COMB - Reason for using Middle Person in Sales/Marketing of Products/Services

COMB - Reason for using Middle Person in Sales/Marketing of Products/Services
(CopyRight 2009; Benjamin Goh, www.bensglobal.com)

C for Core Competencies. In today's highly competitive market conditions, it is even more critical for companies to focus on its core competencies and optimize the limited resources to bring the highest value and ultimate experience for the target market at the lowest cost of sales. The use of middle person relieves the company to focus on its core competencies. Similarly, companies may also outsource other elements of their supply chain like manufacturing, procurement, logistics, etc.

O for Optimization. The ability to optimize resources within the company is critical to the success of any business. Why perform a certain task internally when someone else could do it better, more efficient and more cost effective than the company itself? The opportunity to stretch the dollar even further through the use of the middle person with the core competency of selling and marketing specific products through its existing customer base with its local proximity and presence to the target market. The learning curve of market entry and business development would normally cost much more than engaging a middle person with the local market expertise and existing customer base.

M for Market Knowledge. The common business question of who you know is more important than what you know. Local market knowledge is critical to accelerating market penetration. Armed with an adequate customer base and local application of the specific product or service, the middle person would normally be able to bring the product or service into the market much faster than the company setting up its own operations. Even if the company is able to recruit the business development staff who has the relevant customer contact, the recruitment process will take time and business practices between the company and the customer would still require some time and effort for negotiation and fine-tuning before any transaction can take place. All these time and resources may be better off spent on developing a middle person with the customer base and working win-win business relationship.

B for Business Best Practices. With the diverse cultures and local business practices, it is usually a very costly affair to start up an internal operation to enter a new market since it takes time to cultivate and blend the company's existing business practices with that of the local business best practices. On the other hand, the middle person would already have local business best practices and also, the knowledge of how to introduce and market the product or services to the local market. The myth that some companies believe is that local business best practices can be easily and quickly cultivated internally through the employment of local talent or veterans. In reality, local business best practices are normally established over time through the successful interaction and inter-relation of several critical business elements like the corporate culture, management style, team composition and transaction methodology, coupled with a well managed pool of experiences, talent and skills.

Having said the above, many companies do opt for foreign direct investment because of strategic reasons like branding, local presence, support for existing customers with operations in these markets, etc. Such moves are always backed by adequate funds to ensure that the new operations can sustain in the new market or function with a positive cash position for approximately two years or more for certain products or markets.