Wondering what are the four growth strategies? We’ve unveiled them for you.
So you’ve started a business, and you’re doing okay. Naturally, you want to increase revenue and get the most out of your hard work and investment. Understand this – the value of your business can’t improve without a consistent focus on growth. So, what are the four growth strategies you should focus on? Let’s find out. But before that, let’s understand the importance of growth.
Importance Of Growth
If you want your company to be around for a long time, growth is critical. Growth eases the process of acquiring assets, attracting good employees, and getting funds for investment. It is also often the main thing that pushes you towards profit and business.
There are many reasons why growth is good for business. It enables you to seep out new and fresh opportunities, and with more experience, you can take advantage of them better. You will also be able to get your product or service out there. Customer attraction is also a big area where growth can help.
You will also be better equipped to see market demand and respond to it appropriately, consequently increasing your share in the market. Growth can also stir up your employees to be more innovative, and it’ll help you set yourself apart from your competitors.
Credibility is also a bonus that comes with business growth, and you will be able to broaden the base of your supply. Stability and profitability are likely to improve.
But to be successful and sustainable simultaneously, you absolutely must accompany growth with strategy and careful planning. You must consider absolutely growth strategies to help your business grow.
How Will Your Business Grow?
There are several ways to grow your business. There is no fixed method. Different techniques and strategies will work differently for varying business models and areas. For you, it might be reaching out to neighboring or similar areas, getting more partners on board, or even launching new products within your market space.
What Are The Four Main Growth Strategies?
Although these are not ‘one size fits all’ growth strategies, they are significant and compelling. All four have their risks and benefits. Depending on what you employ, you will get results. These are:
- Market penetration: This means to sell a larger volume of your product or service to the same market. This is generally not very risky because you use the products you already have in hand to increase your market share.
- Product development: If you employ this strategy, you will have to introduce a new product into the existing market. You will continue to sell to the same customer but a different product/service.
- Market development: You can also attempt to sell your same product/service in a different market by repositioning it or appealing to another target audience. You have to be very strategic when employing this because this comes with considerable risks.
- Diversification: By employing this strategy, you do a complete overhaul and sell different products to new customers in a different market. Proceed with caution as this comes with considerable risks.
1. Market Penetration Strategy
Market penetration is a growth strategy wherein a business sells the same product in the same market. One has to find ways to get customers that haven’t yet bought the product or availed of the service. The main goal is to get more customers. An essential understanding is that markets don’t grow forever, technology changes, and consumers aren’t always loyal. A smart business must adapt to the changing circumstances and review strategies if it wants to remain relevant.
Market penetration is done when an organization or company wants growth in sales of a product or service. This methodology can be used at any stage of your business process – as soon as a business has taken off, before sales, or even a few years in, when you find that sales are going down or aren’t rising as your sales team has projected them to.
This method involves focusing on selling your products or services that already exist in existing markets. It aims to increase your company’s overall market share. Almost all businesses employ this strategy as it carries the least amount of risk. Many find it to be beneficial when they’re just starting out.
If you want a successful strategy, you must have thorough information about your market and a successful product. Do your best to understand your competitors and see how they are doing.
Strategies For Market Penetration And Growth
Find below a few ways through which businesses can achieve market penetration and increase growth in their companies:
- A successful strategy aims to dominate markets where growth takes place absolutely
- You must also aim to do away with competitors so that you can get their customers and increase sales.
Find below some more tactics that people employ to increase their market penetration. These have generally proven to accelerate growth:
- Adjust your prices a little bit
- Have a lot of promotions to boost sales
- Your advertising should be more targeted. Not just randomly at everyone, but specifically engineered towards your target audience
- Consider opening shop in other fresh channels of distribution (e.g., sales online).
You can also segment your customers to find another target demographic for your services and products. You could explore selling to a different age group or people who are more enthusiastic about gymming. So, much depends on correct advertising, so be sure that you’re showing yourself to the people who will be interested and respond quickly.
A saturated market may force you to look elsewhere. You can either do that or crush the competition. Also, try dropping prices. Everyone loves a cheap and efficient product!
You can try increasing or decreasing your prices and promote them a lot so that customers see you as a better option when compared to your audience. Also, look for ways to get people to use your product or service more and more. Try fun bonuses, loyalty schemes, and other such incentives to sustain and further your base of customers.
This strategy to penetrate the market does not always work for all products and types of businesses. It is possible that you might want to check out other options so that you can continue to grow.
By trying out market penetration, you can measure how well or poorly your product/service is doing. You can also get an idea of how a customer views the services/products of your competitors.
Whether your market penetration strategy is good or bad depends on your particular industry, product, and your total addressable market (TAM).
Using the formula, Market Penetration Rate = (number of customers/TAM) x 100, you can calculate your current market penetration.
2. Product Development
This strategy of product development is highly dependent on the development of new and fresh products. It also relies on changing and making tweaks to existing products so that customers think that they are new. A product that has been customized to seem new can either be sold in the same old market or a new one. It has proven to be highly effective in driving sales growth and share in the market when the execution is successful.
Businesses generally turn to this strategy when they feel cornered and feel like they don’t have any other ways to grow using the product that they already have in the market that they are in.
If you choose to employ this method of product development for growth, these are your three main choices:
- Introduction of a completely new product that might or not be different from your existing product/service.
- You can also try to bring forward the product/service that you have and have it sell in the market that already exists
- This option combines the previous two – changing the existing product and selling it in a new market.
To create a new product, you want to be very thorough in your research, and don’t forget to keep an eye on your competitors. You should have a point by point, word by word understanding of the needs of your target customer. Have an excellent team to design the product and the brand, and don’t forget to document the design and understand the production process and prototyping.
Different Companies Approach This Method In Different Ways.
Each company approaches its product development strategy in its own way. While some choose to outsource product development and purchase a new product/service and sell basically the same thing to customers but after it has been branded as their own. Some companies just purchase or acquire the permission and right to sell another person’s creation as their own. They may also consider working with businesses in a joint arrangement to develop new products in a partnership.
If you’re going to make a new product, remember that the most essential, without which the whole thing would be pointless, is constant and continuous research.
One of the most useful tricks of this strategy is extending or stretching your brand while developing the product. This entails using your brand’s name for a new product. Some companies might even create a new precuts category so that their product may seem more appealing to the audience.
Here are some ways of brand extension:
- Creating a whole new product that is entirely original in a new form and ready for a fresh market.
- You could also consider making a product that is a combination of two other well-known products. This will give a fresh new product to the market, and customers will be intrigued by the innovation.
- Another option that you could try is to apply the brand that already exists to a different product category.
- Creating products that are complementary to your existing product could also greatly increase sales and revenue. Your brand can also grow from a linear business to one that has several branches and arms
It is common for companies to employ this brand extension strategy under the product development umbrella. It is generally a lot easier to grow as a company instead of creating a whole new product. This also gives you the ability to use your company’s pre-existing credibility to speak for the new product. Usually, the cost of this strategy is lower than bringing in a completely new product that does not already have an identity and can’t speak for itself.
If you plan to expand your brand, you must ensure that there should be a relationship between your original product and the new one you want to bring in. There must be a connection so that it is easier for customers to understand the use. A logical link is a must. If it does not match and people don’t understand the purpose of the new product, your company could suffer a bad reputation, and your brand could slowly die off.
3. Market Development Strategy
If you’re looking to sell your existing products/services to a new target customer base, the market development strategy for growth in revenue and market share is an option you must consider. As is with other strategies, it is of utmost importance that you do your research.
Make sure that you conduct a segmentation analysis of the market that your product exists in, and keep your eyes on your competitors. They can teach you much more than you think. Don’t forget to check out what market segments look good for you and shortlist those you think are worth your time. You can pursue them in your time.
It is essential to identify a segment of the target market. Be sure to look at the following factors:
- Geographical areas that are new and are not as too saturated with the same project that you want to bring in
- Take a look at the people who are not buying your product or enjoying your service. Figure out what appeals to them. Do your best to keep the customer happy for the company’s sake.
- Also, try to analyze what your customer wants. Find the people who don’t buy your product and find out what they lack. If you can fix their ‘problem,’ you have a win.
- Be sure to keep your customer preferences in mind, along with their lifestyle and interests that they have and would not like changed or altered.
Segment your customers. Find customers who are going to your competitors, figure out why that is happening, and do anything to make those customers happier. You could even try to find customer bases whose needs are not yet served by anyone. See if you can help them out a little bit. With your target audience in mind, you can now make a strategy for promotions. You can definitely find methods of calling more people so that they’re attracted to you, and you’re selling your product to them.
There are several strategies that you can try out for your company’s growth. Find them below:
- Offer more competitive pricing. Don’t charge less than your product is worth. Enforce a price point alongside loyalty schemes, discounts, and other offers so that it is more attractive for customers. You could even offer more than your competitors and give your customers more value than the others.
- Try to establish more channels of distribution so that you can reach more and more customers. Reaching out to more customers is sure to increase growth and increase in revenue. For example, you could set up an online shop instead of only having a physically present brick-and-mortar structure.
- Build your brand. You can try creating a new brand for your products so that you can reach a certain target within your target market audience. Brand building helps improve your image and ensures that people trust the product or service that you offer them.
- Keep sending your previous customers reminders that you’re still there and send them personal messages about offers, special deals, and limited period vouchers. It could be emails, SMSs, or even calls. Tell them you’re still here.
You might wonder how this is different from market penetration. The main difference is that market development strategies attempt to increase market potential by reaching out to parts that have not yet been touched. With the latter, there is fixed, and standard market size and the strategy focuses on the maximization of the potential of that market that already exists.
4. Growing Your Business Through Diversification
This strategy for growth is constituted by entrance into an industry or market that you don’t currently have any business in and aren’t yet a part of. Basically, you’re making a completely new product and inserting it into a completely new market.
There are a few different types of diversification strategies that you find below.
- When one acquires or develops a new product or service that complements the main product, it is called horizontal diversification. For example, Apple started with an iPhone and soon transitioned to Mac books, Apple watches, iPods, iPads, Apple pencils, and so much more. This might require a fair bit of new technology, research, skills, and marketing.
- If you add fresh new products that have marketing or tech synergies with product lines or industries that already exist, it is called concentric diversification. For example, if a manufacturer of computers starts selling laptops. This way, you can leverage technologies that already exist, and you will be able to market a certain way. You will also have a very similar customer base.
- In conglomerate diversification, new products or services that are added are completely different from the core business. Many times they may not even be related at all! It is like if a camera manufacturer were to open a bakery next door. This move could be risky and expensive because it not only asks for a new product in a new market, the customer base is also almost entirely different.
- In vertical diversification or integration, a business expands either backward or forward as parallel with the production chain of the core product.
How Do You Know When To Diversify?
You must do adequate research and have lots of details about the new product or service. This is of utmost importance if you’re planning on a conglomerate diversification strategy. Again, do a lot of market research.
You must also have a clear and comprehensive understanding of what a customer needs and assess it correctly. Study your market and test the products accordingly. It can’t hurt to give out free samples and get feedback.
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You might also enjoy these popular International Expansion related articles Steps To Successfully Expand And Scale Your Business, 11 External Growth Strategies For Businesses and Product Expansion Definition: Why You Want To Know More About It on a similar topic.
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