Marketing Insights: Smart Growth

So, you’re thinking about expanding into new
markets. Perhaps you’re considering a new product line, a new
geographic area or perhaps a whole new line of business. That’s great
news – or, is it?

So, you’re thinking about expanding into new markets. Perhaps you’re considering a new product line, a new geographic area or perhaps a whole new line of business. That’s great news – or, is it?

Without a crystal ball, there’s no way of knowing for sure if your business growth strategies will be the start of an amazing new chapter or the beginning of a slide down a slippery slope. When it comes to exploring new frontiers, do businesses come with GPS navigation equipment to help us find the sweet spot? How can we tell if our new venture will work?

The business world is populated with examples of large companies that expanded beyond the scope of their initial business model. If your plan is to expand into new geographic markets, it’s probably a good idea to look at the experiences of larger companies who have already gone down this path.

Wal-Mart is probably one of the most high-profile companies to expand geographically. The Wal-Mart brand was rooted in “down-home rural values” and those first Wal-Mart stores were built in rural America. When Wal-Mart expanded into urban centres, the company’s stance on everything from unionized wages to its “greeters” was scrutinized and often met with resistance.

With the recent initial public offering of Tim Horton’s shares, some financial analysts have commented that this brand’s international appeal may be limited; hence its growth potential is also limited. It seems ‘Timmys’ is a real Canadian brand and it takes a lot of ‘splainin’ to get the brand proposition across to U.S. or other foreign consumers who aren’t familiar with the company. Tim Horton’s truly understands itself and will no doubt have a strategy around awareness when entering new markets.

If you’re expanding into new markets, make sure that you’re objective about whom your true brand loyalists are. Think psychographics not demographics. It may be convenient to build your next store in a nearby neighbourhood, but if your tribe doesn’t live there, you may be better to find another site.

If your growth strategy involves new product lines or even completely new business ventures, you’ll need to assess how well it fits with your current brand. A strong brand is based on knowing what you do really well and then dominating the market you serve. Your brand isn’t what you say it is – it’s what your customers say it is. You simply manage how the brand is communicated and monitor its health.

Any new product or business venture will change how your best customers view your brand. You’ll need to think about fit. Sometimes, businesses that appear to be strange bedfellows at first can actually be quite simpatico when you dig down deep.
 
Starbucks made its name as a premium coffee house and today is the world’s top coffee chain. Starbucks’ store count has soared to over 11,000 from less than 200 since the Seattle-based company went public in 1992. In 1995, Starbucks decided to start promoting and selling CDs. Today, they are one of the top music retailers. Recently, they decided to get into the movie promotion business with signage, web and point of sale materials featuring the movie Akeelah and the Bee.

Many observers feel that Starbucks is suffering from “scope creep,” getting too far away from their business model. After all, they sell coffee, not music and movies, right? Actually, no. From the beginning, the Starbucks brand was based upon the human need for “the third place.” Home is the first, work is the second and the third place is where you get to hang out and not be somebody’s spouse or employee. Part of the Starbucks experience is the music that’s played. It’s a kind-of intellectual jazzy vibe, a bit left of the top-40 chart.

Music was a big part of the original coffee house culture so while selling CDs may appear to be off brand, it may actually be more on brand than introducing a line of hot entrees. Starbucks will need to stay on top of its target group’s musical tastes to continue to succeed in this market. What happens when the Nora Jones crowd starts listening to Mozart?

Years ago, the typical Starbucks customer was pretty narrowly defined as a white, young, upwardly mobile professional making fairly decent wages. Starbucks now appeals to a wider range of consumers. This can make it harder for the company to target products and services especially something like music, which is generally fairly specific to gender, age and cultural background.

The music business, while perhaps on brand from the consumers’ perspective, is a completely different animal for the coffee retailer internally. It will require a separate business unit to manage it and could potentially fragment attention that would be better focused on the business of coffee. Time will tell.

Smart growth is an economic term used to describe urban development by making efficient use of land whilst minimizing sprawl. We need to look at our businesses the same way. Are there opportunities right under our noses? Do we really have to grow by planting our flags in new countries or starting completely different business ventures? Ten years from now, it will be interesting to see where some of these big companies are. Maybe the biggest opportunities can be found in the smallest unused patches?•