The Ideal Customer
When we ask companies who engage us for our business matching services who is their ideal customer in the target market they have selected, they usually describe who they typically sell to in their own home market. But we have learnt from experience that your ideal customer in your home market may not your ideal customer in your export market.
Some years ago, we were commissioned by a client to find them a replacement distributor in Thailand. Our client was selling a type of electrical product, and their biggest customer base in their home market came from the building and construction sector. They had found a distributor in Thailand to sell to these types of customers, but after 2 years, sales were not at the level of where they wanted it to be. They thought that perhaps the distributor was not working hard enough, and maybe it was time to find another distributor who was willing to invest more in marketing.
This client engaged us to help them identify other suitable distributors that were selling to the building and construction sector. But they also asked us to do some market research to help them better understand this sector in Thailand. Specifically, they wanted to know who the key contractors and influencers were, and who were their competitors. They also asked us to speak with some end customers to determine on what basis purchasing decisions were made.
Within 4 weeks of starting the market research project, we began to understand why the client was not selling as well as they hoped for in Thailand.
Market Regulations in Thailand
Their sales were dependent on customers who needed to fulfil specific building code requirements, and this was the reason for their success back in their home market. They assumed that similar building code regulations were in place in Thailand. But that was not the case, and so many contractors had no incentive to use these products, which was also more expensive.
But our research uncovered another opportunity. Thailand had enacted strict regulations in another sector that mandated the use of their type of products. It was in the oil and gas and in the critical infrastructure sectors.
When we shared these findings with the client, they were surprised. They never thought that their ideal customer would come from a completely different industry that they were much less familiar with.
Our project changed after we shared with them our initial findings. Instead of finding a replacement distributor, they commissioned us to look for a distributor in the oil and gas sector instead. They also decided to keep their current distributor.
What we have described is not unusual. Many companies assume that their ideal end customer in their target export market is the same as in their home markets. But that is not necessarily the case. Regulations (or the lack thereof) are not the only driving factor that can determine who is the right customer. Pricing, country of origin, competitors and even local business culture can all have an impact on who are the ideal customers in your chosen export markets.
Ideally, what this client should have done was to do some initial market research before even looking for distributors. They could have checked if the building regulations that were needed to drive sales were in place in Thailand. Alternatively, they could have done a market scan to see if their competitors were selling in Thailand, and who their customers or distributors were.
Fortunately, this company made a strategic decision to review their market entry strategy, and this helped them uncover the fact that their initial market assumptions were wrong, and their ideal customers was not who they thought it to be. If they had not made this decision, they would have continued wasting time and resources trying to expand sales to a limited customer base, while missing out on an even larger business opportunity.
Finding the right customers in your target export market is very important.