          
                         AFTER-SALES SERVICE
          
          
          Three factors are critical to the success of any export 
          sales effort:  quality, price, and service. Quality and 
          price are dealt with in other chapters. Service 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 localized user manual or 
          service manual. 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 varies by the product type, the quality of the 
          product, the price of the product, and the distribution 
          channel employed. For export products that require no 
          service -- such as food products, some consumer goods, and 
          commercial disposables -- the issue is resolved once 
          distribution channels, quality criteria, and return 
          policies have been identified.
          
          On the other hand, the characteristics of consumer durables 
          and some consumables demand that service be available. For 
          such products, service is a feature expected by the 
          consumer. In fact, foreign buyers of industrial goods 
          typically place service at the forefront of the criteria 
          they evaluate when making a purchase decision.
          
          All foreign markets are sophisticated, and each has its own 
          expectations of suppliers and vendors. U.S. manufacturers 
          or distributors must therefore 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 reasonable competitive 
          position, given the other factors of product quality, 
          price, promotion, and delivery.
          
          An exporting firm's strategy and market entry decision may 
          dictate that it does not provide after-sale service. It may 
          determine that its export objective is the single or 
          multiple opportunistic entry into export markets. Although 
          this approach may work in the short term, subsequent 
          product offerings will be less successful as buyers recall 
          the failure to provide expected levels of service. As a 
          result, market development and sales expenditures may 
          result in one-time sales. Instead of saving money by 
          cutting back on service, the company will see lower profits 
          (because expenses are not spread over longer production 
          runs), ongoing sales programs, and multiple sales to 
          developed buyers.
          
          SERVICE DELIVERY OPTIONS
          
          Service is an important factor in the initial export sale 
          and ongoing success of products in foreign markets. U.S. 
          firms have many options for the delivery of service to 
          foreign buyers.
          
          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 the seller 
          must incur the export cost of the same product a second 
          time to return it.  Fortunately, there are practical, 
          cost-effective alternatives to this approach.
          
          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. An exporting firm'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.
          
          For goods sold at retail outlets, a preferred service 
          option is to identify and use local service facilities. 
          Doing so requires front-end expenses to identify and train 
          local service outlets, but such costs are more than repaid 
          in the long run.
          
          An excellent case study on this issue involves a foreign 
          firm's service approach to the U.S. market. A leading 
          Canadian manufacturer of consumer personal care items uses 
          U.S. distributors and sales representatives to generate 
          purchases by large and small retailers across the United 
          States. The products are purchased at retail by individual 
          consumers.  The Canadian firm contracted with local 
          consumer electronic repair facilities in leading U.S. 
          cities to provide service or replacement for its product 
          line. Consequently, the manufacturer can include a 
          certificate with each product listing "authorized" local 
          warranty and service centers.
          
          There are administrative, training, and supervisory 
          overhead costs associated with such a warranty and service 
          program. The benefit, however, is that the company is now 
          perceived to be a local company that competes on equal 
          footing with domestic U.S. manufacturers. U.S.  exporters 
          should keep this example in mind when entering foreign 
          markets.
          
          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 that ability to service requires that the 
          exporter 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 firm's experience in servicing similar 
          products.
          
          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 very specific time 
          parameters. These are negotiable issues for which the U.S. 
          exporter must be prepared. Such on-site service may be 
          available from service organizations in the buyer's 
          country; or the exporting 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 include the associated costs. Existing 
          performance and service history can serve as a guide for 
          estimating service and warranty requirements on export 
          sales, and sales can be costed accordingly. This practice 
          is accepted among small and large exporters alike.
          
          
          At some level of export activity, it may become 
          cost-effective for a U.S. 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, administration, 
          service, and other personnel, most of whom are nationals in 
          the market.  This high-cost option enables the exporter to 
          ensure sales and service quality, provided that personnel 
          are trained in sales, products, and service on an ongoing 
          basis. The benefits of this option include the control it 
          gives to the exporter and the ability to serve multiple 
          markets in a single region.
          
          Manufacturers of similar or related products may find it 
          cost-effective to consolidate service, training, and 
          support in each export market.  Service can be delivered by 
          U.S.-based personnel, a foreign facility under contract, or 
          a jointly owned foreign-based service facility.  Despite 
          its cost benefits, this option raises a number of issues. 
          Such joint activity may be interpreted as being in 
          restraint of trade or otherwise market controlling or 
          monopolistic. Exporters that are considering it should 
          therefore obtain competent legal counsel when developing 
          this joint operating arrangement. Exporters may wish to 
          consider obtaining an export trade certificate of review, 
          which provides limited immunity from U.S. antitrust laws.
          
          LEGAL CONSIDERATIONS
          
          Service is a very important part of many types of 
          representation agreements. For better or worse, the quality 
          of service in a country or region affects the U.S. 
          manufacturer's reputation there.
          
          Quality of service also affects the intellectual property 
          rights of the manufacturer. A trademark is a mark of 
          source, with associated quality and performance. If quality 
          control is not maintained, the manufacturer can lose its 
          rights to the product, because one can argue that, within 
          that foreign market, the manufacturer has abandoned the 
          trademark to the distributor.
          
          It is, therefore, 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 the 
          manufacturer has access in that market; it is important to 
          promise only what can be delivered.
          
          Another part of the representative agreement may detail the 
          training the exporter will provide to its foreign 
          representative. This detail can include frequency of 
          training, who must be trained, where the training is 
          provided, and which party absorbs travel and per diem 
          costs.
          
          NEW SALES OPPORTUNITIES ADN IMPROVED CUSTOMER RELATIONS
          
          Foreign buyers of U.S.-manufactured products typically have 
          limited contact with the manufacturer or its personnel. The 
          foreign service facility is, in fact, one of the major 
          contact points between the exporter and the buyer. To a 
          great extent, the U.S. manufacturer's reputation is made by 
          the overseas service facility.
          
          The service experience can be a positive and reinforcing 
          sales and service encounter. It can also be an excellent 
          sales opportunity if the service personnel are trained to 
          take advantage of the situation.  Service personnel can 
          help the customer make life cycle decisions regarding the 
          efficient operation of the product, how to update it for 
          more and longer cost-effective operation, and when to 
          replace it as the task expands or changes. Each service 
          contact is an opportunity to educate the customer and 
          expand the exporter's sales opportunities.
          
          Service is also an important aspect of selling solutions 
          and benefits rather than product features. More than one 
          leading U.S. industrial products exporter sells its 
          products as a "tool to do the job" rather than as a "truck" 
          or a "cutting machine" or "software." Service capability 
          enables customers to complete their jobs more efficiently 
          with the exporter's "tool." Training service managers and 
          personnel in this type of thinking vitalizes service 
          facilities and generates new sales opportunities.
          
          Each foreign market offers a unique opportunity for the 
          U.S. exporter.  Care and attention to the development of 
          in-country sales and distribution capabilities is 
          paramount. Delivery of after-sales service is critical to 
          the near- and long-term success of the U.S. company's 
          efforts in any market.
          
          Senior personnel should commit to a program of regular 
          travel to each foreign market to meet with the company's 
          representatives, clients, and others who are important to 
          the success of the firm in that market.  Among those 
          persons would be the commercial officer at the US&FCS post 
          and representatives of the American chamber of commerce and 
          the local chamber of commerce or business association.
          
          The benefits of such a program are twofold. First, 
          executive management learns more about the foreign 
          marketplace and the firm's capabilities.  Second, the 
          in-country representative appreciates the attention and 
          understands the importance of the foreign market in the 
          exporter's long-term plans. As a result, such visits help 
          build a strong, productive relationship.
          
          
