For many companies entering new local markets, their growth strategies can incorporate existing products and services and/or releasing new products or services. The businesses intent being to create new or increased revenue streams, broaden the customer base of the company and increase market share; all too often the outcome is more (or less) revenue but even higher costs delivering a negative contribution to the bottom line. As a business owner, you must have a clear competitive strategy for success.
If the expansion is into new foreign markets as part of a global expansion, then even further complications arise as you begin to compete against foreign companies with deep roots in their own countries and costs escalate as you attempt market entry.
The approach to new markets often applied can vary from a salesperson with a new catalogue under the arm to major marketing campaigns to announce your arrival; and many variations in between. The results and profits can be as variable as the processes that are applied.
There are a number of elements of what needs to be considered when entering new markets. Firstly your competitive strategy. The approach will depend on the market environment and how you will position your product against existing players.
- Strategy 1: Reducing prices to penetrate an existing market. The approach of introducing a product at a lower price than the current players, you can attract new customers who would not have otherwise purchased the product. Reduced pricing can also influence the competitor’s customers to change suppliers. This strategy is likely to reduce margins as an outcome unless your cost of production is relatively cheaper.
- Strategy 2: Improve the product or service and focus on a niche market. You can compete by being an innovator in the marketplace. The innovation may be a drastic change, or innovation by way of a small change in function. Small changes can enhance a version of an existing product allowing it to compete directly with current products. It can also be positioned to appeal to a smaller segment of the existing market. Another benefit is the improved product or service may attract new customers that are outside the current target audience for the existing product or service.
- Strategy 3: Target new geographic markets for existing products. As markets mature in the local market, companies look outside to find more lucrative markets. These markets can be interstate markets or countries nearby with similarities to your own. They are often seen with New Zealand companies extending their market by entering Australia. A global expansion would see those same companies aim for the Middle East or the USA, and with those expansion plans comes many issues of trading in foreign markets.
- Strategy 4: Develop new channels to access new markets or better penetrate existing ones. Expansion does not always mean going global. Some companies can find the barriers of risk and the investment necessary to penetrate global markets may not be worth the return. Therefore, focusing on existing markets or nearby similar markets, where your company has a good understanding of the trading environment, can prove less risky and bring quicker successes.
Attempting to expand into new markets, be that local or foreign, without a sound strategy and implementation plan, the likelihood of success of delivery, timely, is greatly reduced.
To take a product to market successfully or enter new markets, you firstly need to understand what are the most common reasons products fail. Many lessons are learned from failure, and when it is known how those failures occurred, it creates an improved path to success.
A good place to start is understanding the root cause of the failure to ensure you are treating the right problem. In the eBook Taking New Products to Market, we outline the eleven most likely contributors to the failure of companies entering new markets. The issues can be anything from a business case that is flawed in taking too much time to enter the market and it’s shifted.
In worse case scenarios it can be the product is not good enough or the alternative being the product is ahead of its time. When a product is truly revolutionary, a strong educational campaign must be included.
Your Bottom Line
It is hard to account for all reasons for the failure of a product or entry to the market. You can have a product that is better than competitors, based on substantial market research and a well-planned advertising campaign; it fails to fire to the forecasted goals. If you look at the above reasons, it shows that failure has many faces and is often unpredictable. You must, however, work to give the product the best opportunity for success in the new market.
Considerable market analysis is required before setting out on expansion. There must be due diligence undertaken of the market including the level of brand awareness required to stimulate sales, the responsiveness of the target audience to new brands, and if your business model can successfully serve the new markets. You require a market entry strategy for your target market.
If you are expanding into an international market, experience in global marketing is imperative. The marketing tactics used on a small scale of the local country can often be at odds with global branding.
Taking products to market successfully
For success with any new market for a product, it requires a pragmatic approach and alignment between marketing and sales. Marketing is the first entrant to the market (after extensive research) followed by the sales effort. The alignment must be seamless and take the buyer on a continuous journey of steps from awareness to purchase.
The eBook Entering New Markets Successfully sets out the fifteen steps you need to follow, in the sequence, the likelihood of success increases tenfold. The early steps being fundamental as they create the base from which everything builds upon. The strategy, the communications plan, and sales effort.
If you are you planning to displace competitors or taking a new product to market two different approaches are required. Displacing competitors is an easier task than taking a new product to market.
Displacing competitors is demonstrating your product is better, smarter, or more fit for purpose than what they are already using. This is the most common sales process of all to apply. New products are a more complicated sales process as you are the educator, the seller, and the influencer of adoption. The latter is having a greater demand for marketing than sales initially.
Have sales goals – don’t just see how it goes.
Importantly, the most common phrase we hear is “I only need XX sales for this to work.” This fallback position is one that will stop you from applying the fourteen steps above and ensure the product excels in the new markets. The see how we go syndrome rarely leads to a profitable new product to market. Companies entering new markets need to be disciplined and with clear sales goals.
Once your marketing review is complete, and the financial analysis of costs to produce are known, you need to establish sales goals based on realistic sales numbers into the market. Understand how much marketing is required, the resources to sell, and all other contributing costs.
You need to establish how many leads are required from sales to support the sales goals to underpin the marketing plan. The marketing lead number and sales goal should be operating simultaneously with the greater number of marketing leads needed earlier than sales revenue goals. With the implementation of monthly and quarterly goals, your product will achieve as you have the right focus and demand on all those involved. Our sales improvement review will answer those questions for you.
The New Bottom Line
If you follow these steps with the right implementation plan, you will increase the success of taking your products to new markets tenfold. The quality of information and experience of those involved in each step defining the level of success you realise.
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Learn more about how we assist in companies entering new markets successfully.
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