Market segmentation expansion techniques 2.0
Written by Geoblink ·
The retail market is in continual change and technology is a major driver. The widespread evidence points to a constant improvement of processes that aims to take advantage of business opportunities that arise in the market in order to obtain greater ROI. To understand the importance of this strategy, we will detail the different techniques of market segmentation expansion 2.0 that aim to deliver favourable outcomes.
As you can see in the image, focusing efforts on one technique over another will depend on the type of market (traditional or new), as well as the type of product, which is also classified according to whether it is new or existing. Once the plan is outlined, it is time to implement a 2.0 market expansion technique, taking advantage of not only the ecosystem of the sector but also the available relevant technology.
What market segmentation expansion techniques can be used according to your type of market and product?
1. Market Penetration Technique:
Many retailers face the challenge of executing a market penetration strategy by having a traditional product that must be launched into a traditional market. With this theory, selecting the best strategy is a constant challenge, and it is unsurprisingly difficult to choose one that leads to the greatest impact with the target audience. Audiences are increasingly aware of the intrusion of companies in their day-to-day lives through advertising campaigns, promotions or discounts. Therefore, in-depth knowledge of this population and understanding how different marketing actions will resonate are two of the main competitive advantages a retailer can exploit.
This market expansion strategy favours fast-growing industries, territories with low competition or locations where there is high demand for certain products. In all these cases, the best market 2.0 expansion technique is the one that is able to cross and analyse different data sources related to the catchment area, obtaining predictive results of the specific characteristics of the consumers in the target location. For example, through developing a market penetration strategy to promote the unique product value proposition, it is essential to keep a number of things in mind; having the right product in the right store, at the right price, and at the right time are the keys to a successful expansion technique. However, to ensure that all these requirements are met, it is essential to have the necessary technological tools.
Defining factors include targeted segments of a specific population, level of disposable income and points of sale located in the best areas are essential for companies such as KFC. The chain manages its market penetration strategies by offering a unique product, and launching it into traditional markets, taking into account the different characteristics of the target audience in the area:
KFC Megabox Promo Video
2. Product Development Technique
When a retailer chooses to operate in their current market but develops new features to improve and optimise an original product, they are faced with a common thought: “Now that we have invested in developing a new change in our product, where can we launch it with confidence knowing it will resonate with the client and satisfy a need”? A few years ago, this challenge was solved with different lengthy studies based on qualitative and quantitative techniques. However, thanks to new technology, we can extrapolate these data-intensive methods in a more efficient way, delivering important insights that help the development of these new strategies.
This expansion technique is an important step for businesses to take advantage of their competition and continue to adapt to the changing needs of existing consumers. Retailers can strategically identify opportunities to capitalise on, utilising technology to provide products and services in the most convenient method, with fewer costs and in new channels. In the retail industry, one of the most valued qualities in the products is ingenuity and innovation.
An example of a successful product development technique is found at McDonald’s, who have a number of standardised products in all its establishments (Big Mac, McChicken Sandwich.) In addition to its permanent products, McDonald’s also develops temporary products, whose purpose is to give the consumer something new to experience at each visit. However, the product development strategy of the brand goes further and as an international brand, in addition to these common products, they have created specific products to meet customer demand in local markets. “Innovation emerged as a response to the requirements of customers and franchisees that have played an important role“, preventing McDonald’s from becoming stagnant, thanks to techniques like market expansion 2.0.
Example of product development technique in the UK developed by McDonald’s taking into account the specific characteristics of a population segment:
3. Market Development Technique:
Demonstrating innovation and generating synergies that reach objectives, can become quite a headache for many companies in the retail sector. Difficulties arise with pushing a traditional product in a new market or implementing new applications for existing products or new geographical locations.
To take on this challenge, it is not only essential to know the profile of the client and the competition within the area, but also to be aware of the value of the location. Selecting a method of expansion according to the needs of the company and compatible with the customs of the market is the key to achieving success.
Screenshot of Geoblink’s Location Intelligence platform that collects several indicators that assess market conditions
Adding new products to the portfolio whilst also making the most out of company resources is one of the main challenges to carrying out the diversification expansion technique. Diversifying a portfolio can be done homogeneously by offering a different product to the same target market as before or heterogeneously by offering new products to new audiences
A modality of diversification is vertical integration, in which the company performs all the processes of the value chain. No diversification techniques are simple, and it is, therefore, essential to have the best possible support to carry them out. Qualitative data now allows us to rely on new tangible and predictable insights, and for companies already facing challenges involved in market expansion 2.0 techniques, a tool capable of providing numerical values on a visual interface would demonstrably elevate operations.
Without a doubt, a successful location in tune with the socioeconomic profile of its area of influence and in-line with its competitive environment is the basis for a new business, to begin with, a level of certainty for success.
An example of how having knowledge of the client and location, influences the decision making of a retailer to employ a market expansion technique can be found in different branches of the retail landscape, each looking to cover specific needs previously detected and analysed.
Marks and Spencer understood the needs of its customers and diversified its business of food and clothing and introduced homeware products (Marks and Spencer home)
In conclusion, the success of any expansion technique 2.0 can have a maximum or minimum impact, according to the type of data used to fuel its implementation. Despite the power data analysis poses for expansion, the technologies out on the market that automatically process those large datasets are relatively new. It is our responsibility as professionals in this flourishing industry to adopt the tools necessary to make in-house data analysis a reality—but that doesn’t mean it has to be complicated. Only then will we be able to successfully manage our retail businesses and ensure they make it into the future.