Impulsive decisions are risky even in times of economic downturn. However, it is periodically essential to consider whether to enter new market segments or explore new international markets. There is a systematic approach for this, which we will outline in seven steps here. We are happy to provide detailed elaboration when it comes to implementation. In reality, this process should be accompanied by workshops and market research to achieve meaningful results.

1.Definition: Determine which product/service will be introduced into new segments or markets.

Exercise caution in this step, as companies must adapt to the world, and the world does not adapt to us. It’s crucial to leave some flexibility initially: With which core product idea or expertise can we address new segments? It should be clear that after selecting the segment, product requirements need to be re-evaluated. Therefore, the term “definition” should be broadly interpreted.

2.Definition: Identify countries or segments that are ruled out based on general considerations.

Currently, there are 195 countries globally. In each market, there are numerous segments. It significantly simplifies the process to predefine which target markets will not be addressed. Reasons can be practical (too far away), fundamental (no direct sales), or political (avoidance of crisis areas).

3.Focus: Define 7 to 12 criteria determining the attractiveness of target markets.

Allocate a day with your key team and a professional moderator for this, as it delves into the details. What are the criteria that make a market attractive, especially more attractive than others? Beyond logical factors like market size and growth, you’ll soon get into soft facts (existing business contacts), philosophical aspects (German business culture, low corruption), or pragmatic factors (key customer on-site, major competitor not on-site). It involves an extended discussion process, and initially, you might come up with quite a few criteria, which then need to be reduced to a maximum of 12; otherwise, a criterion lacks substance and isn’t deemed important enough.

4.Weighting of these criteria.

Once you have the relevant criteria, start with an even distribution and adjust the weighting through discussion if necessary. This happens in the same workshop, ultimately creating a scoring model. When the workshop concludes, you know what you need to know…

5.Data collection through market research.

…and will pass this data requirement to a market research institute because rarely do you have, in your drawer, the data on business law, growth of specific segments, analysis of distribution structures, etc. After about 6 weeks, it’s time for…

6.Result determination and sensitivity analysis.

The market research partner presents the results, meaning the data has been integrated into the scoring model, revealing a “winner” — a particularly attractive target market. The model itself provides the rationale for why this segment is so attractive. If the result is close, you can easily adjust the weights and check if the ranking remains the same. At the end of the process, you have a segment or a country market to conquer.

7.Market selection and determination of the necessary detailed data for market entry.

Before entering the market, further in-depth market research is necessary: analyses of market size, competition, customer behavior, and distribution channels should form the basis for a clear strategy and potential adaptation of the offering.

Author: Dr. Frederik Lehner

01/11/2023

Copyright: Interconnection, Publication free of charge for coverage regarding the study and InterConnection Consulting.