If new geographies and markets are the answer, what is the question for your business?
A recent study by Bankwest, the Future of Business: Economy and Finance Report, has indicated many mid-size businesses are planning to develop new products and enter new markets to combat cash flow challenges over the next five years.
While these strategies may assist with cash flow, and thereby drive growth in the medium term, there is generally a ramp-up period (or J curve) that needs to be considered. This, in turn, should be reflected in a comprehensive business case.
Importantly, executives in the mid-business space must ask themselves, ‘if new geographies and markets are the answer, what is the question?’ Often mid-size businesses rush interstate or overseas in their enthusiasm to grow their businesses, without fully considering the costs associated with this particular strategy or indeed the ‘opportunity cost’ of ignoring (or under-leveraging) their current customers and markets. For many businesses, targeting new geographies and markets is the next step in the organic evolution of their company. But to make sure it’s the right approach for your business, ask yourself the following questions.
QUESTION 1: ARE NEW GEOGRAPHIES AND MARKETS REALLY THE ANSWER?
History (and a great deal of market research) shows us it is significantly easier to sell more products to current customers than it is to win new customers. Have you fully explored this option before jumping on a plane to that all important trade show or sales conference? Are you confident that your business has achieved critical mass in its current geography?
Selling more products or services to your current customers not only costs less from a market development perspective, but will also make it harder for your customers to leave. ‘Selling more to current’ is a great defensive strategy, making it difficult for competitors to take market share away from your business.
QUESTION 2: HAVE YOU MAXIMISED YOUR CURRENT POTENTIAL?
Before expanding into new markets, reach out to your existing customers. Recognise those that have been loyal to your brand. Be certain you have fully exploited your business’ potential amongst your current customer base.
It is surprisingly common for businesses to develop new products or solutions first and then look for related customer needs. But the most successful companies consider their target customers’ needs well in advance, and allow these to set their innovation agenda.
How often do you involve your current customers/clients in your business’ product development cycle? The best way to understand your customers’ needs is to invite them to participate in focus groups, product testing and collaboration sessions. Not only will you gain the insights needed to deliver a product that your customers want, you’ll also secure their buy in before your product enters the market.
Invest time in strengthening your relationships with your most valuable customers. Make it your priority to understand their business challenges and objectives, become familiar with their supply chains and look for ways to add value to their businesses.
QUESTION 3: WHAT IS THE BEST SALES CHANNEL?
If, having answered the above questions, you remain confident in your plan to approach new markets, take time to consider the appropriate channel strategy. Sometimes the only approach that works is via a direct sales channel – this is generally the slowest and most expensive method but is proven to create high levels of loyalty and engagement.
In recent years, most successful businesses have adopted online sales strategies. Ask yourself: has your business developed an online sales presence? How will you drive customers to your web assets? Do you have a social media strategy? Are Google Adwords or SEO strategies discussed at your sales meetings?
QUESTION 4: WHAT IS THE BEST APPROACH?
Entering international markets can be a great move for Australian-based businesses but it’s imperative to critically evaluate the required investment in time and resources prior to doing so. As part of your business case to support this activity, it is important to understand, measure and prepare for all known risks. In a broad SWOT assessment of new geographies, are you contemplating the substantial cultural issues that may assist or thwart your plans? Experience tells us that the Australian businesses that take the time to understand and adopt culturally-appropriate business practises will set themselves apart in a competitive new marketplace.
Have you considered agency agreements and/or partnerships with businesses that have achieved success in similar markets? This approach can improve efficiencies and reduce the risks and costs associated with going it alone. As an additional benefit, agency agreements may allow your business to enter multiple markets simultaneously, allowing you to seize identified market opportunities immediately. You can always scale back your agency agreement once you have established your business in a new market.
TOP TIPS FOR BUSINESSES PLANNING TO EXPAND INTO NEW MARKETS
1.Time is your most valuable asset. Invest more time in planning to understand your current position and map out the realistic costs and benefits presented by new markets.
2.Your existing customers are your most valuable business partners. Invite your customers to participate in product planning – this will build sticky relationships and increase loyalty.
3.Online is the new real estate. Develop a robust online strategy and a tailored presence for your target market/s.
4.Critically assess your capacity to succeed in a new market. Accept that new business landscapes and cultural differences are sometimes best navigated by local agencies or partners.
*Original Article by Mark McConnel: http://www.brw.com.au/p/business/mid-market/questions_you_must_ask_before_entering_P3tS41JM6kdYLChee4qd7H