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Baytex Manufacturing Co Ltd (Baytex) did little market research before entering Australia but has come to understand the market well over the past 28 years.
The privately-owned Mount Maunganui based company, whose products include tents, canopies and marquees, began exporting to Australia in 1982, then as Bay Textiles Ltd. The company established its wholly-owned subsidiary Baytex Australia in 2002 and says while the Australian market is similar to New Zealand, it still requires patience, persistence and perseverance.
Why Australia?
Baytex’s decision to enter Australia was driven by the following factors:
Market demand
Back in 1982 Baytex (Bay Textiles as it was then) was a major renter of tents and marquees at the Mystery Creek Fieldays. They were approached by an Australian hire company attending the event who wanted to buy its marquees, with the comment that there was a good market in Australia for marquees of this quality. After carrying out some basic market research, including making contact with the New Zealand Trade and Enterprise office in Melbourne, a genuine potential market was identified in Australia. On the strength of this, Baytex accepted an invitation to exhibit at the Australian Hire and Rental Industry Convention and Expo later that year and has continued to exhibit every year since.
Growth and diversification
Australia is a much larger market than New Zealand and provided good growth prospects. Once in Australia, Baytex also found the market to be very similar to New Zealand demographically, so it was a logical, straightforward exporting destination.
Exporting experience
As a first step in developing their export capability, Baytex followed the philosophy of the time which was ‘if you can sell to the Aussies, then you can sell to anyone’. Succeeding in Australia gave Baytex the confidence to move into other markets.
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Since Baytex first exhibited at the Hire and Rental Industry Association conference in Melbourne in 1982 they have found trade shows to be a ‘hugely valuable’ means of showcasing products to its market segment.
Subsequent lessons learned while attending large trade shows in the United States have guided its approach to comparatively smaller events in Australia. These include the benefit of one-on-one conversations with potential customers, the need to manage resources to be effective throughout the show, and ensuring maximum results from effort invested. For example, after finding all its printed materials had been taken by lunchtime on day one of an event, Baytex moved to pre-packing material and rationing hand-outs. It also ensures it has enough staff on the stand to avoid burn-out and present the best possible image at all times. Baytex leaves nothing to chance.
As a niche marketer, Baytex knows each individual customer in its market segment. Pre-show mail-outs promote Baytex’s products, including show specials, and help identify which customers are planning to attend. For larger shows Baytex works on a principle of spending five minutes per person, reaching 12 each hour, and staffs its stand accordingly. It holds a debrief after each event to see what it can do better next time. While promoting its product is a key goal at trade shows, they are also a crucial way of getting feedback from customers and seeing what competitors are doing.
Baytex has developed a strategy of exhibiting or sponsoring at all the major shows attended by its customers and supporting other, selected events in markets where it sees opportunities for growth. Because its market is small and specific, Baytex does not do mainstream advertising in Australia, but gets most of its business from trade show contacts and referrals from existing customers.
Benefits of Aust-NZ similarities
While Baytex did little market research before entering Australia, it has found “the Aussie backyard” to be almost indistinguishable from New Zealand, but with the much larger population base offering significant economies of scale. Regulations are similar in both countries, with the only points of difference being in the detail.
Baytex sells into all of the Australian states with customers as far afield as Broome, Darwin, Perth and Adelaide. Given the size of Australia, logistics are complex but building the right relationships has been the biggest challenge.
After many years in the market, Baytex knows its customers well and hires staff who have the right personality to work with them. Relationships formed with relatively junior staff in a client company can pay off over time when those people move into senior positions with responsibility for purchasing decisions. Staff on the ground can also find the ‘soft entry” point where it is easier to gain a foothold in a market. For example, Baytex had little success pitching its products to several large Australian hire companies until its sales manager formed a relationship with the people in charge of purchasing Baytex’s linings. The linings were well received and became the ‘foot in the door’. Baytex has since grown to be a valued supplier to these companies and who in turn are a valuable motivator of new product development.
“Their core business is renting things out while we specialise in design and build. There is zero risk to them in having us develop new items and if they work, we both win,” says Baytex co-owner Spencer Tankard.
Benefits of in-market management
In 2002, a wholly-owned subsidiary, Baytex Australia, was formed and a manager employed. Having a local presence has been crucial for growth with sales increasing steadily once customers were dealing with an Australian company, staffed by an Australian. Products are sold in New Zealand dollars in New Zealand and in Australian dollars across the Tasman with inter–company adjustments made to manage exchange rate variations. Market development is slow and expensive and, at times, the New Zealand business has had to carry the Australian operation. Having clear plans and goals for the Australian business was important in these periods.
Baytex New Zealand ships or air freights product to Australia, either direct to customers or to its warehouse at Kincumber, north of Sydney. In the past, Baytex has sometimes been unable to meet requests for immediate supply. These days its sales staff try to get a clear indication of upcoming orders and the company stores some of its more popular products in-market.
“It is a difficult balancing act. Responsiveness is a key point of difference for us but we can’t afford to have too much product sitting idle,” says Tankard.
Partnering and going Lean
Other key points of difference are product performance – Baytex tents can be erected quickly and easily – as is a focus on developing good relationships with customers.
Baytex’s main competitors in Australia are European companies which have local agents working for them. Some of these businesses have complementary product offerings, such as large structures which Baytex does not produce, and Baytex partners with them so it can supply customers with a full range of products.
Baytex is continuing to grow its Australian business while also focusing on becoming more efficient and future-proofing the company. Lean manufacturing principles are being introduced at its New Zealand facility and owners Spencer and Wendy Tankard are succession-planning to ensure the business is sustainable long term.
Baytex learnt a number of lessons from investing in Australia:
Australia is a key market for Baytex, earning revenue of around AU$2.5million and potential to increase this to over AU$5million per year. Sales in New Zealand bring in between NZ$3–4 million annually and are relatively static while sales grew 30 percent in Australia in 2009 and the company recently employed a third staff member to keep up with demand.
To be successful in Australia, a New Zealand business needs to be able to provide robust answers to the following questions. In Baytex’s case:
Does the business know what success looks like?
Baytex knows each individual customer in its market segment in Australia and targets them with promotional material, visits and face-to-face meetings. It has partnered with other companies that have complementary products to ensure it can offer clients a full product range. Its key strengths are: high quality products, excellent service and a very high level of back up support. Its business model in Australia has since been successfully applied to other export markets.
Does the business have the time and the money to break into a new market?
Baytex had adequate resources and capability to grow its Australian business without detracting from its New Zealand operation. Its strategy has been to aim for steady, incremental growth.
Does the business understand the Australian market?
Baytex has developed a thorough understanding of the market, knows its competitors and what it has to do to succeed. Having Australian staff and an Australian company gives it a local look and feel, which has contributed to Baytex’s success.
Does the business understand how the product will be differentiated in the Australian market?
Baytex understands that its products must be priced competitively while also having points of difference. Its strengths are in selling high quality tents that are quick and easy to erect and dismantle. Baytex’s customers have come to appreciate that the cost of ownership is a lot more than just the initial purchase price.
Does the business have a clear path to market?
Baytex started selling through trade shows and continues to exhibit regularly to source new business. It knows its industry well and has built up credibility and strong relationships that give it a secure business in Australia.
Baytex’s business in Australia is well established and the company expects to make further, significant investment in the market only if new opportunities or challenges arise. However, it does anticipate steady growth. Some of this will come from new customers and some from repeat business with satisfied customers who will eventually want replacement tents. One possibility is to invest in a local manufacturing resource to improve its flexibility and be responsive to local trends. For now, however, its approach is to continue with its proven sales and marketing plan and concentrate on providing excellent support and servicing of existing products.
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