There
are so many different ways in which to deliver growth, and all should
be considered for viability. B2b companies believe that the biggest
opportunities for growth are through launching new products and
improving customer loyalty.
Finding areas for growth:
Through the 1980s
and 1990s Sir Clive Thomson built Rentokil from a tiny royal rat-catcher
into a sprawling services giant with 130,000 employees and a value of
nearly £14 billion ($23 billion). It earned him the sobriquet “Mr 20
Percent”. As always happens, the good times came to an end. It is not
possible to continuously grow by that amount, year on year, forever.
And yet, businesses
have an insatiable appetite for growth. When the good times begin to
tighten, a company that was comfortable selling its products to everyone
and anyone may begin to review its strategic options. Igor Ansoff had
advice for such companies based on a simple premise – you can make money
out of selling your existing products to your existing markets or you
can push them into new markets. Equally, you can find products which
your existing customers may wish to buy from you. Finally, and in fact
the most difficult strategy of all, you can move beyond your current
markets into new ones and find new products to sell. The Ansoff paradigm
presents us with a guideline of how we should manage our business in
times of plenty and times of famine.
Ansoff's Matrix of Opportunities
When the going
gets tough it is especially difficult to move into new markets where it
is necessary to start from scratch and where fresh competitors will vie
for market share. The strategy of pushing into new markets is something
that we should focus on only when we have the money and resources to do
so – not when our back is against the wall. It is more prudent to take
risks in the new and the unknown in times of plenty and when economies
are expanding rapidly.
Hard times are
inevitable in business. There is never a decade which goes by without
some slowdown in the economy. Product life cycles may mean that the
market you serve moves into decline. The swings may just be for a short
period and you can ride them out, or they may be systemic and you need
to think about survival in the longer term. When times are hard it is
much more difficult to make money from selling more or charging more.
The most obvious route to profits in these difficult times may be from
saving money – cutting costs - but there are limits as to how far one
can go with this strategy.
All of Ansoff's
quadrants present opportunities. However, the one that presents an
opportunity for growth at all times is often the one that is often
ignored - it just doesn’t seem so sexy to focus on existing products and
existing markets. Companies that have already crossed the threshold and
become customers present easier and bigger opportunities than those
that have yet to be converted. Extra sales and marketing effort aimed at
these customers will pay more dividends than if those efforts are
diverted towards new markets.
Look for
opportunities to be more efficient with the existing customer base.
Rationalizing product lines is always worth considering as they do have a
tendency to grow over time without being noticed. Becoming more
ruthless with managing inventories could save money because it is widely
accepted that 50% of the items in a company’s inventory generate only
5% of its revenue. (Remember the Pareto rule that says that 80% of sales
come from just 20% of the inventory).
And never give up
on marketing – whatever the economic climate. An analysis of the Profit
Impact of Marketing Strategies (PIMS) database compared the results of
companies that increased, maintained and reduced marketing spend during a
recession, and it showed that while companies that cut marketing spend
enjoyed superior return on capital employed (ROCA) during the recession,
they achieved worse results after the recession ended. Those who had
invested in marketing achieved a significantly higher ROCA during the
recovery, and gained an additional 1.3% points of market share when
growth returned. Have confidence that marketing really works and that it
is your responsibility to make your precious marketing budget work hard
for the future. It is why it is so important to develop a marketing
strategy and watch over it every day of the year.
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