When entering a market, there are several factors that contribute to the success of a product or brand. McDonald (et al. 2014) identifies five significant risk factors to take into account when entering a market with a particular increase in risk when less is known about the market
Product Category Risk
This risk is essentially the entire product strategy may be smaller than what your calculations allowed for. This would not be as big of a risk with a product diversification as the history of the product will give you the insights to understand the category.
For this reason, this risk becomes significantly greater when implementing or releasing a new product when there is an element of unknown about the category’s size.
Segment Existence Risk
While someone self explanatory, the risk of this category is that the target segment you have chosen is smaller than you initially thought or doesn’t really exist at all. With a smaller segment comes less profit, especially if your production is built around catering for a large segment.
Sales Volume Risk
Similar to the above risk, if the segment is smaller than anticipated, sales will be fewer. For some products to be profitable they must sell in large quantities, these products are what will be impacted my by this risk. More comprehensive research can provide a risk reduction to manage with this.
Forecast Risk
This risk focuses on market growth. If you plan for the market to experience significant growth and it reaches maturity early, this can be the demise of a product or brand. While research can help in reducing this risk, history may not paint the most accurate picture for future predictions.
Pricing Risk
This risk occurs when the pricing levels in the market are lower than initially calculated. As a result you will have to reduce price to remain competitive but most likely reducing profit margin as well, it becomes lear how this can be detrimental to a company.
References
McDonald, Malcolm, Peter Mouncey & Stan Maklan (2014) Marketing Value Metrics: A new metrics model to measure marketing effectiveness. Kogan Page: London.
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