Ready to Expand Your Business? 6 Ways to Determine Where and How
Successful small businesses are often at a crossroads when it comes time to expand. Entrepreneurs have to make strategic choices about where to expand their business, what locations they should prioritize, and what is the most effective way to market their product or service.
Every business will make different choices based on how it can best serve its specific audience. Here are six ways entrepreneurs can determine where to expand their business next.
1. Know where your product belongs
Most companies believe achieving national distribution status is the key to success. However, placing your products in a national big box store doesn’t guarantee profit.
Alex Bayer, the founder of Genius Juice, learned this lesson the hard way. Bayer thought that having his coconut-based smoothies sold in Target stores would lead to more purchases and therefore more investments. However, even though Target is a national brand, its consumer base was not the right audience for Genius Juice. Its price point was too high for Target customers and the product faltered there.
Learning from his experience with Target, Bayer’s company focused on “owning their backyard” and prioritized getting Genius Juice into local Southern California stores. Today, Genius Juice does more business with a regional brand that has between 50 and 60 stores than it does with a national brand that has over 400 stores. Bayer and his team assessed the market and their consumers to learn exactly where they can meet their audience.
2. Consider your partners’ motivations
It isn’t uncommon to hear that many successful brands in the CPG space are able to get stocked by national retailers like Whole Foods or Target. According to Alison Cayne, founder of Haven’s Kitchen, the reason is those big retailers are eager to take on new brands.
To stay relevant with consumers, about 20% of a big brand’s stock is new products, which can help them appear “cool” and “trendy” to consumers. But that stock is constantly changing over time — and if your product isn’t selling and doesn’t move to the 80% of the store’s solidified inventory, you may lose your spot.
When considering moving into a commercial space, understand what your partner is adding to your business. Is it because they believe in your specific product or because they are hoping it may catch on with consumers? Entrepreneurs should partner with brands that believe their products will truly connect with customers and sell.
3. Conduct customer research
Successful businesses can grow really big really fast. During this expedient growth, companies may not know what direction to scale in. Since every company’s consumer base is different, you’ll need to determine the best location to reach them. Cayne recommended companies explore some key questions about who is buying their products to give them clarity:
- Who is buying my product?
- Why are they buying my product?
- Why do they continue to buy it?
- How do I talk to them?
By answering these questions, you’ll learn where you can meet your consumers. You may find it is better to reach them locally at regional retailers or invest in a national campaign. The more research you conduct, the more data you’ll have, and the more you can make informed decisions about expansion.
4. Think where a demo can be supported
Consumers are often hesitant to buy a product if they have no experience with it. Without a word-of-mouth recommendation or direct experience with a product, consumers will likely stick with what is familiar and bypass a new brand.
To grab their attention in stores, brands need to have demos set up to showcase the product or give out samples. But as Isabella Chia, managing director of Field + Farmer, noted, demos can be expensive and time-consuming. These activations need to be developed, sent to stores, and have an associate run them, making it difficult for a company to achieve and forecast the best RO.
When determining locations and brands to expand your business to, think about consumers’ familiarity with your product and if you’ll need to set up a demo to help sell it. If so, find brand partners that can support an in-store demo that properly showcases your product.
5. Use social media to find your audience
Social media platforms such as Instagram and TikTok are emerging ways for brands to discover new audiences. By engaging with these audiences, companies can expand who purchases their products and where they can sell to them. A video social media platform like TikTok is a great place to post content featuring your products and their features. You can document what it does and what it is used for, and encourage your followers to post videos of them using the products. This generates buzz that can lead to online orders and give clarity on where you expand your business. Entrepreneurs may find they have a consumer base they did not know of and expand into non-traditional stores to sell them.
Alex Bayer said the biggest obstacle to social media is investing time and money into it. However, even the smallest commitment can go a long way. Bayer noted that Genius Juice invests less than $2,000 a month into social media and organically generates half a million views, without paying for influencer marketing or Instagram ads. Creating strong content can build a loyal fanbase that expands your consumer base and puts your product into different retailers.
6. Understand your limits
Entrepreneurs can get overzealous with their ambitions. While determining options for expansion, know your realistic options. Chia recommended dedicating a very specific part of your business in your time to building up the proper channels that strategically can support your business. While being placed in stores nationally is exciting, make sure your business has the infrastructure to support a national demand.
For more advice on how to expand your business, check out this webinar we hosted with our partner Foodbevy, “How to Grow from a Local to a National Brand.” Then, visit our Dynamic Merchandising solutions page to learn how Trax can help your brand stand out.