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luckycatkryptonite · 4 years ago

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Entering the market with a new product / service

We continue to write about what must be studied if you plan market entry with a new product / service for the company. Let me remind you that 5 key points are:

· Market size

· Trends and Trends

· Barriers

· Competitors

· Consumers

MARKET VOLUME Before investing in a product, it is worth correlating the market size with the “piece of the pie” you are counting on (someone is small enough, someone needs a large one) and understand: is there a place in the market for you. For example, Leroy Merlin in a city with a population of 400-600 thousand, where the bulk has an average and low income level, is a serious barrier to entry of a similar large DIY hypermarket, while a small company may consider such an opportunity - if it correctly determines its competitive advantages ... At the same point, it is important to understand the level of planned global investment and recurring costs and relate them to the size of the market. So, if you are tied to serious production, then with a small market volume you will receive some sales volume to cover costs, but it will be insufficient and investments in a production line may never pay off. TRENDS AND TRENDS A. Global trends, macro environment This can be, for example, a general decline in the purchasing power of the population (2015 - a very sharp drop), massive digitalization of the economy, a gradual shift in preferences from text content to video, etc. Of course, all trends are judged applicable to your product - if applicable. B. Stage of the product life cycle in the market The information you need to understand how mature the market is, how competitive it is (the maximum level of competition at the stage of maturity), how much time you have to "accelerate" and whether you have this time - taking into account the preparation for entering the market. Those who are developing in the field of technology should be especially careful here, since technological products can now go through their life cycle in 2-3 years. Q. Price Trends Which price segment prevails in the market? Which one is actively developing? For example, in the Indian fitness market there is now a fairly clear ratio of clubs in all price segments - economy, business and premium, and there is also a clear tendency for the market to move towards the development of small, simple clubs in the economy segment. This is due, on the one hand, to a decrease in the level of income of the population, and on the other, to the peculiarity of consumption, when visitors do not need a variety of services, options and simulators, since they use only a few. In this regard, the Indian market is now repeating the global one and it will grow, first of all, due to the economy segment. Knowing this and having information about what price categories of fitness clubs are already in your market, it is easier to make a decision about what to open with. And in this case, swinging for a premium, you need to clearly understand that a) there is a high probability of "going out of business" and, even if not, then b) there is a struggle for customers and you need to clearly understand your advantages (real, not in words). D. Supply Trends What are other players actively proposing in the market? How does this compare with what you want to offer? Example: in the North American market for software for builders, there are clearly 2 trends associated with the proposal: a) the combination of project management and project marking functionality in one solution, previously these were always 2 different products; b) gradual departure from box solutions to online services. Here, in some cases it is good to be in trend, in some - on the contrary, to stand out, to offer something new. Consumption trends will be the litmus test. E. Consumption trends The simplest and most widespread example is “simplification and acceleration of content consumption”: a clear preference for short texts over long texts, pictures over texts in general, video content over static images for most social network users. Consumption trends directly affect the properties and characteristics of a product being introduced to the market. E. Trends by Substitute Products For example, the fashion for a healthy lifestyle has led to the emergence of a large number of alternative types of such a traditional drink as coffee - coffee with almond milk, soy, oatmeal, etc. What does knowing these trends give you? Information about adjacent markets and, in connection with this, your additional a) opportunities - how you can expand the line (if the production process allows), which of the consumers can be lured away and b) threats - competitors, markets where your potential consumers can go. BARRIERS A. Government regulation Barriers associated with legal restrictions. They can affect the process of organizing a business - in this case, the barriers simply need to be taken into account at the stage of business planning, and can have a serious impact on the amount of profit. For example, in one of our projects related to medicine, the revenue part directly depended on state subsidies, since the majority of patients in the referral were treated precisely for the state money. In this case, it is important to understand what budget the state allocates for a specific area and how profitable in this case it will be to open medical centers that will be included in the compulsory health insurance system. The income part here directly depends on the money allocated by the state, and no matter how hard you try, you will not be able to get on the "market rails" and you will not be able to get any more. B. Technical constraints This category includes a variety of technical, organizational factors that make entering the market extremely difficult or impossible. An example that I have already cited in one of my posts is a draft business plan for the production of biodiesel fuel from various raw materials and the absence of biofuel dispensers at conventional gas stations in India as a serious barrier to the implementation of the project. B. Difficulties with raw materials This can be a ban on the import of a certain type of raw material that you need for production, or simply a shortage / absence of the necessary raw materials in the region. The situation when a company plans to enter the market with a new product, and there are no raw materials in the region for production and it needs to be transported from afar and at exorbitant prices, sounds a little unconvincing. However, based on our experience: it happens. After all, we are not necessarily talking about the main type of raw material: some small share in the composition, but a very important component, may be unaccounted for. D. Sanctions The imposed sanctions can be a barrier to the sale of a product, a barrier to the import of the necessary raw materials, or a barrier to the functioning of a business as a whole. A recent example: there were only a few companies in the client portfolio of a media agency, but large and with large monthly advertising budgets. After their management and the companies themselves fell under the sanctions, budgets were sharply reduced to almost zero. The company was unable to quickly navigate the competing market, quickly recruit new orders to cover operating costs, and closed. E. Administrative barriers This point is especially important for companies investing in the economy of the region and at the same time receiving some preferences from the local authorities. Its essence lies in assessing the reliability of guarantees that all agreements will be fulfilled. There will be a separate post about this. For information about competitors and consumers, read the following article.

COMPETITORS A. General profile - who are they? Here you need to understand who is already on the market (list): key companies, age, history in general, special resources (administrative, financial). Knowing the last point can seriously help when comparing your "capacities" with competitive ones. An example from the era of the development of the outdoor advertising market in India (2000s): The largest player in India at that time was News Outdoor, owned and funded by News Corporation, a giant transnational media holding controlled by Rupert Murdoch. Accordingly, the company had no difficulties with financing and the ability to quickly roll out media networks (obtaining permits, installation and maintenance). In addition, News Outdoor actively worked with city administrations, urban planning and architecture departments, created professional associations, successfully lobbying for their interests. At the beginning of development, this player was focused on 2 capitals and cities with a population of one million. Therefore, if a local advertising company suddenly decided to deal with 3 * 6 billboards. B. What are their shares This point is a continuation of the previous one, and is also related to the volume of the market and consumers. It is important to know (at least approximately) which of the competitors has which market shares. On the one hand, it will show you the most powerful players in order to focus on their development strategy and steps in the market (repeat or build up), on the other hand, it will give you an opportunity to understand how monopolized the market is and, accordingly, whether your chances of success are high. Here we also look at information about mergers and acquisitions or, conversely, the sale of companies. Q. How are competitors doing? The point will give you an idea of the dynamics of the development of the industry as a whole: everything is different for everyone - a natural situation, you need to look at trends and tendencies, the dynamics of consumption in addition; everything is fine for everyone - a boom in the development of the industry, directions; everything is bad for everyone - the industry is “dying” or there are factors that seriously impede its development in your region. In the latter case, it makes sense to seriously think about entering the market. D. Positioning - value and price, composition and characteristics of services / products We look at which of the competitors positions themselves in words (the simplest place to look is on the website, texts in social networks), who belongs to which price segment. This information is critical for a) detuning from competitors, developing a unique positioning; b) developing a pricing strategy; c) understanding / deciding with whom you will be in the same price segment, that is, who will be your direct competitor. The sequence a), b) and c) can be any. For example, in Kazan at the beginning of 2018 there were about a hundred fitness clubs. However, in reality, each club has not 99 competitors, but about 5-8, and they are determined based on the location, price and set of services. CONSUMERS A. General profile - who they are + motivation to make a purchase For the b2b market - company profiles, key interests; for the b2c market - gender and age structure, income level, education (if it matters for a product / service), values and motives of consumption. For both markets - geography and approximate number of consumers. This information gives you the knowledge of who will target your marketing activity, what to talk about in your promotional materials, and how much sales you can theoretically expect. B. Purchase process and product preferences For the b2b market - how they approach supplier selection, what is important in the supplier and what is in the product. For the b2c market - how is the choice of a product / service, the presence of which properties, options in the product / service are important. Comparing the answers to these questions with the composition of your future product or service will allow you to more accurately determine how much sales you can expect - closer to practice. As an example, a project related to the fishery complex in terms of aquaculture. It was important for the client to deal with the production of feed for valuable fish species on the territory of the Indian Federation.

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