Four Strategies For Growing Your Small To Mid-size Business
“One can choose to go back toward safety or forward toward growth.”
Growth is essential, but not easy.
If you are a business owner or executive, then you know the importance of growing your company. Put simply, growth is essential for survival. But it's not easy! Many small and medium-sized businesses struggle with planning for expansion because they don't know where to start or how to prioritize their efforts in order to grow sustainably.
Proven Strategies for Growth
This article explains the Ansoff model of corporate growth – one of the most widely used frameworks for thinking about corporate strategy today - and explores how companies can use this framework as a tool to inspire their own growth plans.
The Ansoff Model is a proven approach that helps you identify both short and long-term opportunities in the market. It provides a framework for how businesses should think about growth and how to make strategic decisions about where to grow next.
When it comes to growing a business, many leaders think about the same old marketing tactics over and over again. The Ansoff model can help your business to think more strategically about future growth by focusing on high-priority areas of opportunity instead of on tactical efforts alone.
The Four Growth Strategies
According to the Ansoff model, there are four ways in which a business can find growth opportunities.
Market Penetration: Sell more of your existing products or services to your existing customer base
Market Development: Grow by entering new markets or geographic areas
Product and Development: Develop new products or services for your existing market
Diversification: Enter new markets with new products or services
Growth Strategy #1
Market Penetration – Increase your existing market share.
The market penetration strategy is how every new business grows - by penetrating a market with a new product or service. At first, the product meets a need in the market and growth ensues as more and more customers buy. However, at some point, this kind of organic growth will flatten as the amount of market share you can acquire using the same approach will reach a natural limit. In order for growth to continue taking place using this approach, the business must find a way to attract new customers away from competitors and/or make sure that existing customers buy more often.
Trying to increase market share is a highly competitive game where every new customer you make is a customer loss for another company that’s targeting the same market. Put simply, increasing your market share implies serving customers that would otherwise be served by a competitor. In order to be successful at a market penetration strategy, a company must be able to woo new customers from competitors or draw new customers into the market.
Questions to ask yourself when engaged in a market penetration strategy:
How does our existing offer compare with our competitors in this same space?
Is there an opportunity to capture more market share from our competitors?
How can we make it easier for existing customers to buy from us instead of the competition?
How must our business be positioned to become more competitive?
Growth Strategy #2
Market Development – Sell existing products to new markets.
The market development strategy involves selling existing products or services into previously unexplored markets. This requires discovering the ways in which your company's existing products can be sold into new markets. Developing a new market can be accomplished by finding new customer segments where your offer will add unique value. For example, you might discover that household customers have a similar need for your products as your existing industrial buyers do. Or you might decide to begin selling into new geographic areas where competition is low. This approach requires a strong understanding of the new market prior to execution.
Questions to ask yourself when considering a market development strategy:
How large is the new market we want to enter?
How competitive is the new market?
Does my product "fit" a need in the new market?
Growth Strategy #3
Product Development – Sell new products to existing customers.
The product development strategy involves creating and launching new products or services for your existing market. In a way, when you begin selling new products to existing customers, you are using your brand as a kind of distribution channel to reach your existing customers with a new product offer. Typically, new products are created by investment in research and development; however, products can also be acquired through a partnership with another company.
Questions to ask yourself when considering a product development strategy:
Do we have a loyal base of customers that we can leverage to sell the new product to?
Does this new product meet an unmet need for our existing customers?
Where can we acquire new products that our existing customers will value?
Growth Strategy #4
Diversification Strategy – Launch new products to new markets.
The diversification strategy involves launching new products or services to new markets where you have not previously sold. Diversification is the riskiest strategy. It involves the marketing of completely new products and services in a previously unexplored market. In a sense, this is similar to starting a new business, where penetration of the market with a new product and acquiring an initial customer base is required.
Questions to ask yourself when considering a product development strategy:
Will our experience in our existing market provide us with an advantage in the new market?
How competitive is the new market space?
Which customers will buy from us instead of the competition, and why?
How must we position our new product in the market to win new market share?
Conclusion
Companies need to grow if they want to survive. But growing a company can be difficult without the right steps in place. Fortunately, there are proven methods and models that can help leaders find hidden pockets of growth and make their businesses more successful. The Ansoff Model is a proven approach used by organizations of all sizes to identify both short and long-term growth opportunities in the market. It provides a practical framework for how businesses should think about growth and what they need to do to grow successfully in today’s economy.
