Many businesses struggle to become established even in their home markets. About 30 percent of new businesses fail within their first two years, 50 percent during their first five, and 66 percent during their first ten years of being open.
But if you establish yourself as a leader in one market, it makes sense to enter a new market. For that, you’ll need a comprehensive market entry strategy.
The news is rife with examples of businesses entering a new market and failing spectacularly – and it isn’t just small businesses. Both Uber and Airbnb attempted to break into the Japanese market only to have thousands of reservations scrapped. Uber was even reduced to only providing one of their secondary service offerings in Japan: delivering food.
But entering new markets for the first time doesn’t have to be a sink or swim scenario for your business. If you take the right approach, develop a strategy and scale your business in that market over time, you could come out with a significant market share that brings in much-needed revenue.
If you’re a small business owner, here’s how to enter a new market.
Define Your Market
You don’t have to target a market as large or involved as, say, “Japan.” If you’re a small business, it will likely be in your best interest to target a more niche market. You may wish to start with a small but profitable subsection of a larger market.
For example, instead of targeting “Japan,” you could target tech-savvy Japanese millennials who make more than $100k per year.
A target market is a specific group of people you want to reach with your marketing message. The clearer you define your market, the better.
That means going beyond the typical demographic information. Age, gender and income bracket certainly matter, but you should also consider other characteristics that unite your target audience and make them viable prospects for your offerings.
Some definitions to consider are:
- Culture or sub-culture
- Spending power
- Buying patterns
- Personal interests and hobbies
- Internet browsing and social media habits
- Stage of life
- Life goals
- Career role and pain points
- What a typical day looks like
Most companies understand that blanket outbound advertising campaigns aren’t usually targeted enough to benefit small and unknown companies. But if you have this type of information, you can use digital tools to cut costs and send marketing messages to exactly who needs to hear them.
A good starting exercise is to compile data from your existing customers. Once you have all this information, create and document buyer personas for each type of customer in your target market. You’ll use these throughout your campaign.
Perform a Market Analysis
In addition to your target buyers, you must also consider how you stack up against other players in the market. For example, if you’re attempting to sell a productivity app for manufacturers in the midwestern United States, you may discover that the market is already saturated. What can you do to stand out?
A market analysis is both a quantitative and qualitative assessment of your target market. A thorough market analysis typically includes assessments of the following:
- Market size
- Customer segments
- Economic environment
- Barriers to entry
Consider organizing all your qualitative and quantitative data into a report that is easy to present and understand. This is especially important if you need to pitch a market entry concept to other stakeholders.
At this point in the process, you should have a strong understanding of how viable your business model will be in your target market. You may even find that entering this market isn’t in your best interest. But if the numbers look good, you can move on to an internal analysis.
Perform an Internal Analysis
Entering a new market is a big undertaking. You’ll be devoting significant time, resources and funds to the project, so you need to be sure your company is up to the task. Before entering a market, it’s integral that you do an internal analysis to learn your company’s strengths and weaknesses.
Many companies accomplish this by doing what’s known as a SWOT analysis. “SWOT” stands for Strengths, Weaknesses, Opportunities and Threats.
A SWOT analysis should involve every stakeholder and employee, even your leadership team. It’s a collaborative process that helps your entire organization improve.
Most companies ask themselves a series of questions surrounding the elements of SWOT:
What competitive advantages do we have?
Which of our business processes are most successful?
What knowledge or skill assets do we have?
What are we lacking that can make us more competitive?
Which of our business processes need improvement?
Do we need any additional assets, such as money, software or equipment?
Is our target market growing?
Are any of the barriers or regulations in our target market being lifted?
Do we have a successful customer base we can leverage?
Are any other competitors entering this market?
Could this market be disrupted soon by new technologies or regulations?
Do long-term trends suggest this market is shrinking or growing?
Since you’ll be launching a new marketing initiative, you may need to identify skills gaps and outsourcing opportunities.
For example, if you intend to work with a marketing agency, it might be in your best interest to find one that works in your target market. You may also consider a short-term or working capital business loan to help you fund your initiative.
Develop an Action Plan
Your new market entry strategy must consist of high-level goals, but also a ground-level roadmap for how you’re actually going to execute it. Additionally, you should consider an exit strategy in case you fail. This isn’t the most exciting thing to plan, but it could help you dramatically reduce losses if your plan is unsuccessful.
Altogether, your action plan should include the following:
- Business plan
- Case for investment
- Implementation work plan
- Key Milestones
- Exit plan
When entering an entirely new market, some businesses choose to pursue a strategic partnership with a company that already has leverage in the market. You could also consider an acquisition if that’s an option for your company and your budget.
Run a Pilot Program
If your target market looks viable and you have all the assets in place to take advantage of it, you may be tempted to go all in. But one of the best ways to execute a successful market entry strategy is to run a pilot program first.
Whether you offer a product or a service, a pilot program can help you mitigate risk and obtain proof of concept before you fully engage your new market entry strategy. You’ll also get the opportunity to obtain feedback and address unforeseen challenges.
A pilot program may consist of a scaled-back version of your product, a limited version of your services, or a time-restricted engagement of your full offering in the target market.
Scale Gradually Over Time
If your pilot program proves successful and you have a strong proof of concept, it’s a good indicator that you should move forward with your full-scale market entry plan. You can either expand upon your pilot program or roll out your full strategy.
Keep in mind that your initial goal should be to increase your market share, not just revenues. As you gain more visibility in the market, you’ll achieve a more secure foothold.
Entering markets for the first time is challenging. It isn’t an initiative you should take idly, especially when so many of your resources will be dedicated to it. It takes timing, strategy and an actionable plan.
But if you take the necessary steps, you could see unprecedented growth in your business and even more opportunities down the road.