Importance of growth
Definition of Growth
People define growth differently however one common theme everyone agrees on is “sustainable and consistent increase in sales revenue”. Ideally with ever expanding set of customers and increased share of the wallet can also be included in the definition.
1. Growth through raising prices for existing and/or new customers.
This one is simple, but risky. Raise your prices. Fastest way to add additional sales revenue.
You can do this with a direct price increase or through a business model adjustment. Either is valid. It depends on the kind of growth you seek and what your customers (and the market) are willing to bear.
For example, let’s review Evernote a mobile note taking software. If you have it then you may have been affected by their price increase about 2 years ago. They used to charge $4.99/month or $49.99/year for a subscription to their premium service. When a new CEO came on board, he shut down their physical goods market and increased their yearly subscription price to $69.99 to cover the cost and increase revenue. Many people complained, bloggers cried foul, and the inter webs were buzzing with animosity.
For businesses and people that rely on the products capabilities and functionality the additional $20/month is still a “worth the value”. They knew that even by increasing prices they could keep their power users attract more customers at this price point further growing their business in the future.
Evernote isn’t the only example. Amazon did the same thing with their Prime subscription. Remember when it was $75/year? It’s $99 now, and will likely increase in again. Guess who doesn’t care? Yeah, me. It’s so valuable, I’ll still continue paying for it.
Apple, Tesla and innovative companies are also great examples of how a truly differentiated product/service can allow a company to grow by increasing prices.
The above strategic approach is only feasible for companies that have achieved a level of Operational Excellence where the customer continue to perceive enough value for the increase in sell prices. If you’re worried about losing customers with this growth strategy, try selling more to your existing customers. It requires more effort, but safer way to growth.
2. Growth through selling more to existing customers.
If you’ve managed to create brand loyalty through customer experience, product features and value perception (people who will buy just about anything from you), this growth strategy is for you. If you’ve segmented your customers into interest-groups (groups of customers who all wish to solve the same problem), this growth strategy is for you.
What makes these two types of customers prime to grow your company? They are primed to purchase.
The first, customers that are loyal to your brand. They’ve come to know and trust you. They believe in your company and products. They love your products and services. These customers provide a company with a shortest sales cycle. Sometimes these customers will be your early adopters, they are also the most tolerant when it comes to working through initial new product issues and higher cost.
The second, your segmented customers, you know their desires. You know their interests. You know their fears and goals and motivations. So you an speak to them directly. You can create solutions to their problems, help them get to their goals quicker, and sell it to them.
Customer intimacy is critical in both these cases and hence this isn’t something you can do with new customers in the short term.
3. Growth through selling existing products & services to new customers.
Selling existing products & services to new customers that are either in the same industry or from other industries is another option for driving growth. Solution to a problem is key success here. Business Development vs Selling is critical in order to target customers, applications and adjacency that are key to be successful.
This approach requires strategic planning, market research, and robust marketing. Appealing to customers that are not familiar with your brand and may already have solutions that are being provided by existing suppliers (your competitors) requires a unique approach. Messaging and value illustration is critical to gain new customers. Sales cycles tend to be longer however successful implementation rewards companies with broader customer base in diverse markets/industries and sometimes can shield them from market/industry specific volatility.
4. Growth through selling new products & services to existing or new customers.
This is the most challenging yet the most rewarding ways to drive growth. Sustained innovation continues to build value not only for the company but also for employees. Development of new products and services also allows companies to own a higher wallet share with existing customers while attracting new customers. Innovation requires strategic vision and investment in resources for sure however it is the best way to build long term enterprise value.
Development of new products and services require robust innovation planning in order to ensure that company is able to achieve high ROI (Return On Investment). Development of new solutions requires keen understanding of “unmet needs” of the customer or the market. Solutions that offer a unique value proposition do allow companies are able to enjoy a leading position in the marketplace and charge a premium price.
Primary challenge for this growth approach are many but the rewards offered by successful implementation make up for it. Investment costs, speed of innovation, technology limitations, long sales cycle, ever changing market/customer needs, marketing strategies are some of the areas strategic leaders must manage to be successful.
Understanding customers needs and market/industry trends are critical to achieving sustained growth. Companies can choose from a wide variety of growth strategies however a balanced approach is key to long term vitality.
The author, Ketan Deshpande, principal consultant at Ambit Inc., lives in Minnesota and writes about a variety of topics in his blog such as global economy, market and industry trends, successful strategies for businesses, and others. Leveraging his global strategic leadership experience from the manufacturing industry to offer insights in to how businesses can meet the sustainable growth and profitability goals.
Ketan Deshpande is also passionate about sustainability and renewable energy; he curates and shares latest updates in his blog posts. Recently the Southern Minnesota Municipal Power Agency(SMMPA) of Litchfield, Minnesota, endorsed Ketan Deshpande for an energy conservation project.
This blog also features memorable events, travel experiences and his favorite places to visit in the great state of Minnesota.