This is the first in a series of articles to help you plan your business growth strategy in 2017. Over the next few weeks, I’m going to take you step by step a process for putting together your business plan which will include how to prepare a sales forecast and marketing plan. We’ll also delve into exactly how to put together a marketing budget and how much you should invest in your marketing.
When it comes to growing a business, any business, there are only four business growth strategies. These are to:
- Market existing products to your existing market
- Take existing products to new markets
- Create new products for existing markets
- Create new products for new markets (what you’re doing as a start-up)
I’ve listed these in order of the easiest, least risky business growth strategy, with the greatest potential return. Let’s explore each in turn.
1. Market Existing Products To Your Existing Market
The least risky business growth strategy is to sell more products to your existing customer base. This is called market penetration. Consumer goods companies are brilliant at doing this by selling everyday items in large quantities e.g. toilet rolls.
You already have a high level of brand awareness with this audience, and you may even have built brand loyalty where buyers shop exclusively with your company. Apple has done this brilliantly. Think of the shops and brands that you are highly loyal to over and above other alternatives.
I shop at Marks & Spencer and John Lewis for everyday items. If I want to book an adventure travel holiday, I buy through Wild Frontiers. For clothes and jewellery, Anthropologie, The White Company and PANDORA are my brands of choice. If I’m down at the Sussex Coast, I generally go for coffee, brunch and lunch at either The Perch or Ginger & Dobbs. For beauty products, I favour Boots No7, Clarins and Liz Earle. If I want to check the news, I go to The Guardian, the BBC and New York Times.
Because I trust and prefer these brands over their competitors, it’s much easier for them to sell more to me because I have a particularly high level of brand loyalty. Take Red magazine which I’ve read religiously for the past 20 years. When Red magazine outs on events for its readers, like ‘Smart Women Week,’ I’m highly likely to attend.
- What products could you launch multiple times to your current market? E.g. a soup and sandwich meal deal in the autumn and winter months.
- Are there new ways that your customers can use your products? E.g. baking soda could be turned into a fridge deodoriser.
- Which of your products are evergreen and could be promoted annually? E.g. White Company’s winter candle and Michael Hyatt’s ‘Best Year Ever’ course.
2. Take Existing Products To New Markets
This business growth strategy is called market development. You use this strategy when you’ve got a proven product that you want to sell to a new market. A gym owner might open a new fitness centre in a new area. An accountant might set up a second practice in another city. A cleaning company might open new offices around the country through a franchising model. You might license a product and offer people the opportunity to operate under your banner e.g. Zumba.
To enter a new market, you have to build brand awareness and factor the costs of doing so into your marketing budget.
Ways of doing this include:
- Setting up an ecommerce website to sell your products online. E.g. Marks & Spencer invested £50 million in its website and digital marketing strategy to develop its market share.
- Buying a company that operates in the market you want to enter. E.g. the US giant Kraft bought Cadbury’s (a much loved British chocolate brand) for £11.5 billion in 2010.
- Setting up another shop. E.g, The blogger and cookbook author, Ella Mills has just opened a second ‘Deliciously Ella’ café in London.
- Expanding into new markets through franchising. E.g. The Californian based fitness company Club Pilates currently has 350 franchises, and intends to extend this to 400 by the end of 2016 and 600 by the end of 2017.
- Using affiliates with an established customer list. This is very common in the online marketing world, for example Jeff Walker and Marie Forleo’s annual online course launches. Under this arrangement, the affiliate undertakes all the marketing in exchange for a percentage of sales.
How could you take your products to a new market? Could you for example set up an ecommerce site if you don’t already own one? Are your systems and infrastructure robust enough for expansion?
3. Create New Products For Existing Markets
This business growth strategy, called product development, has a far higher rate of failure than the first two options because the concept has not been proven. In addition to the research and development costs, the success of this strategy relies on building brand awareness for your new products as well as running an effective promotional campaign.
This strategy is commonly used by the tech industry because innovation is essential to stay ahead of the curve. In the case of Apple, the company produces relatively few products. But it invests substantially in research and development to improve its products, so that they’re more innovative than their competition. It’s rumoured that Microsoft is about to make a bid for the smartphone market with the ‘ultimate mobile phone’ following rumours that the Surface Phone is almost ready for trial production.
4. Create New Products For New Markets
Diversification is a ‘shot in the dark’ business growth strategy which is why it’s rarely used. There’s no proof of concept, no customer base and research and development costs are high. This makes it VERY high risk.
Apple has pulled off this strategy twice – when it introduced the iPod and the iPhone. What made the iPod such a breakthrough product was that it could be sold alone, independent of an Apple computer. But it also helped expose more new customers to other products Apple offered.
It should be obvious that other options are safer and less expensive.
The irony is that we’ve all used this business growth strategy! That’s because each of our businesses started life as a start-up.
The key to success, whichever business growth strategy you are using, is having a high level of brand awareness, an adequate marketing budget and effective marketing plan. I’ll be delving deeper into these subjects over the next couple of weeks.
Join The Conversation
Question: Reflecting on this article, which of these business growth strategies are you going to use in 2017? I love reading your feedback so please do reply using the comments box below.
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I’m Denyse Whillier, a London based business coach and consultant. I guide entrepreneurs from across the globe to achieve profitable, scaleable growth and create businesses that are Built To Succeed™. Built To Succeed™ is my proven success system, developed during my 8 years in the trenches as a CEO, 25 years’ experience at senior leadership and managerial level and training at Cranfield School of Management, the UK’s leading business school. It’s this background that sets me apart and helps my clients to get BIG results.
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