Want to grow your business but not sure where to start? Advivo Partner, Chris Morris, outlines which growth models you may want to look into.
There are four overarching growth models which can be considered for any business. The ultimate strategy (or combination of strategies) best suited to your business will depend on your unique circumstances and positioning. In this article, we will provide a high-level overview of each of the four growth models along with some comments on costs and examples of each.
Please note that if you are in a service business, then your product is the service you provide. Keep this in mind when reading the below.
1. Market Penetration
This growth model is about obtaining greater market share for an existing product in an existing market. This is often considered a default growth model for many businesses because it’s about selling what you already have in a market that you’re already in. For this same reason, the costs associated with this strategy are often less than those of the other models.
2. Market Expansion
This is about entering new markets with existing products. New markets include geographic (where), demographic (who), psychographics (why) or behavioural (how). Keep an eye out for future blogs on different markets but, for the time being, it’s important to understand that the word ‘market’ doesn’t just refer to geographic locations. The cost associated with this strategy will likely be greater than those of a Market Penetration strategy because there is research, messaging and entry costs associated with entering new markets.
3. Product Expansion
This growth model is about expanding product ranges to have new products available to an existing market. For example, by not just having burgers for sale, but also having fries available to accompany that product. Similar to a market expansion strategy, costs associated with product expansion will often be higher than those of a market penetration strategy because there are product research, development and often manufacturing costs associated with new products.
This is often the costliest of the 4 growth models because this strategy is about creating new products for new markets which diversify the existing business. The reasoning for this strategy could include where an existing market for a product is contracting or set to decline. An example could be an aluminium fabricator, diversifying into boat welding. This would include a new market with new customers and new products, whilst utilising existing equipment and expertise.
In summary, the four broad growth models to consider are:
Each has its pros and cons, and the model which is best suited for your business will be highly dependent on your current position and future goals. If you would like to speak with one of our growth specialists to better understand the options available for your business, please contact us today and mention this article.