According to a recent report published by KPMG, the Latin American outsourcing market will grow nearly 10% through 2017 – a very healthy growth rate indeed.
But Latin America’s participation in the global outsourcing industry is still only 5% of global spending, says KPMG. And according to a 2013 article in Nearshore Americas, nearshore outsourcers are not very good at marketing. Deborah Kops of Sourcing Change said Latin American outsourcers, “…spend very little money on sales, marketing and branding.”
The lack of marketing skills, and especially the type of marketing skills that matter for today’s buyers – social media and content marketing – is hurting nearshore outsourcers.
But recent research conducted by Lee Frederiksen and his team at Hinge Marketing indicates that online marketing could be the path Latin American nearshore outsourcers could take to grow their presence in the U.S. market and become more profitable.
In his recent book, Online Marketing for Professional Services, Frederiksen published the results of research conducted across more than 500 professional services firms. What they found was fascinating.
They divided the companies into high growth firms and average growth firms. They found that high growth firms grew up to nine times faster and were 50% more profitable than the average growth firms, while spending slightly less than average on business development.
But even more fascinating, they found that professional services firms that generated 40% or more of their leads online grew four times faster than firms that didn’t generate any leads online (63% growth rate vs. 15% growth rate), and were almost two times more profitable (25% – 32.5% profitability as a percentage of revenues vs. 15% profitability).
The mix of online marketing tactics used by the high growth, high profit firms included content marketing, search engine optimization (SEO), and the development of a visible expert (a visible expert is a member of the professional services team who becomes well-known in his her or industry by speaking, publishing and blogging, to name a few tactics).
I interviewed Lee Frederiksen, managing partner of Hinge Marketing and publisher of several books, including The Visible Expert, Online Marketing for Professional Services Firms, and Spiraling Up: How to Create a High Growth, High Value Professional Services Firm.
The Highly Competitive U.S. Market
Here’s my interview with Frederiksen and his observations on the nearshore outsourcing market and how online marketing could be a game changer for nearshore outsourcers.
For the study you conducted for the book Online Marketing for Professional Services Firms, what conclusions are there for international firms wanting to enter the U.S. market?
In the technology arena it’s becoming much more of a global market and of course there are a couple of forces that are really driving that market, one of which is the technology itself which makes communication so much easier, and of course the economics of international business where wage rates and so forth are more modest in some other countries.
Those are the good parts that help international firms, but what they sometimes don’t realize is the buzz saw of competition that they’re stepping into when they come into the US market and they try to market to major corporations. You basically have a much higher standard of marketing than you do in many other parts of the world.
Here in the United States?
Here in the United States, yes.
Yes. Absolutely, and I think that that is a huge challenge for foreign firms wanting to compete in the US market, because there is such a dilemma. Everyone wants to get into the US market because it’s the largest market in the world, but yet it’s the most sophisticated market in the world. It’s kind of a catch 22.
Why Low Price Is The Worst Marketing Strategy
Yes. It is, and I think they’re not used to the level of investment that is required. There’s two dimensions to it, one of them is the dollars it takes to get in and the other, frankly, is the calendar time it takes to be able to develop your visibility within the market and your credibility within the market, so that you’re perceived as a real alternative and a real player, as opposed to somebody who was just trying to come in and make a quick buck.
Yeah, like the ones that one to be the low-cost player that will undercut everybody.
Yeah, and there’s another element to that that’s also going on and that’s the perception of risk the U.S. buyer has. I think it’s becoming more and more of a factor in terms of buyers’ decision making. ‘Am I going to lose my job over this decision? Sure I may save some dollars, but I don’t want to risk too much by getting something that is going to somehow introduce a security issue that I didn’t have before.’
The Time and Financial Investment It Takes to Make it in the U.S. Market
Exactly. You mentioned it’s not only the investment of financial resource but of calendar time. Are you referring to, for example, the time it takes to specifically invest in things like marketing, which takes a lot of time to do because of the market research and to create the content and to maintain that consistency over time until it really starts to work? And if they want to develop a visible expert program, what that person has to do to also invest in gaining that visibility, or are there other factors involved as well?
I think you have put your finger right on what’s the key here, and that’s the added amount of time it takes to develop the content and to get that into the marketplace so you can actually start to see the results of it. Our experience is you have to plan on at least a year before you even begin to say, “Is this program working or is it not working?” Now, we’ve seen some players snag international business at the start of a content marketing program within the first couple months, we have seen that happen. But as a business person you don’t want to plan on that.
So we always recommend you plan for at least a year of actively working in the program before you begin to make any assessments about whether this program is going to ultimately be successful.
Also, regarding developing a visible expert, our research shows to develop a visible expert it used to take about five years. Now, with the level of accessibility you have to the marketplace and the ease with which you are found these days, if you do it correctly and by correctly I mean, you’re legitimately an expert and you are using those techniques appropriately, that time can be reduced to about one year.
Marketplaces don’t learn things quickly, it takes them a while to absorb it, and for them to be able to pass it around, and so when someone asks about your firm they say, “Oh yeah, they’re a real player.”
When I’ve spoken to firms from Latin America who haven’t even gained their first client in the United States, but they know I’m offering services to help firms in the U.S. market, their first ask of me is, “Are there sales that you can get me right now? And if you can, we’ll pay you a commission.” I always say, “No, sir.”
You often get these logical non-sequiturs that are like, “Well, I don’t want to spend very much now until we’re successful, then I want to spend on it.” Which is, well that would be great if you could do that, but the reality is you have to invest in it just as much as you have to invest in a workforce or a factory or whatever other the infrastructure is you need. You have to invest in the infrastructure of visibility and the perception of reputation and expertise.
Benefits – and Challenges of Online Marketing in the U.S. Market
My second question is about what are some of the challenges you see for outsourcers from foreign countries using online marketing programs to enter the U.S. market or other international markets. Would you say there are more challenges versus benefits, or more benefits versus challenges?
Well, let me add a couple of the challenges and then we can talk a little bit about the benefits. Additional challenges are the cultural translation, not only just the literal translation but how you translate your cultural values into being ones that are acceptable to the American corporate buyer.
There are issues about how quickly things move, about the clarity of communications and issues around that, and understanding of the marketplace enough to know what’s motivating to buyers. The most common mistake is that firms come in and try to sell on price alone, and if you’re going to pick a marketing strategy of course price alone is probably one of the worst ways to differentiate yourself.
If you’re going to sell on price you’d better have something with that price to help, otherwise people are just going to make the assumption that low price means low quality.
Now, if you turn that around, then that becomes your big asset, and by using content marketing and demonstrating your firm’s expertise then you create the situation where your position is more of having high quality with a lower price, then that’s a greater value proposition, and that is generally a good position to be in. But you can’t do that unless you establish the quality.
Exactly, and that’s communicated through your content.
That’s right. You have to demonstrate that you have sufficient expertise and that you have a level of quality of your expertise, your experts, your service and so forth to actually solve the problem that need to be solved at a high enough quality level. Then the price becomes very appealing, but if you don’t have that quality level it does not matter how low the price is, you just won’t be considered.
Very good point. One of the other things I read in your book Online Marketing for Professional Services was that high growth and profitability directly correlate if a firm generates 40% or more of leads generated online. So if we were talking to an outsourcing audience who is skeptical of online marketing and they want to default to the way they’ve always done things, what can we show from your research that online marketing is able to achieve that for them?
How Not To Get Ruled Out By U.S. Buyers
It’s a great question and it’s pretty straightforward. One of the basic reasons is that it is expensive to have high paid salespeople, and there’s a lot of overhead and expense involved in trade shows and that type of person-to-person marketing. Now, it does have a place to be sure, but what people are missing is that today’s buyers are very time-pressured. They have a lot on their plate, much more than they did decades ago: the jobs are bigger, business is moving faster, so they don’t have time and they look for, ‘How can I find the best world-class solution with the least amount of elapsed time? How could I do it quickly?’ And that translates to, well, you Google it, you check your social networks, you maybe talk to some people, but if they can’t find you, or your online presence is embarrassing, you will get ruled out before you even have a chance to have your first meeting.
They just won’t take the time to talk to you, you don’t have the credibility.
As a matter of fact, we just conducted a recent study on referrals and networking, and what we found was that over 50% of buyers have ruled out firms before they talk to them. So if you think about how does a buyer go about doing it, well, they have an issue, they look around for resources, they gather a bunch of leads, they go online, they Google it, they read a few articles, they talk to their friends or colleagues, they maybe check in a social network and they get a bunch of people and then they start the whittling down process.
Then maybe they start out with 10 or 15 alternatives and then they start ruling them out, and the top reason people get ruled out is, “I can’t see how they could help me or it was unimpressive marketing.” Is what it gets down to. That’s how people get ruled out.
So those things that could have been leads or could have been someone you could develop a relationship with, you never get the chance because you get ruled out. So what online marketing is doing is adding that accessibility to those buyers, which is a growing amount that are looking online and are validating you online, and using that as a mechanism to pre-qualify you to even waste their time talking to you.