Entering new markets can be a risky proposition. There are countless examples of otherwise successful US brands that attempted to expand into new regions only to retreat because they couldn’t enter or create a market for their product or service.
Maybe the messaging didn’t resonate, or the local incumbent was too entrenched – there are a number of reasons why global expansion can fail – but the one that is easiest to avoid is failing to put in the time and effort beforehand to plan and research new market opportunities. To help get you started, we’ve compiled five keys to developing a successful market penetration plan:
Look at the big picture
It’s always good practice to get a view from 30,000 feet before entering new markets. Begin by thinking broadly about potential customers. Is there a population to support your brand? Take a look at raw census data. Can you see your ideal customer persona in there? For example, if you are targeting college educated working moms between the age of 27 and 39 it wouldn’t make sense to enter a market with an aging population.
Drill a little deeper
Once you have a grasp on the overall demographics and makeup of a particular market on a national level, it’s important to drill down into the individual regions. The population could seem more or less homogeneous when you look at it nationally, but some individual markets might exhibit more conformity or diversity as you dig deeper. This knowledge is important because it can help you develop your positioning strategy and determine whether you want to launch your product or service broadly on a national level, or take a more surgical approach and only targeting specific markets in a country.
Additionally. it’s important to get a feel for regional customs, local dialects, and how buyer behavior might differ from region to region within a country, seeking expert advice if not already available in-house. This will help you craft native brand experiences that are personalized and speak specifically to a particular market or region, thus helping those messages resonate.
Calculate addressable market
Knowing the general area in geographic terms can help you zero in on the total size of your target market. If, for example, you are planning a region that has a radius of 20 miles and a population of approximately 100,000 people, that doesn’t mean the entire population fits your target market. To determine the actual size of the market you need to revert back to the census data for this specific region. If you don’t accurately measure the size of the market, it will throw off your other predictions, making it more and more difficult for your expansion to be a success.
Set reasonable expectations
Entering a new market can be exciting because the possibilities for new growth might seem limitless, but don’t let your judgement be clouded with all of the dollar signs you see in your head. Breaking into a new market isn’t for the faint of heart, so it is important to temper that excitement with reasonable expectations.
So what can a business reasonably expect when entering a new market? Dr. Marlene Jensen, an MBA professor at Lock Haven University, states in her book The Everything Business Planning Book: How to Plan for Success in a New or Growing Business that it’s reasonable to expect a consumer product to achieve between two and six percent market penetration, while the reasonable range for a business product is between 20 and 40 percent.
Project the cost-benefit
The final step of market penetration planning is determining whether it makes sense financially. The market might be there and there might be a demand for your product or service, but unless the benefits in future revenue outweigh the costs for entering the market it might not be the right time to expand. The good news is, if you plan properly, execute effectively, and cast a wide enough net while targeting your content as native brand experiences, there are plenty of benefits to penetrating new markets around the world.
Access The Complete Guide to Market Penetration to learn more about the challenges of entering new markets and what brands need to do to successfully expand internationally.