An overview of how important providing good after-sale service to customers is to exporters. This article is part of "A Basic Guide to Exporting", provided by the U.S. Commercial Service, to assist companies in exporting.
Last Published: 10/20/2016
Quality, price, and service are three factors critical to the success of any export sales effort. Quality and price are addressed in earlier chapters. Service, which we discuss here, 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 user or service manual modified to meet a customer’s needs. 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 is an open line of communication between you—the decision maker—and your customer. This includes listening attentively and actively probing for clues on how to make your service or product even better.

Service varies by the product type, the quality of the product, the price of the product, and the distribution channel used. For certain export products—such as food products, some consumer goods, and commercial disposables—service ends once distribution channels, quality criteria, and return policies have been identified.
 
Learn about your local competitors. Find out what people like—and don’t like about working with them. Strive to provide an even better experience.
However, the characteristics of consumer durables and some consumables demand that service be available after the purchase has been completed. For such products, service is a feature the consumer expects. In fact, foreign buyers of industrial goods typically place service at the forefront of the criteria they evaluate when deciding whether to purchase goods or services.

All foreign markets are sophisticated, and each has its own expectations of suppliers and vendors. U.S. manufacturers or distributors must 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 competitive position, especially if the other factors of product quality, price, promotion, and delivery appeal to the buyer.

You may decide, as part of your exporting strategy, not to provide after-sales service. Your company may determine that its export objective is the single or multiple opportunistic entries into export markets. Although this approach may work in the short term, a buyer who recalls your failure to provide expected levels of service will be less likely to respond favorably to subsequent product offerings. As a result, for any such buyer, your market development and sales expenditures may produce only one-time sales.

Reviewing Service Delivery Options

Service is an important factor in the initial export sale and ongoing success of products in foreign markets. Your company has many options for the delivery of service to foreign buyers.
 
Build trust with your local partners and let their service handle local issues. You’ll save time and money.

Requiring the Buyer to Return the Product

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 you must absorb the export cost of the same product a second time when you return it. Fortunately, there are practical, cost-effective alternatives.

Using a Local Partner

For goods sold at retail outlets, a preferred service option is to identify and use local service facilities. Although this approach requires up-front expenses to identify and train the staff for local service outlets, the costs are more than repaid in the long run. 

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 ability to provide service requires that you 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 company’s experience in servicing similar products.

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. Your company’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.
 
Find out what your partner(s)can already do locally. It may save you time and money.

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 a very specific time period. You must be prepared to negotiate such issues. On-site service may be available from service organizations in the buyer’s country, or your 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 specify the associated costs. Existing performance and service history can serve as a guide for estimating service and warranty requirements on export sales. This practice is accepted by small and large exporters alike.

If your export activity in a particular region grows to a considerable level, it may become cost effective for your 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, administrative, service, and other personnel, most of whom are local nationals. This high-cost option enables you to ensure sales and service quality, provided the personnel receive ongoing training in sales, products, and service. A benefit of this option is the control it gives you, coupled with the ability to serve multiple markets in a single region. Be sure to investigate the tax and foreign currency consequences of operating a foreign branch office that collects money from buyers.
 
Depending on your product or service, you may need a local contractor or subsidiary who can meet directly with customers.
If you have neither partners nor joint venture arrangements in a foreign market, you must be prepared to accept return of merchandise that the foreign buyer refuses to take. This situation is not likely to occur in cash-in-advance transactions or with orders entailing a confirmed letter of credit. However, in an open-account or documentary collection transaction, the buyer is in a position to refuse delivery of the goods without suffering financial harm. If you cannot find another buyer in that market or if you elect not to abandon the goods, you will be faced with the fees and charges associated with returning the goods to the United States. Your freight forwarder, who can be of great assistance in this process, should the need arise, can quote you a price for return of the goods.
 
Don’t be afraid to set up contingency plans, or to calculate cost benefit for difficult
decisions. Planning in advance will save headaches later on.

Considering Legal Options

Service is an important part of many types of representative agreement. For better or worse, the quality of service in a country or region affects your company’s reputation there.

It is 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 you have access in that market. It is important to promise only what you can deliver.  

Another part of the representative agreement may detail the training you will provide to your foreign representative—for example, how often training will be provided, who must be trained, where training will be provided, and which party will absorb travel and per diem costs.




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