What Is Market Development Strategy?
The world of marketing is as complex as it is exciting, full of techniques and strategies aimed to propel a business towards success. One such technique, integral to growth marketing, is the Market Development Strategy. In simple terms, it refers to the process of selling existing products or services into new markets or geographic locations. It involves researching, understanding, and targeting new demographics or areas, intending to expand the consumer base and ultimately, increasing revenue.
Market Development Strategy Explained
A market development strategy is a part of Ansoff's Matrix, which includes market penetration, market development, product development, and diversification strategies. This strategy specifically focuses on introducing existing offerings to new markets, which could mean geographical expansion, targeting new demographics, or finding new uses for the product that can attract a new category of customers.
The underlying principle of market development strategy is based on a simple, yet powerful notion - if your product or service is successful in your current market, then chances are it could perform well in untapped markets too.
How to create a market development strategy?
Creating a market development strategy requires a careful and strategic approach. Here is a simple step-by-step guide:
Market Research: Understand new markets, including their needs, preferences, and competition.
Identify Opportunities: Look for gaps in the market that your product or service can fill.
Set Clear Objectives: Define what you hope to achieve, like expanding into a new geographic location or demographic.
Plan your Entry: Determine how you'll introduce your product to this new market. Will you use partnerships, direct sales, or online marketing?
Implement the Strategy: Put your plan into action, focusing on consistent branding and messaging.
Measure and Evaluate: Use KPIs to measure the success of your strategy and make necessary adjustments.
Examples of Market Development Strategies
Geographic Expansion - Netflix: Netflix started as a US-based service and is now available in most countries around the world, excluding a few such as China and North Korea.
New Demographics - Dove: Dove, traditionally a brand focused on women, expanded its market by launching the Dove Men+Care line.
New Uses - Baking Soda: Baking soda was primarily used in baking but found new markets as a cleaning agent, deodorizer, and in personal care.
Incorporating Digital Tools in Market Development Strategy
In the era of digitization, it is paramount to incorporate digital tools and strategies into your market development plan. Here's how:
Digital Marketing: Use platforms like social media, email marketing, and SEO to reach audiences in new markets.
E-Commerce: E-commerce platforms allow you to sell products worldwide without physical stores.
Online Market Research: Use online surveys, social media listening, and digital analytics tools to understand the needs and behaviors of potential customers in new markets.
Advantages And Disadvantages
Market development, like any business strategy, has its benefits and drawbacks.
Advantages
Growth Opportunities: It provides new avenues for growth by expanding the customer base.
Risk Spreading: By diversifying markets, businesses can spread their risk.
Increased Profitability: New markets can increase sales volume and potentially, profitability.
Disadvantages
High Costs: Breaking into new markets can be expensive due to research, marketing, and operational costs.
Increased Competition: New markets often have established competitors.
Cultural Barriers: There may be cultural, legal, or logistical barriers when expanding geographically.
Understanding Market Development Strategy Metrics
Successful implementation of a market development strategy is contingent on proper tracking and measurement. Key metrics can include:
Market Share: Your percentage of total sales in the new market.
Customer Acquisition Cost: The total cost of acquiring a new customer in the new market.
Customer Lifetime Value: This estimates the total revenue a business can reasonably expect from a single customer account in the new market.
Sales Growth: This measures the increase or decrease in sales over a specific period.
Frequently Asked Questions (FAQs)
1. Is market development strategy suitable for all types of businesses?
Not necessarily. It largely depends on the nature of the product, financial health of the company, and the market scenario.
2. What's the difference between market penetration and market development strategy?
Market penetration focuses on increasing sales of existing products within existing markets, while market development focuses on introducing existing products to new markets.
3. How can a small business implement a market development strategy?
Start small. Consider exploring neighboring towns or cities, or think about new demographics within your existing market.