Reconstructing Market Boundaries - How to Develop a New Market
Whenever
I discuss marketing as a subject with a few friends or lecture about marketing
principles, I always get questions about the pressure of emerging media.
Specifically digital concepts and how it affects their existing strategies.
Then there is this debate if digital marketing is another form of "market
penetration" or "market development" strategy.
Some
marketers view digital marketing as a penetration strategy entering an existing
market with existing products. They believe that they are marketing to the same group of
people (using digital marketing concepts) with existing product positioning
will reap higher results.
While
this might be true to some brands or products, what I have observed so far
after countless experiments in a live e-commerce platform is far from just
penetrating a market.
What I
have observed in several digital campaigns being integrated in an entire
existing strategy replicates the primary elements of a market development
approach strategy. So you might ask what are those elements. Simply put, what I
have observed shows the very primary elements of market development - new
market, existing products.
Some
argues that my definition of "new market" does not apply to the
digital realm. Their argument is rooted on the fact that these are same markets
but only equipped with gadgets that are able to transact and receive marketing
messages.
But as I
explore this new media and acquire data-tested results, I firmly believe that
market development strategies would work far more better than penetration
strategies. My hypothesis for this claim is based on my definition of a
"new market" which is:
New Market in the digital space is based on digital behavior rather than the general demographic profile.
This way,
I can increase further our earnings through a more detailed targeting criteria
with higher potential of customer conversion.
So the
next question is, how do I develop a new market? There's no simple way of doing
this but I have used a few frameworks out there that helped me developed
profitable market segments. Here are some suggestions that you can test out on
your own and see if it works!
IF YOU CAN'T BE #1, BE THE BEST #2
The first
time I heard this phrase was during my master's program where one of my
professors said that "strategy" is being the best in your category.
It doesn't mean you have to settle for 2nd best but the takeaway for this part
is to know what space you are competing and being the best in that category.
ACCEPTANCE IS YOUR STARTING POINT
In order
to recreate your market boundaries, you have to start at a product category
that is already acceptable. For example: luxury cars, hand soap, instant
noodles, etc. These are existing acceptable categories. Before competing
directly with accepted categories, understand first how your product will stand
out from the rest based on an existing buyer group.
FOCUS ON THE SAME BUYER GROUP
Before
enhancing your target market, focus first on the existing buyer groups of the
product category you are trying to win.
You can select from the following: it can be the purchaser (i.e. moms
buying hotdogs), the user (i.e. kids who loves hotdogs) or the influencer (i.e.
best friends of the mom who needs a suggestion for quick bites for her kids).
DISSECTING YOUR COMPETITIVE LANDSCAPE
This is
where research comes in. After deciding which buyer group you will focus on,
create a list of direct competitors and define their scope of products and
services offered. Some questions that will help you identify these elements:
- Are there other variants of these products?
- What is their product positioning? Who are they targeting and how are they communicating it?
- What value added service do they offer?
- How often they create promotions?
- Is there something intangible that customers considers valuable from the product?
- How long is the sales cycle?
- How many people buys it from the shelf? Frequency and Recency?
You can
even make a matrix of the 4 P's to complete this section. List down the product
info in one column, list down the place that it is distributed (include if it
has shipping involved), list down how many promotions they did, and what type
(i.e. discount, buy one get one, gift with purchase, etc), list down the prices
in different channels of distribution.
PRODUCT TRUTH - USUALLY STARTS BY ACKNOWLEDGING THE
NATURE OF THE PRODUCT CATEGORY
Once
you've identified all the elements in the previous step. It's now time to
generate you key takeaways as to how the entire industry looks like and accept
its functional and emotional orientation.
Here's an
example: Product category: Luxury Cars
Functional
truth - these cars are the same with other economical cars because it can take
one person from point A to point B. However, the luxury car category boasts of
sophisticated design, slightly expensive materials, customized interiors, state-of-the-art electronics, 24
hours concierge/hotline, free cleaning for one month, and other features like
imported leather seats.
Emotional
truth - two people will buy this. People who are financially capable and
demands them to put on an image of luxury and finesse. These people would most
likely be CEOs and business owners. The other is a group of people who aspires
to be one of the people described above. That they will do anything to come up
with the money to buy the luxury car. But these two groups feels the same
emotional orientation, they want to feel special and be acknowledged as a high
spender radiating an image of sophistication, class and financial stability.
DEVELOPING YOUR STRATEGY CANVAS - REDUCE, RAISE,
CREATE
To
reconstruct market boundaries and developed a whole new market, you can use the
following strategy canvas developed by W. Chan Kim and Renee Mauborgne in their
book - Blue Ocean Strategy. I find this tool very effective in developing a new
market.
What you
do is to have a functional vs emotional grid outlining the key functions of the
product category in the X-axis. Outline all the functions as listed in the
previous steps. On your Y-axis, have two
criteria - High Value or Low value. This will serve as the emotional
meter. You will mark this based on the offering. Mark it high if its being
offered and low if its not.
Here's an example following the Luxury Car product:
You can see immediately which functions you have and you don't have as benchmarked against your direct competitors.
After
mapping out your competitor's functional and emotional positioning, you then
layer your own on top of it. From there you will use the RRC framework:
Reduce -
decrease or completely eliminate from your product features or offerings
Raise -
increase the value of the functions you want to highlight to develop a new
market
Create -
functions and features you know you can fulfill for the customer that adds
value
Taking the example above, you decided to reduce a few features that are not important to the current user base. You raise the features that are important. and create new features that are not yet available to your competitors. Hence, you decided to do the following:
From this graph alone, you can already see your key differentiators and how you can make your competitors irrelevant by focusing on functions that has high emotional value to your target market.
RECONSTRUCTION BEGINS
After
setting on what you will reduce, raise and create in your strategy canvas, this
will then help you fill in the rest of your marketing strategy in terms of
promotion, communication, distribution and positioning.
Following
that will help you target the market you want to attract and therefore help you
define the characteristics of this new market.
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