7 key characteristics of a successful market expansion strategy
How would you define success in terms of market expansion? Is it about increasing sales regardless of geography, expanding into new market segments or entering new territories and countries? Or maybe all three?
Market expansion is the process of entering new markets and selling your products or services to them. This could be opening up the type of organisational profile you are targeting, diversifying to a new sector or going global.
Market expansion strategies vary from company to company. Some companies focus on developing their existing footprint and customer base, while others look at new markets and expand their footprint.
As specialists of medium sized enterprises and micro-international companies taking on a bigger market, at Haynes MarComs we have valuable insights and experience to share. This article looks at 7 key characteristics of a successful market expansion strategy
What Are Market Expansion Strategies?
A market expansion strategy is a way (a plan of action) for a company to expand into new markets. This strategy could be replicated for multiple markets, or be a one-off, depending on the complexity of the market at hand.
Market entrance can be handled in numerous ways, and the way you may have built your existing business may not be possible with a new market. For example it’s easier for a national company to build business in its native territory than it is to enter a foreign country. Similarly, if the business’ heritage is built around one specific sector, entering a new sector will be much tougher.
It’s worth exploring options of market expansion to enter new markets through partnerships, mergers, acquisitions, joint ventures, franchising, licensing agreements, channel resell and similar business arrangements.
Through the research you may find you have to offer different products or services to gain more customers. It could mean adding new features or upgrading your existing products. You may need to address local regulation and provide a solution to their existing challenges. It could be as simple as reworking the value proposition. It could also mean using new marketing techniques to get people interested in your products.
As you go to activate your market expansion strategy be sure of the aims and expected outcome, is it about leads? Market awareness? Sales?
How to Develop a Successful Market Expansion Strategy?
To develop a successful market expansion strategy, identify which markets you want to target. It helps to consider where your competitors are already doing business. Then, if there isn't any competition in those areas, you have nothing to worry about (except that the market may not be ready for your product).
If there is competition, you need to decide if you want to compete head-on, define yourself differently in the market or partner with another company. By competing you will need to determine how much you're willing to spend on advertising, promotions, and other forms of marketing and ensuring you have the right teams and expertise in place.
Market expansion takes time. So you won't see immediate results, but if you have clear measurable KPIs, you’ll begin to see the fruits of your efforts.
Why are Market Expansion Strategies Important?
There are many reasons why market expansion strategies are essential. Here are just a few:
1) New Markets Can Lead To More Sales
By expanding into new markets, you can make more sales. It means more revenue for your company. You can replicate markets particularly if you see the same behaviours and activities among your buyers.
This is particularly noticeable for example if you are selling hospitality products, technology and services to city hotels, the way they behave are quite similar in capital cities worldwide. However holiday beach resorts will be dependent by region, although Spain and Mexico for example have many similarities. This makes for easy sales so you can use the same marketing and sales messages.
2) New Markets Offer Opportunities For Growth
Established companies often overlook new markets. However, these markets offer growth opportunities. In addition, they can provide new sources of income for your company. This is particularly worth exploring if you have tough competition in certain markets, as you can grow in markets where there is less competition.
Furthermore, if you are recognised to have customers in numerous markets - this will help you win business stronger and faster across other markets. For example if you sell to customers in France, UK and Dubai, companies in Germany, Italy or Egypt would see the value you offer.
3) New Markets Help Your Company Stand Out From the Competition
Your company might not stand out from the competition right away. However, as you grow, your company will attract more attention. As a result, you'll find that more people will know who you are and what you do.
This is particularly noticeable if you might work with a sector that is particularly international. We see this especially in travel and hospitality. Take hotel brands with properties worldwide, if a few of their properties are using a product in one country and the brand as a whole takes it up - suddenly the business is international. Through this association you can start to stand out.
4) New Markets Are Less Risky Than Starting Over
Starting a new venture is risky. There's no guarantee that it will be successful. But, on the other hand, expanding the business into a new market is less risky. In part, you’ve been there and done that. You know the challenges and you have the sales processes, marketing assets and product ready to make your mark.
That being said, you will need to consider the cultural, language and potential expertise barriers.
5) New Markets Allow You to Experiment With Different Business Models
Most companies use one model to run their business. However, this doesn't always work well. By experimenting with different models, you can learn more about your customers' needs and preferences.
You may need to try and test, for some markets the price conversion will not work for their budgets. Some sectors of business have specific procurement methods or payment processes. It’s worth doing your research in advance of any major push.
How to find new markets
7 key characteristics of a successful market expansion strategy
Once you've identified a potential market, here are seven things you should look for when developing a market expansion strategy.
1) A Target Market That Has Demand
A good market expansion strategy starts with identifying a target market with demand. The best way to figure out whether a market has demand is to ask two questions:
a) Are my existing buyer profiles in the market?
b) Do they experience the same problems?
The answers to these questions will help you determine whether there's enough demand for your product/service and if you can take what you already have and place it in the market.
2) An Opportunity To Make Money
You don't want to enter a market that only costs money. Instead, it would help to focus on needs that also generate profit. To identify such markets, you should think about the following factors:
- What’s the size of the market? Is there profitability there?
- What’s the level of competition? Can we compete?
- What do we need to do to differentiate? Is it easy to achieve?
If you answer "yes" to all three questions, then you may have found a market that offers both opportunity and profit.
3) The Right Product Or Service
If you're going to enter a market, you need to ensure that you have the right product or service. Remember a bad product or service won't lead to success. On the contrary, it could even hurt your chances of succeeding if your brand’s reputation precedes you.
There are several ways to test your idea. One way is to see how well it performs compared to similar products or services. Another way is to conduct market research. Alternatively, offer the product on a pilot run with target customers.
4) Potential Customers
Another critical part of a successful market expansion plan is finding potential customers. It's easy to spot potential customers. All you have to do is look at the demographics of the market. There are usually databases that can help you.
However, you shouldn't limit yourself to doing the leg work yourself. It would help if you also considered other factors like working with a partner, an industry association, or working with a reseller who already has a captive audience.
5) Access To Resources
To succeed, you need access to resources. These include capital, technology, expertise, etc. There is no point in scrimping to get into the market, it will be obvious and the attempts will fail. You need time to get into the market, to be recognised, build credibility and test your proposition.
Sometimes it’s worth doing one market well rather than several markets rather shoddily.
6) A Competitive Advantage
It would help if you had a competitive advantage. However, it means that you must offer something better than your competition. If your product or service doesn’t cut it, think about how you can sell on the value you offer. Alternatively invest in highly creative engagement campaigns to start driving leads with a fully supportive sales funnel.
7) A Marketing Strategy
Finally, it would be best if you had a marketing strategy. It includes everything from advertising, partners, communication frameworks, distribution channels, pricing, promotion, etc.