What is a target market?
A target market may be a geographical market (eg the United Kingdom or Japan) or a specific customer. If the customer is large enough they become a market on their own. In either case, you need to define your targets in as much detail as possible.
When identifying your target markets, consider including smaller markets because often they are buying centres for other markets (for example Macau for China). The smaller markets may also be easier to trade with as major exporters and competitors tend to concentrate on larger, more complex markets.
Most importantly, don’t tackle too many markets at once. Beware of diluting your focus and resources by tackling too many markets at once (unless you’re selling worldwide through the internet.) Most exporters aim to achieve success in one overseas market at a time before expanding their horizons.
Focus on low risk, high potential return markets. If you have a competitive advantage in New Zealand, look for markets where this can be sustained.
The trick is to find the balance between opportunity and your chance of success.
Why do market research?
Researching your markets before you start exporting will greatly reduce the risk of making costly mistakes.
Your market research will play four very important roles in your decision making process, it can:
- act as a selection tool, allowing you to contrast and compare different countries
- allow you to gauge the potential for business within a particular country
- let you to make an informed decision about what market, or markets, you should approach
- fine tune your business instincts if this particular country or market is one you want to enter.
Avoid making assumptions
Do not ignore the importance of cultural issues when entering a foreign market. Even a familiar market such as Australia or the United Kingdom can be critically different to the New Zealand market.
Gathering market information
You will need to understand all factors that will impact on your ability to enter the market in question. These will include factors that are specific to your product or service, the operation of your sector in that market, or the market itself.
Gather information on:
- the market (or target company) you have selected - you will need to consider political stability and security for some markets
- competing companies and products or services
- market entry models that may suit your business and the market
- relevant regulations and entry requirements for your market
- freight considerations and required export documentation
- obtaining finance for export
- how you will be paid for your exported products or services
After you gather your market information you will then need to ask yourself the following questions.
- What is the environment like for doing business?
- What demand is there for your product or service? Can you describe why a customer would purchase the product or service you offer (your unique selling point)?
- What is the potential market size and what market share do you think you can gain? Will it be profitable?
- Can your target market afford your product?
- How easy will it be to access this market?
- What distribution channels are there for your product?
- What changes will you have to make to your product or service for this market? For example, do you need to change your packaging eg size, or list the ingredients differently? Is your existing branding (colours, imagery, logo etc) culturally acceptable?
A useful exercise might be to rank from 1 to 10 your target markets using the 'Ranking Your Market' template in Related Downloads below.
Market research tips
You may have a strong competitive advantage in the New Zealand market, but will this still be true when you take your product overseas? Look for markets where your advantage can be sustained.
- what similar products exist, who provides them and how does your pricing compare?
- is the market for your product / service mature, growing or declining?
- what is your point of difference and how will you promote your product / service?