Q: What are the points to consider before scaling the brand?
Gaurang Naik, CEO
A: There is certainly not a cookie-cutter approach to geographic expansion strategy, but here are some guiding questions to ask yourself as you weigh the pros and cons:
1. Penetration of current marketplace. Can you drive substantial growth in your current market or are you beginning to hit diminishing returns? If it is the latter, then expansion may become an imperative.
2. First mover advantage. Ask yourself why you want to expand. By not expanding, do you risk potential competitors replicating your business model and saturating the new market before you arrive? If so, better move more swiftly.
3. Proven concept. Are you still working out “bugs” with your concept and the business model? You do not want to increase the resources required to expand until you are confident that your value proposition is successful.
4. Management infrastructure. Managing across geographies can be burdensome on oversight and infrastructure. Do you have managers who you trust with more autonomy? Can your supply chain and IT infrastructure manage?
5. Marketing resources and funding. With each new geographic market, it will take incremental marketing resources to generate awareness, gain trial and build a loyal customer base. These factors may certainly dictate whether you roll out regionally or aim for rapid national expansion.
6. Regional customer differences. This ties back in with the point above. How well do you know the customers and competitors in potential expansion markets?
7. Regional messaging. Regional expansion differences will require multiple tactics on “national platforms,” such as your website and social media. It is important to utilize URLs of users to tailor the message geographically.
8. Tolerance to risk and time horizon of investment return. Overall business funding, time horizon expectations and risk tolerance of investors may dictate the speed of expansion.
The best analytic approach is to develop financial pro forma of each alternative and layer on qualitative factors (risk tolerance, infrastructure complexity, strength of model, etc.) to your analysis.
Stephen Vuolo, clinical faculty for marketing, and Avinash Malshe, Ph.D., associate professor of marketing at the University of St. Thomas Opus College of Business contributed to this response