Marketers spend most of their time and energy creating and executing programs that are designed to increase revenues from their company's core business. Some companies have a vibrant core business that provides plenty of growth opportunities, but many companies operate in mature markets where growth is more difficult to achieve. In addition, most markets evolve from a "growth stage" to a "mature stage," so even if a company's core business is producing healthy growth today, that can change quickly.
When the growth of the core business slows, company leaders will likely start to think about some kind of business expansion. Expansions that take a company "beyond the core" are always strategic business moves that require thorough evaluation. In my view, marketing should play the leading role in evaluating such expansion opportunities. Marketers have (or should have) the specific skills needed to analyze the growth potential presented by new markets. In fact, I contend that marketers should always be evaluating potential expansion moves, so that they are always prepared to provide senior company leaders a range of viable strategic options for increasing growth.
One of the more attractive growth opportunities for most companies is adjacent market expansion. An adjacent market expansion is a move by a company into a market that is related to the company's core business. As the diagram below illustrates, there are four primary ways to move into an adjacent market.
- Sell core products or services to new types of customers
- Sell new products or services to existing types of customers
- Open new selling channels
- Move into new geographic market areas
Adjacent market expansions can produce significant growth, but like all business expansions, they carry substantial risks. As the "distance from the core" increases, so does the risk, and that means adjacent market expansions require careful evaluation.
Any marketer who is evaluating a potential adjacent market expansion must answer two critical questions:
- Does the adjacent market offer significant opportunities for long-term profitable growth?
- What must my company do to win in that market?
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