Re-shape your target market

Know where you are before you plan where you’re heading

Before you think about growing, you need to be clear about your current market. Who are the customers in this market? Where are they?

Once you know your market, you can start to think about how you might re-shape it to grow your business.

Questions to ask about your current market:

• Who buys from your business?
• Why do they buy from you?
• What factors influence their buying decisions?
• Where do they buy from you (online or in person)?
• Have their buying habits changed over time?
• What are their expectations? Look at quality, price and service
• Is there a similar audience elsewhere?

Seeing opportunities

When you look at your current market like this, you may start to see gaps. Are these gaps you could fill? For example, if your customer has had a change in buying habits, how can you cater to this?

You should also think outside your current market. Are there any markets that are similar to yours? Look at your answer to the questions to help. If there are, this might be an option for growth.

In the rest of this lesson, we’ll take a deeper look at how you can grow both inside and outside your market.

Why focus on your current market?

You may have started to see gaps in your market from our last chapter. So you may have ideas on how to grow and increase your market share.

Staying in your current market can be safer than expanding into new ones.

You already know this market, and have existing relationships there. So you don’t need to spend time and money researching. Instead, you can focus on gaining sales – or customers – in a market you’re already familiar with. We’re going to look at two ways of doing this.

Market penetration

This is where you look at the market you’re in, and work out how much of this market you already have. Then you can use this measurement as a baseline for growth. The idea here is to improve your share of the market you’re in.

Working out your market penetration rate

So the first step is to work out your current rate. This is how you do it:

Market penetration rate = (Number of customers/target market size) x 100

Let’s work through this with an example. Say you know you have 500 customers. You estimate that your overall market size is around 2,000.

So your market penetration rate is (500/2,000) x 100 = 25%

You can use this as a baseline, and to show that there’s potential for growth in the market.

Using market penetration to grow

If you know there are potential customers in your market, you can look at ways to attract them.

Here are some examples:

Segmentation

Here’s a different approach. You split your target market into different groups. This could be by location, age, lifestyle, income or other factors. Then you can focus your attention on one or more of these smaller groups.

This can be a useful strategy if large businesses dominate the overall market. Instead of competing across the whole market, you’re using your resources to target certain areas of it.

Here are some examples - select each one to find out more

Why focus on new markets?

You may feel that your business has grown as much as it can in your current market. Perhaps you’ve found a similar market that would be easy to enter. You may even want to extend your reach to other countries.

When you move into a new market, you’ll need to research it first. There may be extra costs or restrictions to consider. The risks – and rewards – may be greater than staying in the market you know.

Let’s look at some methods you can use to enter new markets.

Expansion

Your growth might have peaked in the market you’re in. To check this you can use the market penetration rate we explained in chapter 2. If so, it may be time to find other markets that are easy to reach.

Here, you still have a presence in your current market. But you’re also selling elsewhere. Let’s look at some options for expansion.

Here are some examples:

Open in new locations

You may find you need to expand into a new venue. Maybe you can no longer meet customer demand where you are now You may be running out of space.

To do this, research the new locations. Check - does it attract your target customers? Are there others competing locally?

Another solution may be to grow online. You can also still keep your physical location. You may even decide that a mobile service, like a van or bus, would attract customers who can’t come to you.

There are benefits of expanding like this, within your own country. You may meet less competition than if you moved to a wider overseas market. But in time, you may outgrow your home market.

Target new customer groups

Who are your customers? And who aren’t?

Maybe you have a service that works well for most age groups, but are looking to break into the retiree market. Perhaps your products don’t appeal to young professionals now, but you’d like to attract this group.

Sometimes, with a little creative marketing or product development, we can capture an entirely new customer group.

For instance, Coca-Cola’s Diet Coke product had a wide appeal among women. But men were less attracted to it. This prompted the launch of Coca-Cola Zero.

The aim here was to target young, health-conscious men. The company designed packaging for the new product around that target market. They launched a £10m ad campaign to promote it.

Ten years later, it became Coca-Cola Zero Sugar. Plus, more recently, their CEO cited it as being the best growth driver for the business.

Enter international markets

If your business is doing well in the UK, you may be thinking of growing your market overseas. This could help you expand your market reach, become more competitive and increase revenue streams.

It also carries risks and challenges. Starting to grow in this way can be complex and take a long time.

Research is key.

For the country (or countries) that you’re looking at, think about:

• The demand for your product or services - You may need to adapt to cater for different cultures, languages and ways of working
• Your sector or market - What does the competition look like there?
• Business and trading practices
• Product standards and regulations
• Customs rules and documentation
• Tax laws and tariffs
• Market regulations
• Logistics – How will you transport or deliver your goods?
• Currencies – Which ones will you accept from your customers, or use to make payments to suppliers?
• Will you pay others to help – For instance, customs brokers, freight forwarders, local suppliers or distributors?

Diversification

This can be more complex, as it involves creating new products for a new market. When you diversify, you’re launching new products or services. You’re often entering new markets or sectors at the same time. So there’s much to research - and much to invest. Equally, this approach does bring key benefits.

Diversification can help you:

• Reach new customers – If your current market becomes saturated
• Manage risk – You’re spreading your investments, which can reduce the impact of risk
• Become more competitive – As you widen your range and attract new customers, you can reach untapped markets
• Stabilise the business – There is less dependence on a single product or service

Examples of diversification

Two well-known brands show how this approach can really turn around a business.

Select the brand to find out more

Adapting to grow and succeed

We’ve shown how two big brands have diversified. This approach isn’t just for large companies, though. Sometimes we make a decision to adapt. At other times, outside challenges may prompt these changes.

Think of the challenges that Covid brought, for example. Businesses needed to meet the new ways of living. The ‘stay home’ rule meant priorities changed. We found new ways to use digital tools. We got creative in how we worked. Businesses learnt to become agile and respond quickly to a changing market. It also gave us the chance to think: ‘how can I thrive in an uncertain future?’. This is often the kind of question that prompts growth through diversification. While it may not always feel like it, times like these can inspire you and your business to greater things.

Which methods can reach your goals?

In this lesson, we’ve covered four different ways to re-shape your market.

Select each one to see how they could meet your needs:

Each of these methods has benefits and drawbacks. The right one for you will be the one that fits with your goals for growth. It will also need to align with your business vision, mission and overall goals. Keep these in mind as you research your options.