7 strategies to discover new market opportunities

From supply chain bottlenecks to inflationary pressures, businesses across industries continue to grapple with a world defined by relentless change. In this unstable market landscape, business-as-usual approaches are nowhere near sufficient for survival or long-term success.

Due to the impact of the COVID-19 pandemic, U.S. corporate bankruptcies reached their worst levels in 10 years in 2020, and we aren’t out of the woods yet. Companies must adapt or risk getting left behind, but how do you find the right opportunities for business growth in a noisy, adrenaline-drenched environment?

Based on our experience providing market research to more than 10,000 clients per year across the globe, serving top management consulting firms, investment banks, and Fortune 500 companies, we’ve identified seven strategies to help you pinpoint new market opportunities for your business.

1. Look for shifts in customer behavior

First, understand how your customers are using your product. Are they doing something different with it now than before? This is how makeup removing wipes and toilet paper alternative wipes came about. By talking to their customers, companies realized that there were other ways people were using baby wipes.

Consumer goods and food companies use this strategy frequently to create new product lines. To find ideas, you can start by scanning the internet and social media pages for people talking about “hacks” for your product, or creatively improvising to use your product in a new way.

2. Consider where waste exists

Sustainability is now a core concern to most demographics, including your customers. Can you innovate to reduce waste in production, transportation, packaging, or at end-of-life? Can you make your (or someone else’s) product last longer? Can you make it modular so that broken or worn pieces can be easily replaced?

3. Investigate the pain points

Understanding pain points is an obvious starting point for most businesses, but these gaps must be addressed because they can give your competitors a welcome edge.

Sometimes a pain point creates literal pain or added friction in a work process. Ask what causes potential injury or stoppage with the product or the workplace around it. For example, professional users began to adopt cordless tools at higher rates when they realized that they reduced job site injuries (no cords to trip over).

Another approach is to see where customers want to save time. Robots and automation show up where repetitive tasks can be reduced, freeing people to do other things. For instance, many people don’t like or don’t have time to mow their lawns, but they want to have cut grass—enter robot lawn mowers.

4. Track trends in your market

Track general societal trends related to your industry and see if you can adapt a product line to take advantage of customer interest in that trend.

A recent example come from big changes in food packaging. Several years ago food bloggers, especially in health food circles, started coming up with bowl meals. Grain bowls. Veggie bowls. All the ingredients put in one bowl for a meal. Soon it spread to restaurants, often healthy or Asian-themed. Then mainstream restaurants, even fast food like KFC, came out with their own versions.

Seeing the continued popularity, the trend finally moved into retail food with a number of brands coming out with frozen dinners in bowls. Now bowls are starting to move to other food products as well.

Take a larger trend in your market or an adjacent market and make it work for your customers with your product.

5. Get ideas from a related industry

Instead of duplicating your competitors, look at what the most successful companies in a functionally related industry are doing, and see if you can apply similar approaches to your business.

Wearable technology like Fitbit took off among consumers, and now pet companies have launched similar trackers for pets with products like FitBark and Whistle. Similarly, at-home DNA testing gained traction with 23andMe and AncestryDNA, and now several at-home DNA testing kits have been designed for dogs to provide information about a dog’s breed and genetic background.

6. Think bigger when it comes to your target consumer

Take a holistic approach to product development and sales by targeting the entire customer base for your product or service, not just the obvious or traditional one.

How does your product meet the needs of your entire potential customer base, not just a certain type of company or one job title within a company (such as the purchaser versus the end user versus the decision-maker)?

Focus on the total benefit of your products to the company as a whole and not one particular customer group and communicate that to those involved in purchase decisions.

Take for example packaging machinery. Machinery producers may deal primarily with purchasing departments to sell new machinery. However, they could broaden their outreach efforts by targeting users and top executives:

• Targeting engineers and production managers could provide supporting arguments on how new machinery could improve work flow and efficiency
• Targeting executives such as chief financial officers to promote the long term cost savings of new machinery could help with approval of new machinery purchases

7. Look for products or services that complement your existing business

What are your customers doing that requires your product, and what do they do after they purchase your product? Are there things you can offer that make that entire process better for your customer?

For example, movie theatres added in-seat dining with restaurant-type meals because they understood that many customers went out to eat before going to the movies. Some parking garages added car washes or car detailing services since customers were already bringing their cars to the location.

Re-imagine your business

The COVID-19 pandemic and all the changes that entailed has caused a great re-thinking of so many things we did before. Take advantage of these changes that started so many movements, shot others forward, and nipped others in the bud.

One of the gifts the pandemic presented to businesses is the chance to find new opportunities and new markets in old places.

Author: Robert Granader

Source: Market Research Blog

The key to monitoring loyalty program success

In February 2020, Panera Bread announced the Unlimited Sip Club and rocked the coffee world. For just $8.99 a month, members could get unlimited refills of their favorite coffee or hot tea at any Panera location. With the average American consumer spending more than $2,000 a year on coffee, this sounded like an incredible deal for coffee drinkers — begging the question, how could Panera possibly justify such generosity?

Loyalty programs like this are common in industries as wide-ranging as retail, food and beverages, health and wellness, and more. Proponents argue that increases in sales justify the costs — for example, while Panera may lose money on its drinks, if loyalty members buy a croissant every time they get a coffee, the program could still be quite profitable for the company — but these effects can be hard to quantify.

For example, the average Amazon Prime member spends more than twice as much as the average non-member. This may seem to imply that the program is responsible for a substantial increase in revenues, but the difference in spending could also be driven by self-selection (that is, customers who already intend to spend more may be more likely to choose to become members). The costs to the company of providing membership benefits can also be substantial, whether that’s a free cup of coffee, exclusive product offers, free shipping, or other perks. In light of this complexity, how can managers ensure their loyalty programs are truly profitable?

To explore this question, we conducted a large-scale study in partnership with a major Asian retailer that was launching a new, paid loyalty program in 2015. We analyzed 15 months of transaction data for more than 24,000 customers, about half of whom had joined the program, and identified three key takeaways for managers:

Go beyond averages and analyze trends on an individual level

On average, we found that customers spent more than twice as much per month after subscribing to the retailer’s loyalty program. However, this increase was not evenly spread out across all the members in the sample: Some customers contributed substantially to the increase in revenues, while others did not. This illustrates how a better understanding of whose spending is likely to increase the most after joining a loyalty program can help marketers better target prospects going forward.

To do that, managers must go beyond average results to track and analyze changes in purchasing patterns on an individual level. That means setting up data collection and analysis systems, allocating the necessary resources internally, and getting buy-in from the relevant stakeholders. And importantly, this all should happen before a company introduces a new loyalty program, to ensure managers have the benchmark data that will be necessary to measure the program’s impact.

Don’t just measure changes in profits — measure what drives those changes

In addition to drilling down into individual-level spending, our research emphasized the importance of developing a nuanced picture of the various changes in consumer behavior that may be driving shifts in overall profits. For example, we found that post-subscription, customers bought a wider variety of products: Approximately 75% of the increase in revenues came from new products that customers had not previously bought, suggesting that one factor contributing to the program’s success was that it encouraged members to start exploring products beyond their typical purchases.

Conversely, we also found that while the total number of purchases increased after the introduction of the loyalty program, average basket size decreased. This was likely because membership included free shipping, meaning that customers were no longer incentivized to group purchases together into a single shipment. This change in customer behavior could have substantial cost implications for the firm, as shipping costs increase when members spread out their purchases between more shipments — and if members incur greater costs, higher revenues may not translate to higher profits.

When evaluating a program’s impact, don’t forget about the costs of serving customers

This last example highlights the importance of paying close attention not only to changes in revenues, but also to the various costs associated with a loyalty program. That means both the cost of the additional goods sold and the costs of any benefits included in the program, such as free shipping or member-exclusive offers.

After we factored these costs into our analysis, we found that net profits increased a lot more for some customers than for others after becoming members. Specifically, we found that 14% of the members in our study contributed the highest profits despite incurring high costs for the retailer, 46% generated a sizable increase in profit without as much cost, and the remaining 40% generated minimal profits and incurred substantial costs.

Interestingly, the 14% of members who contributed the highest profits after subscribing were not the ones who had purchased the most prior to subscription. Rather, they were customers who had been less active before subscribing, but who had demonstrated interest in exploring new products, made repeated purchases of similar items, and were responsive to promotions. In contrast, the customers who had purchased the most pre-subscription only moderately increased their spending while still enjoying all the benefits of the program, suggesting that the retailer might have been better off if those customers hadn’t joined.

This analysis highlights the importance of monitoring changes in both revenues and costs on an individual level. Rather than assuming costs stay constant with respect to the value of goods sold, managers should track how costs change for different customer segments after the program is introduced — and then target loyalty program promotions at the customers who are likely to generate the highest net profits.

If implemented well, paid loyalty programs can be highly profitable. Indeed, after launching its popular subscription program, Panera announced that food purchases attached to coffee orders grew by 70%. But to ensure that a loyalty program is actually a net positive for the company, it’s critical to track revenues and costs for different customer segments — as well as the underlying factors that may be driving both — and experiment and adapt accordingly.

Source: Harvard Business Review