Profitably capitalize on new
market entry By Fran
Grigsby/ Business Development Friday, September 1, 2006
What will drive
the growth of your business? International expansion? Mergers and
acquisitions? Entering new vertical markets, extending your product
line or repackaging and repositioning existing products or services
to address the demands of new markets?
Entering a new market is a challenge that
every company must face. Early stage companies face the challenge
of establishing themselves with customers for the first time.
Larger companies enter new markets to grow, to secure their position
against competitors or to take advantage of changes in their customer
base.
Carol
Meyers, Pierrette Kelly and Ellen Rubin are successful businesswomen
who have all led their companies in entering new markets. Meyers is
vice president of marketing for Unica Corp., a provider of
enterprise marketing management software; Kelly is the former vice
president and general manager of CVS.com and now a consultant to the
company; and Rubin is vice president of marketing for Netezza Corp.,
a global data warehouse appliance vendor.
Each of
these the executives discusses the importance of taking risks,
planning, paying attention to how you integrate the new market and
staying close to the customer.
Taking
Risks
Entering
a new market is by definition a risk, and managers need to assess
market opportunities to focus resources on new markets that offer
the most promise.
Netezza’s
Rubin has played a key role in making Netezza prosper in a market
long dominated by established vendors like IBM and EMC, and she
emphasizes the role of risk-taking in opening up a new market.
“When
you are in an early stage company, it is not immediately obvious
what market will make you succeed,” she says. “The best way to enter
is to rapidly test all your hypotheses and get your executive team
out in front of potential customers in a fast, directed way.”
CVS
incurred risks when it acquired Soma.com, the first Internet
pharmacy. But Kelly explains, “We had to make mistakes if we wanted
to get into the game when it was hot. We had some rough spots
because the Internet crash happened just after the acquisition. We
had to get out there and learn how the customers wanted to use this
resource.”
Planning
Research,
analysis, market sizing and setting metrics for measuring success
are key to new market entry. According to Unica’s Meyers, “We have a
process for evaluating market opportunities that we do annually and
whenever a new opportunity comes up. In that process, we also look
at acquisition opportunities. We always establish a set of
objectives. For a new initiative, we look at metrics. Because our
sales cycle is fairly long, we measure interim objectives as well as
profitability and sales.”
Netezza also focuses on planning
to support new market entry. “We do a lot of work on list research
in our marketing group and sales group,” Rubin says. “Then our
execution is focused on how we are going to support the sales
representatives as they go into new markets.”
CVS defines top-level customer expectations, including business,
technical and user requirements and does a five-year roadmap
for CVS Online.
Integrating the New Market
Successful new market entry requires the
ability to integrate the new market into the existing business
infrastructure.
In 2004, Kelly saw that there was more
traffic coming to the CVS Web site for information and services,
rather than to order items. There was a tremendous increase in
online prescription orders to be picked up in stores, and the
digital photo business was growing quickly. She published these
numbers so that managers throughout the company could understand
the changes that were happening in the online business.
“Understanding this helped make us a leader
in the digital photo business,” she says. “After two years of
profitability, I proposed a relaunch of the site so that we could
make it easy for CVS customers no matter where they shopped. As
our next piece of integration, we will give credit to individual
stores for what CVS.com sells so we can take any issue of cannibalization
out of our internal business discussion.”
Unica has successfully integrated acquired
companies into its overall product offerings. “When we acquired
a Web analytics company, we learned that there is a thriving standalone
market that we could not reach with our traditional sales and
marketing resources,” Meyers says. “We developed a new sales force
that can sell to this market rather than making our current people
shift gears and sell to different people. Out of that learning
we addressed two markets—the standalone market and the addition
of the new product as an extension to our current products.”
Entry into vertical markets must be carefully
managed. Rubin warns. “Every time you add a vertical, you are
spreading your resources more thinly and training salespeople
in new information. Our new approach is to have dedicated teams
that have a systematic approach to each vertical market.”
Staying Close to the Customer
All three of these successful businesswomen
agree that staying close to the customer is essential for successful
entry into new markets. Rubin says, “We have a close customer
relationship with the Netezza community. We formed an advisory
council very early and have lots of senior-level contact with
customers. We want to make them feel they are part of a movement.”
According to Kelly, “It is interesting
how much our customers have told us what they want. We have done
a lot of research and focus groups and we have an online advisory
panel with 20,000 customers. Through these vehicles, people are
articulate about what they want.”
Unica’s Meyers says, “We learned the
hard way that replicating public relations programs across countries
does not always work. Building good customer relationships is
more important. We rely on the feedback of people in the countries
where we enter to be sure we hit the right mark.”
The experiences of these three successful businesswomen underline
the importance of flexible leadership in new market entry. By
taking risks, planning carefully, efficiently integrating new
markets into existing businesses and staying close to the customer,
companies large and small can establish clear methodologies
and best practices for profitably entering new markets.
Fran Grigsby
is the founder and managing partner of Next Level International,
the Concord-based strategic consulting firm that helps clients
profitably expand into new markets.
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