Market development

Market development is a growth strategy involving the introduction of existing products or services into new markets, whether through geographic expansion, targeting new customer segments, or utilizing new distribution channels (Ansoff H.I. 1957, p.114)^[1]. You've got a product that works. Customers buy it. The question becomes: who else might want it? A regional bakery expanding to neighboring states. A B2B software company selling to consumers. A domestic manufacturer entering export markets. Same product, new buyers.

H. Igor Ansoff introduced market development as one of four growth strategies in his 1957 product-market matrix. Alongside market penetration, product development, and diversification, market development offers a path to growth that leverages existing products and capabilities. It carries more risk than selling more to current markets but less than developing entirely new products.

The Ansoff matrix context

Understanding market development requires context:

The four strategies

Market penetration. Selling more existing products to existing markets. Lowest risk because you know both the product and the customer. But growth potential is limited by market size^[2].

Market development. Taking existing products to new markets. Moderate risk—you know the product works, but new markets bring uncertainty.

Product development. Creating new products for existing markets. Also moderate risk—you know the customers, but the product is unproven.

Diversification. New products for new markets. Highest risk because both product and market are unfamiliar.

Strategic positioning

When to use market development. Market development makes sense when: current markets are saturated, the product has proven appeal, new markets share characteristics with existing ones, and the company has or can acquire market entry capabilities^[3].

Types of market development

Several approaches qualify as market development:

Geographic expansion

Domestic expansion. A company operating in one region expands to others. A restaurant chain successful in the Northeast opens locations in the Southeast. Same menu, different geography.

International expansion. Entering foreign countries with existing products. McDonald's entering India, IKEA expanding to China, Netflix launching in new countries. The product may require adaptation, but the core offering remains.

Challenges. Geographic expansion involves logistics, local competition, regulatory differences, and cultural adaptation. The product that succeeds in one place may fail in another^[4].

New customer segments

Demographic expansion. Targeting different age groups, income levels, or life stages. A luxury brand launching affordable lines. A children's product marketed to adults with nostalgic appeal.

Industry expansion. B2B companies often develop products for one industry, then discover applicability elsewhere. Software built for healthcare might serve financial services. Equipment designed for construction might work in mining.

Use case expansion. Finding new applications for existing products. Baking soda as deodorizer. Botox for migraines. Industrial drones for agricultural inspection^[5].

New distribution channels

Channel addition. A company selling through retail stores adds direct-to-consumer e-commerce. A B2B company that sells through distributors starts direct enterprise sales.

Platform expansion. Software available on one operating system expands to others. Content distributed on one medium (broadcast) moves to others (streaming).

Implementation approaches

Market development requires systematic execution:

Market research

Understanding new markets. Before entry, research market size, growth rates, competitive intensity, customer preferences, and regulatory requirements. What worked elsewhere may not transfer.

Customer analysis. Who are the potential customers? What do they value? How do they currently solve the problem your product addresses? What would make them switch^[6]?

Entry mode selection

Direct entry. Establishing your own presence—offices, sales teams, distribution. Maximum control but highest investment and risk.

Partnerships. Working with local distributors, agents, or joint venture partners who know the market. Faster entry but shared economics and less control.

Licensing and franchising. Allowing others to use your brand, product, or business model. Lowest investment but limited control and capability building.

Acquisition. Buying an existing player in the target market. Immediate presence but integration challenges and premium prices.

Product adaptation

Standardization versus adaptation. Some products transfer directly; others require modification. Language, cultural preferences, regulatory requirements, and competitive positioning may necessitate changes^[7].

Core versus peripheral. Often the product's core functionality remains unchanged while peripheral elements adapt. The smartphone is the same; the apps, content, and services differ by market.

Examples

Market development takes many forms:

Tesla's geographic expansion. Tesla established its electric vehicle business in the United States, then expanded to Europe, China, and other markets. Same vehicles (with minor adaptations), new geographies. The company built charging networks in each region to support adoption.

Arm & Hammer. Originally a baking ingredient, the brand discovered customers using baking soda as refrigerator deodorizer. This insight sparked market development into cleaning products, deodorizers, and personal care—same basic product, new applications.

Nike. Initially focused on running shoes for athletes, Nike expanded to basketball, tennis, soccer, and eventually lifestyle footwear for non-athletes. Geographic expansion followed, with the brand now selling globally^[8].

Risks and challenges

Market development isn't risk-free:

Market unfamiliarity. You know the product, not the market. Customer preferences, competitive dynamics, and success factors may differ from familiar territory.

Capability gaps. New markets may require capabilities you lack—local relationships, regulatory expertise, language skills, distribution networks.

Resource demands. Market development requires investment in market entry while potentially distracting from core market defense.

Competitive response. Entering new markets may provoke competitive responses both in those markets and in your core markets.

Cannibalization risk. If new markets overlap with existing ones, you may shift revenue rather than create it.

Market development — recommended articles

Strategic management — Marketing strategy — Growth strategy — Market analysis

References

• Ansoff H.I. (1957), Strategies for Diversification, Harvard Business Review, September-October, pp.113-124.
• Kotler P., Keller K.L. (2016), Marketing Management, 15th Edition, Pearson.
• Corporate Finance Institute (2023), Ansoff Matrix Overview.
• Smart Insights (2023), The Ansoff Model.

Footnotes

1. ↑ Ansoff H.I. (1957), Strategies for Diversification, p.114
2. ↑ Corporate Finance Institute (2023), Ansoff Matrix Overview
3. ↑ Kotler P., Keller K.L. (2016), Marketing Management, pp.67-78
4. ↑ Smart Insights (2023), The Ansoff Model
5. ↑ Ansoff H.I. (1957), Strategies for Diversification, pp.118-120
6. ↑ Kotler P., Keller K.L. (2016), Marketing Management, pp.89-102
7. ↑ Corporate Finance Institute (2023), Implementation Strategies
8. ↑ Smart Insights (2023), Market Development Examples

Author: Sławomir Wawak