The ins and outs of market evolution

Non existing Market

When a market does not exist, an entrepreneur must create it or recognize a need for it. At this stage, it is important to identify those potential customers who dare to test the product or service and are willing to provide feedback about its use. These customers are pioneers and deserve special treatment. They help the entrepreneur identify the key drivers of the markets, the needs being captured and the value of the proposed solutions offered by the entrepreneur. Sometimes, you must make a large investment to create an awareness of a need and turn it into a market. However, it’s also possible to partner with one (or more) complementary businesses that could benefit from the creation of this new market.

 

Growing Market

 Once customers stop asking “what is this?” and start recognizing the existing products and services, it is easy to take advantage of growth and garner a piece of the market. In the early stage of the growth phase, there is room for many companies. There are no standards, so it is difficult for consumers to differentiate between one company and another. This is the easiest market stage to start a business. In the early Internet boom, many new companies started up and would surely soon have customers. It was all much easier back then. As the market grows, clients begin to recognize features that become standard. At this stage, total market value grows less rapidly and some companies are not able to sustain operations. Once customers recognize standards, you find the best opportunities via called segmentation. Customers and clients organize into niches according to specific needs. A new company will benefit from entering a small area of the market that large competitors might be unable to enter because doing so will affect their capacity to be efficient and serve the majority of its clients.

 

Stable Market

 Once the market stops growing, you find the best opportunities in simplification required by some customers and integration with other existing solutions. A new company will be able to find niches and tailor uses, as there is no longer a need to explain the need for solutions. In stable markets, you find most opportunities by comparing a company to a standard. Stable markets also provide enormous opportunities for continuous improvement and cost reductions via better processes for delivering products or services.  

 

Shrinking Markets

 A shrinking market is still attractive if a company has a cost advantage. You find the main opportunities in these markets in standardization and aggregation. You can remove some extra features and offer simpler solutions that interest potential customers who have not acquired similar products or services or are willing to change providers. Shrinking markets also provide opportunities for aggregation, when economies of scales allow for costs reductions. At this point, companies are willing to disinvest (sell) out of a market that is no longer profitable. Along the same lines, a company that is no longer interested in a market might want to outsource sales, delivery and after-sales support without completely exiting the market.

Finally, customers within a shrinking market might find it difficult to obtain suppliers. With the reach of the Internet, it is possible to establish a profitable business servicing those customers nobody seems to want. Companies might even add a touch of intrigue and exclusivity by capturing an emotional attachment to the past. We heard a story about a fellow who once serviced old radio stations while his wife reconstructed antique religious sculptures. Their business was eclectic, fun, and very profitable.

 

Disappearing Markets

 As long as there is one person with an unmet need, there is a market. The Internet revolution has opened up opportunities in ways never imagined. Recycling, repurposing, and collecting are now more interesting because of the possibility of reaching potential customers. As an example, there is a cooperative of slum plastic bags washers. They pick up plastic bags in garbage dumps and wash them to a point that customers in China and India can reuse them. An Australian artist created a company to sell pictures of aboriginal art to manufacturers of mobile phone covers and mouse pads. Another company repurposes one-to-three-minute video clips from old mainstream movies to corporate consultants who help organizations keep their staffs motivated. Another example: collectors place a high value on missing stickers or stamps. Before the Internet, the cost of reaching these customers was enormous; nowadays, it is much easier. 

In each phase of growth and decline, astute businesspersons have the ability to convert good ideas into opportunities. The trick is to figure out the market’s evolutionary stage, and how to best exploit it.

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Brian Sutter

Brian Sutter

Director of Marketing at Wasp Barcode
Brian Sutter is the Director of Marketing at Wasp, responsible for the development and execution of the company’s marketing strategy. His role encompasses brand management, direct and channel marketing, public relations, advertising, and social media. He also writes and speaks on topics related to helping small business owners grow their business and improve operational efficiency.
Brian Sutter
Brian Sutter