Market Development
Description: Market Development is a 2-step process to tap the untapped market. It begins with market research wherein a company does a segmentation analysis and short ists market segments that are worth pursuing. It is an attempt to use the existing product or service to attract new customers. The goal is to expand the reach or tap into a different segment or unexplored market. A segment is defined as the small sub-group of a larger population. For example, the marketing team of the company can divide the market based on geography, demographics as well as income levels, etc. Once the company decides which segment to choose, the next step of market development involves creating a promotional strategy to enter into the market. For that, companies may have to take the support of both audio and visual media to push the product deeper into the market.
Another aspect is the pricing of the product. If there are competitors in the market, you may have to price the product accordingly or come out with a product that belongs to the same segment but differs in features, quality, etc. to command higher pricing. To counter competition, the marketing team could look at the penetration pricing where you can aggressively price the product below the competitor’s product to gain market share. The major challenge faced by firms, which want to indulge in market development, is that it is a costly affair. It requires a huge capital investment to keep the project going. If the investment in the new segment doesn’t pay off as desired, then the whole exercise turns out to be worthless.
The Process of Market Development
Market development is a two-step process. It starts with market research. You need to engage in segmentation analysis to determine which market segments are worth pursuing. A segment is simply a small slice of an overall market. You can segment a market along demographic, geographic, psychographic (based on values and lifestyles), and product-benefit lines.
Once you have determined which market segments are worth pursuing, the second step of market development involves creating a promotional strategy to penetrate the new market. For example, you may decide to engage in an aggressive television and direct mail campaign. You’ll also have to consider the pricing of your product. If there are competitors in the market, then you may opt for penetration pricing, where you aggressively price your product lower than the competition in order to quickly obtain a large share of the market and customer loyalty.