If you are unprepared or desperate, entering a new market can kill your business. Deep pockets won’t always save you either.
Remember Target expanding into Canada back in 2013? They had deep pockets and resources. Then after a series of missteps, they pulled out roughly two years later, incurring financial losses in the billions.
Target Canada made a lot of mistakes starting with an overly enthusiastic management team who didn’t believe it could fail. Entrenched and established competitors saw them coming and made competitive improvements ahead of Target’s launch. They didn’t bother to understand the market and how it differed from the US. Then they rushed to build out their supply chain and distribution systems. Target implemented new technology. They didn’t test and build on success before the bigger push. Their culture was not one where anyone on the team could pull the cord and stop implementation without fear. They went full out and failed.
Ultimately, they had a poor strategy, plan, and then failed on execution. You can’t always just work harder and push through. Deep pockets and years of experience do not guarantee success in a new market.
The Three Pillars of Value
I always recommend that you fall back to the basics before you spend a lot of time on the advanced strategies and implementation details. It may seem obvious, but if the basics are not taken care of, the foundation is weak and the strategy much more likely to fail.
That means looking at the three pillars of value:
- Your Brand – How your target market perceives your value
- Your Marketing and Sales – How well you can communicate your value
- Serving Your Clients – How well can you deliver value
Can You Deliver Value?
There are two components to this question.
Value is in the eyes of the client. Delivering value in a new market is not just providing what you do in your existing market. You need to consider the needs of the new market, which may have a different competitive landscape and expectations. Your reputation is critical in penetrating a new market, and if you mess up, you probably won’t be able to rely on a lot of goodwill.
You also have an existing customer base and market. It will take a lot of resources, including the management team, to do the work of getting work and delivering in a new market. Are you likely to impact service, delivery, or reputation for existing clients? Do you have a plan in place to mitigate this?
What if You Succeed?
What happens if you are highly successful in the new market or your current market turns around? Can you grow fast? Are you prepared to throttle back growth to keep it manageable?
A primary cause of failure is growing faster than the business or culture can handle.
Is Your Brand Recognizable?
Your brand is what your target market thinks your value proposition or brand promise is and how well they believe you accomplish it.
For Target, the hype was bigger than the reality. They had great name recognition. While some Canadians had visited the chain in the U.S., the biggest problem was the perceived brand expectations far exceeded the customer experience when they opened.
You can’t just add water, employees, mix, and bake an instant company culture. They also had supply chain and distribution problems they didn’t iron out before scaling. When people are highly disappointed, they don’t quickly come back.
Some questions to get you going:
- Is your brand strong in your current market?
- How well are you known in the new market?
- Do you have one or more customers in your current market that also operate in the new target market?
Opening in a new market is a bit like “crossing the chasm”. You need those local early-adopters to give you credibility and make the leap to the bigger market. Of course, you need to deliver on your promises to achieve that.
How Will You Communicate Your Value?
Generating awareness and qualified leads are the roles of marketing and sales.
In your home market, you may have a deep network of people who can refer business to you. So, you may have gotten into the habit of not doing much in the way of marketing other than what your sales team is doing and a website.
When you enter a new market, they either don’t know who you are or they aren’t aware you are there. So, the game changes, and you need to do things differently or have a lot of time.
You have choices to make around:
- Building out or contracting a local sales team,
- Relying more on marketing to drive leads to your existing (remote) sales team, or
- Some combination of marketing and sales.
A market opportunity assessment can give you a better understanding of the obstacles you face, including your competitive landscape, the expectations of the local market, how open they are to new entrants, etc.
Target blew the launch. They missed an opportunity to come clean and admit they messed up bad. Instead, they doubled down with their existing brand message. With a good marketing story, they could have had a more successful re-launch.
Don’t Be Target!
Target went into Canada with deep pockets, experienced executives, and a strong brand. They still failed. There is a powerful lesson there.
When perceived value, communicated value, and delivered value are in balance, it becomes far easier to enter a new market and achieve sustainable growth. If you are not there now, you need a concrete strategy and plan to help you get there.
Originally published in the July-August edition of the Oilfield Pulse.
Image Credits (modified): Top – Flickr/ Winnipeg_Spotter