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Three market penetration strategies applied in large consumption

by Azahara 18/Apr/2019

Constantly, whether as we walk, watch television or surf the Internet, we are aware of the appearance of new brands or products around us. This is mainly because the markets are constantly evolving and the needs of the customers change continuously.

These changes mean that companies have to rethink their marketing strategies with some frequency. Some of these changes options tend to be to penetrate new market niches or to look for an international market in which to settle.

In this aspect, the so-called product life cycle has a lot to do with four phases (introduction, growth, maturity and decline). When the product begins to show signs of decline in a market, it may be the optimal time to introduce it into a different one or modify it to find a new niche.
The first questions that should be asked by the people responsible for this decision are those related to the causes that push them to expand, the current situation of the company and its preparation for this change and the final goal sought.

Subsequently, it will be necessary to decide in which market or niche to enter. To do this, an in-depth study of them must be done, analyzing their characteristics. We can group the most relevant following this structure:

  • Market: size and growth perspective, degree of openness to other countries, macroeconomic stability, competition.
  • Demographic: size and population growth, age distribution, life expectancy, birth rate, urban and rural population.
  • Infrastructure: state of terrestrial communications, by air or sea or river routes, level of Internet access.
  • Environment: rules and regulations, political and legal stability, habits of life and consumption, level of corruption, security.

Once decisions are made to penetrate a new market or niche and where to do it, it would turn to decide which strategy to confront carry out the process of change. The options are diverse and each one will adapt differently to the company according to the factors described above.

ADAPTATION OF A PRODUCT

Modifying a product is usually a common resource when facing new market opportunities. These changes may be due to various reasons driven by the characteristics of the new destination.

If the decision is to land in an international market, this redesign may be due to legal reasons on the properties of the product, its labeling or packaging, cultural differences, related to the consumption habits of the population or otherwise, such as example the change of voltage due to differences in the electrical network.

An example of adaptation of the product for cultural reasons is that of the fast food multinational Mc Donald’s in India. In this country, cows are considered as sacred animals, so they cannot serve veal burgers. For this reason, special menus based on chicken and typical ingredients of the area were designed, such as some spices.

Another clear case in which the product must undergo modifications to be accepted in a new market is that of the well-known Oreo cookies in Asia. Those responsible for the brand, the company Mondelez, had to design new cookies with different flavors and textures to adapt to local likes. For China, they created smaller cookies with a green tea flavor and less sweet, as well as others with fruit flavors. With these changes, Oreo placed a sales leader in the Chinese country, with a market share of 13%.

As we have said before, a product can also be subject to a redesign to enter a new market niche, thus being able to expand its target audience.
In this situation, we can present the case of the Accentra office equipment company, which decided to innovate with a product such as staplers, which have undergone few changes since its creation. Specifically, they manufactured a high-power stapler, despite not being electric, with a modern design that could be used with just one finger.

These changes led to a marked increase in its market share and the increase in profits by the retailers that commercialized the product. With this new design, it was possible to attract an audience increasingly concerned with design, apart from functionality.

penetración mercado gran consumo

PARTNERING

Collaborating with other companies is a strategy to take into account if you want to enter markets that are very different from ours in all kinds of aspects, cultural, social, business, etc. Thanks to our partner, we will obtain essential knowledge about the market in which we want to enter.

However, this collaboration agreement is not only focused on the contribution of knowledge, but the partner will also collaborate by giving its supply, marketing and distribution channels.

With this type of strategy, the exporting company saves in costs of establishing its own commercial network, while the foreign company thus makes profitable its distribution channels, contributing a new product.

FRANCHISES

By establishing a franchise one of the parties, the franchisor, provides its brand and everything derived from it (products, services, systems and work procedures, etc.) and the other party, the franchisee, provides the capital, the human resources and market knowledge.

With this strategy, the brand maintains an acceptable level of control over its products while gaining flexibility due to its better adaptation to the peculiarities of the local market. In addition, it is a low-cost penetration strategy with little risk on the part of the franchisor.

The establishment of franchises is advisable for very standardized business models, so that it can be more easily adjusted to the target market. In addition, the franchise brand must enjoy international recognition for this internationalization strategy to be successful.

Deciding where to establish the franchise is one of the most important decisions for the prosperity of it. In this aspect, geomarketing has a lot to say, since its tools allow us to know in which areas we will have more influence over our potential clients.

To this end, Geographica developed a solution for a company in Barcelona that wanted to open a new branch in the city. This solution is responsible for collecting information from various databases and evaluating it using an algorithm that took into account variables such as sociodemographic profiles, presence of competitors, average rent or mobility in different areas of the Catalan capital. Finally, the results are visualized in a map.

The penetration in a new international market plays an essential role in the development of the Spanish economy. In fact, according to the Spanish Institute of Foreign Trade (SIFT, for its acronym in English), the number of exports has been increasing since the last nine years, with a year-on-year increase of 6.2%.

As we have seen, there are several variables to consider when defining an internationalization strategy. Many of them are related to geographic and location aspects, so geomarketing tools can be very useful when facing the challenge of entering a new market.

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