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The 4 Cs of US Market Entry

Four critical steps you must take to enter US markets

© Takehill Partners LLC, McLean, VA 22031, USA, - Takehill Partners provides strategic advisory and

business development services to B2B technology companies worldwide, focusing on US market-entry,

business development, and technology commercialization programs. If you need help in assessing your

current US Market-entry plans, call +1 703 504 8157 or e-mail info@takehill.com

© Takehill Partners LLC 2013 info@takehill.com Tel: +1-703-504-8157 www.takehill.com

The 4 Cs of the US Market Entry

As the world’s largest economy, the United States attracts companies with wide-ranging

ambitions, from startups to well-established organizations, with their sights set on scaling

their business to the next level. The size of the North American market is so vast that even

a niche business can become a billion dollar enterprise. Now that the U.S. economy is

recovering, this is an opportune time to consider bringing one's business to the USA.

While market entry programs are not extremely complex, they are often executed in a less

than ideal fashion. According to McKinsey & Co, for every successful market entry, about

four fail. Based on Takehill’s observations, problems in execution are, maybe surprisingly,

related more often to simple business fundamentals rather than complex U.S. regulations,

financials, or legal agreements, which can be managed by attorneys and accountants.

To begin with, competitive landscapes, customer needs, and buyer behaviors are always

different in the U.S. than in other markets. This requires business leaders to go through a

total re-evaluation of their value proposition before any U.S. marketing commences. Many

executives skip this step because they feel comfortable with what they already know. When

bringing your business to the U.S., shortcuts often lead to disaster. Extra care in Go-To-

Market planning and paying attention to business fundamentals is absolutely critical to

success.

The following guide presents a list of critical market-entry factors. Each of these factors is

essential to bringing your business to the USA.

1.Clarity regarding your US market position

Your priority is to gain customers, revenues, and market traction, which requires that your

product has a clear, unique, and compelling value proposition. Focusing specifically on US

customers, by actually speaking with them, helps to define your market position in the U.S.

Re-visit your original value proposition analysis from the beginning. Start by asking the

simple question: Why is my solution better than the U.S. competitor? Creating clarity

around this point is hugely important, as the U.S. market is more competitive than in

Europe, and marketing claims promoted by vendors are very aggressive. You may find it

helpful to segment your value proposition by using the “value map” framework below.

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The “soft values” listed above may become a key facet of your success (just like with

Apple or Google, and along the lines of “Design Thinking”)1)

, but at the outset of market

entry, they cannot be used to your competitive advantage until the market has validated

them over time. Instead, you need to begin with something more concrete, such as Core

values or Unique values, particularly when dealing with early-adopters and innovators. 2)

2.Communication to claim your position in the market

Marketing trends of the last decade show that focusing on customer benefits will make you

more successful than focusing on product features alone. It is important to know that

benefits, not features, will lead to the creation of customer value. But this does not mean

that your marketing team should completely abandon promoting features. Your competitors

are probably solving the same customer problems that you are. Repeating the same benefits

that your competition claims is not the best way to differentiate yourself.

There are also other ways to be successful in business than just through product

differentiation (for one particular example, see this HBR article) 3)

. However, if you are

selling a B2B technology solution as a newcomer in the U.S., these “other ways” are not

yet for you. Rather, you need to communicate a very clear first impression to your target

customers: either you are a) different, b) better, or c) less expensive than your competition.

There are no other options.

Your communication plan needs to be built on a strategic marketing message about your

particular advantage: a simple, consistent, easy to remember and compelling marketing

“mantra.” This should be something that everyone in your organization believes in. Take,

for example, a phrase like “We are the only one who has A, B, and C!”, or “Unlike

competing solutions, we can do 1, 2, and 3”. When you have developed a message like this

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with your team, repeat it through every promotional channel you can think of. But be

careful not to overstate your message with extreme claims that are difficult to substantiate.

Even in aggressive USA markets, you may lose the attention of your prospects if they feel

they are being oversold. Bragging is required, but it only works if it sounds credible. Also

should be noted that what works with early adopters may not work at later stage markets.

Marketing tip: 1) when you stick a number to a claim, it becomes a “fact”. Don’t say “our solution

is significantly faster than the competition”. Say instead “Our solution is 5.2 times faster than the

competition!” Be bold and claim the market position that you deserve. 2) Also, adding an

“Advantage” tab on your homepage that opens to a page where you can explain your key

advantages compared to other players is a useful shortcut for online visitors to understand your

value. 3) Having a good customer contact form on your website, and other marketing automation

tools, will set you apart – in the U.S. you need to also improve the ways you serve the customer.

3.Content so compelling that it makes your phone ring

The world of B2B selling has gone through a fundamental shift over the last decade in

terms of negotiating power transferring from sales teams to purchasing teams. B2B buyers

no longer go through a needs-analysis that requires educating themselves by calling

vendors. According to a study by CEB 4)

, a Washington DC based strategy think-tank, 57%

of the B2B sales cycle today is completed by the prospective customer himself before

talking to any of the suppliers.

This “self-service analysis,” through which buyers research supplier offerings with the

required minimum feature-set and best value, is of course done on-line. Buyers browse

market analyst reports, read blogs and whitepapers, and visit the websites of you and your

competitors. If your online content is not of the same quality as your US competition, you

have likely lost the game before even getting the chance to speak with the first prospective

customer. The company with the most interesting inbound marketing5)

content always

receives the first call. As for others, if you think you can scale your business by cold

calling B2B prospects, you need to think again or move back to 1996. While still important

in finding first reference customers, cold calling is not the strongest tool in your marketing-

tool-box beyond the initial ramp-up. It’s always more effective to let the customer find you

than you finding the customer.

If you want to be the market leader, you have to create content that makes you look like a

thought-leader. This means interesting, compelling, and original content 6)

, including

videos (examples 7)

), whitepapers, case stories, blogs and social media. It is also important

to keep in mind that, particularly in a new B2B technology category, educating prospects

through your content is your marketing!

Marketing Tip: when you set-up a blog, create at the same time a recurring social media on-line

calendar for your team with clear responsibilities about who is writing what and when. Having a

blog on your site with the last post from 6 months ago does not give the impression of a dynamic

thought-leader.

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4.Credibility through local presence

Consider B2B sales like a sports game. To be a winner, you can’t play over Skype. You

need to actually enter the field. If you are a business buyer in the US, nothing could be less

convincing than a company that does not have a US address or telephone number on its

website. Even if customers can make purchases online, questions will be raised regarding

the product in terms of: tech support, the location of the cloud server, contract legislation,

warranties, shipments, etc. This is particularly the case when selling B2B system solutions

through the enterprise buying process, as opposed to selling Angry Birds online.

Resist investing in US customer search and sales efforts, before having a credible local

presence, virtual or physical. It is often difficult to find any prospects (see sections #3 and

#4 above) if you are not visible in the market you are about to play in.

Tips: Setting up a virtual office with the US telephone number (example here 8)

) and virtual address

is easy. The next low-risk step after this is to acquire a shared business space (example here 9)

) that

provides you with an actual street address and service for a nominal monthly fee. You do not need

an expensive office lease in the beginning. Instead, you must simply look welcoming and as if you

care for your US customers.

You Are Almost There….

After you feel confident that you comply with the above 4 Cs, your next issue is cost. The

first important fact to accept is that you will not be a success within the first month upon

entering any foreign market. Here, cost and time go together. The typical US market entry

for a B2B company can take anywhere from 12 to 18 months before creating a steady

revenue stream. Of course, there are exceptions to this, but most CFOs should expect at

least 12 months before positive returns.

So what is the cost of a US employee? If you are going to hire a direct employee full-time -

- that is, an executive sales and business development officer who is an expert in the

technology market -- prepare to pay anything between $100 and $200 thousand for their

annual base salary. Your company cost will increase to almost $250 to $300 thousand a

year, factoring in employee sales bonuses and 1.35x statutory overhead expenses.

The lower risk and lower cost approach would be to first use a US consultant to act as your

company’s sales or business development officer. This would allow for a quick start for

your market entry with the utilization of local expertise with more flexible terms than with

full time employees. During the initial consulting project, your assumptions about the

competitive advantages, market potential and product-market-fit will be validated. If

successful, you will close your first customer, enable the first US customer case-story,

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kick-off PR and start spreading the message about your unique offering, each of which will

help you validate your long-term market entry plan.

Using a part time consultant in the beginning is not as risky as hiring full time employees,

but it still costs money. Very early in the technology market cycle, typical consulting work

is more about business development than sales, and the compensation is in the form of a

monthly retainer. In later stage markets, it is possible to find “hunter sales” consultants,

who are interested to work with sales commissions, even without retainer, if the product is

competitive and the probability of incentive-based income is high.

Tip: if you seek the same expertise and seniority in the consultant as you would seek in a full time

employee, your cost per day for a consultant will not be much less than with your own employee

(after adding the statutory cost). It’s the flexibility of terms and the termination rights, which make

the consulting agreement attractive, not necessarily the cost.

In conclusion, US market entry is not overly difficult if you have what it takes. When

planning, simply focus on the fundamentals, the 4 C's, and you will be off to a good start!

1) Clarity - Be open to re-define and clarify your value proposition, focusing on

the US market 2) Communication - Be bold in communicating your differentiation 3) Content - Make sure you have a high-impact inbound marketing program in place

4) Credibility - Make sure you look and act like a US player, with US presence

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Links and references embedded in text:

1) Design Thinking: http://www.forbes.com/sites/sap/2013/10/02/customer-experience/

2) Early Adopters and Innovators: http://en.wikipedia.org/wiki/Technology_adoption_lifecycle

3) HBR Article about differentiation: http://blogs.hbr.org/2013/10/you-can-win-without-differentiation/

4) CEB Study about B2B sales: http://www.youtube.com/watch?v=NeGkdJaYZ4k&feature=plcp

5) In-bound Marketing for B2B: http://www.business2community.com/b2b-marketing/5-steps-achieving-b2b-

inbound-marketing-nirvana-

0651505?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+B2CMarketingInsider+(Bus

iness+2+Community)

6) Guide for B2B content: http://labs.openviewpartners.com/ebook/content-factory/?referrer=pardot

7) Guide for B2B video marketing: https://www.youtube.com/watch?v=Z4PCGXzGjCA

8) U.S. Virtual telephone number: http://www.evoice.com/resources/toll-free-number

9) U.S. Virtual office: http://www.intelligentoffice.com/virginia/tysons-corner/virtual-office-services/

Additional reading:

McKinsey & Company (US view):

Beating the odds in market entry | McKinsey & Company

Stateside Solutions (Irish view):

http://statesidesolutions.com/2013/07/key-strategies-for-start-ups-on-entering-the-us-market/

https://www.allaboutbusiness.ie/hub/article/top_10_tips_for_us_market_entry

Swedish-American Chamber of Commerce (Swedish view):

http://sacc-usa.org/saccexportguide/doing-business-in-the-us/u-s-market-entry-guide/

Legal views:

http://www.slideshare.net/QDincubator/jarno-vanto (Finnish view)

http://www.proformative.com/blogs/robert-hawn/2012/06/12/us-market-entry-foreign-startups-coming-silicon-

valley

http://www.structurelaw.com/lawyer-attorney-1584246.html

http://www.sanjosebusinesslawyersblog.com/2012/06/us-market-entry---legal-structures-for-foreign-

startups.html

http://www.thelawyer.com/briefings/market-entry-united-states/3011005.article

http://www.fredrickslaw.com/index.php/en/us-market-entry.html