Like most companies that sell complex technical products, Ottawa-based Epiphan Systemsrelies heavily on its distribution partners to connect with customers. The 11-year-old firm manufacturers a range of audiovisual components that provide users with various screen-capture or video-streaming capabilities—applications that have found take-up in settings as diverse as lecture halls, hospitals and flight simulators.
But as Epiphan steadily expanded into new markets, the company’s executives realized that each country had its own subspecies of middlemen.
In North America, observes Michel Ranger, the company’s director of marketing, end-users are happy to buy directly from Epiphan’s website.
Overseas, however, the direct sales channel approach doesn’t take quite so readily. In Italy, for example, Epiphan’s growth was anemic. When Ranger made inquiries among existing customers, he learned why: in that market, end-users prefer to buy from a local supplier. Elsewhere, customers are used to sourcing this kind of technical equipment through dealers. “We sit down with our channel groups and ask, “How do we cover this market, and how is it different,’” Ranger says.
For a firm like Epiphan, the business of understanding the distribution nuances of various geographical territories is both challenging and critical: the company, which ranked No. 223 on the PROFIT 500, generates about 95% of its sales volume outside Canada. About half occurs in the U.S., where the existing channels are familiar, but another 30% is in Europe, where every country seems to have its own way of doing things.
While Ranger says that Epiphan, which was founded by a pair of Ottawa tech-sector veterans, has rigorously automated its sales-tracking systems, the company’s reality is that it can’t identify the final destination of a large chunk of the orders it receives: 70% of the revenue comes through Epiphan’s growing roster of equipment dealers, distributors and local suppliers—all with their own customers. That means that Epiphan can’t necessarily determine why a given geographical market may not be performing as well as it should.
Compounding the dilemma is the fact the Epiphan, because it provides specialized and sought-after equipment in a global market that is far from mature, now receives a deluge of requests from potential partners–small dealers or distributors that want to list Epiphan’s products in their catalogues. The company has an online application system, complete with a survey. Still, Ranger says, the “hit rate” is about one in 50: “They have to trust me, and I have to trust them.” Indeed, he adds, it can take up to a year to nail down a relationship with a suitable channel partner.
With applicants from outside North America, the due-diligence process is that much more challenging because of language subtleties and highly localized sales networks. “They’ll say they’re an integrator or an agent,” Ranger says. “They’ll say whatever to get the job. I spend much of my day clearing up the confusion.”
Once Epiphan does select a channel partner, Ranger says, the company’s marketing officials swoop in to make sure that the new firm’s sales people not only understand the technology but are committed to pushing Epiphan’s products to the end-users. For example, the company recently hired a former NASA astronaut to demonstrate some of Epiphan’s devices to prospective clients in the hospital market. (The astronaut had been taught to use the equipment as part of his training for dealing with medical emergencies in space.)
The company moved to bulk up its marketing teams with technical experts in recent years, and it has hired staff who are fluent in the local languages. Ranger says Epiphan also has taken steps to train its own salespeople in the cultural habits of the markets in which the firm has active accounts and networks of partners. Says Ranger: “You’re trying to help them sell the product.”
Ranger expects that Epiphan’s efforts to optimize the firm’s complicated sales and distribution network will be rewarded when the European free trade agreement comes into effect. With the reduced tariff and red tape, the company will be able to move its products through all those middlemen with fewer logistical headaches. “I think the trade deal is great,” he says, “because it helps our velocity.”