Every business wants to ‘scale’ but there is a lot to consider to make this happen. We invited some of our most talented Southeast Asia founders to share their experiences over lunch:
Think before you leap
The market: While it might sound like a good idea to enter a new market, not every business operates in the same way and by that logic not every market is right for every business. Here are three questions to drill into a market opportunity:
Can your business model make money in that target market?
What is the TAM (total addressable market) and operational complexity?
What is the competitive landscape?
Does it affect your P&L: Often founders focus on the top line numbers like revenue and gross margin but lose sight of their bottom line. Entering a new market often requires significant investment and careful planning to be successful. It shouldn’t drag your P&L beyond the window you are able to afford. Hence, thinking through a few things like setting a timeframe for expansion and listing down tangible milestones to be achieved, is a good place to start. It is important to define such success parameters and avoid unnecessary cash burn. Experienced founders often raise additional capital ahead of time for market expansion and set clear timelines for such activities, be it four, six or even twelve months.
Talent: The founders in the room felt strongly that understanding the local market, its needs and potential gaps requires the skills and capabilities of a strong local team rather than parachuting expats in. We discussed the talent question further at one of our #Scaleup events earlier this year.
Timing is everything: Once you have the made the decision to expand, when should you do it? Some find momentum after a fundraise, some focus on product readiness and others on having key partnerships in place. The key here is to have an anchor or edge that launches the business favorably into new markets.
Whether your business focuses on enterprise or consumer, B2B or B2C, expanding across Southeast Asia is non-trivial. Different countries come with different regulations, cultures, market maturity and customer profiles.
Strategy (one size fits all?): Southeast Asia is a dynamic and complex region. Every country is different, and founders need to be ready to flex and adapt business models, products and in some cases even the way they talk about their product, to truly connect with the local audience.
Product Pricing: Evaluate the market and study consumer spending patterns. What gap does your product fill? What price will consumers be willing to pay? Like many other markets, optimal pricing is even more crucial in this region as consumers are very price sensitive. Businesses often end up in the dilemma of being a price taker or needing to discount beyond sustainable margins.
Trust: Building trust in your product or service in the local market will be integral to your success. Especially in markets such as Indonesia or Thailand, establishing trust is important. Take for example the last mile logistics space, where shippers often choose a vendor based on trust, when there is little price differentiation. Similarly, for online used cars or property transaction platforms. They serve as trusted intermediaries in effecting exchanges between parties in asymmetrical markets like Vietnam, Indonesia or even Malaysia.
Early stage tech companies spend a lot of time and focus on their technology and ‘product market fit’ but often less time focused on their ‘commercial market fit’. Read our blog on designing an effective go-to-market strategy from an event we hosted in India earlier this year.
Marketing - Let’s get talking
If the product or service addresses a problem at the right price, then actually ‘selling’ it shouldn’t be a problem at all. Our founders shared three methods they have found useful in marketing their products:
Lead generation - Without spamming consumers, you need to build your own database in a new country. It might be a promotion in the aisles of a supermarket, a competition or even a free trial for a limited period of time. Understanding your target audience and where to find them, will be critical to your success in the early days.
Partnerships - Local experts, trusted partners and key influencers can add a lot of value especially when you’re new in the market. It’s an automatic endorsement of your credibility.
Word of mouth referrals - Unlike big FMCG companies, startups are tight on budget so big flashy advertising campaigns just won’t work. Getting people to talk about your product and share with friends and family definitely will.
Online vs Offline
- An omnichannel approach works best
- Technology has helped but has also made brands very impersonal
- Consumers crave attention and want their needs met
- Hosting localised events for your consumers is another good way to build credibility and trust
This was our first #Scaleup event in Singapore, but we will be hosting similar events in 2020. Follow us on @8roadsventures for news and updates.