Success is dependent on market understanding –
and getting the right price.
Our research shows that high performers have a focus on their customers that runs like a thread through their operations. It determines the markets where they wish to sell, what they sell and how they organize to supply the markets in question.
High-performing companies have been alert to the impact of the economic turmoil on their markets and their customers and have acted to re-establish their customer focus and relationships. They have sought to get ahead in responding to new patterns of demand.
We structure our findings in this area in two sections focusing on product and market issues, although it is important to acknowledge that success is built by addressing them together.
On market entry:
High performers are taking care when expanding across borders
Market volatility has had a considerable impact on companies’ approach to how they will generate growth – both in relation to their process and how they act.
High performers tell us that they concentrate on maximizing their growth potential at home first and they seek geographic expansion only after careful consideration and assessment of opportunity, cost and risk.
Success is dependent on market understanding – and getting the right price
We asked respondents what was the number one factor for determining success in entering a new market:
Success is clearly driven by understanding market demand and – some way behind – by being able to realize the price for the product or service that was expected. Deep insight into the need that is being met is the best guarantor of success in the short and longer term.
High performers show a significantly greater awareness of the importance of access to effective distribution channels.
Accelerating while others slow
On process, the recent market volatility has led most companies to both reduce risk appetite and increase the sharing of responsibility through increased internal consultation. Both are likely to lead to a slowdown and a scale down of action in market entry.
The impact on high-performing companies has also been marked: they have adopted increased caution, but to a far lesser degree than lower performers. Indeed, they report that they actually have an increased risk appetite.
Focusing on government and policy risk
The risk in entering a new market should not be underestimated. As we found in our previous research, the rapid-growth countries are markets that have seen the greatest increase in competitive intensity since the crisis. This is driven by the arrival of many international players into complex markets that already had large and robust domestic incumbents.
Respondents generally seem confident in their ability to compete with other players. However, they have a concern about shifts in government policy, hostility to foreign investment and the lack of effectiveness or stability in local regulation and governance – all issues that are outside their control.
Careful choice of customer segments is key to product growth
Globalization has driven the appearance of consistency – often amplified through the use of shared branding or packaging – but in practice, markets today are very rarely uniform and a single product or service offering is not sufficient to cover all customer segments or geographic markets.
Differentiated products will only be successful if the features that make them different truly resonate with clients’ requirements, and if there are sufficiently large segments and demand structures at which the product differentiation can be aimed.
A wide range of segmentation tools is being used
We have commented before on the greater use by high performers of analytical tools to understand their market and their future opportunities. Such tools enable the analysis of vast quantities of data and improve the company’s ability to sharpen their segmentation.
High performers are using a range of tools more extensively than others, although direct feedback from current clients is the highest-rated tool for all companies.
High performers ahead in driving innovation
High-performing companies recognize the value of innovation: they consequently have processes in place to support this. Inspiration can come from anywhere and no one has a monopoly of good ideas.
But successful product development is more likely to result from structure and proactive effort. High performers are significantly ahead in utilizing their planning process to drive the innovation process.
Product development is key to the emerging middle class market
Selling premium products to wealthy consumers has long been a successful approach, as the strength of the global luxury brands attest. This segment is growing, as the numbers of the wealthy increase in rapid-growth markets such as India or China.
But the big new opportunity is to sell products and services to the emerging “middle class” from these rapid-growth economies. The demographic growth in this group is simply astounding, with the forecast arrival of some three billion middle class consumers over the next decade.
For further information on this subject, see Customer reach: targeting and satisfying customer needs
Topics covered include how to target and satisfy customer needs to find new sources of revenue growth
- Extending customer reach beyond existing borders – market assessment; new geographies and new market risks
- Market segmentation – investing in deep consumer understanding and focusing first on clients and competition
- Product development and innovation – innovation drivers, creating a company culture that welcomes innovation
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