Market development

Market development is a growth strategy that identifies and develops new market segments for current products. A market development strategy targets non-buying customers in currently targeted segments. It also targets new customers in new segments.

A market development strategy entails expanding the potential market through new users or new uses. New users can be defined as: new geographic segments, new demographic segments, new institutional segments or new psychographic segments. Another way is to expand sales through new uses for the product.

While trying to develop a market, businesses will have to consider many factors. Is the strategy profitable? Will products need to be modified? Will new pricing or new selling channels be needed to reach this new consumer? Will new products need to be developed? The key goal is growth.

Reaching a new market with existing products can be done in a variety of ways. The first step a business should take is to define a new target market. One that is determined, which approach the business takes to reach that new target market can then be defined.

In high tech, where discontinuous innovation is the norm, a successful market development strategy requires crossing the chasm between the early market and the mainstream.

Products

One of the approaches to reach a new market may be for existing product to be advertised differently at different stores. Same product, different packaging, different labeling, perhaps even different retails, are all options. The products may be offered via different selling channels as well. Businesses targeting to reach new consumers know they must have a strong online presence to be relevant in today’s world.

Some suppliers market the same product differently depending on the stores the item is being offered at. For example, many retailers have seen a huge increase in pantry storage organization. Seal-tight containers are being offered to keep your food fresh longer as well as keeping your pantry organized. Recently, we have seen the same containers at pet stores, aimed at pet owners, for storing your pet’s food. The containers are the same, offering the same great features, but with a different label. This new label allows these containers to now be offered at pet stores as well, in hopes of reaching a new consumer.

As mentioned, some companies focus on offering the existing product via new channels. Dollar Shave Club launched razors in 2012, while its competitor, Gillette, had about 70% the market share. Gillette offered the product in stores. Dollar Shave Club offered their product online, going straight to the consumer. In doing so, they saved on costs, which resulted in them being able to offer the consumer a lower retail price. By 2019, Dollar Shave Club defied its competitor and prompted Unilever to purchase for $1 billion.

If not successful with existing products, a company may decide to approach Product Development as a growth strategy and enter a new product segment. This could be a new product category all together or an extension of its current product offering. To successfully launch new products, companies must first research their target consumer, pricing, channels of distribution and determine if it is a profitable investment. A successful example of this is companies such as GE, who has successfully entered new product segments other than their original product offering of lighting and consumer electronics (i.e. renewable energy, healthcare, and aviation). Recently, GE yet again has announced they are investing into a new product segment of high-end refrigerators which is outside of their existing product offering.

However, not all companies are successful when expanding into a new product segment. In 2014 Jeff Bezos, CEO of Amazon attempted to enter the smart phone space and launched the Fire phone. This might have seemed like an easy transition from recently coming off the success of the Kindle. However, consumers did not take to the new Fire phone as expected and although the company invested in R&D, entering this space was a flop for Amazon.

Channels

Market Development can also be in the form of expanding a business distribution channels, which is the means of how a business gets their product to the customer. Companies must first examine their product offering and include as part of their marketing strategy (promotion and place). This is because not all channels are suited for all products. For instance, there are some products that customer would like to touch and feel, such as apparel or footwear. Therefore, having a retail storefront and then adding e-commerce could be the best option for apparel and footwear. However, retail is moving to e-commerce with big players such as Amazon. Therefore, expanding the channels of distribution means you must think about, where else does your customer shop for like items. This could mean offering your products at other retailers, such as Target and Walmart plus their respective online stores, in addition to Amazon.

Global Expansion

Expanding into new countries is a form of market development. When thinking about expanding into new markets it is recommended that you have a well-established business in your current country. However, before expanding into new markets, you must do the due diligence of researching the new market. You will need to consider the following:

1. Language: there may be a language barrier if the language spoken is not English
2. Know Regulations: This can include, import duties & taxes, packaging, and HR regulations
3. Broaden Team: You will need a team to manage sales, customer service, logistics and/or warehousing

As you expand into a new market, you will also need to keep in mind that the process of selling goods or services in another country maybe different. Meaning, the company will need to be flexible and adjust based on the needs of the consumer in that specific market.

A few notable companies that have succeed in global expansion are Coca Cola, McDonalds, Dunkin’, Dominos, Nike and Toyota. McDonalds is a great example of a company that adjusted based on its consumers needs by location. For instance, in India they offer a potato-based burger called McAloo Tikka, in Middle East a flat bread called McArabia and in Europe ketchup is sold as a menu item. This is an indication that companies will need to be flexible when expanding into new markets or countries.

However, with everything there is always risk associated when expanding into new countries. A few of the risk that companies may face are:

1. operational Efficiency
2. Politics
3. Legalities

While trying to develop a market, businesses will have to consider many factors. Is the strategy profitable? Will products need to be modified? Will new pricing or new selling channels be needed to reach this new consumer? Will new products need to be developed? The key goal is growth.

When considering growth, businesses can refer to The Ansoff Matrix, which visually summarizes four high-level business growth strategies utilized by companies. The Ansoff Matrix consist of the following strategies: Market development, market penetration, diversification, and product development. The strategy best fit for each company will differ depending on the company’s specific goals.

See also

The Ansoff Matrix is a good visual tool to use when considering to develop a company’s market. This tool allows teams to exam the existing product, proposed new products and the market development.

• Market penetration
• Product development
• Product diversification