Every company I work with has a sales growth target and a set of planned activities to reach the target. Far fewer, however, have a clear focus on what type of growth they are really trying to focus on. In reality, there are really only 7 key drivers of growth, as follows:

  1. Improve customer retention. Many studies have shown that it’s far more efficient and profitable to improve the retention of existing customers than it is to attract new customers to fill the hole by those who no longer buy from you (although why you need a study to prove this kind of common sense point, I’m not sure). At the top-end of the market, Singapore Airlines creates highly loyal customers through its customer service excellence. But you don’t have to offer expensive products to create loyalty. McDonalds dominates its market and retains customers by providing a mix of brand attractiveness, product quality, price and convenience that its competitors cannot match.
  2. Increase the usage rates of your products and services. A marketing star in Procter & Gamble once had the breakthrough idea of adding the words “rinse and repeat” to the instructions on their shampoo bottles, driving up usage overnight (or, at least, first thing in the morning). In a different market, Swatch turned watches from a product in which consumers had one or maybe two products, to an industry where customers have a collection to choose from.
  3. Attract and retain new customers. There are three ways in which companies can attract new customers: (i) Convert non-users. Many technology companies drive growth primarily by persuading non-users to buy their products; (ii) Find new uses and customer segments. The pharmaceutical industry has a history of re-assigning drugs for new treatments. Glaxo, for instance, first produced Zantac as a prescription-only medicine to treat peptic ulcers, but the company has also developed lower-strength products to aid the treatment of heartburn; and (iii) Take share from competitors. Enhancing the customer experience, creating communities and building stronger customer relationships can help drive loyalty and attract customers away from their current providers.
  4. Offer new products and services. There are offensive and defensive reasons for developing new products and services. Offensively, it can generate significant new revenues for your business and maintain or grow the gap between the value of your customer proposition and those of your competitors. But defensively, you have no choice. There are three valuable forms of product and service expansion: (i) Dramatically improving your current products. Gillette, for example, has created new ranges of razors that continue to keep it ahead of its competition for over a decade; (ii) Extending existing ranges. As Gillette’s razor technology improved it was able to develop a new range, Venus, designed specifically for women. Not only did this generate new revenues for the business, but improved the confidence of men across the world that their razor would be as sharp when they picked it up as it was when they last used it!; and (iii)Moving into new, adjacent markets. Starbucks, for instance, is succeeding with the development of its own instant coffee brands to use at home.
  5. Geographical expansion. The prize from geographical expansion can be huge as it allows you to replicate your existing for success. Up until its merger with Caremark, CVS, the US drug store chain, for example, had driven its growth primarily on the basis of adding new stores in new states across the USA. The company avoided international expansion as the growth provided by its domestic market has more than met shareholders’ growth expectations.
  6. Channel expansion. Channel expansion also offers major profit growth opportunities. Dell originally only sold its products directly, but you can now buy Dell PC’s in retail outlets. A key element of Apple’s recent success has been the growth of its own store chain, enabling the company to avoid sharing margins with other retailers and giving it greater control over customers’ shopping experience.
  7. Partnerships and acquisitions. Where you do not have the necessary assets or capabilities to deliver your growth ambitions, and you are unlikely to be able to develop them organically, acquisitions and alliances provide a fast-track route to growth. Studies have shown that in many industries, acquisitions can deliver 50% or more of successful companies’ profit growth. BAE Systems, the UK-based defence manufacturer, has driven significant growth through the acquisition of companies to drive greater scale and efficiency in existing markets, as well as helping it develop market-leading positions in adjacent markets.

Which of these seven steps are the right focus for your business, what steps are you taking to drive new growth within each of these areas of focus, and how confident are you that they will enable you to achieve your growth ambitions?

© Stuart Cross 2015. All rights reserved.