By Prema Nakra, Ph.D. email
| bio
In 1994, Mexico joined a North American Free Trade Area.
The underlying agreement commonly referred to as the North
American Free Trade Agreement (NAFTA) was signed by the United
States, Mexico and Canada amid heated controversy in all three
countries. Looking back it can be argued that ultimately the
free trade agreement has brought economic benefits to all
three countries.
In this last of my three part series on Mexico, I will offer
some strategies and suggestions for successfully marketing
in Mexico.
Marketing in Mexico
Marketing in Mexico is affected by a firm’s ability
to estimate the market potential; understand and define product
quality and the need for: product adaptation, effective pricing,
viable identification and access to distribution channels;
and effective communication including developing long-term
relationships with suppliers, vendors, after-sale service
providers and end users.
Market Potential
In Mexico gaining market share is largely dependent on the
reputation of companies and their brands. Luxury products
or expensive high-tech goods can be sold in Mexico, but their
market is quite narrow and the prospective exporter should
consider whether the potential returns are worth the effort.
For example, the number of consumers who can afford imports
remains constrained by unequal income distribution, low wages,
under-employment and limited advancement opportunities. Market
size and share is further constrained by the availability
of counterfeit and fake products.
Product Quality and Brand Reputation
As is the case in shipping to any country, exporters must
make sure their products meet Mexican quality standards and
labeling requirements. Labeling must be developed to conform
to Mexican requirements. Mexico requires that all labels for
imported processed products be in Spanish, although they may
be in another language as well. If the label is in two languages,
the Spanish print must be the same size as that of the other
language. Packaging may have to be altered to accommodate
climatic differences or local preferences. Products must also
conform to Mexican health, safety and environmental standards.
Regulations and controls for imported products in Mexico
sometimes change without advance notice causing problems and
delays for exporters. Mexico’s labeling requirements
also change frequently. Exporters should verify all requirements
before proceeding to market in Mexico. In most cases it will
be necessary to have special labels prepared for the Mexican
market.
Pricing
Pricing of consumer products is subject to multiple international
constraints, and they all must be considered. Constraints
such as anti-dumping legislation, resale price maintenance
legislation, price ceilings and price level reviews, international
transportation costs, middlemen in elongated international
channels of distribution, and multinational account servicing
must be addressed.
In the case of direct exports to Mexico, cost calculations
will include the costs of production in home country and the
additional costs of delivering the goods to Mexico including
packing, transportation, export documentation, insurance,
tariffs, customs fees if they apply, licenses and permits,
as well as the costs of distribution, marketing and sales
in Mexico.
Retailing
One important point to keep in mind is that the retailing
market is very fragmented due to the diversity of consumers
with different purchasing power capabilities. Modern specialized
formats such as hypermarkets, supermarkets and department
stores are favored by middle to upper-income consumers. Traditional
formats, such as small independent stores, are favored by
middle and lower-income levels.
Informal establishments, such as street vendors and open
public markets, are estimated to account for 50% of the total
retail market and are mostly favored by lower-income consumers.
Traditional retail stores such as grocery stores and mom-'n'-pop
shops, although a large market segment, are not yet viable
options for imported products because of their comparatively
small size and limited refrigeration. Operators often have
only limited knowledge of imports, restricting their outlets'
potential for U.S. products.
For foreign marketers, convenience stores represent the fastest-growing
segment in Mexico. These outlets tend to be located in large
and medium-size cities and are usually in middle-income neighborhoods
and business districts. Convenience stores typically offer
longer hours and good service. Depending on the nature of
the product, these channels may offer a viable opportunity
for foreign supplies.
Communications
Marketing communications include but are not limited to advertising,
public relations and tradeshow participation. Advertising
and public relations media options include television, print
and radio, which are all well developed in Mexico. For companies
that want to reach a broad, national consumer audience, television
is favored over newspapers and other print media. More than
94% of Mexican households have a TV set, and television captures
about three-quarters of the Mexican advertising market. Televisa
and TV Azteca have 60% and 40% market shares respectively.
Cable TV reaches about 12% of homes (the wealthiest) and is
increasingly a niche avenue for TV advertising.
Internet publicity and advertising has not been as successful
as was expected. Although the Internet advertising construct
seeks to reach the targeted audience, Mexican companies have
not yet aggressively invested in this area as they are not
convinced that Internet advertising works. According to AMIPCI
only 10% of the Mexican firms use the Internet for advertising
purposes, and those that have are focused in the pharmaceutical,
household, education and tourism industry sectors.
Promotional materials can be used in Mexico, but all material
should be modified for the Mexican market. Ideally, they should
be written in Spanish as opposed to simply being a translation
of an English or French original. Exporters should not rely
entirely on what they use at home.
There are numerous trade shows held regularly throughout
the year in Mexico. Exporters must attend such a show to gauge
what the competition is doing or exhibit at such a show as
part of its promotional activity. Trade fairs are an effective
way of acquiring familiarity with the Mexican market or to
promote a product with prospective Mexican buyers. Foreign
suppliers or marketers should attend or participate in trade
shows and missions to find potential representatives—importers,
sales agents, distributors or buyers.
Importance of Relationships
In an economy that is changing as quickly as Mexico's, a
successful export drive will not in itself assure a company
a long-term position. For a company that thinks beyond the
immediate sale, an ongoing relationship with a Mexican partner
and a local presence can provide a window for tracking market
trends and adapting to emerging demands.
In developing business relationships, language can be a significant
barrier to doing business in Mexico. It is not so much a question
of rendering words exactly but of capturing nuances and interpreting
gestures. Companies doing business in Mexico should be careful
to move beyond simple words to understanding the spirit in
which the transaction is being conducted.
Final words
Companies that succeed in Mexico are generally those that
proceed cautiously, take the time to thoroughly assess the
market, and define an effective marketing plan. The efficiency,
quality of product, pricing and communications are all very
important factors for success in this market. Being aware
of cultural factors including corruption, counterfeiting,
restrictions in entry into certain industry sectors, and infrastructure
barriers will help the international marketers in making prudent
business decisions.
