If your company only serves a single market segment or a couple of market segments, you’ll eventually run out of prospective customers to go after. Your company’s growth will plateau because everyone in your target market will either be a customer already or have an alternative solution.
By expanding into new markets, you can increase the potential customers and revenue you have access to. The more you do that, the easier it will be for your company to grow.
There are multiple ways that you can expand. You can move upstream, downstream, or into new verticals. Prior to putting together a market expansion strategy, you need to identify a market to go after and confirm that it is addressable for your company.
Some key areas to assess include availability, traction, and addressability (in terms of language, economic strength, and technology adoption).
“What is the size of the new market compared to others, or how much opportunity is there? How is the company currently performing in this market? How well do our products or services address this market?” prompts Client Success Team Lead Dylan Berno.
Understanding those factors will help you determine if it’s a market you can expand into.
What is Market Expansion?
Market expansion is entering new markets with your current products to increase revenue. You can expand using different frameworks: move upstream, downstream, or into new verticals or geographies.
1. Move Upstream: You're going after more prominent clients in your current market. It's easier to sell more to your existing clients than it is to find new ones.
2. Move Downstream: You're targeting smaller clients in your current market. Finding new clients who need a lower volume of what you're selling may be more manageable.
3. Enter New Verticals: You take your current product and enter a new market. The thinking is that you have a product that can be successful in multiple markets.
4. Enter New Geographies: You expand into new countries or regions. The thinking is that there are untapped markets with potential customers who need your product.
Why Expand Your Market?
There are multiple reasons why you would want to expand your market. The most common reason is that you've reached the point where your current market is saturated, and there's no more room for growth. Another reason is that you may have identified a new market that presents a more significant opportunity than your current one. And finally, you may want to diversify your revenue streams to reduce risk.
The Importance of Choosing a Market Expansion Strategy
While there's no definite answer for expanding your market, selecting a strategy that works best for your company and products is crucial. With that being said, below are some key benefits of expanding your market.
1. Cost Reduction
The most apparent benefit of expanding your market is that it can lead to increased revenue. When done correctly, market expansion can open up new sources of revenue and help your company grow. Plus, you can benefit from economies of scale when you expand into new markets. This is the idea that it costs less to produce more product units. The more you produce, the lower your per-unit costs will be.
2. Risk Management
Diversifying your revenue streams by expanding into new markets can help reduce the risk of relying on a single market. This is especially important if your current market is otherwise unstable or subject to seasonal fluctuations.
3. Opportunity Identification
Expanding into new markets can also help you identify new opportunities for your business. You'll encounter new competitors, technologies, and customer needs when you enter a new market. When it comes to competition, there are untapped markets where you can be the market leader. Or, you may find that the competition is fierce and that you need to differentiate your product to succeed. This can all lead to new opportunities for your business.
4. Tax and Compliance Implications
There can also be tax and compliance implications when expanding into new markets. It's essential to consult with a tax or legal advisor to ensure that you are compliant with all applicable laws in your new market.
Ansoff's Model for Developing a Market Expansion Strategy
The Ansoff Matrix is a product and market expansion grid that provides strategies to support company growth while measuring risks. It's a helpful tool for companies to use when expanding into new markets because it helps them assess the risks and opportunities involved. The Ansoff Matrix can help you choose your company's market expansion strategy.
The Ansoff Matrix has four quadrants: market penetration, product development, market development, and diversification.
Market Penetration: This is when you sell more of your current product to your current market. The thinking is that there are still potential customers in your current market who still need to buy your product.
Product Development: You modify your current product and sell it to your current market. The thinking is that there are potential customers in your current market who would buy a new or improved version of your product.
Market Development: This is when you identify new markets for your current product. The thinking is that there are untapped markets with potential customers who need your product.
Diversification: This is when you develop new products and enter new markets. This is usually the riskiest option because you're starting from scratch in a new market.
11 Steps for Creating a Market Expansion Strategy
1. Set Clear Goals and Objectives
The first step in any market expansion strategy is to set clear goals and objectives. What are you hoping to achieve by expanding into new markets? Do you want to increase revenue, enter new markets, or both? Once you have a clear understanding of your goals, you can start to develop a plan to achieve them.
2. Research Potential Markets
The next step is to research potential markets. This research will help you identify market opportunities and assess the risks involved. When researching potential markets, look for markets that are untapped or underserved. These are markets where you may have a competitive advantage.
3. Choose a Strategy for Market Entry
There is no one-size-fits-all strategy for expanding into a new market. You can enter through the referral business if you have contacts in that space. You could also use networking and build relationships at relevant industry events or through social media. You could even try an outbound approach — though we don't recommend that.
For markets where you don't have personal connections but can truly gain value from your offering, account-based marketing (ABM) and product-led growth (PLG) can be effective strategies to help you get your foot in the door.
ABM identifies good-fit prospects and generates interest using targeted marketing and sales outreach. Because of the personalization of this approach, it will typically be more successful than a purely sales-led one.
"A product-led motion can give people a taste of your solution for free. If you create a tiered pricing structure centered around their success, you could experience momentum turning free users into paid users," Dylan says.
PLG can also work on non-freemium products if you offer free trials or personalized demos.
The success of both of those approaches is due to their focus on providing value to the prospect, so if you choose a different market entry approach, try to keep your marketing and sales efforts centered around how your solution will address the unique pain points of your prospect.
4. Build ICPs and Buyer Personas
Take the data you gained from your market evaluation and turn it into ideal customer profiles (ICPs). ICPs will help your marketing and sales teams target the right leads as you work to generate demand within new market segments.
Additionally, evaluate your buyer personas to determine if you need to adjust them or create new ones to reflect the decision-makers involved in this new audience. Your buyer personas will enable your teams to understand what messaging will resonate with the prospects they're communicating with.
The roles involved in the buying process for the new market might differ from the existing markets you work with, so it's essential to understand what that process will look like so your teams can prepare accordingly. Will you be communicating with a single decision-maker or a team of decision-makers? Is your first point of contact an end-user, an influencer, or a buyer? The answers to these questions will help you tailor your messaging around the goals and challenges of your prospect.
5. Align Marketing and Sales on Target Market
Once you've identified the market you're going to expand into, the next step is to compile foundational assets for marketing and sales.
"Initial alignment amongst sales and marketing is critical and sets the foundation so you can be successful there," Dylan says. "That foundation allows you to design your narrative and tell the story about what you're solving for that pains the prospect."
6. Assess Your Capabilities
After identifying potential markets, it's vital to assess your capabilities. Can your current products or services be adapted to meet the needs of these new markets? Do you have the resources necessary to enter these new markets? Answering these questions will help determine if expanding into new markets is feasible for your company.
7. Build Your Ideal Team
Once you've assessed your capabilities, it's time to build your ideal team. This team will be responsible for executing your market expansion strategy. When creating your team, look for individuals with experience in your target markets. These team members will be invaluable in helping you navigate the complexities of these new markets.
8. Identify Your Investment Needs
The next step is to identify your investment needs. Entering new markets usually requires some level of investment. This investment could be in marketing, product development, or other necessary resources. It's important to clearly understand your investment needs before you start to execute your market expansion strategy.
9. Build Your Tech Stack and Processes
Now that you understand your goals, market opportunity, and investment needs, it's time to start building your technology stack and processes. This tech stack will support your market expansion efforts. When making your tech stack, be sure to include tools that will help you track your progress and measure your success.
10. Build Your Strategy For Localization
The final step in building your market expansion strategy is developing your localization strategy. Localization is the process of adapting your products or services to meet the specific needs of a local market. A localization strategy involves:
- Understanding the local market.
- Adapting your products or services to meet the needs of this market.
- Promoting your products or services in the local language.
By building a localization strategy in your product positioning and SEO efforts, you can ensure that your products or services are well-suited for your target markets.
11. Create Sales Enablement Content
"Any of these different enablement pieces are like cheat codes to get your sales team to understand the language and how to gain buy-in from the prospect they're speaking with effectively," Dylan says.
You might already have most of the content you need from your existing marketing efforts. If that's the case, revise the content into assets that address your new target market. For example, you might need to update the value propositions on your battle cards to better speak to the new buyer personas or pull messaging from a product webpage into a one-sheet.
You also need to review case studies and testimonials from companies that reflect your new target market as soon as possible.
"As you move upstream, especially into corporate and enterprise spaces, buyers may experience risk aversion. They need to see real-time use case examples of how people succeeded that looked like them," Dylan says. "Your speed to garner those stories or examples can considerably impact how quickly you start driving revenue and scaling through that space."
While that same degree of risk aversion might not apply to all markets, it will be easier to gain trust and buy-in if you can prove that your solution has worked for companies of the same size and industry as the prospect you're selling to.
“Technology is really advancing how quickly we can enter new markets and expand through them, but sometimes, it still does take time,” Dylan says. “It could take a couple years to become a player who can start disrupting or gaining market share in your desired space.”
Having an established market expansion strategy in place prior to attempting to enter a new market will help you ensure you’re not wasting resources.
To gain buy-in from new prospects, you need messaging that resonates with them, and if you wait until you need sales enablement materials to create them, it’s already too late. Being unprepared can increase the time it takes to effectively expand into a new market — delaying your company’s growth.
Quinn is a writer and copyeditor whose work ranges from journalism to travel writing to inbound marketing content.