“How to Expand Your Business Through New Market

Development”
Planning and implementing a growth strategy to develop new markets and expand your business before your
current market flattens out will not only help your business survive tough times, it could also give you a
considerable edge_

WHAT TO EXPECT: Your business market, like everything else, will change with time. As your business matures and your
market share steadily increases, you will probably begin to encounter the growth limits of your original target market.
Planning and implementing a growth strategy to develop new markets and expand your business before your current
market flattens will not only help your business survive through tough times, it could also give you considerable edge on
the competition. This Business Builder will take you through the process of new market development. It will provide you
with some easy-to-follow steps on planning and implementing a market expansion strategy before your current market
flattens or declines.

The Business Builder "How to Expand Your Business Through New Product Development" provides information on how
to grow your business by developing new products. Following are a few things to keep in mind before you get started:

 Target Market is the customer group that you feel will most likely want to buy your products or services. This
group is defined by your customer profile.

 Customer Profile is a detailed profile of your typical customer. For individual consumers, it includes information
such as age, income, gender, marital status, profession and buying habits. For businesses, it includes the types of
business, number of years in business, number of employees, annual revenues and products or services sold.

 Demographics are the characteristics of a population such as size, growth, age, income, gender, marital status
and buying habits. This information helps you decide whether this target market is large enough for your
products or services in the target area.

 Market Analysis is an analysis of research data that results in determinations about the marketability of a
product or service in the given market.

A systematic approach is the best way to find a new market. Without it, you can waste a lot of precious resources —
something a small business does not have an excess of. The following steps will effectively and efficiently guide you
through the new market development process:

Define Your New Target Market(s)

Do Your Market Research

Decide To Enter This Market Or Look For Another

Enter The Target Market

HOW YOU SHOULD DO IT: In the business world, change may be inevitable, but growth is not. Business growth
always depends on the strategies and the actions that you take to make it happen. The degree to which you
implement a market growth strategy depends on your own business goals and objectives. You may plan to grow
your business slowly so that you can maintain a small but manageable market share. Or, you may develop an
aggressive growth strategy that causes you to establish a more flexible organizational structure that can adapt to
new markets and rapid growth. Regardless of the degree of market growth required to meet your particular
business goals and objectives, the need for growth and a plan to accomplish it is fundamental to a successful
 business venture. Without it, you will leave your business vulnerable to market pressures such as increased
competition or regional economic downswings. Planning and achieving market growth, whether aggressive or
conservative, requires the application of some fundamental marketing activities and techniques. These activities
and techniques are incorporated in the following four steps needed to expand your business through new market
development:

 Step 1: Define your new target market(s)

 Step 2: Do your market research
 Step 3: Enter the market or look for another target market
 Step 4: Create a plan to enter the market

Since your products, services and customers are unique, you will need to adapt these steps to your own needs
when you apply them to your market expansion efforts. Step 1: Define Your New Target Market(s) The first thing
you will need to do as you begin your market expansion effort is to determine the demographics and the
geographic location of the new target market. Determine which of the following categories characterizes your
expansion efforts:

 Same Target Group,

 New Target Group,
 New Target Group,

If you plan to sell to the same target group, then you should already have a detailed profile of the customers in that
group. If you are targeting a new group, you will need to develop a basic profile of the new customers. The more
you know about your target customers, the easier it is to develop a marketing strategy that will reach them. For
more information on target markets and a customer profile, please refer to the Business Builder How to Identify a
Target Market and Prepare a Customer Profile.

WHO IS YOUR CUSTOMER?

Individual Customers
Age:
Gender:
Marital Status:
Parental Status:
Financial Profile:
Income:
Investments:
Debts:
Profession:
WHAT ARE YOUR CUSTOMER’S NEEDS?
Individual Customers
Buying Habits:
Interests:

What is Important to Him/Her:

 Lifestyle:

Other Needs:

After you perform the market research activities described in the next step, you may find that you will need to modify
your target area boundaries, or find a new target area. That’s OK. Identifying the boundaries at this stage will give you
some ideas of where to focus your research activities. Now take some time and complete the worksheet for your new
target market. Step 2: Do Your Market Research Once you have developed a customer profile and identified the extent
of your new target market, then you can do some basic market research to determine the following information:

Interest in your product or service

 Do customers currently use your product/service?
 Do customers have a need for your product/service?
 What would customers be willing to pay?
 What other products/services would they be interested in?
Current population trends of your targeted customers
 Expanding, shrinking or stable?
How to get your product/service to your customers
 What do your customers prefer?
 What are your competitors doing?
 What is the most economical?
 Can you establish a competitive advantage?
The number and strength of competitors in the target area.
 Who are they?
 Where are they located?
 What products or services do they offer?
 What is their image?
 What is their pricing structure?
 What is their performance history?
 What is their current share of the market?
 What are their strengths and weaknesses?

Key Questions to Answer Your research should help you decide whether or not it will be profitable for you to
enter into the new target market. Refer to your customer profile as you do your analysis to help you stay focused on
your customers and their needs. If you need help in conducting a market analysis, refer to the Business BuilderHow
to Prepare a Market Analysis.Generally, the results of your analysis should help you to answer these basic
questions:

 What are the market trends?Try to determine if your new target market is growing, stable or declining. You may
be able to compete successfully for a good market share now, but if the market trend shows declining demand for
your products or services, then the future may not be promising. It is better to enter into a market that shows
healthy growth trends.

For example: The owner of the Pedal Power bicycle shop believed that he could compete successfully in the targeted area
since none of the bicycle shops in the areas offered mail order service. He estimated that with his purchasing incentives,
such as the earned credit plan, and his low prices, his mail order catalog could capture at least 10 percent of the market
share in this area. Capturing this market share would increase his annual sales by 40 percent.

What are the trends for your market?

 Can I compete successfully in this new market? Decide whether the market is large enough to make it worth
your while. Analyze all your trend data carefully before you answer this very important question. Next, take a look at
the competitive information that you’ve gathered. Is the market already saturated with competitors or is there room
for one more? What is the relative strength of your competition? Do you already compete with them in other
markets? Also, supplement this information with your own experience and knowledge. If you are successful in your
current markets, then you probably already know a great deal about what it takes to sell your product. You should
be able to identify some unique features and benefits of your products or services and the way you promote them.
Remember, features are the special characteristics of your product or service, but it is the benefits that sell a
customer on your product or service. The customer wants benefits; they satisfy his needs. For instance, you may sell
an air-conditioner that is efficient, is computer-controlled, has few moving parts, and is economical. The customer,
however, buys it because it saves money on his electric bill, is easy to use, is quiet, and affordable — all benefits to
him. Think about your prospective competitors. How are they likely to react if you enter the market? Are your
product or service benefits strong enough to compete against theirs?
 What will my market share be? Try to estimate the market share you hope to gain and the amount of time it will
take you to gain it. Most business owners overestimate their expected market share so start conservatively. You
may want to conduct some limited-scale test marketing in the area you are targeting. For instance, if you’re planning
to expand your home inspection services into another region, then try out your marketing plan in a smaller new
area. Promote your service. Test the waters. Find out what the response will be and base your estimate on that trial.
What is your market share projection?
 Can I make a decent profit? Consider pricing and profitability. Can you sell your products at a competitive price
and still make a profit in this new market? It doesn’t always follow that an increase in revenues results in an increase
in profitability, especially if your costs are higher. But how can your costs be higher for this new market? Simple!
Your promotional costs will be greater. Your distribution costs could be higher. Your labor costs may increase, etc.
Before making any concrete decisions on entering this market, you’ll want to have a clear understanding of your
sales and associated costs. Estimate the numbers for the following abbreviated profit and loss statement (also
known as an income statement) to get started on your analysis. If you need more information in this area, you may
want to refer to the Business Builder How to Prepare a Profit and Loss Statement. INCOME Net sales (gross sales –
returns & allowances) - Cost of goods sold = Gross profit on sales

EXPENSES

- Direct/selling (variable expenses) Advertising/Marketing Freight Fulfillment Packaging Salaries and

Wages Travel Miscellaneous Selling Expenses Depreciation - Indirect/Administration Insurance Licenses and
Permits Office Salaries Rent Expenses Financial Administration Utilities Other overhead Depreciation
= Net Income From Operations – Other Income and Expenses = Net Profit (or
Loss) Before Taxes – Taxes = Net Profit (or Loss) After Taxes Now, determine
your potential profitability for this new target market. Does it make financial sense to enter the market?

After you have completed your market research, analyze the information you have gathered to determine whether
market expansion into this particular market is the right decision. The owner of Pedal Power bicycle shop decided to
target a tri-state area. This area contained several large cities. Since readily available demographic information
about bicyclists is limited, the owner decided to purchase a mailing list for the targeted area from a marketing
research firm. The mailing list consisted of people who subscribe to magazines that deal with bicycling, running or
other outdoor activities. The market research company was also able to provide the owner with information on
growth trends for bicyclists in the target area. The information indicated that the increasing popularity of bicycling
was resulting in a steady growth in bicycle-related sales. The number of bicyclists in the target area was also
growing at a healthy rate. To determine the number of competitors in the target area, the owner contacted the
chambers of commerce for each of the major cities. He discovered that there were 17 bicycle shops in the tri-state
area. None of these shops offered a mail-order service. Step 3: Decide to Enter this Market or Look for Another
Target Market After you complete your analysis, you should have a good sense of the growth potential for your
products or services and whether it is a sound financial decision. Your market analysis will help you make a "go/no
go" decision, but don’t be afraid to rely on your instincts. You may see something about the market that isn’t easily
 identified with research data. Remember that the market analysis can only help you make a well-informed decision.
There is always some degree of risk in any business decision you make. Taking well informed risks is an essential
part of being a successful business owner. Don’t be discouraged if you decide not to enter this market. Look for
another one. There are plenty of opportunities out there. You will eventually find the market with the right growth
potential for your products or services. Step 4: Enter the Target Market After you have made the decision to enter
a new market, your next step is to develop and implement a good strategic plan for promoting and delivering your
products or services to that market. This plan should focus on three key areas:

 Promoting your products or services.Develop a marketing plan that details how you will introduce and promote
your products or services to the new target market. This plan should include any media, point of purchase, mailing,
telemarketing or other advertising you plan to use. If you market through a sales force, then you will need to
develop some sales strategies and prepare your sales people with all the promotional tools and information they
will need to solicit new customers. Since you are already in business, you should have some ideas of what has
worked for you in the past. If you use a marketing or advertising agency, then involve them in this process after you
have decided to enter the new market. They will be able to help you determine the best marketing method for
establishing and increasing market share.

For example: To promote his mail order business, the owner of Pedal Power mailed free catalogs to the people on
his mailing list. He included a coupon for 10 percent off any catalog purchase. This offer was also good for anyone
who brought the coupon to his retail store. In addition, he sent his mail order customers a letter that highlighted
the features and benefits of his mail order catalog. Decide the best way to promote your products or services. What
promotional channels are you going to use? How will you allocate your promotional funds to get the best mix?
Outline your plan with targeted dates for each.

 Delivering your products or services to the customer Supply and distribution are the logistics of doing business.
If you are in retail and you are moving into a new geographic area, then you will need to find a good location for
your new store. You will also have to establish a method of supplying the new store with products. If you deal with
suppliers, then you will need to involve them in the planning. If you are a mail order company, then you may need
to contract with a carrier who is well established in the target area. If your product delivery requires data transfer
over telecommunication lines, then you will need to be able to establish the proper connections and provide your
new customers with some means of receiving and sending data. In short, create a detailed plan addressing all the
logistics of getting your supplies and delivering your products or services to the new market. For example: Pedal
Power established a contract with Federal Express to provide delivery service for its mail order products. It also
established a purchase agreement with a local container company to provide a variety of boxes and other shipping
materials. How will you get your products and services conveniently to your customers? What are the logistics for
distribution? How are your competitors currently getting their products to customers? Is there any potential to
establish a competitive advantage here? Considering all this, outline your distribution plan.
 Cultivating new market share and sustaining current business through customer satisfaction As you begin to
establish new customers in the target area, you must remember to stay focused on meeting their needs. It is much
easier to lose customers than it is to gain them. Conduct customer surveys to find out what your customers like and
dislike about your products. Talk to them personally and ask them what they think. If your business is driven by a
desire to meet your customers’ needs, then you will always be successful in new, as well as established markets. For
information on surveys and other assessments, you may want to refer to the Business Builder How to Create a
Customer Service Plan. Now, outline your customer service plan. How will you determine customers’ ongoing
needs? Will you use surveys, interviews? Will you rely on referrals to increase your customer base?

NEXT STEPS. Finally, measure your success by applying standard business measures to your expansion venture.
You should be tracking your sales, market share, profit and loss, and all other key measures that apply to your
business. Use this information along with customer and employee feedback to design and implement better ways
of doing business. Learn from your expansion efforts so that as you continue to grow your business by establishing
new markets, you can translate what you have learned into good business decisions. As mentioned earlier in this
 Business Builder, markets constantly change. If you are aware of this, and you structure your business to be
dynamic, adaptable, and growth-oriented, then you will be successful. ASSESSMENTS. When you have completed
this Business Builder, you should have a general understanding of the following key elements:

 The process for thoroughly defining a new target market.

 The process for developing a profile of the target customer.
 Market research, including a sense of the information needed for good market research, and where to go for
market research information.
 Market analysis its purpose and expected outcomes.
 The overall process of expanding your business into a new market.