Very few people can last a day on bread and butter. The body needs a variety of nutrients to function; it needs water, calcium, protein and vegetables to function at a high level. The same can be said for business. Many business ventures began with one or two clients or a customer segment- their bread and butter. In this era of cut-throat competition characterised by radical customisation and constant experimentation, a business needs to actively engage new clients, learn their behaviours through a microscopic lens to stay competitive. Otherwise, the bread and butter will also be snatched from them and they will starve.
Two years ago, I made a trip to the Pearl of Africa (Uganda), and I met with a business newspaper executive who was struggling to add a new profitable customer segment to his portfolio – to go beyond his bread and butter clientele. His main source of revenue was from government ads and announcements and he wanted to reach out to the private sector to get more advertisement revenue. However, looking at his product, there was nothing there that would appeal to the private sector. He tried a few gimmicks such as corporate social responsibility but they did not work. When I went to visit their offices last year December, they were mysteriously vacant and the website did not work anymore. His business closed.
He sat in his office and thought of ways to attract new clientele as most of the times he was busy with the day to day running of the business. He got tied up.
This is the story of many small business and start-ups but you can avoid it in the following ways.
Per Igor Ansoff, a business can develop a new product, open in new markets, diversify its portfolio, or develop a new product.
But how do you know which one will work best for your business? Each decision you make you creates a risk.
Here, market penetration is the safest of the four options i.e. expanding sales in your existing product market – your bread and butter. Diversification is the riskiest because you’re introducing a new product into an entirely new market that you might not fully understand. This is what my newspaper friend should have done and but I suspect he was not ready to take that leap of faith and create a new product catering to the private sector.
Nonetheless, you don’t just wake up one day and create a new product. It takes research or as I like to call it – active business development. This is a systematic approach towards creating a new product and without it, you can waste a lot of precious resources – something that start-ups and small businesses do not have an excess of. The following steps will effectively and efficiently guide you through the new market development process:
- Define your new target market(s)
- Do your market research
- Decide to enter this market or look for another
- Enter the target market
Define new target market (s)
Determine the geographic location and demographics of the new target market. Determine which of the following categories characterise your expansion efforts:
|1) Same target group||1) New geographical area|
|2) New target group||2)Same geographic area|
|3)New target group||3)New geographic area|
If you plan to sell to the same target group, then you should already have a detailed profile of the customers in that segment. If you are targeting a new group, you will need to develop a new basic profile of the new customers. The more you know about them, the easier it is to develop a marketing strategy that will reach them. To prepare a customer profile, find out the following:
- Financial Profile
- Business Customers Type of Business
- # Of Years in Business
- # Of Employees
- Annual Revenue
- Products or Services
- Individual customers buying habits
- What is important to him/her
- Business customers special Needs
- Purchase decision makers
Once you have developed a customer profile and identified the extent of your new target market, then you can do some basic market research to determine the following:
Interest in your product or service
- Do customers currently use your product/service?
- Do customers have a need for your product/service?
- What would customers be willing to pay?
- What other products/services would they be interested in?
How to get your product/service to your customers
- What do your customers prefer?
- What are your competitors doing?
- What is the most economical?
- Can you establish a competitive advantage?
- Is the population trend of your target customers expanding, shrinking or stable?
The number and strength of competitors in the target area.
- Who are they?
- Where are they located?
- What products or services do they offer?
- What is their image?
- What is their pricing structure?
- What is their performance history?
- What is their current share of the market?
- What are their strengths and weaknesses?
This research should help you decide whether it is profitable to enter a new target. For example, can you compete successfully in this new market? What will be your market share? Can you make a decent profit? When these questions are answered, you then decided to enter a market or not.
If you enter the market, prepare and develop sales strategies and prepare your sales people with promotional tools and information they will need to solicit new customers. In today’s business age, it must be a two-pronged strategy. The old marketing ways such as door to door sales must operate alongside new ways i.e. developing a content strategy for example, how you will utilise Facebook, blogging, twitter and Instagram to build brand loyalty and trust.
Finally, measure your success by applying standard business measures to your expansion venture. Tracking successful sales channels, profit and loss, and all other key performance indicators. Keep in mind that markets constantly change so structure your business to be dynamic and growth oriented.
More important, put time in your dairy for business development. It is easy to be stifled and consumed with the day to day operations of your business but it is equally important to attend events, meet new people and talk about your product and get feedback. Today it has become easier to attend events; through the Meetup app and Eventbrite, you can easily find events around your area that would help to advance your agenda.
To illustrate what has been explained above, a model has been created to pull the business development process together and to offer further guidance.