If you can't grow within your original market, expanding into new markets could boost your revenue and increase the profitability of your business. However, you should not take the decision to expand lightly.
Introducing a new product to market, or going into an entirely new market, both present certain risks. You will need to consider those risks carefully when determining market profitability.
What is market profitability?
Market profitability takes account of the financial factors that affect your ability to make profits. These may be:
- the level of interest in your product
- the ability of customers, buyers or suppliers in the market to influence your business
- barriers to entry, such as government restrictions or limited distribution
- the potential of substitute products to affect the demand for your goods
- competition and rivalry in the market
If your market analysis shows poor market profitability, you may want to look at other ways of boosting your margins.
To help you with market analysis, you can use different types of strategic planning models.
Importance of market research
It's important to thoroughly research potential opportunities before you start. You may be able to tailor or adapt existing products or services for new markets. This can provide new income with minimal costs and can easily boost profits. For example, if you produce tools for the garden market, are there any potential applications for the tools in the construction industry?
When researching your market, you need to clearly understand:
- who your potential new customers are
- why, when and how they will buy the product or service
- how much they will pay for it
See more on market research and market reports.
Expanding into new territories
You may able to sell your existing products and services into export markets. Exporting can extend your market, boost your turnover and minimise reliance on local customers. See preparing to export, step-by-step guide to exporting and support for exporting.
New product and service development
If you're developing a new product or service for a new market, you must be sure that it's feasible for you to do so. Consider the following:
- Do you have the skills and expertise internally or will you need to outsource?
- Have you got the commitment and resources available to make the new project work?
- Can you minimise the risk of a new venture?
- Are you sure there's a demand for the new product or service at a profitable price?
Find out how to research and develop ideas, new products and services.