We are now ready with our third article in the series on International Expansion and this one will cover “go to market” aspects and what to be aware of when you want to build your presence in a new market. For readers experienced in international expansion this may be rather basic, but perhaps still worth a recap…
Old school – yes, but it works
Even if it is old school and almost common knowledge, it is often forgotten or not applied. Which is a shame, because the best and simplest way to look at entering a new market is using the 4 P’s of Marketing: Product, Place, Price and Promotion. Obviously, the 4 P’s are to be considered as one combined approach and each activity under each header should support the overall go to market strategy and market development plan.
In terms of the Product, an identified sizeable market should exist in the new market you’re trying to enter, the product should be well functioning and serve the purpose that the consumer would want it for. You should be prepared that not all of the products from your home market will work perfectly in a new market. Some adaptation may be required, or you’ll have to enter a new market with a reduced product offering. For further considerations around product relevance, and potential adaptation needs for international expansion, we refer to our first article here.
Place, generally refers to that the product should be available where your target consumer finds it easiest to shop. Whilst this is true, it is also only one small component of what you need to consider in terms of place or distribution channel.
In the below figure, we have listed the main distribution channels and the characteristics to be aware of when entering into a new market.
Branded distribution
Generally speaking, if you enter with your own branded distribution channels you’ll be able to have more control, visibility will be good and your brand and pricing strategy is well protected. You can enter a new market quickly and relatively easily, but it often comes at a higher initial cost. Especially, if you plan on entering multiple cities at a time. Given that this comes at a high cost, it is vital that you do your homework in terms of identifying market potential, sales potential and profit potential based on valid local data before you just charge ahead and open stores.
Obviously, if you have no retail operations, infrastructure and expertise in your home market, starting this in a new market could be very foolhardy.
While you can argue that an online store can create the reach for you at a minimal cost, your brand is (likely) completely unknown and therefore your online store will receive little traffic unless it is directed there, which will come at a cost. Your overall cost allocation then changes from store build out and operations cost to more marketing spending.
Multibrand distribution
Generally, multibrand is a lower cost entry approach where you can get good visibility and reach, depending on the retailers you team up with. However, retailers often want to start slowly for a season or two until they’re convinced that your brand will perform. Hence, getting to a point where volume really takes off, may take a while, whereas in branded retail you’re more in control of the speed of volume growth.
Just like in your home market, the places that you decide to sell your product will have an enormous influence on how your product and brand will be perceived.
If brand is important to you, the same fundamentals as in your home market will apply: multibranded retail can be extremely strong brand builders or really poor ones. So, you need to choose your distribution mix where you get the optimum mix between brand image, brand visibility and sales potential and how much all of that is going to cost you. Only you can decide on what is right for your business and that can be hard in a new market. To complicate things further, in some markets multibrand distribution is very limited as mono branded retail is dominant.
Some topics around multibrand retail that need to be mentioned specifically are of course Online and Omnichannel retailers, as this is where most of the growth is found these days. With omnichannel retailers, John Lewis in the UK as an example, you have the potential to get a lot of visibility as consumers can find your brand both in-store and online. As for online retailers and especially some of the bigger ones, like Zalando and Amazon, there’s huge traffic coming into these sites, so the potential for visibility is there. Two concerns as a new brand starting out with large online retailers are
1) Do you risk being drowned out by all the other brands/products they carry as you’ll likely not be able to get a dedicated brand site at the get go; and
2) If they start doing discounting, your brand will probably be included and that may not be in your best interest because the reach of these sites is so substantial.
These last two points apply to omnichannel and online retailers alike on the online part. However, we still find that these potential downsides are negligible compared to the upsides and the benefits that these channels of distribution offer.
Brand may not be important to you but even so, finding the right distribution channel to drive the right level of volume should be.
When it comes to Price the product needs to represent good value for money. This doesn’t mean that the product needs to be a low-end or the cheapest, it’s all about the price being relative to what you get. Consumers are often happy to pay a little more for something that works well for them. Whether that is in terms of the functionality they get from the product, whether it is in terms of the styling or if the brand has a significant value for them. Still you need to be competitive. For more insights on what being competitive means, we refer to our first article here.
Promotion is a very important component as you are starting from scratch in the new market. Whether we’re talking advertisement, Social Media, PR, launch events or use of influencers, these are all extremely important aspects.
A great example of how all this has been combined is how an iconic brand expanded internationally. Prior to entering into new markets, they’ve engaged local enthusiasts that are super connected into the local communities with the aim to start building awareness and spreading the word that the brand is coming to town. These enthusiasts act as ambassadors for the brand. Simultaneously, they have been building exceptional online content in the shape of articles and videos. They have then proceeded to build their own retail stores, which are a mix of traditional retail stores combined with a café and hang out area for by-passers, customers and aficionados of the segment they cater to. They organise events where fellow participants can show up and join in the activities. They’ve essentially managed to create this tribe effect that drives brand awareness with the relevant consumers and high levels of traffic, community and loyalty.
I’m not suggesting this is the right approach for everyone or that the same approach could work for a sock brand, but it’s a splendid example of how the use of influencers, content, retail stores and customer engagement comes together to drive traffic and brand awareness in a new market. What this approach also does is to blend physical and digital touch points of the consumer’s journey. For more on the consumer journey and digital touchpoints check out our article here.
Focused approach
Regardless if you’re choosing a branded or multibranded approach it still makes sense to focus your efforts. In some instances, the market itself will dictate the focus in others it requires a bit more discipline. Let’s say you have a country with a total population of 20 million and two cities that have 7.5 million inhabitants each, simply, you’d probably want to focus your efforts on the two cities. In a different scenario where the total market size is still the 20 million but you have 10 cities of a million each and with a more rural population then you need to be smart about where to focus your efforts to get impact rather than just spreading your resources broadly across the market. Likely, there will be a few “beacon” cities that will influence the others and the rural areas and it’s the “beacon” cities you’d then want to focus on. Focus with the right mix of branded and multibranded distribution as well as the right promotional mix to create real impact. We see different kind of channel mix be relevant in different scenarios when brands want to expand into new markets, but a common approach that delivers impact is a combination of larger online or omnichannel retailers, combined with a level of own branded retail, if possible.
Impact is what you want to make it fun, to make you feel that your plan was a success and to make money to fuel new adventures.
The thing is, no two markets or brands are the same and therefore there’s also not a one size fits all for how to go to market in a new market. If you have specific questions to any points in the article or are faced with entering new markets and want to get that impact, please don’t hesitate to get in touch.
Till next time,
Morten