Whether it’s an entirely new geographical region with a range of cultural, linguistic, and economic factors to consider or just a new age demographic — breaking into a new market is rarely easy.

There are all kinds of risks to try to mitigate and hurdles to overcome. Brands will never manage to avoid every potential pitfall, so a degree of complication should be expected.

Businesses that can minimize these risks and challenges can reap serious rewards. In this article, we’ll look at 5 of the biggest risks and barriers businesses typically face when entering a new market.

Let’s start with the risks.

The risks of market entry

There’s no risk-free way to enter a new market. Some may be easier than others, but problems are always possible. We can break down market entry risks into three main categories — internal, external, and legal.

Internal risks for market entry

Internal market entry risk factors are those that come from within the organization. These are generally easier to control than external risks but are often unpredictable and seriously damaging.

Management and organization

How well is your company structured? In your home market, it’s sometimes possible to function successfully with a flawed organizational structure. However, those drawbacks can become painfully obvious when you enter a new market.

Some common management mistakes include:

Unclear vision from leadership. A lack of coherent vision from the people in charge can lead to widespread confusion and inefficiency. Ensure your goals are established and communicated to everyone on the team.
Sudden staff changes. When a new member joins the team to replace someone else, they must have all the necessary information and direction. Failing to do this can often result in failures in communication and significant setbacks when entering your new market.
Lack of coordination. Working together effectively is critical in a new market — especially one far away from your home market. Your team members must be on the same wavelength, up-to-date with current processes, and in regular communication with each other and leadership.

Human error

Human error is one of those risks that we can’t always control. Mistakes happen in business and life, and while we can’t predict them very accurately, we can certainly say that people will make mistakes.

When entering a new market, a simple mistake can set a project back and send out ripples into the entire process. Usually, one or two small mistakes won’t mean the end of the world, but a series of minor errors can add up.

That could involve failing to convert currency accurately, using the wrong measurement units, or giving incorrect advice about cultural norms. In these cases, one small mistake can quickly snowball into a major setback if nobody catches it.

Logistical issues

Things like delays, accidents, labor shortages, transport and delivery problems, and other logistics and infrastructure challenges can be significant roadblocks for businesses when entering a new market.

These hurdles are especially relevant when expanding into developing countries and regions. Here, infrastructure and technology are often very different from what you might be used to in your home market, so it will be harder to predict delays and disruption.

Markets in developing countries sometimes use more manual processes, so there is often a greater need to work closely with local teams and sometimes the need to adapt your services.

Tech issues

The technology and equipment you rely on as a business won’t always work seamlessly. One considerable risk for market entry involves technology failing to get the job done effectively in a new market.

One example is the Internet of Things devices, which can be powerful assets for businesses when monitoring conditions and optimizing processes in manufacturing. However, if your devices or networks fail, it could cause a significant setback.

If you’re looking to enter a developing country, it’s worth bearing in mind that technological infrastructure can differ greatly from your home country. In some countries, we’ve seen a leapfrog effect, where newer technologies have been adopted to a greater extent, as there are fewer issues with moving away from legacy systems.

Cash flow problems

Entering a new market requires a lot of financial resources, and if the supply of money is interrupted or halted, it can cause major problems for your operation. If not promptly dealt with, internal issues like this can quickly stop a market entry attempt.

External risks for market entry

Businesses must contend with many external risk factors and risks that stem internally within their organization. These can be much more difficult to control and are often unpredictable.

Regulations

It’s essential to be aware of and comply with the local laws in your chosen market. One recent example is Europe’s GDPR law which requires anyone doing business with European customers, or any company based in Europe, to adhere to strict data privacy rules.

Local regulations and requirements are often overlooked — and this can be especially tricky in emerging markets where regulations can be harder to interpret if you’re unfamiliar with the landscape.

Failing to keep up with regulations can be high — the maximum fine for GDPR violations is €20 million or 4% of your annual global revenue. A mistake here can seriously damage your entire company, not just your new market activities.

Politics

Politics can be hard to predict anywhere in the world, although businesses can be reasonably confident that radical changes won’t disrupt their market entry efforts in stable regions.

However, all bets are off in less stable parts of the world. Revolutions, wars, and sudden and significant new legal changes are just some of the political risks you must contend with when entering a new market.

Sudden changes to government can have severely damaging effects on your business. One example is when Fidel Castro’s government took control of Cuba in 1959, seizing hundreds of millions of dollars of US-owned property and companies.

Social unrest

A country (and a market) is nothing without its people. Events involving social unrest and widespread disruption are constant sources of risk for businesses in many markets around the world.

Riots, protests, and revolutions can cause damage to premises and shut down businesses for long periods, while nationwide strikes can leave you without a workforce. It’s crucial to have a plan of action to ensure survival during civil unrest.

Major non-violent social movements and trends can also impact your business. If you fail to show solidarity or are perceived as insensitive to a specific public sentiment, this could cause reputational damage.

Cultural differences

Entering a new market often involves introducing your business to an entirely new culture, which comes with a whole host of new risks.

Brands need to be aware of different customs and cultural nuances. Failing to adapt can impact how your products and services are received in the new market. You’ll need to consider how culture will affect how your new customers will receive your marketing. A television commercial beloved in Western cultures might be perceived as grossly insensitive in more conservative cultures.

It’s easy to get excited about entering a new market and the potential it might offer your business, but you need to do your research upfront. Is there actually a market for your product? Will it need to be adapted for success? And at what point does this become unfeasible?

Knowing when not to enter a market is just as important as knowing when to invest.

Natural disasters

It isn’t just people that businesses have to worry about when entering a new market — nature itself is often working against them. Natural disasters are a significant source of risk when establishing a presence in certain parts of the world.

Hurricanes, earthquakes, floods, droughts, and many other disasters can quickly stop any market entry effort. They can destroy property, interrupt shipping, and close down entire economies in hours. Worst of all, it’s often impossible to predict when the next disaster will strike.

One way to mitigate damage is through insurance, although coverage in developing countries has historically been low. Research shows that only about 1% of natural disaster-related losses between 1980 and 2004 in developing countries were insured, compared to approximately 30% in developed countries.

Market issues

There are several external risks in the market. These can take the form of unexpectedly tough competition, fluctuations in the cost of services and resources your business relies on, and volatile exchange rates, leaving a dent in your profit margins.

Legal Risks

There are many legal risks to consider when entering a new market, and this type of risk encompasses internal and external activities.

Every region in the world has its own set of laws and regulations, which can change significantly even between parts of the same country. For example, it’s legal in many U.S. states to sell cannabis; however, this could carry a severe penalty in others.

Some legal risks to consider are lawsuits, patent rights, and data privacy regulations. To ensure you stay on the right side of the law, you must work with local lawyers in your target market. A major legal setback like a big lawsuit could end your market entry campaign, so ensure you stay on the right side of local laws.

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Barriers to market entry

As well as risks, there are also multiple market entry barriers to consider. Fortunately, these are far more predictable than the risks mentioned above. It’s almost guaranteed you will encounter these obstacles during your market entry journey, so it’s easier to prepare for them.

There are many barriers, but we will cover two of the main ones here – costs and marketing challenges.

Costs

Entering a new market is a costly endeavor. You’ll generally need considerable resources to make this happen, and costs can be much higher than expected.

Some market entry campaigns cost less than others — trying to reach a domestic demographic with your product is more financially workable than establishing a solid presence in a foreign market such as China.

A successful market entry will allow you to make back your investment over and over. But it’s important to understand what costs you might need to consider when entering a new market.

Export and import costs

Moving to a new overseas market typically involves a certain amount of moving goods across borders. Even if you establish a manufacturing base in your new market, there will be costs associated with importing certain materials and goods from your home market.

Switching costs

This refers to the cost involved in switching to a new supplier, brand, product type, or alternative. You might have to do this a number of times when entering a new market, and these costs can add up quickly.

Marketing costs

Reaching your target audience in a new market will require a certain level of expenditure, depending on how well-known your brand is. For example, KFC opening a restaurant in a new region will have less work to do than a smaller and less famous company. Costs include market research, advertising, digital marketing, and analytics.

Access to distribution channels

This is how you make your product available to your customers. Accessing and managing a distribution infrastructure in a new market comes with various costs.

It’s important to anticipate as many costs as possible when entering a new market. Even if you do a great job of this, it’s likely that some costs will still spring up and take you by surprise. Make sure you have the financial resources available to handle these unexpected expenses.

Getting your marketing right

As well as the many costs associated with market entry, another barrier facing companies involves marketing.

Marketing is essential to make your voice heard and your product known in your new market. You need to immediately start connecting with your target customers across various channels and establish your brand as an option.

Marketing in a fresh market comes with a range of challenges. We already covered costs above, but here are some other key marketing considerations:

Demand

Before you even set foot in a new market, do enough people want to buy your product? Your marketing campaign will be an uphill struggle if there isn’t existing demand for your offering. It’s much easier if people are already clamoring for what you have. This is where market research is crucial for helping you to size the opportunity.

Competitors

Entering a new market means — most of the time — walking onto another company’s turf. You’ll need to show your target audience that you can offer something better than your competitors.

Brand identity

Your brand has an identity; it can take a lot of work to import that identity and everything associated with it into a new market. How do you establish yourself in a certain way and send out the right message to your potential customers? Again market research is vital here to understand what to retain and what to adapt.

Customer loyalty to existing companies

We already mentioned your competitors. Many of the customers in your new market will have existing loyalties and strong ties to them. Luring customers away from a brand they have used and loved for decades is much more complex than simply attracting a new customer to your brand. You must stand out, offer something extra, and communicate this clearly. It’s worth paying attention to your competitors and what people like about them.

How will you reach your audience?

Consider how the people in your new target market get their information and spend their time. For example, if you’re targeting an older demographic, investing heavily in influencer marketing might not be a good idea. On the other hand, magazine and TV ads may work to great effect.

Cultural issues

If you’re expanding into an overseas market, you’ll need to consider the differences in culture and how this affects the tone of your marketing. Make sure your messaging doesn’t come across as offensive or inappropriate or appear tone-deaf due to a lack of understanding about cultural nuances and norms. Understanding cultural differences is an area where it pays to work with people who understand the culture intimately. Take the case of Starbucks — whose attempt to break into the Israeli market fell flat due to hubris and a lack of understanding of what the Israeli customers wanted.

Marketing can take a lot of work to get right, which is even more true when entering a new market. The most important thing is to research your new market as heavily as possible and gather as much information as possible before beginning your campaign. Also, be prepared to adapt your approach as you go along in response to data and feedback.

Market entry always comes with a massive amount of risks and challenges. No business can escape this, not even those with a global presence.

But when you get it right, you can reap significant rewards.

Kadence has helped companies of all shapes and sizes research their target markets and gather all the intelligence they need to lead an informed and successful market entry campaign. To find out how we can help you do the same, check out our guide to market entry or get in touch today.

Expanding into a new market is one of the boldest moves a brand can make. It’s an opportunity to unlock new customer segments, diversify risk, and drive meaningful growth. But it’s also a calculated risk—one that requires more than ambition to get right.

A new market isn’t always defined by geography. It could mean entering a different region, selling in a new language, or targeting a customer base with distinct needs and preferences. Each path brings its own set of unknowns. And while the rewards can be significant, the failure rate is high. For every successful market entry, roughly four others fall short—often due to a lack of preparation, misreading demand, or expanding too fast.

What separates the winners from the rest isn’t just a great product. It’s the strength of the market entry strategy behind it.

Why enter a new market?

Entering a new market requires time, investment, and a willingness to adapt. So why do it? For many brands, the decision is driven by a combination of growth potential, competitive pressure, and long-term sustainability.

Here are some of the most common reasons:

To reach new customers and grow revenue. New markets offer access to fresh audiences who may have never encountered your brand. With the right strategy, this can translate into meaningful business growth.
To move beyond a saturated market. If your current market has reached its limit, expansion may be the only path forward. Tapping into new demand can reinvigorate growth.
To meet regulatory or customer requirements. In some sectors, regulations or customer needs may require your product to be available in different regions or languages.
To keep pace with competitors. If others in your category are expanding into new markets, staying still may leave your brand at a disadvantage.

Not every market expansion is motivated by revenue alone. Sometimes it’s about future-proofing your business, staying relevant, or unlocking operational efficiencies. Whatever the reason, the choice to enter a new market should be backed by evidence—and a plan.

Understand the Customer

A successful market entry begins with knowing who you’re selling to. This goes beyond general demographics. You need to uncover what motivates your potential customers, what problems they face, and how your product fits into their lives.

Research methods that can help include:

Focus groups and in-depth interviews (IDIs)
Online surveys and quantitative studies
Online communities and digital qualitative research
Insights from your sales and customer service teams
First-hand observation through time spent in the market

These approaches help you tailor your product features, pricing, and messaging to match the expectations and behaviors of your new audience.

Domestic vs International Markets

Once you’ve evaluated your customers and competitors, the next step is deciding what type of market you’re entering. Are you expanding into a new region within your home country, or are you taking your business overseas?

Domestic markets often feel more familiar. The cultural norms, language, legal systems, and infrastructure typically align with what your team already knows. While challenges still exist, the learning curve tends to be shorter.

International markets, by contrast, introduce a different level of complexity. Expanding across borders means adapting to new laws, languages, business customs, and consumer behaviors. There are often logistical hurdles as well, from shipping and supply chains to currency conversion and tax regulation.

Despite the added complexity, international expansion offers unique rewards. It opens the door to untapped demand, elevates brand visibility on a global stage, and strengthens long-term resilience. But the leap requires a deeper level of preparation, local insight, and cultural fluency.

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How to Prepare for Market Entry

Succeeding in a new market depends on more than a compelling product. It requires a deep understanding of the landscape—commercial, cultural, and competitive—and a plan that balances ambition with operational readiness.

Research the Market Opportunity

Before you commit to expansion, assess the market’s potential. What is its size and growth rate? What are the dominant trends, and how stable is the economic and political climate?

Answering these questions often involves a mix of desk research, expert interviews, and primary research conducted with potential customers. The goal is to understand whether the opportunity justifies the investment and to surface any barriers that could limit your success.

Test for Product-Market Fit

What works in one market may not translate to another. You’ll need to explore:

Does your product meet a real need in the new market?
Are there gaps in the current offering that your brand can fill?
Will your pricing, packaging, or positioning need to shift?
Are you targeting a demographic with different goals, pain points, or cultural expectations?

Use this early research to refine your offer. If necessary, adapt your value proposition to better align with what matters most to your new customers.

Map the Competitive Landscape

Understanding your competitors is just as important as understanding your audience. Identify the key players in your target market and analyze how they position themselves. Look for:

Areas of saturation
Untapped niches
Mistakes you can avoid

Established brands will have the advantage of local knowledge and customer loyalty. To succeed, you’ll need a plan that sets you apart—either through your offer, your brand story, or the customer experience you provide.

Account for Cultural Differences

Cultural insight is one of the most overlooked success factors in market entry. A message that resonates in one country may fall flat—or even offend—in another. From business etiquette to purchasing behavior, you’ll need to immerse yourself in the local context.

Spending time in the market or working with local partners can help bridge these gaps. At Kadence, we support market entry projects with teams based across Asia, the US, and Europe, offering clients immediate access to local expertise.

Understand the Regulatory Environment

Compliance is critical. Local laws around taxation, trade, labeling, marketing, and data privacy vary widely. One misstep can damage your brand reputation or result in significant penalties.

For example, Europe’s GDPR imposes strict rules around how businesses collect and store personal data. If your expansion includes online operations in the EU, these requirements will apply to you—even if you’re headquartered elsewhere.

Partnering with legal advisors or local experts will help you navigate this complexity and avoid costly errors.

Build a Scalable Plan

It’s not just about entering the market—it’s about sustaining growth once you’re there. Around 65% of startups fail due to premature scaling. Without a clear roadmap, even the best-intentioned expansions can overstretch resources and stall progress.

Create a plan that outlines:

How you’ll launch and localize
Milestones for measuring early success
When and how to scale operations
Contingency steps if results fall short

Patience and discipline matter. A slower, well-paced rollout often leads to stronger long-term performance than aggressive expansion with no guardrails.

Risks of Market Entry

Every new market presents opportunity, but it also comes with risk. Brands that expand without understanding the potential pitfalls often find themselves reacting to problems they could have planned for. Below are some of the most common risks to address before you commit to a move.

Cultural Misalignment

One of the most underestimated challenges is cultural difference. Language, customs, consumer behavior, and even communication styles vary widely across regions. If your messaging or product fails to resonate—or worse, offends—you’ll face an uphill battle.

Working with local partners or experts who understand the market’s cultural nuances is essential. Immersion and research can help you align with local expectations from the outset.

Regulatory and Legal Complexity

Legal requirements vary from country to country. You may face unfamiliar tax codes, import restrictions, product certification rules, or data privacy laws. Missteps here can slow down your launch or result in costly penalties.

Take the European Union’s GDPR, for example. These regulations apply to any business handling the personal data of EU citizens—even those based elsewhere. Failing to comply can lead to heavy fines.

Legal due diligence should be a core part of your planning process. It’s best to engage local legal advisors early on.

Political and Economic Instability

Some markets carry higher exposure to political unrest, sudden regulatory shifts, or economic volatility. Currency fluctuation alone can impact your profitability overnight if your business isn’t set up to manage exchange rate risks.

Understanding the local business climate—beyond just consumer demand—can help you weigh whether the risk is worth the potential reward.

Logistical and Operational Barriers

Entering a new market often means building or adapting supply chains, distribution networks, and customer service operations. Challenges in sourcing, delivery times, or after-sales support can erode customer trust quickly.

Consider how your operations will scale across borders, and whether you need to partner with third-party logistics providers or invest in local infrastructure.

Premature Scaling

Even with strong demand signals, expanding too quickly is a leading cause of failure. Brands that invest heavily before securing product-market fit or a reliable operational base may find themselves overextended.

A phased approach allows you to test assumptions, adapt quickly, and scale with confidence. Growth should follow proof—not precede it.

Assess Your Readiness

Before you commit to a market entry strategy, take a step back and assess whether your business is truly ready to expand. These questions can help you identify gaps in your planning and avoid costly assumptions.

Does this product solve a real problem for customers in the new market?
Are you targeting a different age group, cultural mindset, or income level?
Will your existing marketing channels reach the right audience, or do you need to adjust?
Is your pricing aligned with local purchasing power and expectations?

Answering these questions early can help you focus your resources and choose the strategy that best fits your goals.

Market Entry Strategies

Once you’ve validated the opportunity and assessed the risks, the next decision is how to enter the market. There’s no one-size-fits-all approach—your strategy should reflect your goals, resources, product type, and appetite for risk.

Below are the most common market entry strategies, each with its own advantages and trade-offs.

Direct Exporting

Direct exporting involves selling your product into the new market without intermediaries. You’ll manage everything from logistics and distribution to marketing and sales.

Advantages:

Full control over your brand, pricing, and customer experience
Greater profit potential, since no third party takes a share

Challenges:

High upfront investment
Requires internal infrastructure and export expertise
May be difficult to manage across time zones and borders

This approach is best suited to brands with strong operational capacity and a clear understanding of the target market.

Indirect Exporting

In this model, you work with intermediaries—such as agents, distributors, or trading companies—who manage the export process for you.

Options include:

Buying agents, who represent foreign buyers and source products on their behalf
Distributors or wholesalers, who purchase and resell your product locally
Export management companies (EMCs), which handle end-to-end export logistics
Piggybacking, where a local company adds your product to their existing distribution network

Advantages:

Lower financial risk and resource demand
Allows you to test a market without a major commitment
Quick access to existing infrastructure and customer bases

Challenges:

Reduced control over brand representation and pricing
Less direct contact with customers
Margins are typically lower due to third-party fees

Indirect exporting is often a smart first step for brands new to international markets.

Local Production or Manufacturing

Instead of exporting products into a new market, some companies choose to produce them locally. This can reduce logistics costs, shorten supply chains, and align more closely with local expectations or regulatory requirements.

Advantages:

Faster delivery and lower shipping costs
Easier to respond to local demand or customization needs
Potential tax or tariff benefits

Challenges:

High setup and operational costs
Legal and HR complexities
Exposure to local market volatility

Local production is more viable for companies with long-term growth plans and high-volume expectations.

Franchising and Licensing

Franchising and licensing allow other entities to operate under your brand in exchange for fees or royalties. While commonly used in sectors like quick-service restaurants, this model also applies to retail, fitness, education, and more.

Franchising provides a full operational model, brand, and support system to the franchisee.
Licensing typically grants use of intellectual property or technology with less operational involvement.

Advantages:

Fast market access with minimal investment
Local partners carry operational responsibility
Scalable across multiple regions

Challenges:

Quality control can be difficult to enforce
Success depends heavily on the capabilities of your franchisees or licensees

This model is ideal for businesses with strong brand equity and a replicable business model.

Each of these strategies can be adapted to suit your brand’s maturity, product type, and market conditions. In some cases, brands combine multiple approaches—for example, launching through indirect exports while exploring licensing or local partnerships for long-term growth.

Partner with Experts Who Understand the Landscape

Entering a new market is never simple. It takes clear strategy, local insight, and a willingness to adapt along the way. The brands that succeed are the ones that prepare well, ask the right questions, and make informed choices at every step.

At Kadence, we help brands do exactly that. Whether you’re expanding into a neighboring region or launching in a completely new market, we bring the research, frameworks, and local expertise to guide your move. From sizing the opportunity to selecting the right strategy, we work alongside your team to build a plan that’s grounded in evidence and tailored to your goals.

Learn more in our comprehensive guide to market entry, explore our market entry services, or get in touch to start a conversation.

What is quantitative research in market research?

Quantitative research is a fundamental pillar of market research. It focuses on gathering measurable data—hard facts and figures—to build an objective understanding of customer attitudes, behaviors, and preferences. Whether it’s purchase frequency, satisfaction scores, or brand awareness levels, quantitative methods provide the statistical backbone for evidence-based decision-making.

This approach differs from qualitative research, which is centered around exploring perceptions, motivations, and deeper context. While qualitative methods uncover the “why” behind behaviors, quantitative research answers the “what,” “how much,” and “how many.” Both are powerful—but serve different purposes. The most effective research strategies use them in tandem.

In this article, we’ll explore what quantitative research is, how it compares to qualitative research, when to use it, and the different ways to collect and interpret quantitative data.

How is quantitative research different from qualitative research?

Although both are essential tools for understanding customers, quantitative and qualitative research take fundamentally different approaches.

Quantitative research is rooted in numbers. It collects numerical data through structured tools like surveys or analytics platforms and analyzes it to identify patterns, trends, or differences among groups. It typically uses large sample sizes and closed questions to generate statistically valid insights.

In contrast, qualitative research focuses on depth over breadth. It explores individual experiences and emotional drivers by speaking directly with participants in interviews, focus groups, or ethnographic settings. Rather than relying on fixed response options, it uses open-ended questions to allow themes and meanings to emerge.

Here’s a summary of key differences:

Quantitative research measures; qualitative research explores.
Quantitative tools include surveys and structured tests; qualitative tools include interviews and discussions.
Quantitative output is numerical; qualitative output is narrative.
Quantitative methods support scaling and comparison; qualitative methods are best for understanding nuance and context.

Both methods serve different ends of the research spectrum. Quantitative research gives you a reliable snapshot of what’s happening. Qualitative research helps you interpret why it’s happening. Used together, they form a complete picture of your market.

Why is quantitative research useful in market research?

Quantitative research brings a range of strategic advantages to any research program:

It supports large-scale insight: With representative sampling, brands can understand how widespread certain opinions or behaviors are within a population.
It reveals patterns across segments: By comparing data by age, gender, location, or other traits, brands can identify differences and commonalities among customer groups.
It helps assess market potential: Quantitative methods can size an opportunity or test demand for a new product with statistical precision.
It simplifies complexity: Reducing consumer behavior to key metrics makes it easier to track, benchmark, and model over time.
It brings clarity to decision-making: When data is statistically valid, stakeholders can move forward with confidence.

In a business environment where evidence matters, quantitative research provides the solid footing that leaders, marketers, and innovators need. And when used alongside qualitative research, it ensures that decisions are grounded in both data and human insight.

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Types of Quantitative Research

There are four main types of quantitative research, each suited to different objectives:

Descriptive research is used to measure and describe the characteristics of a population. For example, understanding how many consumers prefer brand A over brand B.
Correlational research explores relationships between two variables without manipulating them—for instance, examining whether there is a relationship between screen time and purchase intent.
Experimental research involves manipulating one variable to determine its effect on another. It’s common in concept testing and controlled product trials.
Quasi-experimental research also involves comparisons but without full randomisation. It’s often used when control groups can’t be perfectly established, such as in natural field environments.

The type of quantitative research you choose depends on your goals—whether you’re looking to establish cause and effect, test hypotheses, or simply describe consumer behaviour. For a practical overview of when to use each method and how to pair it with qualitative approaches, see our guide on choosing the right approach: qualitative vs. quantitative research.

Quantitative Data Collection Methods

When collecting the data you need for quantitative research, you have several possibilities available. Each has pros and cons, and it might be best to use a mix. Here are some of the main ones:

Survey Research

Survey research involves sending out surveys to your target audience to collect information before statistically analyzing the results to draw conclusions and insights. It’s a great way to understand your target customers better or explore a new market, and it can be turned around quickly.

Different delivery methods include:

Email — A quick way of reaching a large number of people and can be more affordable than other methods.
Phone — Ideal for reaching demographics without internet access (e.g., older consumers). However, it can be costly and time-consuming.
Post — Offers broad reach but is slower and more expensive, making it less practical for time-sensitive projects.
In-person — Useful for intercepts, taste tests, or central location tests where real-time interaction is necessary. This approach is logistically complex and more expensive.

Survey questions in quantitative research usually include closed-ended formats rather than the open questions used in qualitative research.
For example, instead of asking:
“How do you feel about our delivery policy?”

You might ask:
“How satisfied are you with our delivery policy? Very satisfied / Satisfied / Don’t Know / Dissatisfied / Very Dissatisfied.”

This structured approach ensures responses can be easily quantified and analyzed.

Analysing Quantitative Research Results

Once you have your results, the next step—and one of the most important overall—is to categorize and analyze them.

A common approach is cross-tabulation, where you break the data down into demographic subgroups. For example, among those who answered ‘yes’ to a question, how many were business leaders versus entry-level employees?

You’ll also need to clean the dataset—removing unreliable responses (such as respondents who sped through the survey)—to ensure confidence in your conclusions. These technical aspects are often best handled by a dedicated research team.

The Function of Quantitative Research in Business

Quantitative research functions as a structured method for gathering and interpreting data to support evidence-based decision-making. Its strength lies in reducing ambiguity—translating complex behaviours into measurable patterns. Whether you’re validating a product idea, sizing a market, or tracking changes over time, quantitative methods provide the statistical clarity needed for confident business decisions.

Why Quantitative Research Matters

Quantitative research is an essential tool for anyone looking to understand their customers or market in a rigorous, scalable way. It offers reliable insights into behaviour and preferences across different segments, delivering trends that can guide strategy.

However, while quantitative research can tell you what is happening, it often can’t explain why it’s happening. That’s where qualitative research plays a complementary role—providing the deeper context behind the numbers.

Frequently Asked Questions about Quantitative Research

What are the 4 types of quantitative research?
Descriptive, correlational, experimental, and quasi-experimental research.

What is an example of quantitative research?
Running a nationwide survey with closed questions to understand consumer preferences is a common example.

How does quantitative research differ from qualitative research?
Quantitative research focuses on numerical data and large samples; qualitative research explores motivations and opinions in smaller groups.

What are the advantages of quantitative research?
It’s scalable, reliable, and ideal for comparing subgroups or identifying patterns across a population.

What are the disadvantages of quantitative research?
It may lack context or emotional nuance and cannot fully explain the ‘why’ behind consumer behaviour.

How do I know which method to choose?
Use quantitative methods when you need statistical confidence, clear comparisons, or to validate a hypothesis. For deeper insight into underlying motives, qualitative methods may be more appropriate.

Ready to put your research into action?

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Many global economies are defined by stagnant growth, falling populations and saturated markets, making growth for brands a tricky proposition. In many ‘emerging markets’ there are still big opportunities grow… if you keep your eyes open.

Many businesses are looking to fast-growth, high-energy markets outside the so-called ‘developed’ economies to fuel their expansion. Unlike congested and sometimes shrinking economies in ‘the west’, many parts of the world are seeing rapid population growth, fast-rising incomes and are adopting transformative technologies without the burden of legacy investments. The result? Vibrant new opportunities for businesses.

But while entering any new market is a challenge for brands, moving into these more dynamic economies – often with very different cultures, business practices and consumer expectations – can be particularly tricky. Berlin isn’t the same as Birmingham, but many of the norms in both markets are recognisably similar. Head to Beijing or Bamako, and the assumptions you make about brand, product and business practices will be challenged.

Take a phased approach to understanding the opportunity afforded by new markets

The best way to understand your opportunity in different markets is to take the traditional phased approach to research. This involves the following considerations.

Which markets might we look at? Consider the number of consumers, the country’s income levels and the stability of its economic and political structures. You can also examine the maturity of business practices and think about geographic location, transport links and accessibility in-market.
What’s the macro environment like in a market we want to enter? Revisit all the above, in more detail. Focus on specifics – such as the transport and tech infrastructure; and business support networks (such as accounting firms or legal protections on IP) – and how the trends are evolving in those areas.
How does the competitive landscape affect its attractiveness? Pay attention to other outsider brands and how they’re doing; but also domestic rivals and potential competitors poised to move into adjacent markets.
What are the practical issues for market entry? In new markets further afield, transport links, language barriers, different cultural norms and local regulations can throw up roadblocks.
How do we adjust our product, service or messaging to optimise our offer there? As above, but remember that very different cultures and climates can challenge even the most basic assumptions about how a product will perform.

Step away from the generalisations

It’s vital to acknowledge that ‘emerging markets’ aren’t as uniform as the term suggests. Far from it. There are so many variations by region or category that talking about common features of ‘emerging markets’ is a dangerous over-simplification. And there are as many differences within countries as between them. This particularly true in countries where rapid urbanisation has seen a break with traditional cultures outside cities.

(That’s true for any generalisation, of course. Alcohol brands, for example, can’t even treat the US and Canada the same. North of the border, there are drinking-age laws set province-by-province, massively complicating online alcohol sales. They might look the same in terms of development and even geography and demographics. But they’re not.)

That’s not to say there are no rules that apply to entering markets that share particular attributes. The pace of economic or population growth, or the expansion of middle-class consumers with disposable income, might always be a feature of your selection process for target markets.

But in many categories, consumption is growing so quickly that only the real beneficiary of a ‘toe in the water’ market entry is likely to be knock-off brands and domestic substitutes able to adjust output more responsively to local conditions, especially where legal protections for intellectual property are less secure for global players.

All these caveats mean that in-depth research into new-market consumer appetites, infrastructure and competition is just as important in growth areas as it is in more mature markets.

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Assessing new markets – 5 key considerations

All that being said, knowing the likely biggest points of difference when entering markets with strikingly different fundamentals is still important. Five things to consider:

1. Affordability

In many emerging markets, disposable income may be much lower for large parts of the population. For global products, that means understanding the more affluent segments better and targeting marketing appropriately. For localised or commodity products, the question is cost. Can you use local manufacturing, logistics and even branding to deliver your product to a mass market?

2. Distribution

Getting product to consumers might be more challenging. For brands that rely on developed economy logistics partners, understanding infrastructure constraints, developing local contacts and ensuring quality of service is crucial. When Haagen-Dazs first entered China, it set up its own warehouse and delivery network to ensure the product reached consumers correctly.

3. Localised branding and marketing

What works well in Boston, may not succeed in Beijing. Cultural understanding is key to ensuring that your marketing and branding hit the spot further afield. Caveat: remember the urban/rural split. Many urban consumers are ‘world citizens’ and expect to be treated as such.

4. Watch for local rivals

The cachet of being a global brand can help enter emerging markets. But cost, customisation and the risk of ‘brand colonialism’ can make more assumptive Western brands seem out of touch and vulnerable to local alternatives.

5. Native teams

As a global market research agency, we benefit from having local teams in the markets we evaluate for clients. This means we understand the cultural context, consumer trends and broader macro situation. It is possible to enter emerging markets at arms’ length. But having local people in decision-making positions is the surest way to avoid clumsy cultural or operational missteps.

Look for leapfrog opportunities

There are plenty of upsides to emerging markets, too, beyond simply vast numbers of new customers. In some cases, our research will throw up opportunities that just aren’t available in mature markets at all.

Look at the way different platforms have developed to cater to the nuances of local markets, for example. In many fast-developing economies, traditional channels have been leap-frogged by the adoption of newer technologies. This often happens where older tech infrastructure has attained much less penetration, allowing a newer tech to fill a void.

In many African countries, for example, low population density and long distances between conurbations means traditional copper or fibre telecoms can be limited. But mobile telecoms are more practical and affordable. They offer a plethora of additional over-the-top services that have led to an e-finance and e-commerce boom. Entering those markets will require different thinking about distribution – as well as marketing and payments using creative local solutions.

Remember, e-commerce is not the same everywhere

The Philippines is another good example. In other countries, Facebook might be just part of your online marketing toolbox. But there, Facebook has attained an absolutely dominant position in e-commerce – for one simple reason. With lower average incomes, Facebook and local mobile companies realised their penetration was constrained by the cost of network data. So almost every plan has free Facebook data regardless of contract status. For market entry success in the Philippines, Facebook is going to play a big role.

But we need to distinguish between being available on those platforms on the one hand; and entering a market on the other – which involves boots on the ground. Yes, that’s more investment. But you’re also surrendering less of your margin to platform owners and logistics providers.

A staged approach to entering less well-understood markets, starting with the more popular local social networks or e-commerce platforms, allows you to refine the consumer profile. Companies also get time to get to grips with the legal and financial frameworks that might shape future involvement; and see how local fulfilment clarifies their operational options.

Don’t assume that tried and tested e-commerce strategies from the US and Europe will work everywhere in the world, however. Amazon, for example, simply doesn’t have a presence in some markets. In others, consumers can use the site, but limitations on distribution and other logistics mean delivery times, cost and availability are prohibitive. Local research about the best platforms for reach and fulfilment is a must.

Lazada, Shopee, Zalora and Carousel, are some of the top e-commerce sites in South East Asia. These names may not be familiar to firms outside the region. But they can play a crucial role for testing in these markets. Again, it’s worth working with people who understand how to optimise those platforms, as well as interpret the effectiveness of marketing on them; and what the results say about the potential for deeper market entry.

Understand the technicalities of new markets

Even online entry into a very unfamiliar market can be daunting. Moving in for formal distribution, licensing or agent agreements or even setting up locally or buying into a native business brings with it additional issues that need to be researched.

European companies with experience of entering new markets in the EU can find the regulatory and legal considerations in countries farther afield a challenge. Even in the US there are federal laws and individual state regulations over companies and property to contend with. This can make establishing a new business relatively tough. And that’s considered a ‘developed’ market.

In parts of South East Asia, many European companies report lengthy delays in registering businesses. Others discover that in some markets domestic firms have particular benefits. This could be a form of protected status, or reserved access to certain kinds of contract. This is worth exploring in due diligence especially if you plan to sell to government agencies that are often required to ‘buy local’.

Don’t make any assumptions

Most of the key factors for market entry will depend on exactly which market you’re looking to enter. There are very few hard and fast rules that apply across the generalisation ‘emerging markets’.

But there is a common theme from this guide that should frame your thinking: these markets change – fast. Before committing to entering any market – and especially ones evolving so rapidly – it really pays to research the opportunity fully. This is something that Kadence has helped many clients with, allowing companies to succeed in lucrative emerging markets. Find out more about our market entry services, or get in touch to discuss a project.

It makes sense to open up new markets for a successful product or service. But how do you know whether it’s worth the investment? What makes for a potential buyer in your home territory might not apply in a new location where the total addressable market could be much smaller or many times the size. Enter the market researchers. We explain how to calculate market potential.

Estimating sales can be a chore even when you have historical and well-honed market instincts to work with. But in a new market this is even harder. There’s no historical data to review and it’s challenging to estimate the kinds of expenses and risks that might crop up.

An inability to judge sales makes the decision of whether to enter a new market much harder. Without a decent estimate – of both sales and likely profits – it’s almost impossible to decide on how you might enter and what kind of investment to make there.

What’s the market really worth?

The starting point is to get a handle on the existing market for your brand or product in the new territory. A basic market analysis is a great starting point. Typically it breaks down into:

Market sizing (current and future)
Market trends
Market growth rate
Market profitability
Industry cost structure
Distribution channels
Key success factors

But within each category, there’s lots to research. A more superficial look at the data can be helpful for a ‘first cut’ look at which new markets you might want to enter. But a deeper dive into the numbers will be essential if you’re going to properly evaluate the strategy for what looks like a high-probability candidate.

That more sophisticated analysis could take the form of a total addressable market (TAM) analysis. This looks at both the TAM itself, as well as serviceable available market (SAM). This is the portion of TAM that your company’s products or services play inside; and serviceable obtainable market (SOM), the percentage of SAM which your might realistically reach.

Best guesses?

But getting to SOM for a brand new market isn’t a simple calculation. It’s not exactly easy in markets where you’re a known quantity and understand the competitive environment, either! For businesses in mature categories and with previous experience of being a new entrant to markets, it’s possible to make educated guesses. This can be refined with local research on factors that might shape consumer behaviour.

In some industries that data might be possible to obtain – from industry associations, for example, or government agencies. In others – and particularly in product segments that a relatively underdeveloped in the market you plan to enter – sales figures might be harder to come by.

Then there’s the difficulty of calculating market share. You will know what it might cost in contracts, infrastructure and marketing to build share in existing markets. But the assumptions may be way off-base for a brand new market.

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Talk to people

At this point there are two avenues:

Research sales results that have been achieved by other companies like yours. They don’t even need to be in precisely the same line of business. The lessons of other companies looking to sell into the new markets can reveal both the optimum routes in, the barriers to adoption and the appetite for new brands.

That might even mean contacting other businesses to ask their experience of making the adaptation to the new market – as well as learning about potentially important busy and slow seasons, noteworthy business practices and quirks of the system that might not have a direct bearing on the size of the opportunity, but will allow you to adjust your assumptions.

Talking to local partners, however, is probably the best way of calibrating your expectations. Even if you plan to enter a market by establishing a local entity and investing in your own facilities and marketing, you’ll still be working with many different counterparties. This can span everything from local professional services firms such as lawyers and accountants, to warehousing, distribution or media buying agencies.

They ought to be able to offer anecdotal evidence at the very least; at best, they’ll have insights into the size of the market and chances of capturing that crucial market share. And if the route to market entry is contracting with a local distributor, licensees or franchisees, their sense of the opportunity could be invaluable.

But above all, rigorous quantitative and qualitative market research will reveal a great deal about attitudes and appetites for your brand or product. The more you can contextualise the hard data on existing spend and potential market growth with consumer insight, the more realistic your evaluation will be.

Focusing on behaviour

One other way to address uncertainties about how a new market might embrace a product or service is to think not about that category, or even look at domestic rivals’ sales and strengths. It’s to create a strategy based on consumer behaviours.

If you can analyse why your brand, product or service is successful in its existing markets and break down the results into some key motivators or even behavioural traits of your consumers, it might be possible to assess where those traits are visible in a new market before you enter. In what situations is your product used? What type of people love it? What are those customers’ attitudes across different domains? What role does it play in their lives – and why?

That will require some pretty deep insight into the market you want to enter. Clearly it’s a more useful investment to make if there are other positive signals to encourage you in – fundamentals such as infrastructure, spending power or pre-existing local interest in your brand or product.

How good is your cost analysis?

Knowing your potential sales, market share and growth are all important. But the scale of the opportunity isn’t just sales – it’s profit. And even seasoned businesspeople can misstep when it comes to keeping costs under control in their market entry strategy. Here’s a brief list of costs that won’t affect domestic-only businesses:

Shipping costs – which can also fluctuate wildly, as we’re finding out during the COVID-19 pandemic. Consider, also, capacity. Shipping out of markets with a high balance of trade deficit (Europe, US, UK) to major exporters (China, for example) is much easier than going the other way.
Legal expenses – from registering a business in a new location, sorting out licensing, contracts, the right insurance cover… and complying with local regulations on everything from product labelling to anti-bribery laws.
Foreign taxes – and other local accounting quirks, which might be different depending on your headquarters domicile and the mode of entry into the market.
Translation services – for everything from contracts and technical specs, to instruction manuals and marketing.
Recruitment and HR – even a light-touch market entry will benefit from putting some employees into the new market to oversee set-up and manage local relationships.
Travel expenses – for the above, but also for ongoing check-ins with local teams or business partners.

What do you know about rivals?

Some lucky businesses will find an overseas market where there are few local rivals, legal and business structures that allow them to port across their defensive attributes from existing markets and a ready but as-yet-untapped consumer base. But those will be rare. So to properly understand the market potential, you’ll need competitor analysis. Our typical approach to this considers:

Who are your rivals in that market? Not just currently selling what you want to sell, but addressing your potential customers, too.
What is their range of products? How easily might they change?
How do they pitch their consumers? What messages are they using? Which channels?
What is their competitive advantage? What’s their cost base like? What could you replicate – and where can you out-compete them?
What’s their market share? How fragmented in the competition? What opportunities does that present either in terms of the industry cost-base or even acquiring smaller rivals?
What is their company structure? If they outsource (for supply or support) or license (to address the market), could those be vulnerabilities increasing your potential strength?

In summary

A lack of prior experience and knowledge can make it challenging for companies to assess the potential of new markets. We help lots of business overcome this – not just through the use of primary and secondary market research, but also by having people on the ground in many countries and regions to add specific local knowledge.

This creates a much more rounded view of the market potential – and the optimum ways to tap into it – than simply applying a cookie-cutter approach to market entry. The key steps:

Understand the demographic and economic drivers that underpin the total market for your products or services.
Think laterally about the broader factors – such as the types of consumer and cultural attitudes – that dictate market size.
Analyse existing market activity to deduce a TAM, SOM and SAM.
Conduct consumer research to evaluate your specific opportunity in the market.
Competitor intelligence will help you test assumptions about potential market share gains.
Rigorous local insights into costs and risks will reveal the profit potential – the ultimate rationale for market entry

Find out more about our market entry services, read our expert guide to market entry or get in touch with us to discuss a project with our team.

How you enter a market often dictates whether you’ll be successful there. Different approaches all have pros and cons – and deciding which to choose is as much about market insight as it is financial logic. So what are the four market entry strategies?

Export? Licensing? Franchising? Partnering? JVs? M&A? There are many ways to get into a new market. What situations typically suit each variety? What do you need to know about the market to select the most appropriate options? How do we assess the strengths and weaknesses – and their long-term effect on your business? Here’s our brief overview of your options for an entry strategy into a new market.

Early exposure: the passive way in

Online retail – and social media these days – mean brand exposure in new markets has become relatively easy. Social media shopping, for instance, is becoming an increasingly popular entry point for brands into new markets, particularly if they’re picked up by influencers. This could be by traditional media outlets (like fashionable magazines), web-based trend-setters (such as popular tech review channels on YouTube) or specialist social media influencers on global platforms such as Instagram and TikTok. Most markets have their own versions of these channels – and there are plenty of popular global options, too.

(Caveat: many global influencers, and those within markets, may need inducement to feature products or services. While ‘accidental’ market exposure is possible, you’re still likely to need some kind of strategy for this kind of introduction.)

But e-commerce can be a double-edged sword. Yes, consumers might get exposure to a brand online. But if it’s not available in their market, they can end up buying the next best thing that is available. Your brand could be doing an excellent category building job for local rivals.

It’s also worth looking out for platforms that are not global. In many markets, local e-commerce platforms have emerged. Any attempt to exploit the market will rely on having access to it. (We look into that further in our guide to entering emerging markets .)

In addition to working with local platforms, brands need to consider carefully how to fulfil orders and handle customer relations. Managing all these elements through third parties in a straight commercial relationship can work well. That said, there’s a massive gulf between entering a market virtually via e-commerce and getting ‘boots on the ground’.

That’s not just about commitment. Each of the third parties you work with is taking a chunk of your profit margin. And in some cases – particularly with perishable or heavyweight products, and especially services – the arm’s length approach just won’t work. To access that pool of consumers, you’re going to need a local presence. Here are some main routes in.

1. Structured exporting

The default form of market entry. Consumers and companies in other markets can easily buy your products wholesale, sort out logistics and handle local marketing. Increasingly, brands can ship internationally – riding the kind of passive market entry discussed above – but assigning a local trusted distributor to conduct transactions with your buyers, and even partnering directly with major wholesalers or retailers, is a perfectly good way in.

Working with the right partners can be a make-or-break decision. So thoroughly researching the key players, their terms of trade and their local reputations is vital. Even seemingly innocuous business practices can have a big effect on the way products are handled, sold and supported.

Having local agents doesn’t mean you can ignore the nuances of the local market. It still pays to get under the skin of local retail, for example, understanding any patterns of consumption and thinking about local tastes and behaviours that might shift how a product is presented. Even in an arms-length distribution agreement, it pays to tailor a product to local preferences. Chocolate brands, for example, must cater to both local biases on the flavour and texture of their product – but also the local climate. Getting under the skin of target consumers in new markets is something we’ve supported many businesses with as they’ve entered new territories.

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2. Licensing and franchising

Licensing is giving legal rights to in-market parties to use your company’s name and other intellectual property. Any licensee can produce and sell products under your name or offer services using your brand. In exchange, you get royalties or other payments. It can be an effective light-touch way of entering a market, especially if you’re a service business that needs a local workforce; or your products would benefit from local manufacturing.

But it’s not all plain sailing. How a licensee behaves towards customers, the quality of their output and the local spin they put on your product can affect the brand. That means thorough due diligence is needed on potential partners, and brands that come to the table with detailed research on their new market are much more likely to be able to tie down any important factors affecting those decisions into a contract.

Franchising is similar to licensing but requires a lot more heavy lifting up front. As well as researching any new market before entering it, brands should think about how they will structure any franchise agreement – which will require additional research into local legal structures and potential franchisees; working out what the franchise buys (for some businesses it’s little more than a licence; for others, it’s a suite of processes, marketing support materials and even hardware that come with the deal); and how they might be able to handle disputes with franchisees later.

3. Direct investment

For many companies, setting up a fully-fledged operation in the new market is a big commitment – but also brings huge advantages. This kind of ‘greenfield’ investment – ‘greenfield’ meaning the establishment of new facilities – means complete control over the operations in the new market. Many countries welcome foreign investment of this kind.

Some companies will choose only to enter new markets where this kind of investment is possible – for a variety of reasons. If the product is particularly sensitive to different kinds of handling, for example, or needs to be manufactured to particular tolerances, ownership provides a reassuring level of control.

If that’s the case, the legal and regulatory burden of different potential markets should be a factor in the due diligence process right at the outset. Having local legal and financial advice, in additional to in-market research expertise, is essential.

4. Buying a business

International M&A is still fraught with risks and paperwork, but even in a bad year – 2019 is the last we have figures for, and we might expect 2020 to be an outlier one way or another – cross-border acquisitions accounted for $1.2 trillion. (A ‘bad year’? That was a third lower than the US$1.8 trillion in deals in 2018.) The reason? Buying an existing business is a genuine fast-track for foreign companies to enter a new market.

Market research plays an even more important role in due diligence when you’re buying a business in unfamiliar territory. The traditional metrics you might assess – and even the gut feel of key decision-makers – have to be translated through completely different lenses of cultural and market norms. (Due diligence isn’t easy on domestic M&A deals; it’s much tougher abroad…)

That’s also true, to a lesser extent, with buying a minority stake in a business in your new market. This might mean less up-front investment albeit with less control, too. But in both cases, you’re also buying into local market expertise – which can be invaluable.

That’s also the big benefit of setting up a joint venture (JV) – a new partnership between your company and one or more parties where the ownership is shared. You get the benefits of a greenfield start-up; a lower investment than M&A or setting up on your own; local expertise baked in; and legal status as a native in the new market. Many businesses see a JV as a turnkey project: each party brings existing expertise and capabilities to bear for fast deployment.

But be warned: joint ventures only thrive when the contractual commitments of each partner and the beneficial ownership structures are crystal clear. And some big brands have come unstuck in joint ventures where the local partner’s vision for the product or service deviates from their own. Conflict resolution mechanisms are a must. Unsurprisingly, joint ventures are more common in time-limited projects where several contractors need a legal entity to collaborate on a very specific mission – and have clear terms for the joint venture’s dissolution.

Building your intelligence network

The choice of entry route will be dictated by many factors, then – consumer habits, culture, legal status, taxes and tariffs, local business practices, the transparency you can attain around potential partners and more. As a rule of thumb, the less exposure to cost and risk you have, the less control and margin you can secure.

Arms-length surveys and analysis can only tell you so much, however. Working with international agencies who have their own people on the ground in a new market not only means better access to the nuances of consumer behaviours and local trading rules – it also means dealing with people who have first-hand experience of running a business in that market. This approach has enabled to us to successfully support clients in entering new and lucrative markets.

You can learn more about our market entry expertise, or get in touch to discuss a potential project.

Entering a new market can lead to a massive boost to sales, brand strength and long-term profits. But there’s more to a market entry strategy than great products or services. Understanding the local market – its distribution channels, culture, economic and social trends – through a market research-driven due diligence process is crucial. And sometimes the most valuable insight is the hidden reason why you shouldn’t proceed…

The art and science of market entry

Over the past 40 years globalisation has redefined what it is to be an international brand. For decades, a handful of dominant players in markets such as food and drink (driven by marketing prowess) or automotive (reliant on economies of scale) had been able to enter new markets in ways that most businesses simply couldn’t imagine.

The rapid growth of global trade capacity, and particularly the ubiquity of the internet, has levelled the playing field. Today, a business in Bolton has myriad options for selling in Beijing; an Australian specialist retailer has lots of ways into the Austrian market.

But the process of choosing which markets to enter, how and why remains fraught with danger. The rewards of opening up a new market are potentially great. On the other hand, the cost can be significant, and the list of powerful global brands that have failed to successfully enter new markets is a long.

The factors to consider are varied: there are economic and social dimensions, competition from local companies, the quirks of regional distribution channels, cultural mismatches… and much more. That means undertaking a market-research-driven due diligence project before entering a new market is a must.

Why look elsewhere? The reasons for market entry

What motivates companies to investigate entering a new market? Every organisation will have its own reasons. Exploring them in detail is a useful first step in defining the later market entry strategy.

Brand growth

A huge proportion of value in modern enterprises is wrapped up in intangibles. That means increasing enterprise value requires diversification of the brand. Some very strong domestic brands can move into adjacent markets (Dyson, for example, can leverage its reputation for air-moving engineering from vacuums, to hand-dryers, to room fans and even hair straighteners). A select few can jump into non-adjacent categories (Virgin, for example). But opening up a whole new geographic market can establish a brand with many more consumers, boosting its value.

Saturation of existing markets

Once you have gained significant market share and consumer penetration domestically, it’s easy to see growth stall. Launching new products to address existing customers is costly and high risk. But taking proven products or services to a new market can create fresh upside for growing brands.

Optimising overhead costs

As businesses grow, they build up overheads – around head office functions, for example. They also build up niche skills and experience – in fields such as logistics, legal or financial. These scale well: the more times you can put your experts to work in a new market, the more productive they are. And the more markets you have, the lower the amount each one pays to meet head office costs.

Strategic partnership

Globalisation has meant businesses can easily work with partners in new markets – creating new opportunities for blended products and services. Local distributors, for example, might be pathfinders for a brand into a new market – demonstrating the potential for a more structured entry into that market.

There are plenty of other motivations, often overlapping. Knowing which is driving the decision to explore new markets will help frame the strategy for successfully entering one.

A phased approach to market entry

There are different phases to a market entry project. You need to size the opportunity to judge whether it’s worth entering a new market. There ought to be concept testing, especially for new categories or innovations in that market. Many clients focus on competitor analysis when they’re dealing with less well-known rivals.

Market entry has many dimensions – and no business is too big to skip them.

We work with a number of high-profile Japanese brands, global names that are already present in different countries in some form of another. But they still need to tailor particular products or brands to the local markets they’re looking to exploit; and understand the specific needs of consumers in those categories.

Market entry projects usually involve a series of questions, and typically each of these is a discrete engagement.

Key questions for any market entry project

Which markets might we look at?
What is the macro environment like in a market we want to enter?
How does the competitive landscape affect its attractiveness?
What is the best way to enter the market in practical terms?
How do we adjust our product, service or messaging to optimise our offer there?

While market entry studies are a vital tool in successfully growing a brand somewhere new, sometimes their value comes from showing that entering a new market will not be successful. Around 50% of these projects results in a recommendation not to go ahead as planned. That finding can emerge at any one of the stages above. Far from being bad news, it’s often the most valuable insight a brand can get. Market entry can be costly and complex – not doing so when the conditions aren’t right can save massive amounts of money and time.

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The world is your oyster. But where’s the pearl?

A crucial first step in investigating markets for entry is to analyse why a brand, product or service is successful in its existing markets. How is it used? Who are the type of people that love it? What are those customers’ attitudes across different domains? What role does it play in their lives – and why?

The next step is to look for markets where groups like this already exist. A good starting point can be detailed desk research – using tools like the CIA World Factbook for demographic information, or understanding cultural similarities to your home market through cultural awareness studies like the Hofstede Insights Culture Compass. But ultimately, it’s approaches developed precisely for the brand or product that will reveal good matches. Narrowing down the high-probability markets is hugely valuable for brands that don’t have other clues to go on.

Sometimes brands do have a clear idea from the outset which markets they want to enter. We worked with a company producing ceramics which had a light-touch arrangement with an international distributor. They started to notice a significant uptick in orders from Korea – which was obviously a strong signal that entering that market could pay dividends.

But that also meant understanding why was key to a successful market entry. Closer research revealed that an increase in purchasing power among the country’s middle class had made the designs more attractive; plus online shopping had taken hold and made previously hard-to-get products more visible.

Target acquired. Now what? Next steps in a market entry project

Specific country research starts with fundamental market insight and competitor intelligence work. Initially, that’s secondary research, analysing available insights for the particular category in question. After that, we might move on to interviewing people whose knowledge of the market will provide more nuanced insights.

Companies usually see this as their feasibility study, helping them understand who else is operating in their category, what regulations might be applicable, what the domestic distribution and supply chain infrastructure is like, and what investment they’re likely to need to make under different scenarios.

That industry analysis and expert insight helps generate a strategic overview of the market tailored to the client. Often that’s enough to substantiate the decision on whether and how to enter a market, especially if it’s a close match with the brand’s existing markets.

A good example is some work we did with an electronics brand looking to launch a new product in the US. The group already has a huge presence in America – but not for its new product, a battery system for domestic renewable electricity.

Our project involved interviewing a range of potential stakeholders – such as real estate developers, housing associations, planning authorities and environmental regulators – to get a holistic view of how that market might evolve. That enabled the client to take a realistic view of both the existing appetite for the product and current regulations; and how the landscape might change as they developed the product.

It’s not uncommon for a company to walk away at this point – there might be competitive, regulatory or infrastructure barriers that no mode of entry can overcome cost-effectively.

Frameworks to assess a new market

A structured framework can be valuable in assessing a new market. You might see great consumer interest – but if the regulatory stance is hostile, you have to think twice. One way of conducting a thorough overview of a market to pick up all those factors is to analyse the environment through different PESTLE lenses:

PESTLE

Political – how stable is the country? What’s the prevailing ideology? What biases – intervention in markets, say, or taxation – do politicians have?
Economic – how rich is the country? How is wealth distributed? What’s growth like, and where is it likely to continue?
Social – what’s the culture in the country? What are the typical social structures – family, work, community? What about religious norms? Education levels?
Technological – what’s the infrastructure like? How wired is the country? How lumpy is technology penetration? What about population ‘techiness’?
Legal – what rules are there about business ownership? How about liability laws? What recourse do overseas businesses have in the courts?
Environmental – how might the local climate affect the product or service? What about use of resources? Or end-of-life disposal of products?

Porter’s Five Forces

The next step is to get a grip on the competitive landscape, and that’s where tools such as Porter’s Five Forces come in. Michael Porter worked at Harvard University, and in 1979 he published a paper aiming to describe the ‘microenvironment’ for the attractiveness of any given industry – or, in this case, a new market.

There are three forces from ‘horizontal’ competition:

The threat of substitute products or services – what’s the alternative to your own offering that people might use? How are they achieving the same goals now, and what might shift their views?
The threat of established rivals – bearing in mind that in a new market for you, there will be lots of players who know how to operate there better than you do.
The threat of new entrants – being a new entrant to a market doesn’t mean others won’t follow, too. And if you’re establishing a new category in a market, that might tempt others in, or prompt local businesses to muscle in.

Two forces come from ‘vertical’ competition:

The bargaining power of suppliers – opening up a new market might help you gain economies of scale from higher sales volumes. But it also makes you more reliant on suppliers – especially around issues such as logistics.
The bargaining power of customers – understanding the broader competitive landscape will help you see what choices customers have; but, especially in the initial phases, they might need to be tempted to switch brands or try a new category.

Digging into the nuances

Those kinds of analytical tools mean companies can enter a new market with their eyes wide open. But they’ll still need to develop a sophisticated view of customers, competitors and regulations – the kind of insights that will tell them how they might enter a market, not just whether it’s a good idea.

That’s when they’ll commission more in depth market research and run projects like a market segmentation analysis to dig deeper into nuances they can exploit later to optimise their market entry.

At this point, they’ll be starting to research more detail on potential partners; exactly how they would use infrastructure to import, manufacture and distribute in that market; what specific customer niches exist; and even financial planning to take into account the kind of regulatory and cost-of-trade analysis they revealed in the feasibility study.

But above all they need to understand how their brand might be received. It’s not a given that you can simply transplant over your image or core messages.

Culture and behaviour: getting the key variables right

Cultural fit is hugely important. In this phase of the project, we would drill down into the local factors that might help a brand; or create barriers for its acceptance. This is typically a traditional market research exercise, exploring the behavioural aspects of consumers in the new market.

For example, we worked with a Japanese food manufacturer looking to expand into new Asian markets. But in the Philippines, it quickly became clear that there was no appetite for the more subtle flavourings and preservatives in the Japanese product. It was the perfect case of a potentially costly market entry being avoided through strong research findings.

That’s a lesson Pret a Manger learned in Japan, where it opened 14 sandwich shops across greater Tokyo in 2003. Just 18 months later, the company withdrew after its local partner, McDonald’s Japan, pulled out citing heavy losses. Superficial research indicated that Japanese people would love the convenience and novelty of eating-on-the-go sandwiches. But once the novelty wore off, sales dipped quickly. That combination of financial and cultural barriers hadn’t been picked up.

Speaking the language

As well as deciding whether the consumer will use the product, it’s important to explore the way in which it’s marketed. This is particularly important for brand with an established global image – the logos, slogans and even colour palettes that they’ve invested in heavily to define themselves – because those might have unexpected connotations in a new culture. Take, for example, the beauty treatment marketed in Japan as “for clear skin” – which translated elsewhere in Asia as “ghostliness”.

There have been plenty of cases of companies that didn’t do their market research with disastrous consequences:

Clairol’s ‘Mist Stick’ curling iron flopped in Germany: ‘Mist’ is slang for manure.
Coors’s slogan ‘Turn It Loose’ translated into Spanish is slang for diarrhoea.
KFC is known globally for being ‘finger-licking good’ – which translated as ‘eat your fingers off’ in China.
Also in China, ‘Pepsi Brings You Back to Life’ was interpreted as ‘Pepsi Brings You Back from the Grave.’

But rival Coca Cola entered the China market much more deftly. Initially, signs produced by local distributors for ‘ko-ka-ko-la’ (using symbols for the closest phonetic translation) were translated as ‘bite the wax tadpole’. But the company was developing its own local brand positioning, and settled on the symbols ‘K’o-K’ou-K’o-lê’ – which means ‘to allow the mouth to be able to rejoice,’ a far more apt trademark that it registered in 1928.

The money question – how to approach pricing

The other marketing fundamental that research can steer is pricing – a factor every market entry project needs to examine. Where is the competitive price point for consumers in the new market? What volumes and margins might you expect, based on the market opportunity? How does the new market stack up cost-wise – are you importing or manufacturing locally, for example – and what does that do to your opportunity to flex prices?

More broadly, the profitability of different business models often dictates whether and how to enter a new market at all. For some businesses there’s relatively little financial penalty to operating exclusively through local distributors. But at a certain point, issues such as volume of sales, cost of distribution, tariff levels, changes to local taxes and so on will shift the financial rationale. For example, we’ve already seen many UK businesses enter EU markets directly as a mean of offsetting post-Brexit tariffs, staffing, distribution and other costs.

The financial calculations can also dictate the viable means of getting into a market. At one level, that’s purely a ‘treasury’ consideration. How will profits be repatriated? What are the currency risks associated with the new market? How does banking and taxation work there? But how much you can control the brand locally – rather than relying on local agents – is also a factor. (We’ll look at the different modes for entering new markets in more detail in a separate guide.)

Know when to hold… and when to fold

All these factors are a reminder that even strong and established global brands don’t always have an easy time expanding into a new market. They might have some leverage with their global brand name. They have the resources to invest in market penetration. But to do so effectively – and without incurring higher opportunity costs elsewhere – they need data and insights to ensure their entry is tailored.

Even brands that take precautions to adapt to local culture can miss valuable clues as to their viability in a new market. Starbucks famously waited 47 years to open its first branch in Italy – wary of the very particular approach to coffee there. In 2018, its first shop opened in Milan. But the brand has struggled in the country. Limited research into new markets had affected the brand before, with its Australian business failing to meet the demands of local coffee-lovers; its Israeli operation closed in 2003 within two years of launch.

Granular, holistic research is the key

To gain the right insight to inform your market entry strategies, you’ll need to work with external agencies. For some very fast-growing and global brands, there might be a case for building an in-house team with the kind of expertise and experience needed to evaluate new markets in sequence. But when it comes to local research expertise and cultural understanding, the insights can often be two-dimensional.

McDonald’s Japan is a great example of using local insight to tailor what is, on the face of it, a universal brand. Every country has their tiny variations in the McDonald’s menu. But visitors to Tokyo will find radical departures such as Ebi Filet-o (a burger with breaded shrimp); Teriyaki McBurger; and even chocolate fries.

For many businesses – and business models – international expansion is likely to be a multi-year project with long pauses. That means bringing agencies to advise and evaluate each market entry is the only practical solution – especially if they bring specific knowledge on particular markets to bear.

At Kadence, with offices spanning Europe, the US and Asia Pacific, we are well positioned to support brands with market entry research. Find out more about our market entry services or get in touch to discuss a potential project.

Introducing market segmentation

There is no product or service which fits every consumer uniformly. Sometimes there needs to be variation in products to suit different people – compact smartphones for people with smaller hands, for example, or simplified apps for those not so good with tech. It could be different ways of selling a product – appealing to some people with an emotional message and others with a technical pitch.

Knowing the ways consumers behave, feel, think and make decisions can help any business tailor its products and its pitches to meet their needs more fully. By breaking down the market into segments – which share certain traits, are identifiably different from other groups, or have similar attitudes – we can find efficient and effective ways of targeting products and services.

Market segmentation is one of the most commonly used market research and analysis tools. When you call your mobile network provider, for example, you can be sure you’ve been categorised into a tailor-made customer segment, and that the interaction you have with the call centre is at least in part defined by the persona you’ve been assigned. It helps them understand how to talk to you, what behaviours you’re likely to exhibit, and the types of need you’ll have.

There are three reasons organisations typically commission a market segmentation project:

They feel they don’t know enough about their customers.
They have some basic ideas about the types of customers they have but they can’t apply that knowledge to meet their marketing needs.
They have a successful segmentation analysis but they’re finding it’s flawed in some way and needs updating.

A segmentation doesn’t just shape the way businesses deal with target customers or existing clients, it informs the design of new products and services and will dictate how they decide to reach you and with what messages. It can shape marketing campaigns and entire brand strategies.

What is market segmentation?

Once upon a time, all business was local. Consumers bought products and services from nearby providers – people from their own communities who understood their needs. There were crude forms of segmentation but they were instinctive and obvious. Salespeople from the dawn of time have tailored their messages according to who they were addressing.

About a hundred years ago, that started to change. Mass-produced goods and emerging global business models meant companies needed to understand in more detail the different markets they might address. Mass media accelerated the trend. When you could reach anyone via a newspaper ad or a TV commercial, understanding who might buy your product, why they might like it, where to reach them and what to say to them became much more important.

Then in July 1958, consultant marketer Wendell Smith wrote an article in the Journal of Marketing titled ‘Product Differentiation and Market Segmentation as Alternative Marketing Strategies’ – the first time the word ‘segmentation’ had been used in this context. He argued that understanding the basic facts, personality traits and needs of different groups of potential customers – and tailoring products or messaging to suit – would increase sales.

By the 1970s, Smith and his colleagues were using what became known as ‘psychographics’ (psychology plus demographics) to come up with classic market segmentations, such as the Values Attitude and Lifestyle Study (VALS) – featuring segments such as “innovators” (high-income, motivated by status and exploration) and “thinkers” (well-educated, thoughtful decision-makers open to new ideas).

The forms of segmentation have evolved over time, as have the specific categories and personas that companies target. Sometimes it’s as crude as defining a target audience as a particular age group but it can also be a sophisticated analysis of deep emotional needs. Methodologies have adapted and diversified, too.But a couple of things remain constant for market segmentation projects. First, they look for definable truths about customers – reliable information that enables you to group them in useful ways. And segmentation remains a cornerstone of marketing campaigns. Segmentation allows companies to target high value consumers and position their product or brand in ways to maximise their performance. That ‘STP’ approach remains fundamental to good marketing.

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Different ways of segmenting your customer base

There are four main categories of information we can use to segment a market:

Geographic: where do people live? What is their environment like? What local factors might influence them?
Demographic: how old are they? What social groups do they fall into? How educated are they? How big is their family?
Behavioural: how do they make decisions? How do they use products? What are their attitudes to brands?
Needs based: What are their needs? What are their attitudes and values?

One of the most obvious ways to approach market segmentations is by generations. But people quickly realised that simply looking at age groups glossed over huge variation in attitudes and needs within generations. There are relatively few ways in which an age cohort behaves uniformly. You must ally demographic with behavioural and attitudinal insights to create segments that are truly useful.

This is illustrated by the rise and fall of the concept of ‘Millennials’. There have been a number of well publicised marketing fails of companies targeting millennials. Lumping them all together – rich and poor, graduates and school-leavers, different countries and cultural backgrounds – is a major misstep. Millennials are hardly homogenous and treating them as one group risks alienating your customer base.

Why ‘needs’ make for compelling segments

We believe that identifying segments by exploring the needs of your potential customers is much more valuable than thinking about any demographic aspects. And this is why the vast majority of market segmentation projects are now needs-based.

For example, you might discover that there’s a portion of the population whose prime need is for low-cost products; another seeks quality or status from their purchases; and some need to have products that meet exacting technical specifications. Once you have those needs-based segments mapped, you can cross-reference by demographics or behaviours if that looks like a useful way of finding other people who might fall into those need groups.

Behaviours are harder to use in a predictive sense. They can change rapidly, especially as a result of external influences. Attitudes and needs, on the other hand, are more revealing and often more predictive. For example, we worked with one academic institution to segment their alumni in order to target graduates with a high propensity to make donations. The value of ‘attitude’ was illustrated by two graduates who both worked in finance in the City. They were the same age, had similar jobs and backgrounds. But one had enjoyed their time at the school and saw it as a springboard for their career; the other had not relished their time there and was considering a career change. The demographics said they were the same segment. But attitudinally, they were poles apart. Creating a segment of ‘inspired graduates’ made more sense than one of ‘rich bankers’.

Getting granular: what really makes a difference when it comes to market segmentation?

Working towards a granular market segmentation is important. If your category is too broad (e.g. ‘millennials’), it’s likely that you’ll capture too many different attitudes to be able to develop compelling strategies. When you mash together a lot of different colours, you just end up with brown. You need to be able to pick out individual colours – those different attitudes and needs – so they can be addressed in a compelling way.

How you’re planning to address your different segments should also help frame your market segmentation strategy. For example, if you’re planning to promote a product through newspaper advertising or on TV, there’s a limit to how granular you need to get.

But as new ways of interacting with customers have evolved – particularly in the digital era – the value of finer segmentations has risen sharply. Today, using tools like email, targeted advertising, or big data analytics, the subtleties between segments can really make a difference.

Imagine you have a product to help pensioners release equity in their homes, for example. There’s an obvious demographic segmentation: you’re only interested in the over-65s. You need to conduct an inspection of their home when they apply and your valuers only cover the South East of England. In this situation, a geographic segmentation is a no-brainer.

But then you know from your existing customer data that people with grandchildren are much more likely to want to free up cash so differentiating between them and the childless elderly is worthwhile. Financial literacy is also a key factor and how trusting of financial services companies they are. Risk appetite can’t be measured demographically but it might define your segmentation.

How to use market segments

So when companies debate which kinds of factors will define the customer personas – and how finely to segment their audience – the most useful question to ask is: how are you actually going to use the segments?

You might be a global business, looking to understand how the same six segments present in multiple countries. Will you actually be able to tailor the product or service around those segments? Can a central marketing function use them in the same way in every country? Or will local teams who understand the nuances of their own markets offer more valuable insights, and perhaps even more relevant segmentations of their own?

Or if you have 15 market segments, for example, and identify seven of them as high priority targets, are you going to tailor your product around every one of them? If not, might there be more value in a more limited approach?

We were approached by a large global business who had segmented the entire personal care market in the UK, which resulted in a lot of different segments. These included people who did the minimum to appear presentable, using the cheapest products infrequently. At the other end were big spenders on grooming who were the real target for that brand’s products.

How might that segmentation have been done differently? In terms of time and money, making a first cut to eliminate the parts of the market that have never shown propensity to buy the brand’s categories of product creates headroom for a deeper segmentation of those more lucrative parts of the population, allowing for more effective targeting.

Embarking on market segmentation? Start with what you already know

The first step of that segmentation journey is looking at what you already know about your existing customers. What is your data telling you? If you’re a pay TV network, for example, your database contains a lot of raw material for market segmentation. You can analyse by frequency of contact, whether someone has switched away and come back to you, whether they opt in to promotional emails, etc. Those kinds of factors alone are a good start to segmentation.

For example, we worked with an online dating service to comb through their database, identifying key segments based on usage patterns and other behaviours, then assigning all existing members to one of those segments. It was a powerful tool for the company’s call centre operators who quickly got a sense of the type of member they were talking to from the persona that popped onto their screen, as well as targeting email marketing and much more. The segments became a lens for the business to view its own customers but also gain insights into the wider market of potential users.

A high-quality customer relationship management (CRM) system is obviously a big help. You need to be in compliance with GDPR and be responsible in how data is used, of course. (And bear in mind: if you formally assign customers to a segment, they might one day see how that’s defined thanks to GDPR’s focus on subject access rights). But allying CRM analysis with an attitudinal, needs-based market segmentation can help extrapolate the behaviours you see in existing contacts to potentially untapped audiences, too.

Many traditional (typically pre-digital) businesses have started to accumulate a lot of data about customers but struggle to make the connection between what they know about them and how that might fuel a market segmentation project. Conversely, online-only businesses are typically built from the ground up around careful segmentations, whether they emerge organically from CRM data or are built as part of a formal project.

Why market personas must be instinctive

It’s important to create segments that are meaningful. The key to a really good market segmentation is that anyone can use it.

It should be intuitive – so the personas you create from your segments are recognisable and understandable.
It should be useful to people in different functions – whether that’s new product development, marketing, communications, sales, customer service or even the finance function.
It should work as well for people in the boardroom as it does for people at the front line.

That means how you brand your segments is actually a very important part of the process. We all know some famous segment names – DINKYs (Dual Income No Kids); Yuppies (Young Urban Professionals); Mondeo Man and Worcester Woman in the UK, and Soccer Moms in the US. They’re memorable and self-explanatory.

When you’re working on a market segmentation project, you need to bear in mind who’ll be using the segment analysis. That should be everyone, from the board to the call centre operative. Without their buy-in (and their insights) it’s much harder to make the segmentation intuitive. Each segment must make sense to them and tell at least part of the story.

At Kadence, we also have a graphic design team in-house. The use of visuals to bring a segmentation to life is critical, not only to make it live on in the organisation but to frame an understanding of the segments. We often produce documentary videos to show what kind of people are in each segment and how they behave or react.

The impact of market segmentation

What difference does market segmentation make to key decisions? Which decisions does it most affect? We see many different benefits from market segmentations. For example:

Incremental gains in congested markets. Successful products and services rely on fine-tuning to gain market share or increase sell-through with existing audiences. Segmentation allows you to identify how to exploit opportunities in underserved areas, or segments where rivals currently outperform.

Product evolution. Segmenting the market allows you to see what other underserved needs exist in groups that are already customers, allowing you to fine-tune your offer, especially if the product or service has flexible elements built in.

Targeted communications. Even email costs money (and goodwill, if it’s perceived as spam). Identifying common traits among high-propensity segments not only allows for less wasted communications, it also allows those comms to be fine-tuned for maximum impact.

Smarter automation. Customer service and call centres are increasingly reliant on automated systems. A solid market segmentation can help ensure those interactions are properly tailored and high-value segments are prioritised.

Extrapolating from the existing customer base. Market segmentation can help identify traits in existing customers that might be shared by other segments that don’t seem at first glance to be fertile markets.

New product development and launch. You might already have an idea of the types of customers a product will work for, or situations where it might be applied. You might not even need a market segmentation in the development phase but once a product or service has launched, the need to optimise its performance becomes much greater. Who’s actually using it? How? Why? Those early adopters (another classic segment) can help define and exploit other segments of consumers.

The role of market segmentation within your long-term strategy

A market segmentation project, done right, is extremely valuable but it’s also a significant undertaking. Segmentation studies aren’t designed to be done every year – ideally it should have a five or even ten year shelf life.

Even then, some events are so huge as to require a fresh look at segmentation. The Covid-19 pandemic has prompted many businesses to refresh their buyer personas. For the bulk of 2020, people’s lives have been artificially constrained. How someone behaves or reacts, what they prioritise in life, and even what values they have, are all affected by ‘not going out’.

Even when lockdowns (hopefully) abate in 2021, how the market breaks down for previously predictable products – from personal grooming and alcohol, to cars and holidays – is going to be quite different to what went before. And it’s very unlikely the old segments will move to adapt to the new reality in precisely the same ways.

We’ve already seen some significant pandemic-inspired segmentation projects, with brands wanting to understand how their market breaks down now that people are eating out much less and work-from-home consumers are shopping differently. Previous segments might not be helpful: do you need to re-cut by job status, for example, given higher unemployment?

It doesn’t matter whether you’re targeting niche markets and need to understand where to find them, or want to tailor a broad-based approach to maximise penetration among different personas, an effective segmentation will set you up for success. Find out more about our experience in running market segmentation studies, or get in touch with our team to discuss a specific challenge.

Market segmentation studies help brands uncover the distinct groups within their customer base. By grouping people with shared characteristics (such as needs, behaviours, or attitudes), brands can identify which segments offer the most commercial potential. This enables sharper targeting, clearer positioning, and more relevant customer engagement across marketing, product, and service functions.

What is the purpose of market segmentation?

Just because your product can reach everyone doesn’t mean it should. People have different priorities, and they respond best to brands that reflect those differences. Segmentation helps you focus on the right audiences, so your message cuts through and your offer resonates. It’s also the foundation for creating customer experiences that feel personal and intentional, rather than one-size-fits-all.

A common question clients ask is: “What’s the real benefit of market segmentation, especially when mass marketing feels more scalable?” We often hear variations of the same concern: “Why narrow our focus if anyone could be a potential customer?” and “Wouldn’t we see stronger returns by casting a wider net?” These are fair questions, especially for fast-growing or resource-limited teams trying to scale quickly.

In practice, the opposite is usually true. Segmentation is powerful because it helps you identify and prioritise the customers who drive the most value. It’s a more focused and efficient route to growth—and often more cost-effective than broad-reach tactics that fail to convert.

One of the biggest misconceptions about segmentation is that it’s only valuable for large brands with vast data sets. In reality, businesses of all sizes can benefit. For smaller companies, segmentation helps stretch limited budgets by focusing on the audiences that matter most. For enterprise brands, it ensures that marketing, product, and service teams aren’t speaking to everyone—but to the right ones. We’ve seen clients across industries—from tech startups to heritage FMCG brands—unlock new value by focusing on high-potential groups rather than chasing scale for its own sake.

There are two key reasons why segmentation works.

First, not all customers deliver the same value to your business. Take a charity, for instance. Some donors give sporadically, while others contribute regularly and at higher amounts, often because of a stronger emotional connection. Understanding and prioritising these high-value groups ensures your efforts are directed where they’ll have the greatest return. Whether you’re optimising acquisition, retention, or service tiering, focusing on value-driving segments gives clarity to your commercial strategy.

Second, customer needs and expectations vary widely. These differences influence everything from what people buy to how they interact with your brand. When you tailor products, messaging, and services to reflect the needs of each segment, you increase relevance. This creates stronger customer experiences and delivers better outcomes—whether that’s improved satisfaction scores, stronger conversion rates, or more effective upselling.

Not all segmentation methods deliver the same depth of insight. While demographic and geographic segmentation are common starting points, they often create overly broad groupings that miss the nuance of real customer behaviour. Just because people share an age bracket or live in the same location doesn’t mean they share the same needs, values, or buying motivations. Over-reliance on these basic approaches can lead to ineffective targeting—or worse, misalignment with your audience that damages engagement and trust. To uncover what truly drives decision-making, brands need to go deeper.

How market segmentation studies can inform your strategy

When done well, a segmentation study becomes more than just research—it becomes a blueprint for better business decisions. From product design to marketing and customer service, segmentation brings clarity to where and how to focus for commercial success.

Design more successful products and services
Customer-centric product and service design starts with knowing what different audiences need. Instead of trying to appeal to everyone, segmentation allows you to focus on solving the real pain points of high-potential groups. This results in solutions that feel more relevant, driving greater satisfaction and adoption.

Develop more effective marketing campaigns
Segmentation clarifies who to target and how to reach them. When you tailor campaigns to each segment’s priorities and preferences, your marketing becomes more precise and efficient. It also performs better. Mailchimp found that segmented campaigns had open rates 14 percent higher than non-segmented ones.

Build stronger emotional connections
Messaging that reflects a customer’s values builds trust. When creative assets and communications align with what matters to each segment, brands can foster deeper emotional connections. This improves retention, loyalty, and long-term value.

Maximise marketing ROI across channels

Segmentation enables brands to target with greater precision across channels, from personalised email campaigns to highly focused digital advertising. As media budgets come under increasing scrutiny, the ability to align messaging with customer mindset delivers a measurable advantage. Generic campaigns struggle to gain traction in an environment where relevance is expected.

Offer more relevant customer service

Segmentation can also enhance the quality of customer service. We have worked with clients to integrate segment profiles into their CRM systems, allowing frontline teams to tailor interactions based on customer type. One dating app, for example, used this approach to help service staff adjust their tone and guidance depending on the segment profile. The result was improved customer satisfaction and closer alignment with the brand’s positioning.

Allocate resources more effectively

Segmentation provides clarity on where to direct investment, staffing, and strategic focus. It supports better decisions about which product lines to prioritise, where to focus acquisition efforts, and which customer groups warrant additional service or retention strategies. This structured approach enables brands to maximise returns by aligning internal efforts with external value.

Improve overall customer experience

A segmentation model that is embedded across product, marketing, and service functions can transform how brands engage with their audiences. By understanding and addressing the specific needs of each group, brands can deliver experiences that feel relevant, considered, and consistent. Over time, this builds loyalty and supports sustainable growth.

What makes a good market segment?

Before investing in a segmentation study, it’s essential to understand what qualifies as a good segment. A well-defined market segment must be strategically valuable, actionable, and enduring—not just statistically interesting. Strong segments typically meet the following criteria:

It’s large enough to be profitable
While micro-targeting is possible, segments must have enough commercial potential to justify marketing investment, product development, or operational focus.

It’s internally homogenous
A good segment is made up of customers who think and behave in similar ways. This consistency allows you to craft messaging and experiences that resonate across the group.

It’s externally heterogeneous
Each segment should be clearly distinct from others. If two segments respond the same way to offers or messaging, they may not need to be separate.

It’s stable and future-proof
A segment should remain relevant over time. This means avoiding definitions tied too closely to short-term trends or temporary behaviours unless that’s the goal (e.g. campaign-specific segmentation).

It’s identifiable and targetable
Beyond analytics, segments must be practically usable—i.e., you should be able to identify and reach them through your channels, whether through CRM systems, digital targeting, or media buys.

It aligns with your strategic goals
Not all segments are equal in value to your business. A useful segment supports your commercial objectives—whether that’s increasing share of wallet, growing in new markets, or building loyalty.

Keeping these principles in mind ensures your segmentation outputs are both methodologically robust and commercially meaningful—enabling real-world activation and strategic impact.

What does a typical market segmentation study look like?

Market segmentation studies are not one-size-fits-all. Each one is tailored to the business’s objectives, the market it operates in, and the resources available. While some projects aim to create broad strategic frameworks, others focus on campaign targeting or product development. That said, most segmentation research follows a common set of stages—each critical for uncovering meaningful customer groups.

Start with the right type of segmentation
Not all segmentation methods deliver equal value. Basic demographic or geographic segmentation can be easy to execute, but they rarely reveal the motivations or needs that drive consumer behaviour. For a more meaningful understanding of your audience, consider behavioural segmentation (based on actions), psychographic segmentation (based on beliefs and attitudes), or needs-based segmentation (based on problem-solution alignment). These approaches often provide greater business value by helping brands craft experiences that align more closely with what customers care about.

Behavioural data—while rich—isn’t the full story. It tells you what someone did, but not why. For instance, a customer’s browsing history might show interest in winter jackets, but without understanding their underlying need—are they shopping for fashion or function?—you risk missing the mark. This is why needs-based and psychographic segmentations are often more effective. They reveal the motivations behind behaviours, offering deeper insight for product innovation, creative messaging, and brand positioning.

Immersion and stakeholder alignment
Every successful segmentation study starts with immersion. In this phase, your research team works closely with internal stakeholders across departments—marketing, product, sales, and leadership—to understand business goals and existing customer knowledge. Through stakeholder interviews or workshops, hypotheses around customer types begin to emerge. These early-stage insights not only shape the questionnaire design but also promote internal buy-in, setting the stage for long-term adoption. We’ve seen clients revise their entire view of the market after initial assumptions were disproven during this stage.

Designing and conducting fieldwork
Once the groundwork is laid, it’s time to collect the data. Most segmentation studies are grounded in quantitative research—typically a large-scale survey that includes behavioural, attitudinal, and demographic variables. Depending on your goals, this may be complemented by qualitative research up front (e.g. focus groups or in-depth interviews) to explore hypotheses in more depth or post-survey to humanise the segments. In some cases, omnibus surveys help establish market incidence, especially when segmenting between category users and non-users, or customers and prospects.

Sampling and questionnaire design
A robust segmentation requires a representative sample. We ensure the respondent base reflects your actual or intended customer base—across age, region, usage, or industry vertical. Questionnaire design is equally important. It should include a mix of profiling questions, attitudinal and needs-based statements, and behavioural indicators. These are later used in the segmentation modelling to form clusters that are both statistically and commercially relevant.

Creating the segmentation solution

Once the data is in, the focus shifts to turning it into a usable framework. Advanced analytics identify patterns in attitudes, behaviours, and needs that group respondents into distinct segments. But statistical rigour isn’t enough. A strong segmentation solution must translate into real-world impact.

At this stage, we work closely with stakeholders to refine the segments, not just for statistical validity but also for business relevance. This includes evaluating each group’s size, commercial potential, and strategic fit. What makes each segment tick? What do they value? How do they behave? We go beyond demographics to uncover motivations, preferences, and barriers to purchase.

Just as important is how segments are communicated. Naming matters. Clear, descriptive labels—rather than generic ones like “Segment 3”—make insights easier to adopt across departments. Memorable names humanise the data and accelerate internal alignment, ensuring segmentation becomes a shared language, not just a research output.

Bringing the segments to life

Once the segmentation model is finalised, the real work begins: embedding it across the organisation. A 100-slide PowerPoint may satisfy the insight team, but it won’t drive adoption. To make segmentation operational, you need materials that are practical, memorable, and easy to absorb—regardless of someone’s role or data fluency.

Think beyond reports. Effective deliverables include one-page segment summaries, posters, wallet cards, internal wikis, and short videos that showcase each group’s mindset and behaviour. Documentary-style videos in particular are powerful—they use real quotes and relatable settings to turn data into compelling human stories. Humans relate to people, not charts, and that emotional resonance is key to building internal empathy.

When done well, these materials become everyday tools. They help teams across departments understand and relate to their audience, guide product innovation, inspire creative briefs, and onboard new hires into a customer-first culture.

Activating the segments

Even the strongest segmentation will stall without a clear plan for activation. Success depends on structured rollout and consistent reinforcement across the organisation.

Activation workshops are among the most effective tools. These sessions are tailored to each department, helping teams translate insights into action—mapping segment needs to product roadmaps, campaign strategies, service protocols, and sales tactics.

Some organisations go further by embedding segments into CRM and analytics platforms, enabling personalised engagement at scale. Others develop segment-specific playbooks, personas, or test-and-learn frameworks to guide execution.

Ultimately, activation is about turning insights into outcomes. It’s what ensures segmentation doesn’t gather dust, but instead shapes real decisions and delivers measurable impact.

Ready to unlock the full value of market segmentation?

Segmentation isn’t just a research tool—it’s a strategic asset that can transform how your brand develops products, communicates with customers, and allocates resources. If you’re looking to better understand your audience and turn insight into action, request a proposal to see how we can help.

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Market segmentation studies are powerful tools for businesses. They help organisations divide the market into distinct groups that share specific attributes. This enables businesses to focus on the most lucrative segments. Segmentation can guide everything from marketing to product development, right through to identifying new market opportunities. In this article, we outline the key benefits of market segmentation and how it supports growth across functions.

The benefits of market segmentation studies

Focus on the customers that matter most

The core principle at the heart of market segmentation is to divide the market into groups of customers you can target, rather than addressing everyone in the same way. Instead of trying to be all things to all people, segmentation helps brands concentrate on the most valuable customers—those with the greatest potential for conversion, loyalty, or long-term value.

So what does this look like in practice? A recent case study brings this to life. We partnered with a leading university to design a segmentation of its alumni. Securing donations from alumni is a core revenue stream for universities. While it might seem logical to target all alumni equally, the reality is that a small proportion make the biggest impact.

There are many ways of segmenting a market. In this instance, we used a needs-based segmentation, exploring the attitudes and values of past students. A demographic segmentation would have enabled targeting based on income bracket or profession—but what truly mattered was alumni sentiment. Those who had valued their university experience and saw it as a stepping stone to their careers were most likely to donate. By segmenting in this way, brands can focus on those most likely to convert, helping to lower acquisition costs.

Power new product development

Another benefit of market segmentation is the ability to uncover new opportunities for innovation. Needs-based segmentation is particularly valuable here, as it breaks the market into distinct groups based on underlying customer needs. By understanding what people are looking for from the category—and the pain points they experience—brands can identify whitespace and design products, services, and experiences that genuinely meet demand.

Segmentation can also play a crucial role post-launch. It helps brands assess where a product may be falling short of customer expectations—and how to refine the offer to better compete.

Design more effective marketing

Segmentation also strengthens marketing strategies. It doesn’t just clarify who to target—but also where to find them and how to tailor messaging. This ensures your marketing spend is more efficient, while delivering greater cut-through and relevance in communications.

You might be investing in TV advertising year after year, aiming to reach as much of the mass market as possible. But segmentation often reveals smarter paths. Your audience may be Instagram enthusiasts or loyal readers of niche publications—reachable on those platforms at a lower cost. In an age of digital targeting, market segmentation provides the clarity needed to invest wisely and improve campaign efficiency.

Another important application of segmentation is in shaping your marketing messaging. Different customers respond to different triggers, and a strong segmentation can help you understand what to say—and to whom. Imagine you’re a mobile phone company with a broad customer base spanning all ages and levels of tech fluency. Segmenting this audience enables you to create tailored campaigns that speak to each group’s priorities. Early adopters may want technical specifications front and centre. Bargain hunters will be drawn to pricing and value. By matching messages to mindsets, you can boost engagement and increase conversion.

Deliver better customer service

Segmentation is often mistakenly viewed as the sole domain of marketing. In reality, its value multiplies when everyone—from the CEO to the cashier—understands and uses it.

We partnered with an online dating platform to build segments based on user behaviours and usage patterns. Each customer was assigned to a segment in the CRM, which appeared during every interaction—giving call centre agents instant insight into the person they were speaking with. This context allowed them to tailor conversations more effectively. You’ve probably experienced something similar: the network provider that offers you new perks when you threaten to leave, or the TV service that recommends the perfect plan based on your habits. These aren’t guesses—they’re segmentation strategies in action. Armed with the right insights, frontline teams can drive retention and upsell with confidence.

Use your resources more efficiently

As the examples above show, segmentation studies can help businesses understand where to focus. This leads to more efficient use of resources—whether it’s allocating sales teams to high-value segments or prioritising marketing spend on high-impact channels, like a trade show known to attract your target customers.

This focus on smart resource use is exactly why segmentation studies can be especially valuable for the businesses least likely to consider them: SMEs. While robust segmentation requires investment—often involving in-depth research into behaviours, attitudes, values, and needs—there are ways to start small. Begin with simpler segmentation types, such as geographic, demographic, or behavioural (if the data is available). Even a basic approach can cut through the noise and bring sharper focus to your strategy.

Develop a more customer-centric culture

One of the more underrated benefits of segmentation is the cultural shift it can support. A well-executed segmentation can encourage employees across departments to better understand your target customers—and to put their needs at the centre of business decisions.

It’s important to recognise that creating a segmentation alone won’t lead to cultural change. That shift needs to be nurtured through intentional management and internal engagement.

Start by securing buy-in early. Work with key stakeholders so they feel involved in the process. Segmentations can be disruptive, so it’s critical that those expected to use them feel a sense of ownership. That ownership is what drives long-term adoption.

Next, ensure the segments are clearly communicated across the organisation. They should be easy to understand and memorable. Visual tools can help here. Our in-house design team has created deliverables that transform insight-heavy slides into accessible, engaging outputs—ensuring segments live on beyond the research team. These should be widely shared. Everyone, from engineers to sales teams, should be able to picture the segments and use them in their daily work.

Finally, activate the segments and embed them into future strategy. We often work directly with teams to help them interpret the segments and understand what they mean for their work.

Create a superior experience for customers

At its core, segmentation is about delivering a better experience for the people you serve. When targeted marketing, responsive service, and innovation are aligned to customer needs, brands create experiences that build loyalty and strengthen long-term relationships.

Increase profitability

Segmentation is one of the most effective ways to improve your bottom line. By focusing your time, energy, and budget on the most promising customer groups, brands reduce waste and increase conversion. You’re no longer investing equally in every potential buyer—you’re prioritising the ones who are most likely to deliver value. That shift leads to higher margins, stronger returns, and a more efficient path to growth. It’s a smarter way to work—and one that delivers results.

Improve return on investment (ROI)

ROI is a critical metric for every team—especially when budgets are under pressure. Segmentation boosts ROI by helping teams allocate spend more effectively across campaigns, channels, and initiatives. Instead of spreading your marketing or product development budget thin, you can focus it on the segments most likely to respond. Whether you’re launching a new product or testing messaging strategies, segmentation helps you get more out of every pound spent.

Achieve better customer retention

Acquiring customers is one thing. Keeping them is another. Segmentation helps brands better understand what their different audiences need—not just to buy, but to stay. When service teams are armed with segment-specific insights, they’re more likely to anticipate problems, offer the right solutions, and build relationships that last. Personalisation becomes easier. Upsell opportunities are clearer. And the cost of churn goes down.

Gain competitive advantage

In crowded categories, segmentation can be the difference between blending in and standing out. It allows brands to position themselves more precisely, spot unmet needs faster, and adapt more quickly to shifting consumer expectations. Rather than chasing trends, you’re responding to real differences in what customers want. That deeper understanding of your market gives you an edge—and a roadmap for staying ahead.

Why segmentation is more essential than ever

Segmentation isn’t just a research exercise—it’s a strategic imperative. In markets shaped by shifting behaviours, evolving needs, and rising customer expectations, brands that truly understand their audiences are the ones that thrive. The most successful organisations use segmentation to focus their resources, spark innovation, and build lasting relationships.

Whether you’re targeting new customers, refining your messaging, or transforming how teams make decisions, segmentation provides the clarity and confidence to move forward.

Want to know how we can help? Explore our segmentation services or get in touch to discuss your next challenge.

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