This is a question that came across my desk recently and it’s a great one, because there’s an almost endless amount of market research that you could do, before tackling a new market. And for some people, the sheer volume of potential research stops them from ever getting started.
The trick is to work out what you need to know before you go ahead and launch.
In this blog, I want to highlight four questions that you should ask when you’re trying to work out whether what you sell is likely to do well in a particular country. These are not necessarily the only things that matter, but if you can get a ‘yes’ on all four of these factors, then it’s likely that you have the potential to succeed in your new market.
Do enough people need it?
Before you lock on a market, you need to be sure that there are enough people there who actually need what you sell.
For example, one of my clients is an architectural services firm that does 3D-modelling. They were very keen on expanding their operations to Singapore, which has a great reputation as an South East Asian hub. But the more they thought about it, the more they realised that the Singaporean market for their product was limited, because the number of architectural firms that needed their product was small. They didn’t rule Singapore out, but they realised that long-term, the real growth was likely to be elsewhere, and added other regional markets into their expansion strategy.
Will they pay for it?
Once you’ve worked out there are enough potential customers for your product, it’s very important to make sure that people will actually pay the price that you’re asking for it.
You might be targeting a very large market, but one that has a much smaller proportion of people who have the means to buy your product. There’s no point in having an awesome corkscrew that you intend to sell for $200, if most people in your target market are only willing to pay a maximum of $20 for it. This is a key question that you CANNOT afford to skip over.
Can I compete?
On that note, you need to be sure that you can compete in your sector, in your target market. For instance, If you plan to sell your awesome corkscrew for $200 and you know that people are willing to pay that much in your target market, that’s great. But imagine that there is a competitor with a strong brand in the corkscrew space that makes a virtually identical product, which it is marketing aggressively for $150 in your target market? This could significantly reduce your market share before you even get started.
On its own, competition isn’t a reason to avoid a market, but you need to be confident that you can compete, or that there is a blank space in the market that you can occupy. Sticking with the corkscrew example, you might be better to target the very top of the market with $1000 corkscrews, or go for a low-cost, high-volume play, where you sell basic corkscrews for $10.
Can we afford to sell there?
And finally ‘can we afford to sell there?’. Once you’ve established how much consumers in a particular market are likely to pay for a product like yours, you need to calculate whether this is compatible with your cost structure.
If you decide that market conditions mean you can only charge $140 for your awesome corkscrew, but it costs you $100 to make, ship and distribute each corkscrew, you might conclude that the margin is too low to make it worth your while.
In a services context, this can be a challenge for firms that are supplying to low-cost markets, and resourcing their teams with high-cost staff. One way around this problem is to establish teams in-country, to enable cost-effective pricing that chimes with local trends.