Business Tips: The Four Types of Market Opportunities to Pursue
Filed Under: Business, Lifestyle | Posted: 04/24/2008 at 5:38AM
Comments | Region: United States
Most people have unsatisfied needs – and alert marketers who see these needs find opportunities all around them. Unfortunately, some opportunities seem "obvious" only after someone else identifies them. Marketers need a framework for thinking about the kinds of opportunities they may find. Let’s look at the four broad possibilities separately:
1. Market penetration means trying to increase sales of a firm’s present products in its present markets – probably through a more aggressive marketing mix. The firm may try to increase the customers’ rate of use or attract competitors’ customers or current nonusers. For example, Visa increased advertising to encourage customers to use its credit card when they travel – and to switch from using American Express.
New promotion appeals alone may not be effective. A firm may need to add more stores in present areas for greater convenience. Short-term price cuts or coupon offers may help. Obviously, to do effective analysis and planning, marketers need to really understand why some people are buying now and what will motivate them to change brands, buy more, or begin or resume buying.
2. Market development means trying to increase sales by selling present products in new markets. Firms may try advertising in different media to reach new target customers. Or they may add channels of distribution or new stores in new areas, including overseas. For example, to reach new customers, McDonald’s opens outlets in airports, office buildings, zoos, casinos, hospitals, and military bases. And it’s rapidly expanding into international markets with outlets in places like Russia, Brazil, Hong Kong, Mexico, and Australia.
Market development may also involve searching for new uses for a product, as when Lipton provides recipes showing how to use its dry soup mixes for chip dip.
3. Product development means offering new or improved products for present markets. By knowing the present market’s needs, a firm may see ways to add or modify product features, create several quality levels, or add more types or sizes to better satisfy customers. Computer software firms like Microsoft boost sales by introducing new versions of popular programs. Microsoft also develops other types of new products for its customers such as computer books (some in the new CD-ROM format) and even computer hardware.
4. Diversification means moving into totally different lines of business – perhaps entirely unfamiliar products, markets, or even levels in the production-marketing system. Until recently, Japan’s Sony produced electronic equipment. With its purchase of U.S.-based CBS records, Sony expanded into producing music – and it is considering other moves that will take it even further from its traditional business.
Diversification presents the most challenging opportunities. Diversification involves both new products and new markets. The further the opportunity from what the firm is already doing, the more attractive it may look to the optimists – and the harder it will be to evaluate. Opportunities very different from a firm’s current experiences involve higher risks. The landscape is littered with failed efforts at diversification. For example, Holiday Corporation learned fast that making mattresses (like the ones used in its Holiday Inn motels) was not one of its strengths.
Which opportunities come first? Usually firms find attractive opportunities fairly close to markets they already know. This may allow them to capitalize on changes in their present markets – or more basic changes in the external environment.
Most firms think first of greater market penetration. They want to increase profits where they already have experience and strengths. Marketers who understand their present markets well may also see opportunities in product development – especially because they already have a way to reach their present customers. But a firm that already has a big share as it can get in its present markets should consider market development – finding new markets for its present products – including expanding regionally, nationally, or internationally.