Research and planning steps for entry into a new market space

market-research

 

When entering a new geographical market there are few tasks to complete such as:
1. Define the market (is it any company in the country or only SMEs or only certain vertical etc)
2. Establish market demand (how many potential customers…)
3. Market share review (who are key competitors, their market shares etc…)
4. Strategic market assessment to support new marker space entry decision (ie. how attractive the market is and what competitive advantages does one have) plus few more steps but let’s cover these…

When defining the market a very useful tool for high-level and macro market viewing is PEST,  or very often in telecom space modified to PRESTO.
The PRESTO tool provides a consideration of the following factors:

  • Political factors may include government, state and country stability, broad business environment, employment, unionisation and other factors
  • Regulatory factors may include taxation framework, legal and laws, regulations such as government mandatory reporting policies etc…
  • Economic factors play a critical rule such as levels of unemployment, interest rates, trade, consumer confidence, CPI, stock and real-estate prices and performance
  • Social factors include areas such as income and age of population in certain target areas, numbers of children or similar lifestyle issues
  • Technology factors such as availability of technical products, staff technical skills but also the attractiveness of a market to investments in technology, or specific segments like biotechnology, ITC or similar
  • Other factors would include factors not covered by the above categories

Once you have established a market definition you should be in a better position to consider underlying market demand. From the ‘market based’ business perspective, a key question to consider is: ‘how many customers are interested in our business products’. This is different to the traditional product based approach which is concerned only with product volume.
We suggest two simple approaches bottom up and top down. With the top-down:

  • At the highest level your market is defined as all businesses (say 10,000 companies)
  • At the next layer you may identify that some businesses are locked into contracts with other suppliers which are more than 12 months away from ending (this may reduce your number of customers to 3,000)
  • At the next layer, from the remaining 3,000 customers for example, you may realise 1,000 are only interested in a different product (not a service you offer). This will then finally reduce your potential market to 2,000 businesses

To further understand the demand you also need to identify and manage five market forces that impact and limit the market potential:

  • Awareness (eg. this factor needs to also include comprehension of benefits in addition to product awareness)
  • Availability (eg. product availablility in a geographical market)
  • Ability to Use (knowledge & resources to make the product workable)
  • Benefit Deficiency (certain benefits are not relevant to a subset of customers)
  • Affordability (eg. product is just too expensive for some users)

One you have done this you will conduct some market share analysis. Components of this estimation are derived from the common marketing mix factors and include:
–        Promotion Strategies (impact product Awareness)
–        Product Strategy (impact the product Benefits)
–        Pricing Strategy (impact Pricing/Affordability)
–        Placement Strategy (impact Availability)
–        Service Strategies (impact customer Experience and Satisfaction)

And finally the strategic market assessment.
You wound conduct such analysis on two levels by analysis factors such as:
LEVEL 1 (Market attractiveness): Market Size (volume), Market Growth Rate, Buyer Power, Price Rivalry, Ease of Entry, Substitutes, Channel Access etc…
LEVEL 2: (Competitive Advantage): Differentiation Advantage, Product Quality, Service Quality, Cost Advantage, Marketing Advantage, Brand Awareness etc…

From the combination of all above you should get to a position of reasonable understanding of the target market…

Parcus Group has some great software tools for automation of all these tasks… see more at: Product Management Software, Training and Consulting Services

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