How businesses in Greater Lincolnshire and Rutland can conduct market research to enter lucrative international markets.
There are many successful businesses across the county that can expand into international markets, whether it’s capturing a share of a growing market or entering new markets because local saturation is high.
But with expansion comes risk, as for many businesses the distance alone essentially means starting afresh. There will be no existing customers, no existing network of business contacts and no familiarity with the product or service when expanding into a totally new geographic market.
For many, this risk alone would result in avoidance of expansion. But businesses can avoid the risks and make the most of opportunities using market research.
Marketing is all about understanding who you are selling to. This allows businesses to know where to go, what to sell, at what price and what products and services to promote. Many businesses have built their success without using structured marketing approaches, but past approaches are no guarantee of success. And it is market research that leads to effective business planning when looking to expand to new horizons.
Reducing business risk through market research
The reality for businesses is that risk mitigation is a key part of any business decision. Going blind into an opportunity is a huge risk. One of the major benefits of research is being able to identify the risks that will affect business decisions.
Is there a market?
This is the first question every business must confidently answer. If there is no market, or the market is too small or oversaturated there won’t be any customers worth finding. And if businesses don’t know which of their products or services are attractive, they may end up promoting the wrong thing.
The main concern is over-saturation. Many markets are already highly competitive, with businesses both large and small fighting over a customer base that is mature. This mature customer base means that businesses are fighting over existing market share, essentially everyone is trying to get a slice of cake.
In markets that are new and growing, that slice of cake is still growing – meaning that is it easier to get customers because the market itself is still expanding and in these scenarios, it is quite typical for businesses to do well if the timing allows them to enter the market quickly.
Businesses need to answer two parts of this question:
Is there a market? And if there is, what stage of life is it? Is it a growing market or a mature market?
In some instances, businesses have tried to enter declining markets and upon entry have realised that not only was it difficult to enter the market but that year on year there is a slow and steady decline in customers regardless of what the business does. Situations such as this are common in industries that panic about declining sales within their own geographies, as such they instinctively look for greener pastures, but the market overall is on the decline and businesses would be better served if they divested rather than invested.
Market sizing and life cycle stage tools
One of the most common tools used is the BCG Growth Matrix. This is a simple 2x2 tool that helps businesses identify which of their products and services have potential opportunity for growth.
The BCG matrix in this context would help a business make decisions around which products or services they promote.
They may find that they have a service or product in a growing market and high market share, this would reduce the risk of investing into new geographies if it’s found that a market abroad is underserved.
Inversely, it may identify that a significant service or product is a cash cow meaning that although it makes significant revenue for a business, it may have low growth rates and low market share. This essentially means ‘what’s taken for granted’ is not the best product or service to promote to new markets abroad.
Competitive pressures
The second largest risk to a business investing in new markets is competition. For many, this is viewed as immediate business rivalry but there are a huge number of external pressures that affect competitiveness.
A useful tool is Porters 5 Forces, this framework helps businesses to understand what variables can affect their competitiveness in a market place.
A good example would be that perhaps there isn’t much rivalry for a business, but they may find that the barriers to entry are very low – meaning it is easy for newcomers to enter the market. Alternatively, there may be many alternatives available to a customer that while not a direct competitor it still ends up doing the job they need to be done.
Cultural differences
One of the most overlooked aspects of entering new markets is the tendency to neglect major cultural influences. This is something that even major corporations have failed to address, one of the most egregious examples is Walmart.
In the early 2000’s, Walmart attempted to enter the German market and found very quickly that their company culture and even products were simply not culturally relevant.
The two most famous examples are their pillows products, which were stocked as usual, but Walmart didn’t realise that in Germany the most common form of pillow is square – not rectangular. A simple, but major pitfall from a product point of view.
The other example is Walmart’s insistence on demonstrating ‘customer service’ to a level that was considered unacceptable to German customers. This included being overly friendly and packing customer’s bags, two things that did not go down well in Germany.
As a result, they left the market and have not returned – at a cost of billions of dollars.
The key to avoiding cultural irrelevance is to perform field research, this means active research in a location with real people and customers to understand who they are, what they believe in and how they buy in the everyday. There should be no assumptions that people are the same everywhere.
How to do market research
Some businesses can afford to commission market research from independent companies. This can be valuable as results are often quicker and unbiased providing the scoping of the work is done correctly.
But for many businesses, it may be possible to perform research internally. There are several roles within businesses that can perform market research. Qualified and experienced marketers should have the knowledge but not every business has internal marketing staff. In this case, it’s likely that financial professionals and analysts will also be able to perform market research tasks if they are briefed correctly as they will possess the hard skills to do so.
There are two main forms of research, these are broken down into secondary and primary research:
Secondary Market Research
Secondary research uses information that is either publicly available or accessible at a cost. This information is then reviewed based on the research requirements. For instance, this may be using census data to calculate how many people are potential customers in a geographic area.
Primary Market Research
Primary research is active research that involves creating data, this can take the form of running surveys for research purposes. Conducting interviews with potential and existing customers and field research – often called Ethnography. This can include monitoring customers in the buying environment and is often used in retail to make decisions around product placement in store as well as shopping experience design.
Additionally, products and services can be tested in new markets using distribution trials and monitored during a fixed period. In this case, products and services are often distributed through third parties to reduce the financial capital required to launch. An example of this would be stocking a new product under a local brand, and if this product is successful, it could be sold through a direct presence.
Next steps
In summary, market research is the key to unlocking growth for businesses in Greater Lincolnshire and Rutland that want to enter new markets abroad. It’s a necessary part of understanding what opportunities there are, what risks are present, how they can be mitigated and ultimately ensuring that capital and investment isn’t put at risk.
If you are ready to start your market research journey, you can get in touch with the Exporting & Internationalisation team at Business Lincolnshire who can help you explore new markets!
