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The pursuit for growth often leads organizations to explore new markets.  There can be a variety of options for new markets to serve.  It helps to have a method or process that can serve as a framework for selecting your growth strategy.

One such framework was developed in 1957 by Igor Ansoff.  His article “Strategies for Diversification” in the Harvard Business Review presented a model, known as the Ansoff Matrix, that has since been used by companies and marketers worldwide to address growth. The model presents four main categories for selection.

  • Market Penetration- focuses on increasing revenue by marketing and selling existing solutions to existing customers
  • Market Development – achieves growth by taking existing products into a new market
  • Product Development- relies on replacing existing products with innovative solutions that are marketed and sold to existing customers
  • Diversification – we attempt to do both – new products in new markets where we may or may not have previous industry or market experience.
Ansoff's framework for achieving growth

Ansoff’s Matrix provides a framework for exploring growth opportunities and strategies.

If sales are flagging or if your revenue goal is especially high, or the market just seems very exciting, companies use the framework as a vehicle for exploring potential options, such as looking for a market in an adjacency, or even a new market.

Many companies view market development, that is entering a new market, as a key strategy for growth. That is, they believe a new market whether in terms of geography, industry, and/or application, provides the next best opportunities for profitable revenues. The key issue is that a new market requires an investment to reach a new set of customers. Such an undertaking takes preparation and an approach.

 

Five Considerations BEFORE You Plunge a New Market

Take these considerations into account if you decide to take the plunge and enter a new market.

  1. What is your objective in entering the new market? Have an explicit objective and a defined revenue and time frame target. If you can’t articulate an explicit objective and aren’t able to set revenue and time frame targets, wait to enter until you can. Manage your timeline. Entering and expanding into a new market takes time. The sales cycle will probably be longer because you don’t have the credibility and experience. After you do your initial sales forecast and timeline, lower it. Evaluate the market’s attractiveness based on the assumption that it will take twice as long as you think it will. If it takes longer than expected to reach the revenue target, can you stick it out?
  2. Why can’t you achieve this objective in your existing market? Breaking into a new market is hard work. It takes a large investment. It is generally easier to sell into a market that knows you, knows your products, where you have references and an established reputation and track record. Use this question to as a gate. If you can achieve the objective by staying in your existing market, reconsider entering a new market.
  3. Do you have a plan and the resources? Make a detailed rollout plan and identify the important milestones and challenges. Don’t take any action until you have a plan with contingencies. Having a plan is one thing, being able to implement it is another. Verify you have the resources and a product and corresponding value proposition for this product for a new market,
  4. Do you know who and what you are up against? Every market has incumbent competitors. Before you enter a new market, be certain you know who you will face, how they sell, why they win.
  5. What is your plan to sustain your efforts in your current market? Pursuing a new market may mean we take our eye off the ball. Assume at the start the pursuit of a new market will impact on your existing resources and your existing market and revenue from this market and plan accordingly. Be sure you have a plan for reassuring your existing customers that they are still important.
Dive into a new market

Be prepared if you decide to take the plunge into a new market.

Five Questions to Answer Once You Decide to Jump into a New Market

You’ve addressed the considerations and you’re ready to dive in. Before you jump, there are five questions you should answer to come up with a viable plan (and budget) for going after a new market, in the following order:

  1. Start with the Whos. “Who,” meaning to what market, sub-segments, companies and personas would you be marketing? Who is the competition and how do they go to market? Who are the influencers, e.g. analysts, consulting companies or publications? Who else will need to be involved in the complete solution, e.g. an integration or distribution partner?
  2. Answer the Whys. “Why” specifically does the market need your proposed product, your service, your company? Why now?
  3. Crystalize the Whats. “What” do you provide that answers the “Why” differently from solutions already being marketed? What are the buying criteria and preferences? What is your value proposition and promise?
  4. Develop the Hows. “How” do prospects want you to connect with and engage with them? Think Customer Journey Mapping. How will you engage influencers? How do you develop new, or extend existing, partnerships? How will you engage, provision and train internal departments and external partners to sell and support the new solution in the new market?
  5. Determine the When. Is there a seasonality to the solution? Is there a major industry event such as a trade show that would be a good time to launch with press, analysts as well as customers?

When you know the answers to these questions, ideally in the above listed order, you are ready to create and implement your Marketing plan and supporting budget request. As always, the devil is in the details in answering these questions and developing the required market entry plan. While there is always risk when entering a new market there are ways to improve your odds of success. If bandwidth or skill set is an issue, or you want an objective point of view we can help.

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