The new B2B market entry challenges are not as obvious as they may seem. Yes, you need a killer product that fits with the need of the marketplace but image, relationship and your people are also key. We consider the key challenges and suggest some potential solutions.
One of the main routes to increased sales and growth is penetrating a new market. But to try and fail wastes considerable resources and in some cases can be catastrophic for a business. Two potential routes to try are:
- To only attack a niche market and grow from there, and/or
- To collaborate with an intermediary with an existing foothold in the target market.
As one of the four routes to business growth covered in Ansoffs matrix the benefits of penetrating a new market is clear but to be a success requires:
- A solid strategy.
- A product/service that addresses the needs of the marketplace.
- The resources to implement the strategy.
- The right people signed up and committed to the cause.
Even with all the above in place, there is a problem. It is almost certain there will be entrenched competition in the new market. The impact of their existing relationships with key decision-makers should not be underestimated. People buy from people and there is always an issue of trust that any new supplier to a marketplace must overcome.
The entrenched competition will be at the top of the experience curve having learned from their mistakes. Any new entrant must accept that it will take time to generate any meaningful results and gain traction. It is difficult to gain any foothold in static markets but a growing market can offer opportunities.
Strategic Market Review
Each potential new market opportunity should be subjected to an initial screening process before a more thorough marketing audit. If the analysis shows there is an opportunity then a strategic plan that considers all possible scenarios, risks and resources is required before any attempt is made to move forward.
An experienced and flexible sales and marketing team is also required and in many organisations, this can be a real issue. The best sales teams tend to be focused on the immediate future. Marketing teams are often competent in their market but stretched when it comes to addressing something new.
It is important to answer the key marketing questions, check assumptions, identify risk, and truthfully analyse limitations. Build a strategic plan that identifies potential roadblocks and how to deal with them with timescales and costs.
Product And Market Fit
A new product that is an innovative and elegant solution to a long-standing customer problem is the ideal. These products are rare but fortunately, they are not essential. In some circumstances, an equivalent product to the entrenched competitors will suffice.
The key is the overall health of the competition. If they are well resourced, customer focussed and well managed then only something truly original will gain any attention. If not then a ‘me too’ product can be sufficient.
People And Resources To Attack New Markets
Any strategy and plan is useless unless it is communicated to those tasked with making it happen. Everyone must understand the plan, be committed to it and motivated to take it forward.
In general, people are resistant to change. With many years working in a particular market sector, they may be resistant to stepping outside their comfort zone. It is important to outline to all company personnel:
- The reasons for attacking the new market.
- The opportunity for the business and all those involved it represents.
- The risks associated with focussing only on existing markets.
- An overview of the characteristics of the new market.
- An outline of the strategic plan and timescales.
Not everyone will sign up to the way forward and there will be doubters. Strong leadership is required to ensure they are converted (ideally), marginalised or removed. New operational and marketing skills may be required or it may be necessary to hire those with some existing expertise in the new market.
Overcoming Entrenched Relationships
Any new market will have entrenched competition. Often they will have many years’ experience of the market, a presence and existing relationships with the key decision-makers. Any competitor with high levels of customer service, reasonable pricing and a progressive attitude to new products and solutions will be difficult to dislodge. All that can be done is to nibble away at their second-tier accounts while building awareness in their key accounts.
There is no doubt penetrating existing markets is tough (and potentially expensive). It is important to pick a fight carefully. Perhaps the greatest opportunity exists if an entrenched competitor is complacent or in a weak position.
A poor financial position, mismanagement or loss of key people can all offer an opportunity. If a solid strategy is in place to deliver the highest levels of service at competitive pricing then a market presence can be established.
To overcome existing relationships it is often best to attack new B2B markets where the business already has some presence in the key customers. If this is not possible then finding a suitable partner with existing access to key decision-makers can be the key to success.
Entry into a new B2B market is always a challenge but assuming the potential is properly researched, a strong plan is in place and the business has its key people on-board there will always be potential opportunities in market segments where entrenched competitors drop the ball.
B2B Market Penetration – A Case Study
What follows is based on two real businesses operating in a high technology B2B market. The market exhibited slow growth but did offer high margins. To preserve confidentiality the company names and details of the precise market have been excluded.
A U.K based business had built a strong presence in the marketplace growing from a small start-up to a business with a turnover exceeding £20m.
They were the dominant player in their market niche but were starting to lose focus for a variety of reasons. Top-level management was not exceptional and this was reflected in a slow decline in levels of customer service. The new product development process tended to be based on small revisions to existing concepts. There was no real creative product innovation.
The new entrant was USA based but already had some exposure to the market. They were a minor supplier to the target customer base with a different product range.
They chose a niche distributor with excellent relationships with the target customer base. They offered the distributor excellent support and training and pricing that allowed them to make a good profit margin.
The new market entrant copied and manufactured a limited range of close copies of the most successful product lines of the UK business. This they did on a sampling basis without customer orders at a considerable cost.
With excellent delivery, good customer service and investment in low pricing (in the short term) they were able to take initial orders on a limited range of contracts.
The U.K business due to a mixture of complacency and poor management failed to identify the long term threat of the new entrant. They dismissed the initial level of their orders as insignificant. Crucially, they failed to recognise the importance of the foothold secured by the new entrant and their ability to capitalise and build upon initial relationships.
Three years later the UK business had lost most of its business on several key product lines to the new entrant. They eventually declined to the point they sold out to a competitor.
The new entrant executed a new market entry strategy perfectly. They had a foothold and established relationships. They identified a weak competitor and an excellent intermediary. They started with a niche, gained a foothold and built from there. They took a calculated risk and invested heavily.
The amount of research carried out by the new entrant is unknown but it is not thought to have been extensive. This was a major risk given the amount of financial and other resources allocated to the project but in this case, the strategy did pay off.