What is growth strategy?
A growth strategy is a strategy to empower your business to gain market share in selected areas.
The reason why it's important for your business to have a growth strategy is to ensure your competitiveness. Without a growth strategy, your business could lose market share and, in the worst case, end up out of business altogether.
Growth opportunities can basically be divided into two main dimensions: market and product. Here, each dimension is further divided into: current and new.
5 examples of growth strategies
Upsell or cross-sell
An obvious opportunity to further your growth strategy can be upselling or cross-selling. This is simply about offering more (possibly different) products to the same customer. It's much easier to "upsell" to a customer who already has a credit card in their hand than to acquire a completely new customer. So make sure you offer relevant cross-selling products to your customers.
New markets
It almost goes without saying that entering new markets will be a good growth strategy. You don't necessarily have to think far from where you are now. Start by seeing if you can dig a little deeper. Are there niches right next to your current market? Little pockets that overlap with your area but that no one has really filled yet? Of course, you can also think bigger in your growth strategy and simply try to break into a completely new market. However, this often requires you to expand your entire business and offer completely new products or services.
Pricing
It's an often overlooked but really important factor in your growth strategy. Let's say you sell pens. If you can sell 100 pens in a month at 10 kroner each, you've made 1,000 kroner in sales. If, on the other hand, you raise the price per pen to 15 kroner, you may only sell 75 pens in a month. But you'll have a bottom line turnover of DKK 1,125. An improvement of just over 10%. Over thousands of sales, this will make a huge difference. You don't "only" earn 5 kroner more per pen. That $5 is an increased profit of 33 %. This example shows how important the right pricing can be to your growth strategy. It may only take a small adjustment before you can grow significantly.
Better retention
Retaining an existing customer is both cheaper and less time-consuming than seeking out a new one. So make sure your retention - or customer retention - is good. A loyal customer base is also one of the best insurances you can have against recessions and bad periods. Because even though those sales might go down, your customers won't flee. As soon as the economy improves, you can usually count on the fact that most of them will still be with you, so you won't have to go out and find new ones. Note, however, that it's wise to nurture your customer relationships even during periods when you don't see the desired sales figures.
Increase customer satisfaction
When several large companies compete for the same part of the market, you often see a strong focus on customer service. This is true both if you sell products, but especially when it comes to technology or service. Take telecom companies such as YouSee, Telia, Telmore and Oister, for example. If we assume that prices and products are pretty close, customer service is where they can stand out and really make a difference. By offering fast, efficient customer service, you can also better retain your current customers. Nothing sells better than a happy customer.
Types of growth strategies
Growth strategies can be divided into five different types:
Market penetration
Market penetration is a growth strategy where you and your company try to increase sales to current markets with current products. You can undertake this growth strategy in the following ways:
- Increase market share.
- Increase spend by getting your current customers to buy more.
- Find new applications for the product.
- Get more of your target audience to use the product.
Market development
In this growth strategy, your company tries to grow by selling its current product in new markets. Market development can be accomplished in two different ways - either by geographical expansion or by expanding the market to new segments.
Product development
When growing through product development is a growth strategy where your company offers a new product to the current markets you are already established in. This can happen in three ways:
- Product improvement.
- Product line extension.
- New product for the same target group.
Diversification
This growth strategy basically involves your company developing new products for new markets. Diversification diversification means that your company tries to diversify your business areas. There are two types of diversification:
- Concentric diversification, where there is some overlap with the existing product portfolio - for example, in terms of marketing or technology.
- Conglomerate diversification, where your company takes on completely new business areas that have no connection to the current product portfolio.
Integration - another form of growth strategy
Integration is another growth strategy by which you can achieve growth. In this growth strategy, your company attempts to grow by moving up the supply chain, or in other words, acquiring other companies and "integrating" them into your business. This can be done in two ways: vertical and horizontal integration.
By vertical integration your company takes over some of the functions in the overall supply chain that were previously handled by other companies. This can happen as both backward and forward integration. Backward integration means that your company goes one or more steps back in its supply chain (up stream), which means that you either take over or partner with a selected company.
You can also choose to move forward in the supply chain (down stream). This means that you take over the next link in the supply chain.
By horizontal integration your company expands its operations at the same level of the supply chain. Horizontal integration can be done in two ways:
- Your business can set up a completely new company that produces essentially the same type of products, but under a different name.
- Your company merges with/acquires an existing and competing company.
