As our world changes we need to figure out how to not only earn money, but to keep earning revenues to cover our bills, grow, expand and thrive.
As we think of growing our business we must strategize to increase our revenue growth opportunities. It’s important to know that structural sources of growth are not dependent on the types of products a company sells or on how a company is organized, but rather on the business and marketing strategies which a company uses to tap into each source.
Many persons accurately think of earnings in 2 ways – from current customers (retention) and from attracting new customers (acquisition).
Let’s expand that thought a bit and look at 4 tried and proven growth strategies:
- market penetration strategy – Sales of existing products in existing markets
- market development strategy – Sales of existing products in new markets
- product development strategy – Sales of new products in existing markets
- diversification strategy – Sales of new products in new markets
To implement these we need to think of the primary avenues to deliver on the strategies.
- Grow within your current category (Strategy 1)
- sell to new customers in existing markets, this may include identifying and capturing your competitor’s customers or capturing previously unserved customers.
- sell more to current customers, i.e. improving customer retention strategies (keeping your current customers happy and coming back to support your business)
- Seek opportunities outside your market / category (Strategy 2 & 4)
- Identify adjacent markets, and grow through partnerships, mergers, acquisitions (Strategies 2, 3 & 4)
Driving consistent, profitable revenue growth is one of many business challenges, but is perhaps indeed the most persistent challenge, that a business may face. Please note the word “consistent.” Though companies often produce substantial revenue growth sporadically or over a short periods it’s often difficult to consistently generate ‘above-average growth’ over the long term. There is need to develop ways of generating consistent growth through deep-diving into the strategy implications.
Planning for Growth
Sales growth is essential for a business’ revenue growth. We can grow our revenue by deepening markets through selling to new customers in new markets. It is however important to first find the right balance between short-term and long-term growth opportunities. Having struck the balance, the business must then ensure the identification of the available growth opportunities and then prioritise which are most attractive.
When you are planning for growth one of the first steps in identifying potential growth opportunities is to understand the dynamics of revenue growth / increase in income. We must understand not only how growth happens but more importantly how we can sustain this growth.
Identifying the growth opportunities is often simple:
- What are the challenges within your industry which you can address. Listen to your potential clients and past leads, needs, wants, challenges and frustrations with your industry
- Talk to your current customers, ask for their feedback and ideas, needs, likes, dislikes
- Know your competitors
- Understand and know industry trends and insights.
To put thoughts into a framework we look at five structural sources of growth:
- Continuous sales to existing customers (base retention)
- Sales attracted from the competitors (market share gain)
- New sales in an expanding market (market positioning)
- Sales from expanding into related(but different) markets (adjacent market expansion)
- Sales from expanding into new, unrelatedlines of business (diversification)
The framework above is a good tool for stimulating your thinking about how to grow your business and for identifying the growth opportunities that are available to your business. You must however keep several things in mind when using this framework.
- structural sources of growth as shared above are always present, at least to some degree.
- their existence is not dependent on the market conditions faced by a company at a particular moment in time, however,
- the size of the revenue that a company can obtain from each source is greatly influenced by the market and the competitive environment.
Although we have identified potential sources of revenue growth, the framework doesn’t explain the relative attractiveness of each of the identified sources.
To properly evaluate the relative attractiveness, traditional market and competitive analysis tools and techniques need to be employed. It is also important to note, no single source of growth is likely to provide all the revenue needed to reach your business’ growth objective and in addition, each source of growth has distinctive attributes and dynamics.
You will need to create a specific strategy and game plan for each source of growth chosen. In the midst of the current global pandemic, there are still many growth opportunities, however, you now are forced to take a focussed and strategic approach to ensuring growth and sustainability.
Dr Charlene Ashley
International Business Strategist & Behaviour Consultant
Date: December 10, 2020