I’m always excited about going into a new market. What are we going to find? What challenges are we going to have to overcome? What don’t we know yet that is unique to this market that might trip us up?
Despite the excitement over the years, we have learned the hard way at RFi Group all the things not to do when entering a new market. Of all of them, the most important lesson is not to make decisions based on assumptions, on what you think you know about the market. We’ve made this mistake in many markets ( Canada and Singapore both spring to mind) but perhaps the most glaring example is the UK. Admittedly we launched a mortgage program at the start of 2009 and at the height of the financial crisis, just as the UK mortgage market went from net positive 350 billion to net negative 100 billion ( I often say it was the worst time in the last 100 years to open a London office!) but aside from our spectacularly disastrous timing, we also made a lot of mistaken assumptions.
Based on learning the hard way, how do you go into a new market?
The first question to answer is; ‘Are there any gaps in the market and if so where are they? Where is the opportunity?’ It’s always easier to find an unidentified gap or unmet need than to go up against a local incumbent who has the benefit of possibly years of history and trust. Next is to find out who the local incumbents are and therefore, potential future competitors and exactly what it is they offer and how they are perceived. Do customers like them or are they sick of them? Do they only buy from them because there’s nothing better on offer? Most unchallenged incumbents eventually get lazy and begin to drop the ball, at which time they become much easier to disrupt. Finally, once you have worked out if there is a niche for your value proposition and how to adapt it to local conditions, you need to see if you have any transferable clients i.e. existing clients in your current market, who are also in your new market, where you might be able to get a referral in.
Once these questions have been answered you have to go and spend time in the market. Ruchir Sharma the famous JP Morgan economist, investor and author of Breakout Nations always suggests that going to the market, getting a taxi, a haircut and a beer and talking to people is as useful as any economic analysis and I couldn’t agree more! Whether it’s a new geographic market or a new niche in the industry you operate in, you have to personally experience it. Not only does this allow you to better understand your future customers and their needs and wants, but it also allows you to answer the fundamental question of what problem/ issue/ pain point your product/ solution is going to solve in this new market.
I’ve lost count of the number of times I’ve seen or heard of a really successful product or business idea that is expanding rapidly, but then pulls back from a number of markets and every time the reason is the same – ‘We didn’t understand the market/ we didn’t do our research/ we didn’t realise that the problem we solve in our home market, isn’t an issue here’.
Once you’ve understood the market as much as possible then you need to work out who to send and it always has to be the A Team. You want to do everything possible to maximise the chance of success so sending your best people is a no brainer. You can’t be half-hearted about it – you either need to spend the resource to send your best team or honestly, not bother. Not only does it increase your chance of success but it shows to the potential new market how serious your intent is and how committed you are.
So don’t make assumptions, experience the market first hand, even if only briefly, and send the A Team and you will significantly increase your chance of success, especially if you can adapt to the culture, my next topic…
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