Testing the water with new markets
What do you do? Jump right in with a great big splash or carefully lower yourself until you’re fully submerged then then swim off?
If you’re the entrepreneurial type, you will probably opt for the first option.
Jump right in!
After all, that’s how you started your own business… just do it, right?
Any lean startup advocate will agree with you: create your MVP and get to market… fast. The quicker you do that, the quicker you can achieve that elusive product/market fit.
Which is fine when you’re a start-up finding your way; but what about when you’re a scale-up seeking to extend your business into new markets?
In this case you may want to take the latter approach to having a dip in the lake.
It would be wiser to test the temperature by dipping your toe in. Entering more cautiously gives you time to acclimatise to new waters.
There may be objects under the surface that you hadn’t considered until you got in. And sometimes you will need to come out and find a different way in.
This metaphor is very apt
Why new markets need a different approach
When you’re entering a new market, whether that’s a new geographical market or customer segment, you are doing so with a product or service that has already been developed for a different market.
Having an existing product or service brings its own advantages and challenges.
Yes, you will have traction in your own market, with established customers, references and revenues; but you cannot assume that what works in your market will be the same elsewhere.
Jumping right in, whilst it may be the way you launched your existing product or service, runs a huge risk of a mis-fire.
When you were a startup, well… you probably had less to lose. But now you’re looking to scale-up through new markets the stakes are undoubtedly higher.
So this really isn’t the time for the gung-ho approach; it’s a time to dip your toe in and check the temperature.
What’s under the water?
In new markets there can be a number of obstacles hidden under the surface.
Domestic, incumbent competitors are an obvious one and they can often be surprisingly difficult to spot from the outside.
Cultural differences and local business practices are also hard to perceive.
And, if you do encounter any obstacles that were hard to spot beforehand, they can be challenging to handle on the fly, leaving the only option to back-out and re-enter when you’re better prepared.
By that time, however, you’ve already made a splash – metaphorically and financially.
And, usually, it’s a significant splash of cash.
Testing the water
So, what’s the answer? How can you enter new markets with less risk?
The best approach is conducting a market assessment, either direct or through a third-party.
A good market assessment goes beyond data research and seeks to engage with the market to deliver real commercial insight, by which I mean actionable feed-back on the market, perceptions and competitors.
Aside from the possible resource implications of conducting this kind of assessment yourself, there are several good reasons for considering a third-party:
- Local knowledge – ability to rapidly engage, with a deep understand of market landscape, cultural norms and business practices
- Cleaner feedback – third-parties can often elicit more honest opinions from the market and should give you unbiased feedback – they may end up telling you what you don’t want to hear.
- Anonymity – sometimes you may want to conduct a market assessment before showing your hand. Engaging with a third-party gives you the opportunity to do this; effectively they dip their toe in the water so you don’t have to.
The last point about anonymity is an interesting one.
I’ve conducted projects for clients to understand market perceptions, competitive landscapes, etc without disclosing who our client is; obviously we position the client to frame the conversation but full disclosure isn’t always necessary.
At the end of each project there will be contacts and relationships that could be useful to our client and these can be transferred through introductions that will often lead to significant opportunities. This also has the added advantage that the client has time to refine their proposition based on what they have learned through the market assessment.
It’s a valuable approach and, in my experience, delivers both insight and actionable opportunities to clients, rather than research based on stats and secondary market data.
So, whilst “jumping right in” might be in your nature (and can of course be fun) sometimes it’s wiser to test the water first.
This article was originally published on LinkedIn in 2017