The Vation Ventures Glossary

Market Development: Definition, Explanation, and Use Cases

Market development is a strategic business approach that involves the selling of existing products or services into new geographic areas or demographic segments. This approach is often adopted by businesses seeking to expand their customer base, increase sales, and achieve growth. Market development is one of the four strategies identified in the Ansoff Matrix, a popular business tool used to evaluate the potential for growth.

Market development is not just about geographical expansion. It can also involve targeting new customer segments, creating new uses for an existing product, or even entering into new distribution channels. It's a strategy that requires a deep understanding of the market, the product, and the customer. In this article, we will delve into the intricacies of market development, providing a comprehensive understanding of its definition, explanation, and use cases.

Definition of Market Development

Market development, in its simplest form, is a business growth strategy that involves expanding the customer base for an existing product or service. This is achieved by identifying and reaching out to new market segments or geographical areas that have not been previously targeted by the business. The primary goal of market development is to increase sales and revenue by tapping into new customer bases.

It's important to note that market development is not the same as product development. While product development involves creating new products or improving existing ones, market development focuses on finding new markets for existing products. This distinction is crucial in understanding the strategic implications of market development.

Components of Market Development

Market development typically involves three key components: market research, market segmentation, and market penetration. Market research is the process of gathering, analyzing, and interpreting information about a market, including its customers, competitors, and other market factors. This research forms the basis for understanding the potential of a new market and the strategies needed to penetrate it.

Market segmentation involves dividing a broad market into sub-groups of consumers (known as segments) based on some type of shared characteristics. These characteristics could be demographic, geographic, psychographic, or behavioral. The aim of market segmentation is to identify high yield segments – that is, those segments that are likely to be the most profitable or that have growth potential.

Market Penetration

Market penetration is the process of entering a new market and gaining customers. This can be achieved through various strategies, such as competitive pricing, advertising, sales promotions, and improving product quality. The goal of market penetration is to quickly gain a sizable share of the new market and establish a strong presence.

It's worth noting that market development is a risky strategy. It involves venturing into unknown territory and facing new competitors. Therefore, it requires careful planning, thorough market research, and a deep understanding of the new market's dynamics.

Explanation of Market Development

Market development is a growth strategy that involves identifying and developing new market segments for current products. It's a strategy that requires businesses to step out of their comfort zone and explore new territories. This could mean entering new geographical areas, targeting new customer segments, or finding new uses for existing products.

The process of market development involves several steps. First, businesses need to conduct market research to identify potential new markets. This involves analyzing market trends, customer behavior, and competitor activity. Once potential markets have been identified, businesses need to segment these markets based on various factors such as demographics, geography, and consumer behavior.

Market Entry Strategies

After identifying and segmenting the new market, businesses need to develop a market entry strategy. This could involve direct exporting, licensing, franchising, or forming strategic alliances with local businesses. The choice of market entry strategy depends on various factors, such as the nature of the product, the characteristics of the target market, and the resources available to the business.

Once the market entry strategy has been decided, businesses need to implement their market development plan. This involves marketing and promotional activities to raise awareness of the product and attract customers. It also involves monitoring and adjusting the strategy based on market response.

Challenges of Market Development

While market development can offer significant growth opportunities, it also comes with its share of challenges. These include understanding the new market's culture and consumer behavior, dealing with local competition, complying with local laws and regulations, and managing logistics and distribution.

Overcoming these challenges requires careful planning, thorough research, and a flexible approach. Businesses need to be prepared to adapt their products, marketing strategies, and business models to suit the new market's conditions.

Use Cases of Market Development

Market development has been successfully employed by many businesses across various industries. Here, we will explore a few notable examples of market development.

One of the most famous examples of market development is McDonald's expansion into international markets. The fast-food giant has successfully entered and established itself in markets around the world, adapting its menu to suit local tastes and preferences.


Another notable example is Starbucks' entry into the Chinese market. Despite the country's traditional tea-drinking culture, Starbucks managed to carve a niche for itself by offering a unique 'third-place' experience and adapting its offerings to local tastes.

Similarly, Netflix's expansion into international markets is a classic example of market development. The streaming service has not only entered new geographical markets but has also diversified its content to cater to local audiences.


Apple's entry into the Chinese market is another example of successful market development. Despite initial challenges, Apple managed to establish a strong presence in China by offering high-quality products and a superior customer experience.

In conclusion, market development is a powerful strategy for business growth. However, it requires careful planning, thorough research, and a deep understanding of the new market's dynamics. With the right approach, businesses can successfully enter new markets, expand their customer base, and achieve significant growth.