting other buyers to Pacific Island brands. High-value customers have a significant impact on an exporting business’s bottom line.”
Stewart says that beyond all else, it is important to deliver on our promise.
“If we do not deliver on our promise, our customer will have a good reason to negotiate and focus on price. When customers are happy because their expectations are being met, they tend to focus less on price, and are generally better behaved. There is a great deal of evidence that satisfied customers pay more rapidly than dissatisfied ones. In the long run, the quality of our goods and services is the deciding factor on how much these will be valued by the global marketplace.”
