What Is Market Expansion Strategy and How to Expand Your Company?

Management

Pawel Tatarek

10 Mar 2023

11 min. read

Contents

Market expansion offers a number of benefits. It gives you a chance to grow your customer base, increase revenue, reduce production costs, and attract new talent to your business.

However, developing and implementing a successful market expansion strategy is incredibly complex.

To help you navigate the process, we look at different approaches to market expansion, provide a step-by-step guide to building an expansion strategy and show a bunch of examples of companies that have really nailed it.

TL;DR

  • Market expansion is a growth strategy aimed at expanding the organization's customer base and market share.
  • A market expansion strategy allows organizations to reduce and mitigate risks and reduce costs associated with entering new markets. It also allows them to identify more growth opportunities.
  • Companies expand by entering new sectors and markets, both locally and internationally, and/or by expanding the range of products they offer.
  • Before you start your expansion into new markets, make sure you fully realize all the opportunities in the existing markets. Tracking your product KPIs will help you determine the right moment to expand.
  • Always conduct market research. It's necessary to choose the best target market and develop your differentiation strategy.
  • Your market expansion strategy won't succeed unless you get full backing from your company's senior leadership.
  • To make a compelling business case for expansion, assess the required expenses and develop a detailed budget.
  • Use a goal-setting framework to identify long- and short-term targets for your product in the new market.
  • To successfully build and implement your market expansion strategy, you will need a cross-functional team including engineers, designers, marketers, and legal and financial advisors.
  • Entering new markets often requires expanding the product functionality and adjusting the pricing strategy.
  • Localization tools like Centus will help you adapt your product to the needs of international audiences. This should include localizing all aspects of the user experience.

What is market expansion?

Market expansion is a business growth strategy that focuses on expanding the customer base either in new or existing markets.

This could be achieved either by developing your product or service portfolio or targeting new market segments with your existing offerings.

Benefits of a market expansion strategy

Why are market expansion strategies important?

In short, they help you to use your resources in an informed way to take the best advantage of existing opportunities.

Risk mitigation

A market expansion strategy allows you to assess and minimize the risk your product will face when entering a new market.

For example, it increases the chances of targeting the right market and the right audience. It also tells you what you need to do to outcompete your rivals and whether you can afford it.

Reduced expansion costs

A market expansion strategy also helps you minimize the costs involved in entering a new market or developing a new product.

Instead of spending your money randomly, a research-driven plan allows you to make informed prioritization decisions. As a result, you can choose only the motions and initiatives that are necessary to achieve your goals.

A good strategy will also help reduce the time needed to enter a new market and establish your position, which will result in even further savings.

More business opportunities

A robust market expansion strategy allows organizations to identify more business opportunities.

If your strategy is based on comprehensive market research, you're likely to see new markets or user segments for your product that you could otherwise miss.

Ways to succeed with market expansion

If you think it's time to take your company to another level and are looking into market expansion, you have a few options. Companies normally use a combination of these.

#1. Selling existing products to existing customers

The easiest way to expand is by selling more of your product to your existing customers. Encouraging users to upgrade from freemium to premium or to more expensive plans is a good example.

#2. Acquiring new customers in existing markets

If your market is not completely saturated, try to increase your market share. Simply, focus your marketing efforts on raising your brand awareness and acquiring new customers.

#3. Entering new sectors

By making adjustments to your product, you may be able to target different market sectors. For example, video conferencing tools originally designed for business have proved very effective and desired in education.

#4. Moving into new geographies

For digital products, moving into new geographies normally means international expansion. It requires greater changes to the product and marketing strategy than the previous two.

#5. Creating new products and services

Adding new products to your portfolio is another option to grow your business. This requires considerable resources, so make sure you validate your ideas before you commit to their development.

#6. Developing new value-delivery approaches

In addition to developing new products, you can look at other ways of delivering value to customers. A classic example would be switching from brick-and-mortar to online retail. Not only does it give you access to more customers but also allows you to satisfy their needs better.

7 Steps to developing a bullet-proof market expansion strategy

Let's look at the different steps you need to develop a strong market expansion strategy customized to the unique needs of your product and the market you're entering.

Step 1 - Review your business KPIs to choose the right expansion strategy

Before you start expanding into new markets, make sure you fully exploit the existing market. To determine that, you need to keep track of your product performance.

What key performance indicators (KPIs) you use will depend a lot on your product, but some common examples include:

  • growth rate
  • sales revenue
  • market share
  • website traffic volume

Besides helping you choose the right time to expand, tracking your KPIs also helps you choose the direction when you start looking for new target markets. For example, interest from customers in a particular country or sector can be an indication of unmet demand. website KPI in Google Analytics Source: Google Analytics

Step 2 - Do market and customer research

If market research reveals no further room for growth in the existing market, you can start looking elsewhere.

Your market research will help you to choose the right market. Ideally, you want a market with great growth opportunities and low entry costs. In the real world, it rarely happens, so be ready to compromise.

Pay particular attention to the competitive landscape. Studying your competitor's behavior will also help you figure out what works and what doesn't. Why learn from your own mistakes, if you can learn from theirs?

Finally, you need market research to identify the best ways to enter the market. This includes finding the best acquisition channels and designing your marketing campaigns.

Your market research will most likely use a combination of primary and secondary sources.

Primary:

  • focus groups
  • customer interviews
  • social media monitoring
  • product usage tracking
  • surveys

Secondary:

  • company websites
  • governments statistics
  • industry associations
  • published market research reports
  • trade publications

primary and secondary market research data Source: Market Research

Step 3 - Get a leadership buy-in

Your market research and competitor analysis are also essential to get support from senior stakeholders and leadership.

Market expansion initiatives are risky, so you need to build a robust business case to reassure them that it's worth pursuing.

Apart from product and target market knowledge, you will also need to have a good grasp of your corporate landscape and great persuasive skills to bring all key decision-makers on board.

Step 4 - Develop a budget

Apart from the potential benefits, your business case needs to include the details of the financial resources needed to enter the new market. Typical costs include:

  • Salaries
  • Market research
  • Product development
  • Marketing and advertising
  • Sales
  • Customer support
  • Tool stack
  • Contingency

Step 5 - Set clear targets

Once you get the green light from the management, you need to set clear goals for your product in the new market.

Start by choosing the high-level goals you want to achieve in the long run. Next, focus on more granular short-term objectives that will act as stepping stones toward the overall goals.

There's a very big chance that your company is already using a goal-setting framework and it may be a good idea to stick to the same one for the sake of consistency and efficiency. Some popular examples include:

  • Objectives and Key Results (OKRs)
  • Think big, act small, and move quickly (BSQ)
  • SMART goals
  • Goal Pyramid
  • Backward Goals
  • Big Hairy Audacious Goals (BHAG)
  • One Word Goal Setting

Step 6 - Build a cross-functional team

To develop and implement your market expansion strategy, you will need support from teams across the organization. Your team should include members with expertise in:

  • Analytics and data science
  • Marketing
  • Engineering
  • Design
  • Finance
  • Legal

As a part of the team-building process, you need to provide its members with adequate training. Make sure that all team members are familiar with the characteristics of the new market, and the tools and processes you will use.

Step 7 - Adjust your product and offer

Having identified the characteristics of the new market and set your expansion goals, it's time to adapt your product to the requirements of the target customer.

This may require adapting the product functionality. If your competitors are offering features that you don't, you will have to add them to stand a chance of getting a foot in the door. This may be necessary when you're entering a new sector.

Designing a new pricing strategy is another step. Again, if your competitors are cheaper or the target consumers have less dosh, your pricing plans need to reflect it. Amazon Prime Video offer and pricing around the globe Source: Comparitech

Step 8 - Localize your product and marketing strategy

If you're looking at international expansion, you will most likely need to localize your product.

This may require not only translating your website, product UI, or marketing materials into another language.

Even if your target customers speak the same language that the product was originally designed for, you will need to make adjustments to account for cultural differences. For example, the British and the American use different date formats.

To make sure your product localization is comprehensive, why not look at the customer journey map? It will help you identify all the assets that users engage with at different stages of their journey. These include:

  • display adverts and search keywords
  • landing and product pages
  • sign-up flows and payment pages
  • onboarding steps
  • emails and newsletters
  • in-app messages
  • resources center entries and educational materials like tutorials

Translating all of these manually is extremely time-consuming. However, localization tools like Centus will allow you to automate many of the processes. centus dashboard

5 Excellent examples of market expansion strategies

Let's look at a few good examples of market expansion strategies.

#1 Netflix - Content localization

Netflix is well-known for its international expansion and localization strategies.

To start with, the streaming giant uses subtitles and dubbing into 60+ languages to make its content accessible to audiences all over the globe.

The localization isn't limited to films and shows but covers all aspects of the user experience like the landing pages, advertising campaigns, and pricing plans.

The company goes one step further. Instead of relying on the international appeal of the content created for American viewers, it develops original content for local audiences. Its classic hits include Squid Game (Korea), Money Heist (Spain), and Sacred Games (India).

netflix homepage Source: Netflix

#2 Hubspot - Market expansion by expanding product portfolio

Hubspot launched its CRM in 2006. Since then, the company has added a range of products to its portfolio.

It now offers a marketing and CMS hub, the Sales Hub, the Operations Hub, and Service Hub.

By developing new products and entering new sectors, the company has managed to increase the number of paying customers from just over 8k in 2012, to over 158k in 2022. hubspot products Source: Hubspot

#3 Duolingo - Expansion into international markets with new courses

Duolingo is a well-known language-learning app. It is a great example of market expansion through diversification.

While the core product is the same, the company keeps expanding its course offer. Currently, there are over 100 language courses in over 40 languages.

Since its launch in 2012, its user base has grown to over 500 million registered users and it boasts over 50 million monthly active users all over the world. popular languages studied on Duolingo Source: Duolingo

#4 Uber - Market expansion through diversification

Uber's growth strategy relies both on international expansion and product development. Since its launch in 2010, the company has established its position in over 80 countries across all continents.

Apart from developing its taxi service, Uber has expanded its portfolio by adding a car-sharing service and Uber Eats, a food delivery service. It also invested heavily in the development of the self-driving car but eventually killed it.
Uber market expansion Source: FourWeek MBA

#5 TikTok - Rapidly evolving global expansion strategy

TikTok has taken the social network market by storm. In 2021, it passed the 1 billion user mark and its user base grew by 43%. Its popularity is growing, especially among young users, which is a serious threat to established rivals like Instagram.

Apart from TikTok's virality, such rapid growth was possible thanks to the company's international expansion strategy.

TikTok has developed a market ranking that divides target markets into 4 key groups:
S - strategic, highest priority, (US, Japan, and UK)
A - 2nd priority (Germany, Brazil)
B - 15-20 countries (like France, Italy, Russia, South Korea, Indonesia, Mexico, or Australia)
C - 4th priority, 20-30 countries (like Thailand, UAE, Egypt, Argentina)
Others - lowest priority (rest of the world)

tiktok global expansion Source: Interconnected

What's remarkable about TikTok's strategy is the cadence at which the ranking changes. The company reviews it every two months!

Find other examples and strategies of internal growth here or explore international expansion failures.

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