Businesses can grow in many directions, not just vertically. When business owners think of expanding, they often think about winning over more customers within their current market. But some of the world’s most successful companies have expanded by entering brand new territory – and they grow their client pool, their customer base and brand loyalty in the process.
New markets mean new opportunities
Marketers are always told to think outside the box – but this advice doesn’t always apply to the entire business. But when companies think about expanding their customer and client base, they don’t often consider entering a new market. That’s because entering a new market can be risky and only work if your management and organisation is in a healthy and agile space. If your company has a clear vision, operates efficiently, has a loyal team and a strong collaborative culture then you’re in a great position to expand your business into new markets.
If executed successfully, market expansion can benefit your company in a number of ways. Expanding your product will create the impression of greater financial viability, which will appeal to investors and increase the probability of receiving financial assistance. Additionally, expanding into new markets with a brand new product or service will diversify your client and customer base, making your business model more sustainable long-term.
On top of that, expanding into new markets spreads the risk posed by market volatility, and if one product isn’t doing well you can lean on the other. It actually gives your business a greater chance of success, even if there are some operational risks involved (more on that below).
The Wall’s Effect
Probably the most legendary example of market expansion dates back to 1913. T. Wall & Sons Ltd. were having a slow summer. Their butcher’s shop in London’s St James’ Market was empty, and sales were dwindling – no doubt thanks to the sweltering heat outside. That’s when their chairman, Thomas Wall, had a lightbulb moment. They would start selling ice cream in the summer months. It would keep their business afloat and ensure their employees could get paid all year round. So Wall’s ice cream was established, and it wasn’t long before Londoner’s were happily consuming ice cream during the summer and sausages during the winter from the exact same brand.
Today Wall’s is responsible for some of the world’s most loved ice cream – Cornetto, Twister, Feast – and that’s all thanks to a creative leader who knew how to think outside the box.
What to consider when expanding your business
As I mentioned, expanding your business into new territory is by no means risk-free, and ensuring your leadership and company vision is aligned doesn’t quite cover everything. Human error is a risk that no company has total control over, which is why it’s crucial you factor it into your strategy. When entering a new market, mistakes can set a project back, dent your budget and impact your team’s confidence. Common human errors include failing to convert currency accurately, failing to execute comprehensive market research and misunderstanding cultural norms. That’s why I recommend hiring a consultant or permanent staff member who has deep prior knowledge of your new market with a proven track record of success.
Logistical issues are another hurdle to consider. Accidents, delays, order mistakes, shortages, transportation issues and miscommunications are just some of the challenges you’ll undoubtedly come up against when launching your new product or service. These issues are particularly important when expanding into new countries or regions, and when marketing your product online.
Companies now have access to millions of potential buyers online, which is why it’s important your communications strategy is researched, stream-lined and sense-checked every step of the way. Because with great reach, comes great responsibility.
And that leads me to tech issues – another unavoidable yet manageable issue when expanding your business. If your new service or product heavily relies on digitisation, the failure of that technology will have a massive impact on the success of your expansion. That’s why hiring the best software engineers and developers is a smart move. Even if it costs more money in the short-term, it’ll increase your revenue in the long-term. For more information about market expansion risks, check out this blog post by Kadence International.
How to ensure a successful expansion
Research is undoubtedly the most important factor when expanding into new markets. Ask your current customers what they want, and how they want it. Even if you’re planning to expand in a totally different direction, their feedback will spark ideas and creativity and help you strategise your expansion effectively.
Additionally, a full market trend analysis will help you ensure you’re tapping in to what people want and need. Read trade magazines and reports to understand what was popular last year, the year before and the year before that. You’ll start to pick up patterns and notice behavioural changes, which will help you predict what’s to come.
And finally, decide on your mode of entry. There are three key ways you can enter a new market. You can build – which means do everything yourself from testing the product to developing the market segment to establishing the selling point (whether online or offline).
You can buy – which means acquiring another business that’s already established in your market of choice. This will cost you more, but will generate fast results early on.
And finally you can partner. This could involve working with a distributor or business to share the risk and the costs. It’s worth noting that this dynamic can get complicated, so I recommend establishing a legal agreement before you get started.
I hope these ideas inspire you to open your business up to the wonders of a new market – and if you’re still undecided, Allianz wrote a comprehensive guide to the advantages and disadvantages of expanding your business. And to find out how ryze can help your business target a brand new market segment and generate sales at the same time, get in touch today.