Profitable growth is a challenge every CEO must have a sound strategy for. Fundamentally you have two options: Sell more in your existing markets or identify new markets in which your products and services can be sold. Existing markets are comfortable, low risk, and you have a well-developed velocity to benefit from. Expanding new markets are opportunities filled with growth but fraught with risk. They are expensive to access, difficult to define yourselves in, and have no velocity. To mitigate risk, the process of choosing new markets requires precision and extensive market research to provide actionable insights.
Ideally, you want to begin close to where you have existing velocity. Profiling from this point will provide you with a clear understanding of your customer persona that is contributing to the best value and growth to your company. The analysis will assist you to determine the profile that defines your ideal customer.
The next consideration would be the key attributes such as vertical industry, revenue, the number of employees, growth rates, and distribution area. You also need to consider buyer behaviour and review metrics such as deal size, annual spend, and customer lifetime value. These factors become key to identifying your markets. The key is to duplicate those elements as they have the highest likelihood of becoming good customers.
The consideration that often is overlooked is the competitor behaviour in those markets. How dominant are those competitors in the markets you have defined as targets? Do they hold a substantial market share or hold key customers that define the market? Competitors dislike newcomers, and you need to understand how much market share they have and importantly their competitive strategy to blocking new players. For some companies, you can enter quietly into a market and be relatively unnoticed for a period of time. For others, your entrance is immediately noticed and competitors use their experience in the market and with their customers to take an offensive play against you. Underestimating the competitors when expanding new market is one of the greatest risks to expansion plans being successful.
Obtain and independent view of your competitive advantage or point of difference. Examine the key elements of competitive advantage: price, product, distribution capability, and customer experience. How genuine is your competitive advantage that you are taking into those new markets? It is important that you are not taking to the marketplace a false presumption of superiority or advantage. You need an independent perspective “Is this competitive advantage transferable to new markets?”
Developing your strategy is based on the research you have undertaken. That research should clearly articulate all the elements that contribute to entering the new market. The target customers, the positioning, realistic timelines to enter the market. Forecasts should be conservative and all costs, direct and indirect, should be considered for accessing those new markets.
The final consideration is the talent strategy. Do you have the right talent in the business, experienced in those markets to expand? The lone ranger or the popular person in your company is often not the best talent to use. Careful consideration needs to be made of the talent that will lead the business.
Extensive market research will increase your chances of success and enable you to develop an effective strategy.
If you are looking to expand, please contact us to discuss your specific requirements.
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You may also be interested in reading these articles:
- The Challenge of Entering Into New Markets
- Entering New Markets Successfully
- Why Great Products Fail to Sell
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