Factors To Consider Before Entering a New Market – Guest Post
by Matt, on 18 Aug 2020
The business decision to enter a new market – whether with a new product, a new service, or simply a new geographic area – should be made based on several different factors.
These include the target demographic (or audience) and what they are looking for, competitors and what’s been successful in the past, and the issues or unmet needs that potential customers are facing.
You will also want to consider how long it will take for you to learn the ins and outs of the new market and become skilled at operating there.
Here are some questions and tips you can use when evaluating a potential market entry:
What’s Been Successful?
It’s important to consider what has been successful in the past in the target market, and why it has worked.
By understanding what’s worked before, you can learn more about what customers are looking for in a successful solution.
Have lower-cost alternatives been successful? A luxury product or service? Or a high-quality, high-value product that’s affordably priced?
Understanding the customers’ appetite will give you a baseline for evaluating your own solution and creating something that has a higher probability of performing well.
What Audience or Demographic Are You Targeting?
Whether you are selling something or looking to provide someone a service, it’s important to consider the party on the other side of the equation – your target demographic or audience.
Each target audience faces an unmet need – an underlying problem or issue they’re looking to solve or a result they’re hoping to obtain.
Identifying an ideal customer and considering their needs, wants, desires, or problems, will give you a clear idea of what to offer them, and how to promote your solution.
If you are launching a new product or service, this same level of understanding will help you create a solution that serves their needs and wants and leaves them delighted and coming back for more.
What’s Your Strategy?
Entering a new market requires a clear strategy – an ‘angle’ you will use to gain traction.
The type of market, the competition, what approach you believe will be successful, and where your company sees a unique opportunity to differentiate itself will all play a role in the type of strategy you select.
Strategies are usually based on some combination of price point, quality or luxury level, and unique value you can provide to the customer.
Whichever strategy you choose, it should be based on a detailed analysis of what’s currently being offered within the market, and matched to the customers’ wants or needs.
What’s Your Timeframe?
The amount of time you have available to enter a new market is also an important consideration.
You will need a clear sense of how early you need to start preparing, how long it might take to get up and running, the time it will take to reach profitability, and consequently the size of financial investment you may need to make.
New market entries always come with some bumps in the road. They teach you more about the market, and often require you to adjust your offering.
It may take time for customers to evaluate your solution, provide feedback, and review any changes you make in response. All of that before they are ready to purchase.
And, even once you have entered the new market, it will take time to reach an efficient level where you can operate profitably.
What is Your Mindset? What Are Your Expectations?
Your mindset and expectations when entering a new market are also critical.
There’s usually a steep learning curve that affects how long it takes to produce the results you’re looking for or to operate at the levels you’re expecting.
By anticipating the learning curve rather than assuming your knowledge from existing markets will necessarily transfer to the new one, you can accept it as part of the process of getting to where you want to be.
Although you can’t plan for the inevitable bumps and setbacks, you can start out with the right mindset and the right perspective to keep you moving forward, whatever happens.
Patience and perspective are perhaps the key ingredients to success when entering a new market!
What’s Your Value Proposition or Competitive Advantage?
Having a clearly identified competitive advantage is essential when entering a new market or industry.
Whether it’s the process or systems you have in place, the experience or operational excellence you’ve established in other markets, or the actual solution you offer, something must clearly separate you from the established competition to convince customers to evaluate and prefer your solution over other available options.
If you market analysis doesn’t uncover any obvious value differences or competitive advantages between incumbent competitors, they are likely trading a commodity, differentiated only by the price of the services or products they offer. Unless you can introduce a step-change in performance or price, this might not be a good market to target.
Focus on honing your competitive advantage before launching the market entry. It will give you the edge you need to secure initial business and then expand your market share.
Entering a new market or industry sector is not trivial and there are many factors you should consider.
- Figuring out what’s been successful in the past can provide you with valuable information about the market and buyers’ criteria, helping you to position your company and shape your offer.
- Understanding the target audience or demographic, their needs, wants, desires, and problems, can help you create a stronger solution that clearly delivers the results they’re looking for.
- The strategy or angle you pursue should reflect where your company sees a differential advantage upon which it can capitalize.
- The timeframe you allow for entering a new market should take into account a learning curve, and realistic estimates for planning, initial entry, and building up to the desired level of success or efficiency.
- By starting out with the right mindset and expectations, you can stay focused in spite of inevitable bumps in the road and setbacks along the way.
Part of what business analysts do, is to help businesses figure out these components, evaluate new market opportunities, and help shape the company’s business plans. Please contact us for more information about how a business analyst can help your team make more informed market growth decisions.