Market expansion is an enticing prospect. New B2B markets provide opportunities for corporate expansion. New markets might be advantageous to the company with the proper preparation, investments, and expectations.
Companies routinely discuss expanding their target markets. Often, market growth ideas (penetration marketing) are motivated by wishful thinking rather than a sound reason and business plan.
What is the new B2B market?
A new market is any B2B market in which you are not actively pursuing business aggressively. You may be doing some sales in that market “accidentally,” but you are not aggressively pursuing that source of revenue.
The new market could be a geographical location (growing to Europe from the US), a new sector (selling to hotels from hospitals), or a new use for existing items. The critical point of market expansion is that entering a new B2B market demands investment in order to reach a new group of customers.
New market skimming is thrilling because the established market segments are perceived to be challenging, whereas the new market is perceived to be simple. Businesses are frequently victims of “incestuous consensus,” in which a small group becomes isolated from external reality and gathers to agree.
For instance, people may conclude that entering a new market is simple without having the necessary external information.
Penetrating a new market is an excellent strategy to boost sales of your current products and services. It is critical, however, to approach the market growth strategically in order to mitigate risk and contribute to the success. Developing a market expansion strategy might assist you in accomplishing this.
10 Questions to Consider Before market expansion
1. What is your business objective in terms of market expansion, and why?
As with every business move, you must have a specific goal in mind for B2B market expansion. It could be a short-term target (we need more revenue next quarter) or a long-term objective (we want to grow our business) (our biggest competitor is in Europe and we are afraid that it will cause our US sales to erode if we are not there also).
The market penetration strategy should be explicit and include clearly defined revenue and time targets. We hope to sell to the car manufacturing industry is a wish, not a goal. By 2022, we expect to generate 15% of our sales from the major automobile manufacturers is a good defined goal!
Why are you seeking market expansion? There are numerous reasons to do so, including growth, stability, and avoiding depreciation of your existing offering. Consider the business indicators, possibilities, and risks associated with achieving this target.
2. Are you capable of achieving your strategic goals in your current market?
Investing in your present market may be a more cost-effective strategy than market expansion. It’s always difficult to penetrate into a new market. Unless your current market is saturated, it may be easier to accomplish your objective with market development strategies.
Selling in a market where you have established relationships, knowledge, a product, and a reputation will be easier than selling in a new market.
When responding to this topic, inquire, “Why are we unable to expand in our current market?” New markets are attractive, and excitement frequently leads businesses to place their hopes in new markets before thoroughly exploring their existing ones. My standard response is, “So your existing market is completely saturated?”
3. Are you realistic about the resources required to succeed in this new market?
At first glance, market expansion always appears to be simpler than it is. Do not underestimate the effort required to succeed. It will require a greater investment, additional personnel, and additional time than you anticipate. How can you obtain a reasonable estimate? Create a precise rollout plan based on input and estimations from all involved executives.
Determine critical milestones and obstacles. For instance, if the initial sale does not occur on time, will other operations need to be postponed? Consult with others who have experimented with this method of market expansion. Always include some emergency time and money in your plan, since you will require them.
4. Do you possess the necessary industry knowledge to succeed in market expansion?
Once you’ve created a market expansion strategy, it’s possible that you’ll discover that you lack some resources.
People in the new place are required to make the geographic market expansion successful. You will require current staff to assist these remote individuals. Trainers, sales support, and executives will need to go frequently to the new location if success is to be expected.
Either post-sales resources must arrive in time for the first customer in the new location, or they must be borrowed from current resources prior to the first sale.
If you’re entering a new industry or application, do you have employees on staff who are familiar with the new target B2B market and its requirements? Is your product (good or service) ready to launch? It is uncommon for a product to be offered unmodified or extended into a new application or industry.
You may be able to postpone this purchase until you make your first sale, but doing so will exacerbate the already difficult process of making your first sale and increase the likelihood of failure.
5. Who are your competitors and how will you beat them?
Each market has well-established competitors. Whom will you have to contend with in the new B2B market? How do they make money? How do they succeed?
Prior to entering a new market, it is critical to study the competition and how you can outperform it. Often, CEOs will tell us that a market is wide open, but this is almost always a sign that they have not conducted adequate market research.
6. If you enter a new market, will you have to divert resources from your current efforts?
This is a conundrum. The answer is always affirmative. However, the majority of respondents respond with a no or a not much. How can you expect the market expansion effort to remain resource-light? If the endeavor is significant enough to invest in, it will require some of your existing resources to succeed. Any time or resources devoted to the new attempt detract from ongoing efforts.
Executives frequently declare, We will not allow our current staff to be distracted. How will the new initiative thrive without the assistance of your current staff?
How are you going to dissuade people from performing favors that wind up diverting resources away from their current endeavors in order to aid market expansion? Make no assumption that your existing resources will be unaffected.
7. Will your current revenue be impacted by your market expansion efforts?
If the previous question was answered affirmatively, then the answer to this question is very certainly affirmative as well. Will the head of sales lose sight of existing revenue targets as a result of market expansion? Will the CEO or others be available for as many sales calls? Assume that current revenue will be impacted.
8. How long will it take to reach an acceptable level of business in the new B2B market?
Market expansion takes time, and is frequently slower than anticipated. Numerous elements, such as schooling and training, relocating to a new office, or even purchasing new computers or business cards for any new employees, can eat into selling time in the beginning.
Deals will take much longer to close than usual. You have few, if any, references in the new market, no track record of performance, and no credibility. As a rookie player, your risk is more than that of veteran players. The initial few sales will be made to risk-taking prospects.
Profitability develops significantly more slowly than revenue initially due to a greater cost of sales and frequent discounting. Conduct a forecasting exercise for sales, costs, and profitability. Then reduce the sales forecast, lengthen the time required to complete the sale, and raise expenditures. How does the new industry appear now?
9. What if the project takes longer or costs more than anticipated?
If reaching an acceptable level of business takes longer than predicted (as it almost always does), do you have the financial means to wait? Will management have the fortitude to wait?
On the other side, if establishing a footing in the new market proves too tough or impossible, will management take bold action to quickly limit your losses?
10. How will your market expansion decision affect your present consumers and market?
Generally, your existing clients and market view any attempts to penetrate a new market skeptically. They feel abandoned, or at the very least less significant. What impact will this have on your current connections and revenue streams?
Summary of market expansion strategies
Market growth provides opportunities for corporate expansion. New B2B markets might be beneficial for the firm with the proper preparation, investments, and expectations.
However, many businesses fail to apply a critical eye to a new market and allow excitement to trump sound commercial judgment. Ask yourself the difficult questions prior to embarking on developing your market expansion strategy.