[EN] Market research : the first crucial step

One of the top markets in which most of our French clients want to expand to is the United States
market. Not so surprising when you consider that the size of that market is 5 times larger than the French market. In 2022, there were more than 70 000 active startups in the U.S., making it the country with the most startups in the world.

Can you imagine using the same strategy in the U.S. as in France?
Every market has a different culture, buyer persona, purchasing process, competitors and status quo:

Does your brand meet the targeted market’s demand?

First and foremost, conduct an audit of your company: What are your strengths, your weaknesses, your products and services? What are your opportunities and threats? Using internal and external data, a SWOT analysis will allow you to set up strategies that are more likely to succeed. In order to assess the viability of your product or service, you should study the characteristics of the demand in the target country: Age range, gender, socio-professional category, interests and the evolution of the latter over time.
You should be interested in their consumption type while going international, you will discover a culture that is different from yours and this should not to be left unknown. American people, for example, are known for getting straight to the point: Things are said as they are.

Once the target has been defined, finding the most efficient channel to reach out to them and above all knowing how to develop their loyalty is crucial. Market research helps you to see what works best in your sector: interacting with your consumers on social networks, proposing personalized offers, a reward program…

Afterwards, you may need to modulate your offer. For example, McDonald’s has modified their offer in India, with vegetarian options on their menu as most of the population neither eat beef nor pork. Beware, sometimes it’s not the product itself that raises issues… but the product name. Make sure your name does not have a negative meaning in your target market. In fact, one of the main causes of a startup’s international failure is due to misreading the market demand.
Facing the challenges of new markets encourages creativity, which is itself driven by the need to
adapt. New products or services can thus be created from this “voluntary imbalance,” and even serve to enhance the market in your country of origin.

Business angels to understand the potential of your expansion plan.

Investors want to briefly see what your chances of success are before making the decision to invest in your project. A complete and well-conducted market study will allow you to gather in a single document the answers to all the questions of your potential investors: Who are your target customers? Who are your competitors? Are you meeting the demand in this new market?

The American business culture is focused on efficiency and productivity. You probably know the
saying “Time is money” means that no one has time to waste on business opportunities that would not be based on clear data proving their potential return on investment.

Put yourself in the position of future investors, you should reassure them about your project if you want to raise funds because remember, equity investors receive their share of each dividend paid by the company and can realize a capital gain when they resell their shares in the event of a sale or company’s listing.

However, there is no guarantee that the company will be able to pay dividends or that their shares will be worth more than their purchase price if they are resold. And, in the event of bankruptcy, they are the last ones getting nothing back. Looking at the current trend, confidence is no longer the watchword after the last few months of economic, social, and political events: Global early-stage funding reached $34 billion in the third quarter of 2022, down 25% from the previous quarter and 39% from a year earlier. Series A funding
was the least affected in the early stage, down 23% year-over-year, while Series B funding dropped 54 % for the same period.

Avoid making mistakes that could be costly.

Three examples of large groups that did not conduct extensive market researches before expanding their business:

• In 2008, Starbucks had to close more than 2/3 of their stores in Australia. It was simply too difficult for the brand to establish themselves in the country where the coffee culture was already established. Results: : $143M in losses and 61 stores closed.
• In 1999, Sephora, a company specialized in the distribution of perfume and cosmetics, decided to establish themselves in Japan. However, Japanese people hardly use perfume… Sephora closed their 7 stores 2 years later.
• The British grocery chain Tesco, failed to win over the U.S. market. In fact, a few years earlier, the brand might have been successful, but Tesco’s Fresh & Easy opened in 2007, on the edge of a recessionary cliff, as U.S. consumers’ appetite for food spending went down. 5 years later, in 2012, Tesco announced it was giving up the U.S. market and closing its nearly 200 West Coast stores. The failure cost nearly $1.5B to the chain.

Market research is essential when you want to conquer a new market. 7Mountains helps you from the market research to the fundraising step in order to succeed in your international expansion (contact us).
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