How to Expand into a New Market
Posted by Joseph Mignano on Tuesday, January 24, 2012
Under: Marketing Strategy
Without question, any company not looking to expand their product offerings is losing market security and possibly market share to other competitors (both current and future). I've seen the affects of breaking into new markets first hand at the two companies I've worked for since graduation, and I'm convinced through experience this is a true statement.
Starbucks recently announced an expansion of its own (or at least the testing of one). Now instead of coffee and breakfast/desert food and beverages, caffeine junkies can look to Starbucks for their favorite beer or wine (in select markets). Is this a good business strategy?
Expanding into new markets can be done with minimal affect on a company's core revenue stream. This has occurred at both the companies I've worked for, and at any number of well known consumer companies. Victoria's Secret is a great example. At a typical Victoria's Secret store, 60% of sales come from their Pink merchandise, which is essentially casual underwear and clothing (as opposed to lingerie). Many Victoria's Secret customers shop for both lingerie and casual wear. However, the Pink merchandise also brings Victoria's Secret additional market segments (older, younger, heavier, gift-givers, those intimidated by the traditional Victoria's Secret products, etc.) that they wouldn't have without it.
How was Victoria's Secret able to break into the casual clothing market without alienating its core customers?
The Pink merchandise, which is effectively marketed as its own brand, is kept in a separate room, allowing shoppers to segment themselves by age and mission. Boyfriends and husbands don't need to fight against 13 year old girls while sifting through merchandise. Young girls can shop at Victoria's Secret without being criticized by their parents. And Victoria's Secret's target market has the perfect place to shop for casual apparel (the two offerings actually complement one another). In short, more shoppers can shop, every shopper has more options, and shoppers arguably have a better experience.
Here is the problem with the Starbucks move into alcohol: it carries huge potential of angering their current coffee loving customers. The last thing a half-asleep commuter on their way to work wants to deal with is a group of college kids enjoying their final round of brews before passing out for the day. Unless Starbucks plans on segmenting their restaurant into coffee and alcohol specific areas (and I am assuming Starbucks won't allow drive-thru customers an alcohol option), they are going to have to deal with customers being hesitant to subject themselves to the randomness of the Starbucks clientele.
If Starbucks is serious about this strategy (and they should be), they should launch a series of stores under a different brand name specifically targeted for consumers (presumably younger) looking for a classier place to grab a beer or a glass of wine.
Starbucks recently announced an expansion of its own (or at least the testing of one). Now instead of coffee and breakfast/desert food and beverages, caffeine junkies can look to Starbucks for their favorite beer or wine (in select markets). Is this a good business strategy?
Expanding into new markets can be done with minimal affect on a company's core revenue stream. This has occurred at both the companies I've worked for, and at any number of well known consumer companies. Victoria's Secret is a great example. At a typical Victoria's Secret store, 60% of sales come from their Pink merchandise, which is essentially casual underwear and clothing (as opposed to lingerie). Many Victoria's Secret customers shop for both lingerie and casual wear. However, the Pink merchandise also brings Victoria's Secret additional market segments (older, younger, heavier, gift-givers, those intimidated by the traditional Victoria's Secret products, etc.) that they wouldn't have without it.
How was Victoria's Secret able to break into the casual clothing market without alienating its core customers?
The Pink merchandise, which is effectively marketed as its own brand, is kept in a separate room, allowing shoppers to segment themselves by age and mission. Boyfriends and husbands don't need to fight against 13 year old girls while sifting through merchandise. Young girls can shop at Victoria's Secret without being criticized by their parents. And Victoria's Secret's target market has the perfect place to shop for casual apparel (the two offerings actually complement one another). In short, more shoppers can shop, every shopper has more options, and shoppers arguably have a better experience.
Here is the problem with the Starbucks move into alcohol: it carries huge potential of angering their current coffee loving customers. The last thing a half-asleep commuter on their way to work wants to deal with is a group of college kids enjoying their final round of brews before passing out for the day. Unless Starbucks plans on segmenting their restaurant into coffee and alcohol specific areas (and I am assuming Starbucks won't allow drive-thru customers an alcohol option), they are going to have to deal with customers being hesitant to subject themselves to the randomness of the Starbucks clientele.
If Starbucks is serious about this strategy (and they should be), they should launch a series of stores under a different brand name specifically targeted for consumers (presumably younger) looking for a classier place to grab a beer or a glass of wine.
In : Marketing Strategy