How is a market development strategy composed?

Mario Busshoff

18. March 2020

A market development strategy is geared towards growth, your company is looking for new consumer groups or markets for its products. It is an Ansoff strategy (a product-market matrix) that supports companies in planning their growth strategy. In addition to market development, this matrix also provides strategies for market penetration and product development as well as diversification.

This is how I generate growth by opening up new markets

The market development strategy focuses on creating new sales markets. Instead of developing the products further or penetrating existing markets more deeply, your company is dedicated to new markets and tries to convince new groups of buyers of your own offers or products.

It is therefore possible to penetrate new geographic regions or to enter new market segments. As a manufacturer of sports watches, for example, you could try to expand your activities, which were previously limited to Europe and Asia, to North America. In such case, you as a management team are looking for new sales markets abroad. However, it is also possible that a manufacturer with its sports watches has so far mainly aimed at younger buyers and now wants to reach older athletes with its products. The pure market development strategy actually does not require any further development of the product, the aim here is to find new buyers with existing products.

The strategy implementation is associated with costs

It is typical of the market development strategy that there are high costs in the beginning. It is conceivable, for example, that customers in other languages ​​than previously have to be reached and that exporting to new regions is associated with higher transport costs. The strategy implementation must therefore be preceded by an in-depth risk analysis and planning. Your company must determine what means it wants to use to penetrate the new markets and what chances of success there are. The costs are very high at the beginning of the market exploration and launch, however the may decrease later as soon as your company has established itself with its products on the new market.

Create new uses

A market development does not only result from the opening up of new markets or new consumers. It is also possible that you will find new uses or applications for one of your products. For example, it would be conceivable that a sports watch can now be used not only in the context of fitness, but also in relation to health applications. For instance, users could use the watch to check their health data. Or the watch is no longer only used in sports, but also in the everyday life of the user. No further product development is necessary in this case either. It is understandable that management likes to target such a market development, because if successful, sales can be increased without the development costs for new products.

The market development strategy and the expanded Ansoff matrix

The market development strategy described above refers to the Ansoff matrix in its basic form with four fields. In fact, this classic form of the matrix provides a good basis for strategy determination in the company. However, interim solutions are neglected here, which is why the Ansoff matrix is ​​expanded to the 9-field matrix.

But what does that mean for the market development strategy? For example, it is typical that an adaptation of the product is required to reach new market segments. Often, market development and product modification cannot be viewed separately. If your company would like to sell its sports watches to an older target group as described above, adjustments to the special needs of these users may be necessary. For example, it would be conceivable to enlarge the display or choose other and more legible characters and fonts. In this case, it would be necessary to modify the existing products for new customer groups before you can start the actual market development.

The same applies to opening up new markets geographically. Modification of the products is often necessary here too, and an isolated consideration of the market development strategy without product development makes no sense. For example, it may be necessary to translate manuals or to support new languages ​​in the menus of electrical devices.

How do I successfully implement the growth strategy?

In order to develop the growth areas using the Ansoff matrix, a procedure in several phases is recommended. This applies regardless of which field management chooses and whether it wants to develop one, several or all fields.

It always starts with the as-is analysis. Your company must determine which resources are available for the desired market development. As described above, opening up new markets can be very resource intensive.

An in-depth analysis of external market forces is recommended here. Answer the following questions:

  • Which competitors are already working on the new target markets and how is the competition positioned?
  • Are other competitors planning to expand into the desired market?
  • Which suppliers are available in the new geographic region?
  • Can I implement the market development in a meaningful way with these?

This is followed by a description and adaptation of the growth strategy to the individual requirements of your company. There is also talk of individualizing the generic growth options. Only then will you move on to choosing a targeted growth strategy and putting it into practice. We would be happy to support you and show you the advantages of market development strategies for your company.

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