Problem:
Since the early 80’s Hayes had been the leading modem manufacturer in the USA. By 1995 Hayes was in the top 3 in market share in the US, Europe and Asian markets but lacked any presence in Latin America. However, Hayes lacked the resources to build a dedicated local team to enter the market.

Core Strategies Assignment:
The mission was to acquire 20% of the Latin American modem market without a direct presence and with a very limited marketing budget.

Solution:
Core Strategies researched the market and prepared an entry strategy that defined the business model required to acquire a sizable market share of the territory while keeping front-end sales and marketing investments at a minimum. The outcome of this effort was a framework entitled Core Strategies Latin American Channel Development Program that has been successfully deployed in several other projects in the region. The program identified and recruited the right distributors and arranged to have Hayes products assembled in Brazil without capital investment.

In addition, Core Strategies created a pricing and distribution system that minimized the effects of Latin America’s infamous “gray market”.

The program involved three-steps. The first step was to establish a strategic partnership between Hayes and a local Brazilian modem manufacturer where the latter would represent Hayes in that territory. This way Hayes not only achieved a full local representation with sales, marketing and support services from day 1 at no cost but also turned a potential competitor into a partner. In addition, this partnership generated significant revenues from day 1. This same formula was repeated in Argentina and Mexico.

Once the partnership was operational, Core Strategies launched the second step of the program aimed at building brand recognition. A focused, cost-effective newspaper and PR campaign was created. The message introduced Hayes modems as “best modems for the telephony lines of Latin America.” Even though the modems being sold in Latin America were the exact same ones being sold elsewhere in the world the perception created was that the Hayes model was indeed better suited to overcome the low-grade quality of the lines in that region.

The final step was to launch a sales program aimed at building large volumes. Core Strategies devised a breakthrough promotional idea for Latin America: to bundle free ISP services to each modem sold. This was accomplished by establishing partnerships with local Latin American ISPs who were spending large amounts of marketing dollars in order to acquire subscribers. Core Strategies showed these ISP’s that extending one year of free internet access services to Hayes users was a much more cost effective way to acquire clients than the traditional advertisement way.

Results:
As result of Core Strategies’ recommendations Hayes sold 700 thousand modems in the first 12 months. In addition, Hayes signed OEM deals with 5 of Latin American top 10 PC manufactures (who also bundled the free internet promotion to their PC’s) By 1998 Hayes had acquired 22% of market share in the region.