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Growing in a Shrinking Market

© Bert Markgraf

With technology changing rapidly many market segments are growing and new market segments are appearing and being developed all the time. The flip side of this is that older markets often become served by new technology and their traditional suppliers find themselves with fewer and fewer customers.

If such a traditional supplier wants to survive, he will have to expand into new market segments as his old base shrinks. The supplier can do this by adding new products, adding new customers or both. A supplier who properly evaluates the risks and benefits of different possible courses of action can, in the end, benefit from the change by treating it as an exciting new venture which can motivate his team and lead to a better business model.

When such a supplier looks at the possibilities for change, the lowest risk option will be to add new products and offer them to existing customers. Getting new customers in your traditional market is hard enough - getting them in new markets will be expensive and take substantial new resources. Adding popular new products to the product line will be less risky in the short term.

Products to be added can be products related to existing products or completely new products. In any case, while they may be new and unrelated from a supply point of view, the new products must be related from a customer or user perspective. When making this kind of change, it is important to leverage existing resources which, in this particular case, are the existing business and customer base. The customer must see the new products as related even if their supply is not. Otherwise the existing customer base becomes much less valuable and the initiative's chances for success will be little more than for a new start-up.

Once the supplier has evaluated the possibilities for the introduction of new products and acted on his conclusions, he can start looking for customers from outside his traditional market. Since he knows his existing customers and why they are buying from him, his best bet is to look for the same kind of customer elsewhere. "Elsewhere" can be in the area where he is already doing business but in a different market segment or it can be in a different geographical area. This step is necessary because adding products in his traditional market is, at best, a short term solution as that market shrinks further. Ideally, the plans for change will consist of a first step during which new products are added and the company is strengthened. The new strength and resources can then be used in the drive for the development of new markets outside the traditional area.

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