An Introduction to

Market Development Principles

P3-M1
For Healthy Food & Drink Products
Module Content
3-8
1. Introduction
9 - 12
2. Why Develop New Markets

13 - 21
3. Identifying New Market Opportunities

4. Your Market Development Strategy 22 - 32

5. Choosing a New Market Route 33 - 46

6. Marketing 49 - 54

7. Managing the Finances 55 - 59

 1. Introduction
The training module is primarily aimed at SME’s starting to
expand their business, but should also prove useful to
companies building on top of the markets they already
service.

It takes a step-by-step approach to the market

development journey.

Beginning with the decision of

“If now is the right time for your company to expand”

Then moving on through the next steps required on the

Market development process.
 Definition: Market Development

A step-by-step process
to expand the reach into a
different segment or unexplored market.

Seeking for new buyers to pitch your products to, or a different segment of
consumers in an effort to grow the business and increase sales.
 Questions to ask before you begin your journey

What’s your end goal?

Is the business idea itself scalable?
Can your business support scalability?
Is your business adding something?
What is your growth opportunity?
Is this the right time?
Can your company grow faster selling to current
Are there support systems in place? customers or new ones?

Do you have the right resources in place? What new products can you sell to existing customers?

Is there a plan in place to support expansion? Which new customers should you target and what
should you sell them?
You will need to ensure you have the capacity to:

Produce increased units

Take on additional staff required

Manage the increase on the production line

Grow the transport network to deliver these products

Manage the financial strain

Market
Development Overview
Strategy Some see it simply as the idea of change through time.
If you are in business after time you simply grow organically.

For others it’s a planned action.

A growth strategy that involves selling your existing products or services
to a new group of customers.

It begins with market research where you:

(a) Carry out a segmentation analysis of your existing market

(b) Shortlist those market segments which you feel you should pursue
(c) Consider the two crucial factors
• products - what you'd like to offer in the future
• markets - where you'd like to sell in the future
2. Why Develop New Markets ?

• Increase profitability
• Increase sales
• Grow the company
• Become more innovative
• Generate economies of scale
• Gain new knowledge
• Reduce dependence on the home market
 For many companies growing is a natural part of the journey
when you start a business.

You may have outgrown your local market or your products may
be more suited to Artisan markets and require a bigger geographical area to
achieve profitable sales levels.

For others it may simply

be a natural progression to look further afield for new
opportunities.
 1. Increase sales 2. Increase Profit
The company may have Increased sales do not
exhausted opportunities always translate into
in its domestic market and increased profits.
may have little choice but However, even with
to look further afield for tighter margins, profits
growth can be improved by selling
Why Grow? into much larger markets

Core reasons 3. Grow the Company 4.Reduce Dependence

Revenues and cash flows SMEs find themselves
required to support this in a position where they are
may not be available from reliant on a small number
the local market. Greater of customers. Expanding
regional or national sales into National markets
are therefore almost a reduces this exposure
necessity

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 Developing New Markets

● You may need to adapt some of the suggested strategies to suit your particular circumstances.
For example, you may want to explore:
● Acquisitions
● Franchising
● Strategic partnerships

● You may also want to construct your own unique combination of strategies.
The best approach will usually be the one that suits your overall strategic plan.

● Focus on finding an option that could yield most results from the least amount of risk and effort.

● Keep in mind that, to succeed, your growth strategy has to be deliberate.

● Success will require a great deal of research and thorough planning for business growth.
The benefits of trading across a bigger markets
Gaining new Economies of Becoming more
knowledge scale innovative

Companies trading in just one While sales across a Learning the skills and
market naturally develop the skills bigger area may not be as techniques required
and knowledge required for profitable as those on the to succeed in other markets
success on that market. home market, the overall greatly improves a company’s
increase in production overall innovative capacity.
Exposure to new customers and they generate can be used
competitors in export markets can to drive economies of Achieved by adapting products
bring the knowledge and skills scale which results in a and packaging to meet the
necessary to do this rise in profitability, particular needs of individual
competitiveness and and bigger markets
capability

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 3
Identifying
Market
Development
Opportunities
 Extensive market research is an absolute prerequisite before you begin.

Because a product is successful in one market - does not mean it will be in another
 Identify new opportunities
Analyse new opportunities in your business by understanding your demographic better.

Understand everything from:

• Distribution channels
• Direct competitors
• Analysis of market segments
• Other potential sales channels

There are likely dozens of new opportunities you could pursue immediately with the proper
amount of analysis.
 Market Segments

New customer needs

New geographical areas New customer preferences,
New demographic segments interests and lifestyle

You may want to look at customers Once you identify the target segment, you
typically served by your competitors, or should create a promotional strategy and
customers currently not served by anyone find ways to attract and sell to customers
within it
Research the competition
When going to market, you need to research the
competition.

Know the information which could be of benefit

Take a look at their prices.

Where do they get their supplies?

Who distributes their goods?

Learn from any mistakes your competitors have made

You definitely want to know what their customers are saying about them

See what they’re doing that is working and If what they’re doing makes sense for your business
 Pick the market that interests you most,
also the one with the fewest barriers to entry
Desk Research - Internet In Market Business Contacts
The websites of your competitors and those of Early stage research can uncover a range of
relevant retailers or foodservice operators will good quality information which can indicate
also provide valuable insights. the existence of an opportunity or not, or if
such an opportunity is worth pursuing.
Websites of major retail chains or specialist
shops will give you an indication of the range of For instance, can you meet the price
products in your category, how they are expectations of the market while generating
packaged, pack sizes, flavours and price points. sufficient margin to make the enterprise
worthwhile?
It can also identify gaps on the shelves and
where your products might fill that gap.

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 The type of data to be gathered can be
broken down into a number of key areas:
Market issues Market structure Routes to market

These include issues such as Variations in market It is important to consider how

regional locally based stores that structure even between difficult it is to physically get
you have no links with. neighbouring countries. products from your location to a
customer in the chosen market.
Strong local competition in your Some may have a retail
sector segment dominated by a Look at existing transport links
small number of key between the two regions.
Overall economic issues including players while another
consumer spending power and may have a highly Distribution channels vary from
regional economic variations fragmented foodservice market to market as will the means
should also be analysed. sector. of accessing potential customers.

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 • Economic trends

• Competing products and prices

The type of basic data • Population and demographics

which should be sought • Trade statistics

and will be readily • Logistic costs
available includes:
• Delivery time lines

• Regional competitors

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If research shows positive results it is then time to
look more closely at the market

This will inevitably require a market visit and

investment in quality in-market research

You may be able and have the time to do this

yourself or you can employ Business Development
Managers or consultants to undertake this
research on your behalf

Marketing, sales and other experts may be

required at this stage and their time will not
come cheaply

It is essential to define in advance

the type of market intelligence you are seeking
and to set clear budgets
 4. Market Development Strategies
Pricing Branding Sales
You could implement You could create a new You could target a different
competitive price structures brand for products demographic segment or
with offers and discounts or, aiming to reach a target type of customer to create
to command a higher price, market or a specific new leads and opportunities.
provide a product with more customer segment Example alter an existing
value than the competitor's product or develop a new one
for the untapped market
What are the three major growth strategies?
Market Penetration

Sell more of the same things to the same market.

The risks are usually low as you focus on capturing a bigger share of your current
market with the products you already have.

Market Development

Where you try to sell an existing product in a brand new market.

For example, you may want to segment your existing market or reposition your
product in it, or target an entirely different geographical area.

Product Development

You are introducing a new product into your existing market. You're effectively selling
something different to the same customer, potentially encountering greater risks.
 Your Market
Development Plan

Having decided that growing your market

is the next step for you, and you have
identified a suitable market to target, the
next step is to develop an strategic plan.

An plan will be similar to a business plan in

that it will include an overall strategy and
objectives, a background analysis,
and sections covering marketing, budget,
action steps, implementation schedule,
targets, and of course market information.

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 Market Development Planning
Measurement
The plan should set benchmarks and targets against which actual
performance can be measured

Complexity and Detail

The degree of complexity of the plan will depend on whether the
company intends selling directly into a market or indirectly using
distributors or agents

Live Document and Active Plan

The Market Development plan will grow and become more
comprehensive as time goes on

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Market Development Plan
The best plans are dynamic in nature and are compiled at least
partly as a result of the research being carried out into the target
market or markets.

The plan should also be capable of adaptation and alteration

during implementation as actual market conditions on the
ground are taken into account.

It is therefore best to try to keep the plan as simple as possible in

order to avoid unnecessary rigidity. It should be capable of
changing in response to the company’s real experiences and
learnings in the market.

The plan should therefore grow and become more complete

as time goes on.

The plan should set benchmarks, timeframes and targets

against which actual performance can be measured.
Without these milestones it will be impossible to judge. 26
Build a Market & Business development funnel

The Marketing and Business Development Funnel

depicts the journey that a business takes when
assessing new locations.

The journey typically begins with an initial

evaluation, that identifies your new market as a
prospect.

It culminates with a decision as to whether the

location meets the criteria for investment and next
stage development.
 KEY QUESTIONS

Which market (or markets) is being targeted?

What type of market research has been carried out?

What were its findings?

Which products are to be sold?

Are product modifications required?

Who are the target consumers for the products?

What are the specific challenges and constraints?

 KEY QUESTIONS

How will each of these challenges be met?

Who will be responsible for meeting them?

What is the chosen route to market?

How will it be accessed?

How will the product price be set?

What are the steps to enter the market?

 KEY QUESTIONS

What budget is set aside for the market development effort?

What personnel resources will be devoted to it?

Will it be necessary to increase production?

If so, by how much?

What are the performance targets?

How will performance be evaluated?

A plan based on the questions above
will increase the overall chances of success but will not guarantee it.

What it can do is provide focus to alert you when things are going wrong.

This will allow changes to be made to avoid making costly mistakes.

 Getting Your Products To The Customer
Remember making that first sale or
reaching an agreement with a distributor
is just one step in the export process.

You then have to fulfil the order and

actually get the goods to the customer
or distributor.

This can involve a number of other

parties along the chain and close
attention to detail is required to ensure
that everything goes smoothly.

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 5. Choosing Your New
Market Development Route
The most important decision to make at this stage is whether they will
sell directly or indirectly into a new market

(A) Direct Sales involves selling direct from the producers location direct to the customer

(B) Indirect means working through an agent or distributor

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 Organic
Market Development

Here are three examples of growing your

market from within your existing set up –
using smaller incremental steps to grow
 (a) Customer loyalty
Loyalty programs are great ways to increase market share.

It costs up to three times more money to acquire new customers, than it does to sell something to an
existing customer.

It might also help you attract new ones as well.

If there's a clear incentive to spend more money with

you, it'll pay off in the long run.

Building a customer loyalty program will help you

retain customers and grow sales.
 Look into diversifying your product range

(b) Diversify What complementary products can you offer in your business?

your offer line Identify new opportunities within your market segment

up. Uncover the pain points or emerging opportunities

What else can you sell to your customers?

Where else can you add a new dimension to your offering?

(c) Leverage new and
global platforms

Move across to ecommerce business for selling

products.

Find a platform that's reached saturation and use

it to grow your business quickly.
 A sample of the Ecommerce Options

Facebook Amazon Shopify

Sell directly to your customer Increased Your in control- creates
base geographical reach your own website or links
to existing site
 Strategic
Market Development

Developing new markets in big steps -

Entering into contracts that can dramatically
step things up
 Form strategic
partnerships
Strategic partnerships with the right
companies can truly make a world of
difference

It could allow you to reach a wide swath

of customers quickly

Look out for companies that are

complementary to your own.
Contact them and propose
opportunities for working together But… Identifying those partnerships
might be easier said than done.
 Sometimes, acquiring other businesses is a very quick way to
expand into new markets.

If you can find competitors or businesses within your sector that

Acquire Other can complement your own, you could use them as platforms to
scale fast.
Businesses
Take a look within your industry or market place and to find
potential for new opportunities to develop or exploit new
markets.
 Franchise or Licensing deals

Franchising Licensing

If you have a successful business, and you're If you have a product that you can
really looking to grow quickly, consider license to others and share a
franchising it. revenue of, that's an ideal way to
grow quickly
Although franchise costs are high and moving
to a franchise model is complex and takes a Taking a popular or successful product
lot of marketing know-how, it could make and bringing it to a company with a
all the difference if you're truly looking for large footprint can help you achieve
quick growth. market saturation quicker.
 CHOOSING THE RIGHT ROUTE TO MARKET IS KEY, BUT IF
REQUIRED, CHOOSING THE RIGHT PARTNER IS CRUCIAL

It is essential to seek references from other businesses working in the area, as well as
taking legal advice before entering into any trade agreements.

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Distributors
Takes charge of sales, marketing, promotion, logistics within a market

Offer ready market access and take a lot of the risk out of new market development

Have reach in their own markets and can put new products on shelves or on restaurant tables

There are some downsides of course for example, High margins (regularly 30%) and long credit terms

These can be justified if they achieve their sales promises but there can be difficulties if they do not

Distribution agreements often involve long exclusivity terms with few performance penalties

Distributors sometimes make agreements in order to control competition in a market

If you use a Distributor seek references from other businesses and take legal advice before entering into any agreements
 Agents

Halfway house between a distributor and having your own in-market presence

Agent acts on behalf of the company, finding customers and selling products to them

Once a sale is made the order is then passed over to the company who dispatches it and invoices for it

The agent receives an agreed commission for their services, (typically 5% -15%)

Care has to be taken when appointing an agent to ensure that they have the right contacts with the customer

The advantages and disadvantages of using an agent versus a distributor have to be assessed very carefully
Agents

An agent’s commission may be significantly lower than a distributor’s margin

But remember that you are responsible for all logistics and other in market cost of sales

You are also exposed to payment risk from multiple customers

Legal and other advice should be taken before reaching an agreement with an agent

…..and their credentials should be checked

Useful Tips When Picking An Agent Or Distributor

● Consider hiring a sales consultant in the market to advise you on your options

● Look for recommendations from other exporters first

● Find out who the key distributors are for the customers you wish to sell too

● Look at the distributors website to check prices and the product ranges they offer

● Consider working together on a trial basis for a fixed-period

● Always try to minimise the agent or distributors period of exclusivity

● Talk to your lawyer before signing any agreements

 Can you expand internationally?

Can you take your existing offers and scale them internationally?
International What would it take to do business in Canada or Mexico or Asia?
Expansion
If you have a converting offer, international expansion could be a quick
way to grow.

This sort of Market development will incur costs, but, the potential for
profits can be rewarding
7. Marketing - Across a Wider Region
INTRODUCING A NEW BRAND OR PRODUCT TO A MARKET IS NOT EASY

Building awareness with trade customers can be done in several ways.

Advertising in relevant publications and attendance at exhibitions can be effective

 Ensure your target customer base knows
that your products have arrived

Advertising The Online Direct

Channels Trade & Consumer
When considering Localise your website for This should only be considered
advertising, the first thing to the market & use social when your product is actually
do is research the target media to promote and on sale in a market.
market thoroughly to assess engage with the target
how best it can be addressed. region In many cases local distributors
and agents will bear a
share of advertising costs.
Build an
Contact List
One of the most best and most effective ways to grow a market quickly is to build an contact list.

Social media and direct email

are the best examples of this.
 Social Media For Market Development
If you can communicate directly with your consumer base then you can,

Seek & Find Delight & Inform Engage & Convert

You should tread carefully ...

Gentle engagement is the key and not the hard sell.

This can be seen as a turn off, and reason to unsubscribe or delete emails without opening them.
Create a As an extension of the Social media campaign, Webinars are a
great way to promote any company or product.
Webinar It can also help you grow your market share relatively fast.

Webinars provide an effective tool for literally taking any product to

market and reaching a wide audience quickly.

The webinar medium is great for captivating audiences to clinch

sale after sale, automatically.

Remember consumers will only visit or watch your webinar if they

believe it will provide value to them.

New Information on for example,

• Health benefits
• Cooking process
• Diet information
Consumers will not join a webinar for the hard sell
 Exhibitions and Trade Fairs
Trade shows are often the best way to meet buyers and research new markets

A presence at a trade fair can also be a very cost effective means of selling and promoting
your business to key customers
7.
Managing The
Finances

The Market Development journey involves

significant costs for a business and these need
to be factored in from the very beginning.
The
Initial costs Ongoing costs
Costs Market research Costs associated with longer production runs

Visits to the market Investment in new plant

Staff training Hiring additional staff

Specialist advice New packaging development

Product development Marketing

Early stage marketing costs Logistics costs

Reduced margins on promotional products

Agents - Consultancy - In-market representation

Bank and finance costs

Legal fees
Financing Options

Factoring Credit Control

This involves the exporter
“selling” its outstanding Tightening up on this area
invoices to a factoring can improve cash flows and
company which takes help provide the additional
on all of the payment resources required for the
risks but also takes a export effort
substantial discount in return
 Credit Insurance
One way of dealing with the risk of non-payment is credit insurance.
This is an insurance policy taken out by the business to protect against non-payment.

Safety First

The best way to reduce the risk of non-payment is to be absolutely sure who you are doing business with.
This might narrow your potential customer base somewhat but having a customer who doesn’t pay is far
worse than not having a customer.
 LEGAL & REGULATORY
CONSIDERATIONS

When signing any new agreements,

if you have any doubts always get legal advice

Initial advice on all these areas is available from

Chambers of Commerce, Government Agencies
and Trade Associations.
 Here are links to other AHFES training Modules to
help build your Market Development strategy

The AHFES training modules and Programmes are built to give the companies a more in-depth knowledge about how
to approach innovation and internationalisation, so they can be more competitive and thrive in the market.
It is very useful, and desirable, to combine the tools and information in each training programme in order to achieve
better results.

P1-M1 Consumer Insight P2-M3 Creating A Product Strategy

English Spanish French Portuguese
English Spanish French Portuguese

P1-M2 Market Understanding P1-M8 Tailoring Your Products to Suit Specific Markets
English Spanish French Portuguese English Spanish French Portuguese

P1-M6 Defining Your Brand Values

English Spanish French Portuguese

Please click the link in your desired Language. Ctrl + Click to follow the link
 We hope that you have found this training module a useful and helpful support to your healthy food
and drink innovation.

This training module is one of a number of training opportunities, organised into themed training
programmes to support SME’s (small & medium sized enterprises) in the participating regions of Wales,
Northern Ireland, Ireland, Spain, Portugal and France to successfully bring new and reformulated
healthy food and drink products to market.

The training was created by the partners within the AHFES project
which is a quadruple helix Atlantic area healthy food eco-system for the growth of SME’s
funded by the European Union under the Interreg Atlantic Area Funding Programme.

This programme promotes transnational cooperation among 36 Atlantic regions of 5 European

countries and co-finances cooperation projects in the fields of Innovation & Competitiveness, Resource
Efficiency, Territorial Risks Management, Biodiversity and Natural & Cultural Assets.

For more information about other training available please click here.
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 This project is co-financed by the
European Regional Development Fund
through the Interreg Atlantic Area Programme
 Credits

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