By Brian H Meredith
From the NZBusiness Magazine"Marketing
Maestro" Archive.
First published October 2004
Growth (and the demand for it) must surely be one of the most omnipresent pressures facing managers today and it is a pressure which I have explored in this column before.
The solutions of the past are no longer adequate. Re-engineering to cut costs is less likely today than perhaps ever before — many companies have so little fat left to cut. Yet, more than ever, senior management is being pressured to grow their bottom line. In many instances, this is going to need more than simply adding to the product line or the services offered.
Besides, expanding a company’s product line is unlikely to work. In the postwar decades, all it took to grow a company was to invent a great product, launch it, and sell it like hell. But, today, markets are increasingly being saturated and traditional sources of economic growth have run out of steam.
If management is to grow its company’s bottom line, it will have to grow the business itself which, after all, is what the concept should always have meant anyway.
The question is: how can it do this? The answers can be complex and, as with all management concepts, there is no panacea. However, the following are five strategies that you might like to think very carefully about as you start to navigate your way around the complexities of business growth strategies:
1. Hold Onto What You’ve Got.
One of the easiest ways to achieve growth is to slow the rate at which a company loses existing customers. This requires much more than the simple loyalty programs employed today - this is a deceptively tough strategy but one that should form the lynchpin of any growth strategy. It is clearly pointless to invest in pouring new customers into the top of the barrel without ensuring that the leakage from the bottom is minimised.
An effective retention strategy must be anchored in a dynamic understanding of the following key issues:
• Customer experience: What measurable service experience is the customer exposed to?
• Customer perception: How does the customer claim to value the experience?
• Customer behaviour: How does the customer actually behave after his or her experience?
Understanding these areas in depth and how they relate to each other is essential to improving those elements of customer experience that will translate into satisfaction and loyalty. For many New Zealand businesses, external specialist help may be called for here.
2. Gain Market Share.
Companies can gain market share both by internal actions and by acquisitions, but it is important to keep in mind that no company gives up market share without a struggle. Equally, in exploring any strategy to gain market share, don’t lose sight of the fact that market share, in itself, does not necessarily result in growth (and you’ll have to call me if you want to discuss that one further!)
Market share gains only add value where the growth is profitable and sustainable over time.
3. Exploit Market Position.
Companies must learn to anticipate which segments of their markets are going to grow the fastest and position themselves to get the biggest boost from this growth. This requires a sophisticated approach to risk management.
As a component of that, it also requires a realistic investment in resources to ensure the business is properly equipped to understand the dynamics of its market/s and accurately predict its likely behaviours. Additionally, it needs to have (or have access to) the intellectual grunt to understand what market data and behaviours might mean and what to do about it.
4. Penetrate Adjacent Markets.
But beware of illusionary opportunities. A business must objectively assess whether its key operating capabilities can genuinely give them an advantage in an ancillary market and whether the organisation can build (or acquire) the new capabilities needed to meet competitive standards in that market.
Where the answer is “yes”, sustainable growth can often be achieved via this strategy. Where the answer is “maybe” then strategic alliances or other forms of partnership may well offer the opportunity to turn “maybe” into “yes”. Where the answer is “no” then take “no” for an answer!
5. Invest in New Lines of Business.
This represents the toughest and highest risk scenario and, often, doesn’t really constitute growth at all but, rather, effectively creates a new entity or organism that will itself require growth in order to succeed. Invading new sectors unrelated to the primary business requires an organisation to proceed with great caution.
Notwithstanding the above options (and there are many more not discussed here), a business should never ignore the potential for growth that almost always resides within its current business activities. Typically, such growth opportunities can only be realised by ensuring that it is serving those markets exceptionally well with meticulously developed and targeted offerings based on sound (and dynamic) market knowledge, backed by innovative and cost effective marcoms strategies and driven by strong and committed leadership that is in no doubt that the marketing concept is at the centre of the business universe.
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