It goes without saying that the most affective strategy for a business is to go where the growth is. Find that growth and let it carry your business. Demand is usually higher in developed markets, rather than emerging, therefore you have higher chance of selling your product.
It is much easier than suffering and trying to grow in shrinking markets where the demand is getting lower as time passes. Very few markets are growing rapidly at any point in time, and most markets are growing at a slow pace and some of them are shrinking. One has to anticipate such change… this information is a key driver for your sales, thus profit. You should also take some time to evaluate the potential growth of your market, maybe in the future this market is going to shrink drastically. When a market is expanding by at least 5% annually, it is a growing market, anything less than that is too slow and makes it hard to grow a business.
Take the example of print media, according to Statista the print media industry is facing an uphill struggle due to increasing competition from the internet and other digital platforms. This is evident in the steadily decreasing revenues of U.S. and worldwide-based newspaper publishers. Despite the fact that the total number of magazine readers has actually grown in the past five years, publishers seem to be finding profits harder and harder to come by. Even organizations like the New York Times, has faced similar financial troubles in recent years, with the company’s revenue more than halving since 2006. This is a great example of emerging and declining markets. As digital media continues to dominate the plains of media communications, print media will slowly but steadily come to the natural end of its life cycle, and this is the kind of factors that marketeers and business leaders need to anticipate in order to prepare for the changes of tomorrow.
So how could you asses a markets growth potential? To do that think of some simple indicators of your markets overall growth rate. These could be yearly trends in industry-wide sales, numbers of customers and trends in purchases, as well as size of purchases per customer. These could be either positive or negative. If you find that the market is shrinking, then you need to look for another growth opportunity.
It is not always a simple task to find this information. Selling office equipment, for example, in a specific area in the US, your market becomes the dollar value of all office furniture purchased in that area, which makes it hard to find out the exact figure. So you would need to find other indicators of the markets growth rate.
Another very important task is to respond to a shrinking market. Sometimes businesses fail to analyze if the market will grow or shrink. When businesses find themselves in the unfortunate situation where the market is shrinking, they will usually: reduce retail stores and other investments to avoid losses, get rid of low-margin products in order to survive in the slow market, come up with another product line or look for other locations where their product might be in more demand. Trying to grow in a market that is flat or shrinking is a waste of time.
Analyzing the market is a continuous process. By keeping an eye on this aspect, you are reducing the chances of your business failing in case a market shrinks, as well as missing an opportunity if the market grows even more. Moreover, slow growing markets are extremely competitive where you have to cut down prices to an extent where you destroy your profit margin… unhealthy. This is why experienced marketers always concentrate on growing markets and always keep an eye on the situation in the market.
In summary, before starting a business or establishing a new product line, make sure you understand if your market is growing or shrinking. Some markets have an increasing number of customers, some don’t. Try to avoid starting a business in a flat or slow growing market at all costs.
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