How do you grow your business? Most of our customers are technology or software companies and they vary in size from start-ups to multi-million operations. Regardless of size, they are all trying to drive growth. We usually start by focusing on the basics i.e. identifying how they can generate more sales and revenue. So we help clients generate more sales leads using their website, digital marketing and some automation technologies. And this works – if you generate more high quality sales leads then you should generate more sales which helps drive growth.
However, on a few occasions recently our discussions about growth have extended beyond lead generation for an existing product range to a broader discussion on the future options for growth. How do you identify the best opportunities for expanding a business over the next two to three years? While there is no simple answer to that question, we find this “Product / market expansion grid” a useful way to generate ideas and discussions.
The grid comes from Philip Kotler’s “Principles of Marketing”, a standard business school text book. In it he highlights the 4 basic options any company has when it comes to driving growth.
- Market penetration – sell more of the same stuff into your existing target market(s). In this case you focus on generating more leads and sales and worry less about new products or markets.
- Market Development – take an existing product or service and begin selling it into a new market. This could be a new industry sector, or a new country or a new demographic. In this case you will focus on understanding the new market and re-launching your product into that market.
- Product development – sell a new product to your existing market. This could be some extension to your product or service that you think your existing customers will adopt. You’ll be able to re-use a lot of your current sales and marketing materials and know-how.
- Diversification – in this case you’ve decided to attack a new market and a new product category. The example Kotler gives is of Daimler Benz expanding from automotive manufacturing into airline production. Apple has done it by moving into the phone and music business. For smaller firms it is relatively high-risk so you need to hedge that risk by using a lean approach to new product lines and new markets. Don’t over commit until you’ve developed some proof that you can sell the new product into that new market. Diversification is a bit like being a start-up all over again.
So, there are the four basic options for driving growth in the long term.
Of course, that still doesn’t answer questions like “What kind of new product should we launch?” and “What new markets should we try entering?” That will be the subject of another post.