The Whiteboard: Four strategies to consider for boosting your company's sales growth
The so-called Great Recession ended in June 2009, according to the U.S. Bureau of Economic Research. That was almost four years ago, and, still, many of the businesses we work with are struggling mightily to achieve decent sales growth.
One way to generate ideas is to think about sales growth in a systematic way.
Sales growth can come from four different strategies based on combinations of products or services and markets or market segments. Thinking about each of these combinations separately is one way to organize brainstorming around the topic of growth.
The first strategy is growth through increased sales of existing products or services in existing markets or market segments. Existing markets or segments contain existing customers and similar potential customers who may currently favor competitors or may use substitute products or services.
Current customers — and often those who favor competitors — know you and your products and you know them. There is a certain level of built-in trust. There is an ability to get a meeting. They can be induced to buy more of what they are already buying or to switch suppliers through various pricing strategies, such as volume discounts and rebates. They can be introduced to existing products and services they don't currently buy — often complementary to what they currently use — through targeted educational efforts. Supply agreements or other business combinations that take the competition out of the picture and increase market share can be considered.
The beauty of this strategy is that the products and services exist, the customers and key contacts are known and the logistical systems needed to serve the market are in place. Investment and risk are both low. The potential downside is that customers may be saturated and competitors may be firmly entrenched. That makes it important to meet with customers, learn how much of their potential spend is being captured and estimate growth potential before offering discounts and rebates that could actually be harmful if real growth is not achieved.
A similar strategy is selling new products or services into existing markets. The advantages of knowing customers, i.e. built-in trust and having logistical systems in place, are the same as for the existing product or service strategy.
The upside of this strategy is that you have something new to offer. A product or service, complementary to what already exists, will heighten the interest of the customer base. Many purchasing departments are under pressure to reduce the number of suppliers they use. Complementary products and services that broaden your offering can be very appealing.
Every sale of the new product or service is incremental if it doesn't cannibalize existing product or service sales. Cannibalizing sales is one of the downside risks of this strategy. Businesses often expect great things from new products that are supposed to supplement sales of the old but instead become a substitute for them.
Another big risk is developing new products and services without enough customer input. It is easy to fall into the trap of theorizing what customers will want instead of asking them.
Businesses that introduce new products or services also run the risk they won't perform as well as advertised. That can turn customers off, and, if it is really bad, can turn existing customers off to the products and services they were already buying. That is a disaster.
New products and services cost money to develop, test, launch and support. This strategy will cost just as much, if not more, for customer education as the existing product/service strategy, so the total costs, and the financial risk, are considerably higher.
A third strategy is selling existing products/services in new markets or segments. These could be geographic or they could be based on some other demographic.
The good news in this strategy is that the products/services exist and you know what they can do. Also good news: all sales are incremental. The bad news is that you don't know the customers and they don't know you. There is no built-in trust. It is really tough to get attention, not to mention a meeting.
If the strategy involves an entirely new geographic area, logistical systems may not be in place. There may be language, culture and currency issues to worry about. Product standards and regulations may be different. This strategy requires a lot of homework to assess costs and risks before being executed.
The final strategy is selling new products/services in new markets or segments. This is the riskiest of all. Everything is both new and untested in practice or is unknown. This is the high-risk world of the true entrepreneur, a great place for someone with nothing to lose, but maybe not for an established concern.
If you're challenged by slow growth, fill a room with smart people and brainstorm these four strategies.