What is growth strategy?
En growth strategy is a strategy to empower your business to gain market share in selected areas.
The reason it is 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, be completely outcompeted.
Growth opportunities can basically be divided into two broad dimensions: market and product. Here, each dimension is further divided into: existing and new.
5 examples of growth strategies
Multiple or cross-selling
An obvious opportunity to further your growth strategy can be multi-selling or cross-selling. It is simply about offering several (possibly different) products to the same customer. It is much easier to "sell a little more" to a customer who already has his credit card in his hand than to have to find a completely new customer. So make sure you offer relevant cross-selling products to your customers.
It almost goes without saying that entering new markets would be a good growth strategy. You don't necessarily have to think far away from where you are now. Start by exploring whether you can dig a little deeper. Are there niches right next to your current market? Small 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 whole new market. However, this often requires you to expand your entire business and offer entirely new products or services.
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 for 10 kroner each, you've made 1,000 kroner in sales. If, on the other hand, you raise the price per pen to DKK 15, you might only sell 75 pens in a month. But your bottom line will be DKK 1,125. An improvement of just over 10%. Over thousands of sales, that will make a huge difference. So you're not "just" making 5 kroner more per pen. That 5 crowns is an increase in profit of a whopping 33 %. This example shows how important the right pricing can be to your growth strategy. You may only need a small adjustment to grow significantly.
It is both cheaper and less time-consuming to retain an existing customer than to seek out a new one. So make sure your retention - or customer retention - is good. A loyal customer base is also one of the very best insurances you can have against recessions and bad times. Because even though sales may go down, your customers won't flee. As soon as the economy looks better, you can usually count on most of them still being with you, so you don't have to go out and find new ones. Note, however, that you'd be wise to nurture your customer relationships even during periods when you're not seeing the desired sales numbers.
Increase customer satisfaction
When several large companies are competing for the same part of the market, you often see a strong focus on good customer service. This is true whether you sell products, but especially in engineering or service. Look, for example, at telecoms companies like YouSee, Telia, Telmore and Oister. If we assume that prices and products are quite close, then 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 existing customers. Nothing sells better than a satisfied customer.
Types of growth strategies
Growth strategies can be divided into five different types:
Market penetration is a growth strategy where you and your company try to secure increased sales to current markets with current products. You can undertake this growth strategy in the following ways:
- Increase market share.
- Increase consumption by getting your current customers to buy more.
- Finding new uses for the product.
- Get more of your target audience to use the product.
This growth strategy involves your company trying to grow by selling its current product in new markets. Market Development can be implemented in two different ways - either by geographic expansion, or by expanding the market into new segments.
By growth through product development is a growth strategy where your company offers a new product to the current markets in which you are already established. This can be done in three ways:
- Product improvement.
- Product line expansion.
- New product for the same target group.
In general, this growth strategy involves your company developing new products for new markets. Diversification means diversification, that is, your company is trying to diversify your business. There are two forms of diversification:
- Concentric diversification, where there is some overlap with the existing product portfolio - for example in marketing or technological terms.
- 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 you can use to achieve growth. In this growth strategy, your business seeks to grow by moving up the business supply chain, or in other words, acquiring other businesses 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 other companies previously handled. This can be done 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 collaborate with a selected company.
You can also choose to move up 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 activities at the same level in the supply chain. You can do horizontal integration in two ways:
- Your company can set up a brand new business producing essentially the same type of products, but under a different name.
- Your company merges with/acquires an existing and competing company.