How should we expand our markets? When? Where?
These are among the most complex questions that any tech CEO faces today.
Every market expansion decision a CEO makes has a domino effect on what follows — whether it’s a success or failure. Often tech CEOs are too quick to move into a new market and don’t take the time to first understand the unique complexities of a particular geography or competitive environment.
“There are several different key activities to building a market expansion strategy and identifying new routes to market, each with their own benefits and detriments,” says Patrick Stakenas, Senior Director Analyst at Gartner. “When executed successfully, market expansion provides an increase in customers and drives new revenue; however, it is a risky endeavor that requires commitment and data to make the right decisions.”
Download now: Decision to Execution: Market Expansion Strategy for Tech CEOs
In the Gartner 2021 Tech CEO Survey, CEOs cited customer acquisition as the most important initiative for the success of their respective organizations — and they view market expansion as a primary way to achieve it.
Certainly, taking on a market expansion initiative without a market assessment and formal plan is a high-risk endeavor. That's why we've identified four key activities that are deeply connected and essential to achieving market success.
The most important decision is determining which activity to pursue first. The rule: one activity at a time — they cannot be done simultaneously. With that, you should have a clear perspective on each of these four activities to begin the process:
1. Product Market Research
How much is enough when entering a new market?
Too often, the planning for the market introduction of a new product or offering is inadequate, rushed or skipped over altogether. The assumption is that an innovative product will sell itself, regardless of market fit, buyer behavior, regional nuances, competitive landscape or vertical preferences.
Market research is about looking before you leap — that is to say analyzing the new market for business and product fit, identifying and quantifying any trends in the new landscape, and approaching the market on its own merits.
Is your product similar to the competition's? What’s a significant differentiator? Are there any gaps you can exploit? Can you add any additional features? What investments will cause the greatest disruption to the competition? Perform a thorough, in-depth analysis to decide if the conditions are right to secure a win before taking your product to market.
Read more: 5 Impactful Technologies From the Gartner Emerging Technologies and Trends Impact Radar for 2022
2. Formal Competitive Intelligence
Is it really required?
Before entering a new marketplace, it is essential to understand the unmet needs and gaps in competitive solutions and identify trends to assess future market opportunities. Accessing the raw data needed, along with identifying a means of turning that data into actionable intelligence for key stakeholders, is critical.
By identifying and ranking key competitors’ strengths against their own, you create a decided advantage in markets. To achieve this, set aside dedicated time, or assemble a team for competitive intelligence operations. Over time, transition into the development of a formal function by hiring a dedicated competitive intelligence analyst who can produce deliverables such as battle cards and product teardowns.
Read more: 6 Key Forces Shaping Technology and Service Providers Through 2025
3. Segmentation and Positioning
Are they necessary when entering new markets?
If the audience you're pursuing is too broad, you run the risk of decreasing the impact of the market messaging. The more focused your definition of the audience segment is, the better the market opportunity will be. This comes as a result of evaluating market-specific data about technology, industry, submarket, geography and company size.
The key to strong segmentation and positioning is understanding the buyer on an individual level. By working with other executives and channel partners who have customer and market insights, you can define clear goals for segmentation. It starts with fully understanding the positioning framework and the ideal customer profile, then formulating target audience profiles that enable more relevant interactions with sales teams.
4. Routes to Market
Which approach new markets should you use?
A route to market is the method and channels used to distribute an offering to a target audience. There are many route-to-market strategies to consider, including outsourcing, subcontracting and communities, but tech CEOs often find that partner and channel strategies provide the greatest opportunity — presuming clear value proposition and target audience are defined first.
All possible and feasible routes to market should be considered to determine the best approach to a given market. If choosing a channel partner strategy, you'll need to know how many partners are necessary to define partnership objectives, and must ensure product or service readiness for indirect channels. By identifying the attributes that align with the business objectives, establishing program metrics, and documenting the channel partner strategy, it becomes easier to attract the right channel partners.