Planning for market entry
Many companies have a product. Some will say they have no competition and that everyone will buy their product. This generally is interpreted to signify that there is a lot of competition and no one will buy their product.
November 27, 2017 - Author: Mark Thomas, Innovation Counselor, MSU Product Center Food-Ag-Bio
Every entrepreneur needs to be able to see an opportunity, size it up (is there a market) and seize said opportunity. Many skip the second step. They have to have the capability to make something, manage the business and have the know-how to understand the market that the product will be sold into. Marketing involves identifying what the customer needs and wants. Providing a basic need, like food or shelter, solving a problem and/or allowing for an indulgence are the basic drivers of product demand.
Successful companies adapt operations to develop an appropriate mix of products to provide for sale to the customers. Marketing involves five basic elements: product, package, price, placement and promotion. The right product certainly is a good place to start. Your research should provide a valuable clue toward that. Packaging should provide a convenience to the customer. If you have ever shopped at Costco and purchased a very large container, you will understand. Having a price consistent with the perceived value is paramount to generating sufficient sales to generate a profit. There are two ways to be profitable in the long run. Be the low cost, high volume producer (low margins with high volume) or offer product attributes that consumers recognize have desirable benefits (higher price with reasonable volume). If a customer perceives a good benefit he/she will be willing to part with a little more cash.
Where something is sold is also an important factor. Having a number of outlets eases the burden on the consumer to purchase your product. Currently, only 5 percent of grocery sales are generated on the internet, but with sizeable players (like Amazon) gaining a better understanding of the potential and technique, this number should increase in the coming years. Entrance into this market may prove problematic. However, providing additional benefits like meal solutions on your packaging could help overcome this trend. Promotion involves knowing what your target customer values. Basic needs of having nutritious, safe, yet tasty food with a reasonable amount of variety will result in lower prices being obtained. Adding convenience and health benefits will move up the price range. Moreover, having attributes like organic certification or being local should result in higher prices. Communicating the level of benefits to your target market could increase your market share.
The market potential of any product depends on the consumers’ reaction to your promotional rollout. Market trends should be followed closely for significant adjustments. Also important is the response from competition to your entry. How will you react to threats to maintaining your share of the market?
Michigan State University Extension educators working with the MSU Product Center help guide new and expanding businesses in developing a marketing plans.