With your company growing across the United States and maybe in some international markets, you now maybe thinking about pushing into other developed markets.
Many U.S. companies make the grave mistake of thinking that what works in America will work internationally and also that Europe is a single market. Be careful with this thinking. Europe is not a single market. The cultural differences across the continent is the real sales challenge, not the multiple languages.
With the many differences and challenges in entering the European market, there are clearly defined market-entry options to suit your particular type of business and target customer industry sectors.
With its population of more than 730 million people, Europe must be considered for all software businesses seeking world domination. Europe has 50 countries, more than 200 languages spoken and 28-plus currencies, even with 18 countries using the euro currency and 27 countries in the European Union. If this wasn’t complex enough, there are a quoted 87 distinct ethnic groups across Europe, which presents a spread of cultural differences across the region. All this is fantastic if you’re a leisure tourist, but these differences can present great challenges in selling software across the region.
But there is a clear path forward for companies entering European markets.
The cultural differences from doing business in America present a real mixed bag: What will work sales-wise in one market is a big no-no in another. Also, traditional or older industries can present higher barriers to entry, with hierarchical layers within companies’ decision structures, making it very difficult for outsiders to break in.
Sales approaches are very different in Europe than in the United States, across the majority of sectors. Trust and personal relationships are more important and take longer in European countries than in the United States. This leads to slower purchasing decisions. You may think you’re getting positive indications that you have the business that in the United States might mean it’s in the bag, but in the UK, for example, it might mean you’re only starting to get the attention of the buyer. Germans—noted for discipline, focus and caution—evaluate diligently and tend not to rush into decisions, so be prepared to adjust your sales forecasts accordingly. France, and the French, are always interesting and simply don’t look at the world like Americans. There is a passion for lifestyle in France that must be admired but can bring its own challenges in business.
But where there’s sufficient market opportunity there is a path forward.
The three largest European markets by software sales, population and GDP are France, United Kingdom and Germany. Even though I stated above that language is not the greatest challenge, you can sell in English into the United Kingdom and Ireland (at least a small bit), as well as Netherlands and Scandinavian countries Denmark, Norway, Sweden and Finland. Scandinavians are also known for being early adopters of technology.
So, Where Do You Start?
In setting out your company’s Europe market entry plans, first determine your target markets based on market opportunity, your ability to access the market and then your ability sell, deliver and support in the market.
For many U.S. companies, the United Kingdom may seem like an obvious starting point because of the common language and seemingly similar cultures. Culturally, the United Kingdom is different than the United States. But if there is a market for your product in the United Kingdom, your ability to access the market is good and you understand how you can compete, sell and deliver into the market.
Sidebar/aside: Where you set up your European HQ is a different decision and one for the finance and operations people, with a long list of parameters including skills, currency, taxation and foreign investment state supports. This article is focused on winning customers and generating sales.
How Are You Going to Enter the Market and Win Customers?
1) Through building a direct sales force. Yes, this can be slow and risky, with a reduced reach and pace. But it may provide higher margins in the long term.
2) Through securing local sales partners. Agents, representatives, resellers, agents, distributors—whatever you want to call them. Depending on sector and how compelling your proposition is the right sales channel partner can start building a pipeline for your business very quickly.
3) Through acquisition. This is the most expensive option and carries great financial risk. But it also can be the fastest, as you instantly have customers and revenues but not new users of your product. It could take some time to find the right acquisition target, and then if market timing is in your favor for valuations.
When selecting your target market, your method of market entry can change depending on the market you pick. For example, if you're selling direct, it makes sense to require one of your existing business development team to relocate and start in a smaller market that is more accessible due to language. If you're entering a new market through partners or acquisition, language is less of an issue, as your partners or new local team will have these skills. If that is the case, pick the markets where you are most likely to win, has the largest market, has the greatest need, is more accessible and has the easiest competition to beat.
Donagh Kiernan is founder and CEO of Tenego Partnering, a business development services company based in Cork, Ireland, providing hands-on international partner sales channels development for growing and established software product companies.