Is there a direct correlation between growing a business and getting more revenue? It sounds logical on paper. The question now is—will that growth be sustainable?
Businesses need growth strategies to ensure they can scale sustainably within competitive markets. Without it, they get stagnant or worse—grow too fast, balloon then pop.
There are hundreds of growth strategies out there to take inspiration from. However, most are rooted in these fundamentals: Penetration, Expansion, Diversification, and Acquisition.
But, to fully understand these fundamentals, we need to go through the following:
- What is a growth strategy?
- Types of growth strategies.
- Identifying which strategy to go for.
- Growth strategy examples.
- Best practices to follow.
What is a Growth Strategy
There are two growth goals in most markets—short and long-term. The short-term might refer to growth strategies focused on penetration and expansion. Meanwhile, diversification and acquisition can fit into long-term strategies.
Following a growth strategy allows you to get a higher market share—the percentage of product or dollar sales against competitors. In order for us to develop holistic growth strategies, we need to consider the following:
- What are your organizational goals?
- Are your goals aligned across each department?
- Are your products/services aligned to reach your goals?
- How will you reach your goal?
All departments should be aligned for strategies to work. This covers development, marketing, and even cold sales. From here, you can take a look at growth strategies to take the next step.
Types of Growth Strategies
Customer acquisition is a growth strategy for startups and established businesses alike. The difference is in how it’s approached. Depending on where you’re at, you can use one or multiple of the following strategies:
Market Penetration
If your product is 100% unique, you wouldn’t have any competitors. That will never be the case in any market. Even with better features, you’d still have competitors offering similar products.
For startups, trying to penetrate saturated markets is one of the first and biggest hurdles you’d have to face. You’d need market penetration strategies to differentiate yourself, such as:
- Lowering the price to make it more appealing.
- Develop disruptive products (game changers, something totally unique).
- Invest more in sales rep activities (outreach campaigns, lead generation).
- Increasing prices (promotes exclusivity or prestige, depends heavily on brand image).
- Focus on unconsidered needs (solving issues outside general pain points).
Market Expansion or Development
Market development or expansion is selling your current products/services in a new market. You might be expanding to scale your business further or to get away from saturated markets.
Another strategy is to find new uses for products. For example, guitar tube amps were always intended to increase the volume of guitars. Then, it was used to create distortion. Eventually, it sparked the birth of an entirely new genre of music. This is called product expansion.
Product Expansion
Smaller businesses can expand their product line by adding new features to promote sales and profit in their current market. This is often done as a pivot as technology starts to evolve. Companies are either forced to adapt to new trends and technologies or face being outdated.
Businesses can also diversify products by introducing new features or designs. It can even be related or unrelated to their existing customer base.
Diversification
One of the riskier growth strategies is diversification. Here, businesses sell new products to new markets. It requires higher capital due to the amount of research needed.
That’s why this is often a long-term strategy used by established businesses with a solid and known brand. When you’re already established, it’ll be easier to transition.
Think of brands like General Electric (GE). They started selling electrical and electronic equipment. Now, they’re in aviation, renewable energy, venture capital, and finance.
Acquisition
Acquisition is purchasing another company to scale up or diversify operations. For example, Facebook was originally just a social media platform. Then, it acquired Instagram back in 2012.
It was a risky play and many speculated it to be one of the biggest tech acquisition blunders. But, the move cemented Facebook (now Meta) as the most dominant social media platform.
With the types of growth strategies laid out, it’s time for you to decide which one your business should go for. If you’re not sure about which route to take, here’s a quick checklist.
Which Growth Strategy Is Best for My Business?
Each business is unique, with its own specific needs and goals. This means strategies that work for some might not work for your business specifically. To help you identify which growth strategy to go for, start by answering the following questions:
What Type of Business Growth are you Trying to Achieve?
There are several ways you could define “growth” within your organization. Some of the most common indicators include:
Revenue Growth
The main goal of any for-profit business is to earn revenue. In terms of growth, revenue is one of the first clear indicators. Since revenue is directly related to not only the number but also the quality of customers, you’d want to include strategies like cross-selling and upselling.
Employee Growth
Scaling your business demands that you also scale operations. If you scale too fast, employees might be overwhelmed with the added workload. For this, you’d want to use recruitment strategies like sending recruitment emails, joining job fairs, or recruitment marketing.
Functional Team Growth
Functional teams handle specific functions within your organization. An example of this is having a manager assigned to handle employees in a specific function of your business, such as accounting, purchasing departments, logistics, or marketing.
Customer Growth
Finding new customers is one of the fastest ways to scale your business. That’s why startups often invest in lead-generation strategies to acquire more customers. One of the most effective of these strategies is social media and cold email marketing.
Why Do You Want to Grow Your Business?
There should be a clear reason as to why you’d want to grow your business. Whatever the reason might be, it should be based on research and data.
Data-driven decisions show businesses the right direction. For example, if you’re doing cold sales, you’d need the right email outreach tools with built-in analytics for campaign monitoring.
But for the most part, businesses want to grow because of the following:
- Having stagnant growth after a huge upward trajectory.
- An influx of new clients, customers, or leads.
- Opportunities for market penetration.
- After acquiring new capital.
- A need to scale operations to meet demands.
What are Your Overall Business Goals?
Your overall business goals should be aligned with your growth strategies. If you’re struggling to find the right goals to go for, you could use the SMART goal-setting method.
It’s a framework that helps businesses create goals that are Specific, Measurable, Achievable, Relevant, and Timebound.
When Do You Plan on Growing?
As mentioned earlier, with SMART goal-setting, your growth strategy should be bound to a timeline. Set a realistic time frame and measure key metrics to find out what works.
If you’re planning a growth strategy around lead generation or customer acquisition through email marketing, you’d want to track key metrics to maximize your ROI.
Growth Strategy Examples to Draw Inspiration From
Taking examples from successful growth stories gives us a template we can build upon. But it’s important to note that these strategies have specific goals in mind.
Calendly: Product-Led Growth
The scheduling app Calendly is a prime example of product-led growth. It’s easy to use and utilizes a viral loop through a freemium model.
Users get tons of value from the app with the free version. This leads to more and more people using the app (viral loop). Meanwhile, high-value users get access to the right paid plans.
LinkedIn: Market Penetration
LinkedIn’s growth was slow after its launch back in 2004. But, they were right at the forefront of a technological shift within the professional industry after digitizing the use of business cards.
At first, LinkedIn used email marketing to reach new contacts hoping to turn them into early adopters. As more and more industry leaders used the platform, it created a networking loop.
Emails were sent to the contacts of new users and on top of thousands of others inviting peers. Soon enough, FOMO started to kick in. If you weren’t on the platform, you’d be missing out.
Trello: Market Expansion Masterclass
Trello had an ambitious goal of hitting 100 million users. But, they were confident in reaching it because they focused efforts on three key areas:
- Ease of use.
- No specific target demographic.
- Being accessible to a global audience.
The app virtually has a zero learning curve. It’s not complex and is literally the digital version of sticking notes on a board. And everyone can use it.
It didn’t matter which industry you’re from. You can use it for sales, recruitment, content planning, and, more importantly—collaboration.
Its collaborative nature is what led to its virality. People could add friends if they wanted to make a simple checklist for a pizza party. Managers could add team members and assign tasks.
It was risky making such a valuable freemium product but it was worth it. From here, leads didn’t need personalized demos to convince them of its value.
Google: Acquiring Android and Google
Acquisitions can revitalize companies, find growth in new industries, and create a diversified set of products. But, it can also fail horribly and go into flames. This was never the case for Google.
The search engine acquired two of the most important pieces of tech on the market—Android and YouTube. Back then, they weren’t that popular. Now they’re taking as much as 70% of the market share for smartphones.
Disney: Diversification
Disney didn’t only diversify through its acquisitions of popular media companies like Marvel, Pixar, or Lucas Films. It also had theme parks, retail, and cruise lines under its belt.
But, Disney didn’t just use a diversification strategy—it used a “related diversification” model. Disney diversified into other businesses that hold cross-business opportunities.
Their theme parks, merchandise, and cruise lines are all related to their movies or shows. They currently apply this strategy to their five divisions of business units:
- Media networks.
- Parks and Resorts.
- Studio entertainment.
- Consumer products.
- Interactive media.
Best Practices to Follow When Creating Growth Strategies
There are several routes to take when it comes to following a growth strategy. These strategies will be unique to each business. But, these best practices ensure a streamlined and optimized approach for whatever strategy you choose.
Choose Growth Area to Focus On
As mentioned earlier, identify what type of growth you want to spend your precious time and resources on. The good news is, growth in one area could also benefit another.
For example, growth in unit sales will ultimately lead to more revenue. This results in the possibility of needing to grow headcount to keep up with the demand.
All Decisions Should be Data-Driven
Intuition is absolutely necessary to succeed in any market. However, data-driven decisions keep you grounded and focused on exactly what needs to be done.
Always do research on your own market. Determine what’s feasible. Data should justify your growth goals. Use the analytics to your advantage to find cracks you can fill.
Identify Growth Prerequisites
Before executing your growth strategy, you need to identify what you’d need to actually achieve your goals. This can include the following:
- Capital: Your business might need funding to realistically achieve a growth goal.
- Software: What tools will you use to streamline and optimize the growth process?
- Outsourcing: Some goals may be met faster with outside help. For example, a purely brick-and-mortar store hiring social media managers to penetrate the online market.
Key Takeaways
Growth strategies are necessary to facilitate sustainable growth. The main types of growth strategies include market penetration, expansion, diversification, and acquisition. As a refresher, here are some key details you might’ve missed in this article:
- Businesses need to identify what type of growth they want to focus on.
- In most cases, executing a growth strategy requires certain prerequisites to be met.
- Your overall business goals should align with your growth strategy.
- Use tools to streamline and optimize every step of your growth process.
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