You’ve decided to grow your business. What next?
At the start of a New Year we like to reflect on our ambitions, where we want to be? What do we want to do? Are we on track?
If you’ve decided that growing your business is going to be the big aim for this year, the next question to ask is, how?
We’ve pulled together not only the five different methods of growth, but also specific examples to help you answer that ‘How’ question.
What is important to know is that there is no one magic formula. The most successful companies create their own unique combination of growth strategies that are suited to their overall strategic plan and also to their current market conditions. Whichever route you choose, engage your team, craft it together, gather their feedback and check all practicalities of it including how it will affect your finances.
Growing Existing Products in an Existing Market
The least risky method of growth is selling what you already have, in the same places, by encouraging your customers to buy more or for new customers to start buying your products. You either need to win over those who have never tried your product before, or tempt customers away from a rival producer. Once successful at this you will have a greater share of the market.
Of course, if you are already well established in your market or the market is mature, any growth here will be minimal and you will instead need to focus on defending what you have.
Here are five examples of this strategy:
- Introduce a loyalty scheme – it is widely known that it can cost at least 3 times more money to acquire new customers than to sell to existing ones. Loyalty schemes not only encourage current customers to purchase repeatedly and potentially more frequently, but can also attract new customers who see a benefit in buying from you rather than a competitor.
- Increase sales force activities – this can help gain awareness of your product for new consumers and can encourage repeat purchase for existing ones. The sales force can prompt sales before your customer buys from someone else and can make sure that your product is stocked and available to buy.
- Promotions – run time-limited or quantity-limited promotions and use scarcity to get customers to act now instead of later.
- Price. This can be a sensitive issue, but it is important to get right – sell it too cheap and you will not make enough profit, but too expensive and no-one will buy. Before you change the price, check the competition, assess the market, understand what the consumer is willing to pay. Do not decrease the price unnecessarily, as once you have dropped the price it is difficult to increase again, although done well it can be a great method to increase trial of your product.
- Marketing – This is where you ask questions like “Who are our customers, and our competitors?”; “What will make our product or service stand out in the market?”; “Which market trends can we take advantage of?”; and “How can we promote our product, so that we make best use of our company’s opportunity?” The answers to these questions will help you to identify your customers’ needs so you can target them and help meet that need when they need it.
Growing Existing Products in a New Market
Here, you are sticking with your existing products but aiming to sell into new areas. This method is only slightly riskier than expanding an existing market as you are still using your core expertise in your existing products.
Here are four ways to use market expansion to grow your business:
- Target different geographical markets – home & abroad. There are many frameworks that you can use to analyse the best options for your business at this specific time. Whichever framework you use, weigh up the opportunities and threats, advantages, disadvantages, resources and requirements and to help make your decision.
- Use different sales channels such as online or distributors. The key here is to understand your current business model and look where there are gaps that could be filled. Compare those gaps to your ability to fill them and the size of the opportunity that they provide.
- In order to combine points 1 and 2 above, one option is to leverage global platforms. For example, if you sell products online, Amazon’s FBA service could be an option. Find a platform that has global reach and use it to grow your business quickly.
- Use market segmentation to target different groups of people from your usual customers. These are customers that you can find in your current or new territory/distribution channel but who have yet to buy into this type of product. To do this you can advertise in new locations or ways to target your new consumers or you can show a new use for a current product that makes it more applicable for them.
For example, Cif cleaning Cream was being bought by an increasing older demographic. However, the marketing team saw that the product was excellent at keeping white trainers white, so they used a different type of marketing to target a younger demographic who were buying the white trainers and wanting to keep them white.
Growing New Products in an Existing Market
The objective here is to sell additional or new products to the same people, your current customers.
What complementary products or services or information can you offer in your business? Identify new opportunities within your niche. What are the up-and-coming trends that you can adapt to take advantage of? What else can you sell to your clients? A product expansion growth strategy also works well when technology starts to change, as you may be forced to add new products as older ones become outmoded.
Product expansion strategies:
- Extend your product range by producing different variants or repackage existing products. E.g. a new flavour or colour. This is likely to be a less costly or risky option.
- Develop related products or services. E.g. conditioner as well as shampoo, or biscuits as well as cakes. More risk and more cost will be involved here for all departments, including R&D, Production and Sales & Marketing.
These first two options require investment in innovation and/or R&D. Alternatives to developing your own additional products could include the following:
- Acquisition of the rights to produce someone else’s product.
- Buying in the product and “branding” it.
- Joint development with another company who need access to your business’ distribution channels or brands.
If you do want to pursue option 1 or 2 then here a couple of tips for your innovation strategy:
- Ask for ideas and feedback from your stakeholders; from suppliers, customers, consumers and do not forget to harness your employees’ creativity. They have first-hand knowledge of your business and industry and are often the best source of ideas.
- Develop an innovation strategy with the help of your team. It should cover improvements to your products and services, processes, marketing strategy, business model and supply chain. Remember to keep it up to date. For example, production staff often have great ideas on efficiencies and savings. Make sure you have a feedback loop to include all departments in idea generation.
Keep in mind that innovation does not necessarily mean inventions or radical departures from your way of doing things. It can also include gradual improvements in products, processes and market approaches.
Growing New products in a New Market
This means launching new products or services in previously unexplored new markets. This diversification is the riskiest strategy as there is often little scope for using existing expertise or for achieving economies of scale, because you are trying to sell completely different products or services to different customers.
You will need to plan carefully when using a diversification growth strategy. Marketing research is essential because you need to determine if consumers in the new market will like the new products. Risk and cost are likely to increase the further you depart from your current products and markets, and therefore can be done to a greater or lesser extent to mitigate this.
Beyond the opportunity to expand your business, the main advantage of diversification is that, should one part of the business suffer from adverse conditions, another may not be affected; the principle of not having all your eggs in one basket, or selling umbrellas and ice creams.
The methods we have looked at so far have focussed on internal options but there are also options external to the business.
Four external growth options:
- Acquisition strategies – Here, a company purchases another company to expand its operations. An acquisition growth strategy can be risky, but not as risky as a diversification strategy as the products and market are already established. Acquisition may be a good strategy if you want to expand into a new geographic location or to another country where you lack contacts and local knowledge. It can also be a very quick way to grow your own business. If you can find competitors or businesses in other industries that would complement your own, you could use them as platforms to scale fast.
- Franchises –
- Franchising your business can be a successful growth strategy, especially if you have a profitable operation that can be easily replicated by others. Although franchise costs are high and moving to a franchise model is complex and takes a lot of marketing know-how, it could make all the difference if you’re truly looking for quick growth.
- Buying a franchise business usually comes with name recognition, serious marketing power and support from the franchise owner. Be sure to investigate all your costs, including start-up fees, royalties, advertising and supplies.
- Strategic partnerships – Another common growth strategy is to pursue partnerships with other companies. A partnership can be as simple as an informal agreement between businesses in complementary markets to refer clients to each other. More complex partnerships include joint ventures (in which two or more businesses pool resources to pursue a common project).
- Licensing deals – Doing licensing deals is a great way to grow your business if you have a product that you can license to others and take a share of revenue. Taking a popular or successful product and bringing it to a company with a large footprint can help you achieve market saturation quicker.
Through reading these options you should have a sense of the options that are applicable to you and your business in this moment. Before you go ahead and implement the plans, take a moment to weigh up the different factors to make the best choice. Conduct a risk analysis for the options you are interested in and develop a contingency plan for the most likely risks.
Then go for it, take action and do not forget to measure as you go and learn from what you do.
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