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August 2006 - Strategy Magazine
Where next

Targeting America
If your company is considering U.S. expansion, the key to a successful transition lies in getting one thing right: target market strategy

by Lisa D'Innocenzo
page 44

Countless American brands have ventured across the border over the years, most to be greeted with open arms by Canadians. Ironically, despite the fact that our southern ally is home to 10 times our population, Canuck brands haven't always been as fortunate traveling stateside. Those that have retreated from U.S. expansion plans include such Canadian powerhouses as Canadian Tire, Second Cup and Shoppers Drug Mart.

But if the Great White North can accept and adapt marketing strategies from the U.S., ostensibly due to our cultural similarities, then it stands to reason that our brands should easily fit into their marketplace.

In fact, almost half of 250 CEOs recently polled by Ipsos Reid in the "Annual Canada Most Respected Corporation Survey" cited the U.S. as the most important country for growing their business in the next three years. However, if those who have gone before them were to offer any advice, it would be to cherry pick markets, locations and consumer segments.

John Torella, a senior partner and consultant at Toronto-based JC Williams Group, suggests that what is required is an in-depth understanding of what he calls a very

complex market.

He cautions that the U.S. is not a homogenous market, and that it requires "all kinds of segmentation" due to the diverse ethnic groups, and geographic and lifestyle differences. After all, he points out, New York City is a far cry from San Francisco.

Plus, due to intense competition, it takes deep pockets to succeed south of the border; JC Williams estimates a price tag of $100 million over five years to build brand awareness in the U.S. "The home improvement category for Rona is going to be a daunting challenge - especially with Lowe's and Home Depot in that market," he says. "You need a larger budget for marketing [in the U.S.], but also the question is are you prepared to make an investment for critical mass?"

One brand that runs smoothly stateside is Aldo. According to Torella, this is because the footwear retail chain adopted a "cluster" approach, winning over markets one at a time, as opposed to spreading out across the country. "Whether it was Chicago or Boston, they [targeted specific] areas and gained critical mass."

Susan Sanderson, EVP client and creative development at Toronto-based brand consultancy Watt International, also stresses that a finely honed market choice is crucial. "You're in a different place and it's 20 times more complex," says Sanderson, an American who has lived and worked in Canada for the past five years. "You can certainly fail if you fail to understand who your consumer is. Yet it can be overwhelming for Canadian companies to figure out whom to go after.

"And it's not just whom - it's also, are you going to start out regionally or go for the whole enchilada?"

Mississauga, Ont.-based Manchu Wok Group has certainly grappled with that issue. President/CEO Kelvin Chen says the retail chain first entered the American landscape about five years ago, when it purchased 20 stores in California. It now has 120 outlets in the U.S., a favourable market where Chinese food makes up over 25% of eatery occasions when it comes to all "ethnic" foods, according to the company. Thus, you can now find Manchu Wok banners in New York, Florida, Texas, Louisiana and D.C. (By comparison, the QSR operates 80 shops in Canada.) "We have been growing, but not exceptionally aggressively, because we're careful with the locations we choose as well as the franchisees," says Chen.

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