With the recent tumultuous state of the economy, businesses big and small are increasingly re-examining their structures, processes, and strategies to ensure stability and longevity. This not only raises questions along the way but often requires the outside help of consultants and specialists experienced in scaling growth.
Before you consider internal strategic growth planning or bringing in external resources to help, let’s get a sound overview of the ‘what’ and ‘why’ behind growth strategy altogether.
In this guide, we’ll answer the questions – what are the four major growth strategies? Why are growth strategies important? And we’ll cover all the basics of strategic growth to support the health and success of your business and legacy.
What is strategic growth and growth strategy?
Put simply, a growth strategy or strategic growth is a plan you put into action that increases your company’s revenue, market position, or share. It involves internal alignment to make the most of the assets you have and, when successfully implemented, allows you to conquer market expansion with ease.
Looking at the numbers of things – a growth strategy is based on the simple equation of acquiring more customers than you lose, or increasing revenue from existing or future customers. Even more, the growth strategy should also aim to reduce or control expenses to further support and allow for sustainable long-term growth.
What are the four growth strategies?
Across the board, there are four major growth strategies – market penetration, market development, product development, and diversification. Let’s learn more about each in-depth now.
#1 – Market penetration
Market penetration is a growth strategy that aims to increase existing products or service sales to existing markets. By doing so, a company can increase its market share and have a better opportunity to grow exponentially. Another example of a market penetration growth strategy is entering a market with a unique differentiation.
For example, you may penetrate a market with a new luxury product line at high-end prices to reach a new demographic of a market. Conversely, if you’re already producing a high-end product or service, you can offer a budget or lower price to penetrate the opposite market demographic.
If you’re not in the position to launch all new products, market penetration can also be achieved through re-branding, or revamping advertising, to show your product or service in a whole new light or to reach new target markets. On the other hand, market penetration could also be as big and bold as acquiring a competitor in the space.
#2 – Market development
Market development describes entering a whole new ball game. It refers to the type of market expansion that increases sales of your current products or services to unexplored markets. For instance, if you’re heavy B2B, it may involve developing a B2C side of the business. Or, going international, for businesses that have remained in the states. It can also be as simple as adding an online storefront to supplement sales of your physical location.
#3 – Product development
Another type of business growth strategy is product development, which consists of upgrading or improving upon a current product or creating an entirely new product (or service) to offer. In today’s more modern day and age, product development also includes –
- Acquiring the rights to produce someone else’s product
- Brand collaborations and joint development of a new product
- Whitelabel products and branding as your own
With product development, the new product may also solve a different problem that the current customer base has or help improve the use of your current product.
#4 – Diversification
Out of the 4 growth strategies, diversification is by far the riskiest. It involves the creation of new products for an entirely new market. Its risk comes from the challenge of succeeding amongst current competitors, but as you know – high risk can often equal high rewards. Here are three of the most common types of diversification and examples of each:
- Horizontal diversification – the development of new products that may appeal to current customers, such as a notebook company entering the pencil or pen market.
- Vertical diversification – the entrance into a market related to its suppliers or customers, such as an interior design company selling wall papers or paints to use in its work, or sell to vendors.
- Concentric diversification – the development of a new line of products or services that are similar to the current, such as a smoothie shop offering smoothie bowls.
Why are growth strategies important?
From corporate growth strategies to small business growth strategies, strategic growth is crucial in sustaining long-term success. Clear and concise growth strategies outline not only how a company can align itself for increased profits and market share, but how to maintain that growth over time, too.
Now that you have a good grasp on the major 4 growth strategies, you likely have an idea of which one(s) will work best for you, internally. But, externally, do you have the help and support you’ll need to be successful in strategic growth? Let us help.
At Double Iron Consulting, our founder, Bill Smith, has decades of experience in scaling growth at his own prominent, family-owned business, Royal Cup Coffee and Tea. Schedule a consultation with Bill now, and begin your journey toward sustainable growth and success.