Selling Directly to Mines or Working Through Partners?
Mining technology companies looking at Latin America need to decide on the best way to service the region. One of the first decisions that companies need to make once they confirm a market has potential is whether they will work through partners or sell direct to the mines.
The answer to this question is not always black or white. There are many considerations that will determine which option is better. Factors such as the market you are trying to enter, the solution being offered, the needs of your client, and/or the internal resources a company has at its disposal to enter a new market will all come into consideration.
When to work with partners or when to go direct to the mines?
From our experience, one of the best indicators to determine whether a company should work through partners is by looking at the actual solution being offered. Specifically, you need to look at the complexity of the product/solution being offered to help you decide whether to use a partner or to sell direct.
- Higher complexity – Includes technology that requires a consultative sales process to convey the value add, whether the technology requires a change in behavior from operating staff, whether the technology could have an impact on downstream or upstream production processes, and/or requires a high level of support both to implement and to provide after-sales support.
- Lower complexity – Includes technology or products that have been in the market for some time, technology or solutions that can be sold based on features, technology that is already well accepted and known in the industry, and lastly, technology that has low degree risk for the mines in terms of impact on operations.
Ax Legal Practical Advice –
- Technology or solutions that are considered high complexity require longer sales cycle, require more on-the-ground support, and typically with these type of solutions, mining clients want to know there is technical support in the region that speaks the same language. In these cases, it is often better to go directly to the mine.
- Technology or solutions that are considered low complexity often compete on features and price. They do not require the same level of technical know-how and do not carry the same risk. In these cases, it is often about showing why your features are better than competitors. Solution with lower complexity can be sold more easily by partners.
Once we can determine whether the solution is of high or low complexity, we can then evaluate what are the next steps. That is, if we believe our solution is of high complexity, do we really need to have a local presence or can we sell directly from our home country? If it is of low complexity, where do our partners need to be located, should they be able to provide support, etc.
From our experience, the best way to quickly answer these questions is by speaking with local clients and asking them directly what they think. Many companies will shy away from doing this, but it is important part of understanding the client’s perspective which then influences the next part of your strategy.
High Complexity – Selling Directly to Mines
If you see that your product or solution is of a high complexity, then it is often better to have your own sales team in the region for the following reasons –
- We need to understand that culturally, Latin Americans tend to be more risk averse than Australians or Canadians in certain areas. Many Latin American mining professional will not want to recommend a solution where the outcome is not certain to be positive. This often comes from not wanting to look bad in front of their bosses or peers. Something that we all face in our careers but from a culturally perspective is more distinct in Latin America. Technology suppliers need to understand how these cultural factors can impact the sales process.
- Mining companies in Latin America will always look more favorably at foreign companies who have a local presence. For them, it is about minimizing risk and reducing uncertainty which ties into the first point. A company with a local presence means there is local support, in their language, and that the supplier is committed to the market for the long-term. All of which is required for a more complex solution.
- Solutions that are more complex often require a behavior change from the status quo – whether that be for staff on-site or for management teams. Highly complex solutions require us to work with clients to ensure they receive the benefits we promised and that it continues to be used even after implementation. Local staff that can support the after-sales effort is often needed. There are very few partners who can provide this after-sales support to the same level as your own people.
Companies that have solutions which could be considered of higher complexity, are often better off to develop the market directly. No one is going to sell your product like your own people. The drawback is that there is costs and resources involved which is why the decision to have a local presence or to work through partners is not always black and white.
Due to this, some companies will decide to work through partners regardless of if their solution is considered of high complexity. In those cases, companies should expect a longer lead times to develop a sales pipeline. They will need to have partners who are committed to opening a new market and the challenges that come along with it. Most importantly, companies will need to work very closely with their local partners to support them whether that be technically or commercially.
Next week we will provide practical tips on what type of partner you should be looking for, how to select a partner, and how to get the most out of that relationship. The hope is to provide practical information that will help you select partners that can grow your business in Latin America and not just represent it.
Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.
To better understand how we can support you in the Region, please contact Cody Mcfarlane at firstname.lastname@example.org