Which growth strategy is best for your business?

Janine Coombes pointing at the title

Business growth is often talked about in a bit of a wishy-washy way. Digital strategies and marketing plans are all well and good, but why reinvent the wheel when a jolly clever chap has done a lot of the hard work for us!

The Ansoff Growth Matrix

His name is (was) Ansoff and he did a matrix. Imaginatively, it’s called Ansoff’s matrix and it looks like this:

The Ansoff matrix, a strategic planning tool developed in 1957 by Igor Ansoff.

It’s one of those models that takes a sticky subject and bubbles it down to tasty, suckable lumps. Like boiled sweets.

Like most matrices, it has two axes; markets and products. Running from ‘new’ to ‘current’ for both.

Market refers to your broad target market. Who you’re expecting to buy your products or services.

Product, for our purposes, refers to both products and services. When Ansoff wrote this, it was the age of product marketing. Our economy has since got far more service heavy. And arguably the distinction between products and services has been blurring for decades. But that’s a topic for another article.

The matrix allows you to easily classify your business growth ideas into four buckets:

  • Current market, current product: Market penetration
  • New market, current product: Market development
  • Current market, new product: Product development
  • New market, new product: Diversification

One of the simply beautiful things about the model is that you can clearly see the risk increasing as you move away from your core business function.

What you’re known for. Who you’re known by. The further away from familiar territory you go, the more uncertain your results will be. There lurk the dragons… but also greater potential treasure.

Having dwelled in the world of content marketing and entrepreneurship for a while now, I’ve taken the liberty of doing my own version of the model.

Take a look at this:

I’ve changed ‘market’ to ‘audience’ because this is how we’re talking about our target markets nowadays.

And I’ve changed ‘products’ to ‘offers’, because this captures the complex mixture of messaging, pricing and positioning that goes into offering products and services to your potential customer.

I’ve given each square a simplified name, so it’s obvious what’s what.

I’m going to run through each one now, with some juicy examples so you can see what I’m talking about.

1. Same stuff to same people- Market development

Question to ask yourself: How can we sell more to our current audience?

As a marketer, if you haven’t wrung every possible opportunity out of your current situation, then you’re not doing your job right. Harsh? Perhaps. But it’s coming from a place of love…

The inspiration for writing this article is that I’m seeing SME’s and entrepreneurs bounding off into unknown territory because a minty fresh idea has struck them, but they’ve missed the gold that’s right under their feet.

Ideas for selling more to your current audience:

  • Different messaging
    • For instance you could promote different benefits of your product/ service. A business coach whose audience is used to them going down the angle of ‘earn more’ could test out other messages such as ‘business enjoyment’ or ‘work less (and still earn more)’
  • Different usage occasion
    • A classic example of this was when cereal companies tried to get us to eat cornflakes for our evening meal as a way of losing weight. Don’t remember it? It happened.
  • Encourage more usage
    • For example, the Temi transcription service is pay-as-you-go. It makes sense for them to encourage you to use it as much as possible. Giving their audience inspiration for more things they could transcribe, saving them time and effort, would be a cheap and quick way to get more revenue rolling in.
  • Refer a friend and affiliate schemes
    • Get current clients to refer you to more people like them. That’s it.
  • More marketing activity or better promotion
    • An obvious one, but one that’s easily forgotten! Especially if you’re overseeing the entirety of your marketing function or that of your client’s. Optimising current marketing communications is a no-brainer. If in doubt, get a channel specific expert in to wheedle out areas that aren’t performing well enough.
  • Add more delivery channels
    • Nespresso had pursued a channel strategy of only selling their capsuled coffee direct to their consumer via their website. They then realised that there were vast quantities of customers buying Nespresso machines from Amazon and they expected to be able to buy their capsules from the same outlet. So the cheap knock offs were getting all their Amazon trade. So they have started to sell their capsules on Amazon now, to capture that demand for themselves.

Taking a different angle to this, if the ultimate outcome of this exercise is to increase revenue, you could always raise prices or cut costs. Not a growth strategy as such, but worth ticking off the checklist!

This isn’t an exhaustive list. I’m sure you can come up with better ideas given that you know more about your industry and clients than I do. #JustSaying

2. New stuff to same people- Product development

Question to ask yourself: What else does our audience need?

In this quadrant we’re looking at our current audience who we (hopefully) know so well and trying to work out what else we can do to help them.

Otherwise known as cross-sell, it makes sense to look at this in priority order as follows:

  1. Check if there’s anything you already have that you can offer your current audience. This is only a slight departure from growth strategy no. 1, market penetration.
    • I’ve seen expert-led memberships who offer 121 calls with the group leader for an extra fee. There’s zero risk on the part of business owner to offer this.
  2. See if there are any products or services in your portfolio that you can tweak or add bolt-ons to, so that they’d be appropriate to cross-sell to your current customers
    • Puck Creative, a copywriting agency, are now offering brand workshops. This is essential work that needs to be done as part of writing quality copy anyway, so separating it out, involving the client and asking them to pay for it, makes sense. It will ultimately lead to better results for their customers; win-win.
  3. Develop something new for your current audience.
    • Automation Ninjas has recently launched their own membership. Their current portfolio of services model has been a mixture of consultancy, done-for-you automation and DIY course-style packages. Following a successful series of webinars, their audience asked them for a membership, so this feels like a relatively low risk, albeit new, offering.

The point here is that there are degrees of ‘new’. You don’t necessarily need to create brand spanking new products and services. The path of least resistance is usually the best way forward. To begin with at least.

Things to watch out for when developing new products and services for your current audience:

  • Creating a new product or service can inadvertently change your target market
    • For example a sales coach who usually works one-to-one with clients could launch a DIY course covering similar subjects. But this is less likely to appeal to their current target market. People who work 121 with coaches have usually moved on from the paying for DIY courses. A lower risk idea could be to launch a group programme or mastermind instead. Or create and position the DIY course with significantly different content in it so that it becomes a ‘market development’ strategy instead i.e. selling current services to new people.
  • You could cannibalise current sales
    • If the new offering is promising a similar result to something else in your porfolio but at a lower cost, customers might down-sell themselves and take the cheaper option.
  • You could be watering down your proposition
    • For example Nutmad, the snack subscription, only offers activated nuts. The owner, Michaela Hardt, set up the company to share the superior nutrition that activated nuts supply. She’s never going to dilute that with crisps, dried fruit or other nutrition-poor snack options.

Brucie bonus: When I worked for EE, a UK based mobile network, we found that customers who had multiple services with us had lower churn. In other words, they were less likely to defect to another company. Nice.

3. Same stuff to new people- Market development

Question to ask yourself: Who else needs our stuff?

Pure market development examples are hard to come by. This is because when you’re offering something within your current portfolio of products and services to a new audience, you’re likely to have to change it a bit.

I’ve ranked the risk factor as higher than that of selling different things to your current audience because:

  • Getting to know a new audience takes time
    • For example, a stylist who’s target audience is well groomed city gents might think it logical to target grooms preparing for their big day, but penetrating the world of wedding suppliers would be a lengthy and expensive pursuit. And would those wedding clients be likely to buy again..?
  • You might have to start the audience building process from scratch and you’ll then have two (or more) audiences to manage
    • If you’re lucky enough to have an audience and/ or a healthy client base, take a moment to feel how wonderful that is. Then imaging having to build it all again from scratch. Even an offer as innocuous as an executive recruiter offering CV workshops to candidates has massive implications if they don’t already have a database of likely customers for that service.
  • You might accidentally reposition the brand
    • For example, if you’re appealing to entrepreneurs and then want to start selling to corporates, you’re likely to have to change your communication style. Perhaps even your tone of voice and brand image. This has to be managed carefully.

Some good examples of selling the same stuff to a new audience:

  • Digishare was helping consumer electronic retailers to get their product specs uploaded onto online retailer sites like Amazon. It was a no-brainer to offer the same service to their current clients on other online retail platforms too. They did this by joining forces with a partner company so they wouldn’t have to build the relationships in those other outlets.
  • Hepburn and Hughes were selling their upcycled cufflinks direct to the consumers who’d be wearing them, but have recently added people who are searching for presents who are difficult to buy for to their target markets. A low risk decision.
  • Capaldi Marketing initially offered their LinkedIn lead generation services to entrepreneurs. They quickly saw a gap for corporate training and LinkedIn strategy. Their techniques for both are very similar, their brand already suited both markets, so the complexity of managing these two different audiences were minimal.
  • Janet Murray has been cultivating her target market online entrepreneurs for years now. When the COVID crisis hit, she saw an opportunity to offer a bundle of DIY courses for offline businesses who wanted to move their business online. For a less established personality this would have been a bit of a stretch. But because Janet’s audience now stretches to the hundreds of thousands and because she had already created tonnes of online DIY courses, this offer was easily within her wheelhouse.

4. New stuff to new people- Diversification

Question to ask yourself: Are we willing to risk the dragons to get to the treasure?

Low-risk diversification

Louise Humphrey of Studio 44 Pilates offers online Pilates classes. As a keen runner and dog lover, she’s getting qualified as a canicross (running with your dog) trainer. She’s going to combine this with her Pilates and offer it to dog loving runners. You can see how this is about as low-risk as diversification gets. Easy to test out and there’s lots of overlap with her current work.

High-risk diversification

Most examples of high-risk diversification are among massive, well-known names like Virgin. They have an extremely well-known brand to carry off daring direction changes. The brand acts like a massive umbrella- even people who aren’t current customers, know who Virgin are and there’ll be a level of ‘know, like, trust’ pretty much globally. It doesn’t always work out mind you. Virgin Cola anyone?

Accidental diversification

I like to call this panic pivoting. Something big has happened (can you think of anything big that’s happened recently..?) Everyone to action stations! What can we do to generate more revenue NOW NOW NOW? You have frenetic brainstorming sessions then come up with a shortlist of the biggest, shiniest ideas.

STOP

Take a breath…

Does the white knight concept involve creating something you’ve never offered before and selling it to an audience that you’re going to have to build and get to know from scratch? If so, have you really explored all other less risky avenues?

If you take nothing else away from this article let it be this:

When it comes to business growth, exhaust your low risk options first before venturing forth into the unknown waters of diversification.

It might be that a heart racingly amazing opportunity plops into your lap. Consider it, by all means! But make sure you make the final decision on whether to go for it or not in full awareness of the amount of work you’re taking on. Work to get a whole new audience to get to know, like and trust you for something that you’re not known for doing yet.


 

Janine Coombes is a marketing coach for joyfully ambitious small business owners. As an ex-corporate marketer with 20 years of experience, she loves nothing more than simplifying marketing nonsense and helping her clients get the results they’re after without them getting too knackered.

Are you a marketing outsourcer and fancy yourself as a marketing coach or consultant? I’m looking for 2 wannabe marketing coaches to run through a new programme I’m working on. If you’re interested in applying, click here and let’s set up a chat.

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