Chapter 4
IN THIS CHAPTER
Determining your market’s growth rate
Creating successful go-to-market and profitability strategies
Looking at market segmentation opportunities
Growing your market share
Defining your position and expanding your market presence
Operating from a growth vs. a fixed mind-set
Amantra from the Native American belief says that elements of nature provide important guiding lessons for life. For one, we’re taught that we should live our life like a river, always flowing and moving forward; otherwise, we stop progressing and become stagnant, like a pond that can be compromised by moss, fungus, and other elements that hinder growth.
As a marketer, you need to look at your business from the same perspective. Where are the white-water rapids, or the growth waves, and how can you ride them to grow your business?
To succeed in any business, you need to go where the growth is. You should always be looking for new opportunities and riding the growth waves you find for as long as you can. Doing so will better enable you to operate at a profit so you can capitalize your next round of product development, marketing campaigns, and expansion into new markets.
This chapter helps you determine the growth rate of your market and evaluate opportunities to find the best options for scaling your business.
Typically, only a few markets are growing rapidly at any given time in an economy. Some are actually shrinking. In 2022, industries projected to grow the fastest include most types of manufacturing, artificial intelligence, data sciences, and global travel and tourism. It’s important to know how quickly or slowly your market is growing because market fluctuations directly impact your sales growth and profits.
Your core market should be experiencing a 5-10 percent overall annual growth. Anything slower than 5 percent makes it difficult for a business to thrive. Monitoring sites like Bloomberg.com and IBISWorld.com can help you understand potential changes in your market and others that impact your industry. You can identify opportunities and threats and determine how and when to reinvent or adapt your brand for current or projected changes.
In contrast to the fastest-growing industries projected for 2022–2023, the fastest-declining industries, projected to shrink between 7 percent and 15 percent, include scrap metal recycling, sign and banner manufacturing, record stores, paper wholesaling, and coffin and casket manufacturing. Paying attention to projections for your market can enable you to plan ahead and stay competitive in any economic climate.
Clearly there are many reasons why markets grow or shrink. For example, technology changes the tools we use to do routine tasks, and consumer attitudes toward environment, cultural and social issues can change what we buy.
If your primary market is shrinking or not growing fast enough to support your business goals, you may need to focus your energy on getting into ancillary markets you can serve, reinventing your business, or adapting your product line.
As a business owner or marketing manager, you need to monitor market and economic insights on a regular basis. By following the key indicators of growth and decline in your overall market and the general and local economies, you will be armed with powerful information for managing the expansion of your operations and business.
To assess your market’s growth potential, you can use simple indicators such as:
Mapping out these growth indicators for the past one to three years can help you see what’s happening in your market and what to expect. Although these indicators will provide only rudimentary guidelines that aren’t based on statistical formulas or predictive analytics, they’ll give you valuable insights nonetheless.
Analyst firms like Deloitte, Forrester, and Gartner, local and state chambers of commerce, and trade associations are also good sources of information on growth trends for regional and national markets.
Also pay attention to the business news in specific cities in which you sell your products. Follow the trends on home sales, new construction, real estate development, job growth or decline, and other similar indicators.
Many entities, including the federal government and private firms, report regularly on the economic indicators that provide powerful insights on current and future market conditions. The most common economic indicators small businesses need to monitor include:
When faced with a flat or declining market, consider making the following adjustments:
Slow-growth and no-growth markets are brutally competitive. To make sales in either case, you often have to slash prices, ruining your profit margins. Sustainable businesses keep their eyes on growth rates in all their markets to identify potential slowdowns that may indicate a need to move on to new markets and/or product lines.
Reinventing yourself before you have to is critical to staying alive and profitable. Never assume you can’t fail. There’s no rest for the successful enterprise that seeks sustainable growth.
Also, look at the geographic areas you target most to assess their economic health and strength. If your current market isn’t growing, search for nearby markets with stronger population growth and economic projections. Research a market’s workforce to ensure potential employees have the skills you need at affordable salaries. Markets with a highly educated workforce and a lower cost of living tend to be best for sustainable growth.
Market growth and expansion strategies should center around getting your product to customers as efficiently as possible and securing new customers by expanding your reach demographically and geographically.
Clearly, your marketing strategies will differ if you’re new to an established market, an existing brand looking for growth, or launching new products within an established brand. The following sections cover some tactics for achieving success in these and other scenarios.
Essentially, this entire book is about going to market. A go-to-market (GTM) strategy is your blueprint for getting your product to the end customer and achieving a high level of sales and awareness at the same time. Pricing, distribution, and publicity are key to GTM strategies. There are many innovative ways to take a product to market that will get you noticed and help you build your base.
At one time, big brands like Microsoft and Dell expanded their market presence by building their own retail stores, which helped them gain total control of product demos and customer experiences. However, with online sales continuing to outpace in-store sales, most brands have shut down this strategy.
You can build a sustainable presence by exploring a wide range of selling opportunities, including third-party online channels like Amazon or eBay, partnerships with ancillary and complementary brands for reselling each other’s products, and so on. (See Chapter 15 for more information on these alternatives.) For business-to-business brands, building a reseller network can be key to growing sales without adding to overhead.
Crowdfunding refers to the process of raising funds for a new business, project, or venture from multiple donors, primarily over the internet. While other channels can be used for the same purpose, most crowdfunding today takes place via online sites set up to link borrowers with funders.
Kickstarter and other crowdfunding sites can help you raise money and assist you in creating a strong base of champions to help spread the word about a great new product.
If you create a strong campaign with product demos and great videos and get lots of people talking about your Kickstarter campaign, awareness will skyrocket without you having to pay for most of it. Additionally, if your campaign can create enough emotional enthusiasm to succeed, you’ll likely have a lot of excited backers to tell your story and promote your products and brand to their networks.
Also known as user acceptance testing, beta testing involves giving a product that is almost ready to go to market to a group of prospective users to test performance and functionality for real-world application.
Beta testing can give you valuable insights about your product and what might need to be fixed and it can aid you in getting sales off the ground. Instead of offering introductory or discounted pricing — which can lock you into low profit margins — invite people to be part of a beta program. Give them discounts in exchange for insights on what’s working and what’s not, and for sharing their success stories about outcomes and satisfaction with future prospects.
Once your pilot stage is complete, offer participants further incentives to continue doing business with you and serve as evangelists for prospects.
You can grow your market presence and revenue by introducing more products into the market and using a best seller to draw more customers to your brand.
The more products you sell, the more revenue share you can potentially gain in a given market. However, this approach is not without risk. More products and more sales don’t always mean more profitability. You need to weigh the costs of developing innovative products that support or expand your existing product lines, getting those new products into your distribution channels, and, of course, designing marketing programs to create demand. Overextending your resources can backfire in ways you may not be able to overcome.
For example, if you own a restaurant and plan to expand to new locations, be sure you have the capital to cover the full cost of operations for a given period of time while you staff up and build a new following and customer base. If the new location fails, it can send a signal to customers that something is wrong with all your locations, causing you to lose even more revenue.
But you should also consider how launching a new product slowly and on a small scale can tip off the competition to a really good idea they may be better poised to develop and market faster than you can. They’ll become the market leader and “innovator” of a new idea, and you’ll be the “me too” if you end up launching after they roll ahead with your idea.
Some marketing experts define best sellers as products that achieve sales at least ten times the norm for the overall category. If you have a best seller — a product that substantially outsells your other products — it may make sense to put most of your resources toward maximizing sales for this product and using the profits to grow other areas of your business.
To use a best seller to help fund new product development, look to expand demand by creating new experiences around your best-selling product, partnering with others to expand distribution, or bundling your best seller with related products. If you sell comfy throw blankets, for example, partner with a company that makes fuzzy slippers or herbal teas to help round out the cozy-at-home experience.
Use some of the profits from a best seller to build your next best seller, because like all good things, your current best seller will eventually lose its momentum. Always be looking for your next top product so you can have it ready and waiting in the wings.
While your products are selling and your customer satisfaction is high, referral marketing and reward programs are critical to maximize your sales and profit potential. Reward customers who continue to buy your products by giving them discounts for repeat purchases. Also consider giving referring customers a financial reward and see what that alone can do for your profits.
Another strategy is to influence the supply and demand, and thus sales and pricing, for a product that’s showing signs of becoming one of your top sellers. You can do this by releasing a limited number of the promising item to specialty stores so that people have to seek out your product.
Remember Beanie Babies? Those useless but adorable and coveted collectibles are a great example of the influence of supply and demand. Creator Ty Warner released his Beanie Babies for short periods of time and then retired them, making them collector’s items that people wanted even more. And he produced only a few hundred of certain kinds of Babies, turning them into instant and rare collectibles. The value of some of his products at the peak of the Beanie Baby frenzy reached upwards of $3,000. In 2022, many years after their peak, a rare, mint condition Princess Bear, made in honor of Princess Diana after she died, was getting bids well into the six figures. Scarcity pays off when you have something people really want.
Take a look at your distribution strategies for your top products. Can you produce fewer and make them more valuable? Can you change your access points to make them seem more exclusive? Or do you just want to keep marketing a product until it doesn’t sell anymore and pocket the profits while you can?
Whatever your plan for maximizing the growth of your current top-selling products, have an exit strategy in mind, too. Be prepared to answer the following questions:
A market segmentation strategy is more than just sorting customers into like groups so you can build marketing campaigns around specific personas. It involves building distribution strategies to reach your best segments first and then trickle down to your secondary segments.
If your sales are best among millennials, for example, prioritize sales channels that reach them easily. If your sales do best in states with consistently warm climates, consider dropping out of channels in colder states where sales may only be seasonal even though you’re paying for shelf space year-round.
In a world that’s looking for more customization and personalized service, niche marketing may make the most sense. It helps you better compete with larger businesses because you can specialize and personalize in ways they can’t.
With a strong customer database program and accurate market analysis tools, you can gather information about your current customers and identify hot markets that have look-alike audiences, or more consumers just like them. If you find that a subset of your customers is growing faster than the rest, adjust how you spend your marketing resources to reach more consumers like them instead of trying to reach many groups you may never convert. Look to adjust pricing and distribution to cater to your best consumer groups rather than trying to be everything to everyone, a strategy that fails more often than not.
Scaling your business is obviously the best way to improve your ability to compete with larger, more established brands and increase your market share. Market share is, very simply, your sales as a percentage of total sales for your product category in your market (or in your market segment if you use a segmentation strategy). If you sell $2 million worth of widgets and the world market for widgets totals $20 million per year, then your market share is 10 percent. It’s that simple. Or is it?
Following are some insights on understanding and increasing your market share.
Before you can completely determine your market share, define the metrics that matter most to you. Is it better to determine market share by dollars earned, containers shipped, or units sold? Pick whatever seems to make sense for your product and the information you have access to.
To effectively increase your market share, you must have an accurate picture of where you currently stand. Here’s a simple method for estimating market size and share:
Estimate the number of customers in your market.
For instance, estimate how many people in your total addressable market are likely to buy products in your category. Using Statista (www.statista.com
), a consumer statistics portal, or D&B Hoovers (www.dnb.com
), a commercial database of businesses and executives, you can get fairly precise insights on the size, sales, and market leaders for any industry.
Estimate how much each customer buys a year, on average.
What’s the current and projected annual sales volume per customer in your category? Check your sales records for data or turn to industry research for specific information and year-over-year growth data.
For example, if you sell specialty tea, you may estimate that 75 percent of the wholesalers handle lower-quality, inexpensive teas and therefore don’t compete directly with you. In that case, you can calculate your market share against the 25 percent of total sales for teas similar to yours. Your resources will likely go further if you try to capture this narrow market share rather than a share of the total category.
To create a market share strategy, you need to know your product category — the general grouping of competitive products to which your product belongs (be it merchandise or a service). If you don’t know where your product and your brand fit into the market, you can’t begin to develop a strategy to build up and increase your existing market share, and you’ll likely waste a lot of money and time, making it hard to catch up with brands that are executing better marketing programs.
If your goal is to increase your market share by a certain percentage or dollar value, you need to do some calculations to determine what those figures look like.
For example, if you own a tea store in Shanghai, you may have a goal of increasing your share of tea sales by 1.5 percentage points. If each point of market share is worth roughly $40,000 in annual sales (1 percent of the total sales in the market), then you’ll likely need a plan that involves spending, say, an extra $25,000 to win that 1.5 percent share gain. If it works, you can make an extra $60,000. These numbers are just examples. You will need to determine costs specific to your business and markets.
To be cautious, you may want to discount this projection of $60,000 in additional sales by a risk factor of, say, 25 percent, which cuts your projected gain back to $45,000. If you exceed it, you can enjoy the reward. If not, you avoid setting your business up for missed sales projections.
Be realistic about the time and risks associated with reaching your market share goals. Calculate the extra monthly costs associated with the marketing and distribution changes you’ll make to get the share you want using historical promotional spend and sales figures. Then compare these costs with projected increases in monthly sales. This will help you see potential risks and potential gains. You should give a new initiative at least six months before you assess its success or failure.
Base your goals on realistic, actionable items you can measure. For example, if your goal is to increase your market share from 5-7 percent with a product upgrade or new promotion, be sure you have metrics in place that will enable you to attribute any market share growth to those actions so you know what’s working and what isn’t.
A positioning strategy reflects the emotional fulfillment and psychological relevance of building emotional selling propositions (ESPs) over unique selling propositions (USPs), because unique isn’t a sustainable strategy (see Chapter 2 for more about ESPs and USPs). It’s too easy for a competitor with more resources or a quicker time to market (the time it takes from product idea to sales launch) to duplicate your product and take away a “unique” advantage. A successful positioning strategy focuses on getting customers or prospects to see your product by the emotional and functional value it offers, to trust your claims about quality and service, and to try your product before considering competitors’ offerings.
Good positioning drives mind share (share of awareness among your market compared to competitor products’ awareness) among consumers, which will in turn help you gain market share. Your positioning statement should be believable and actionable. It should reflect the core values of what you offer and make a statement about how you differ from competitors and functional alternatives.
After you’ve defined the emotional value you offer in addition to the product value or competitive difference that sets you apart, you can start building growth plans.
For example, if you produce and sell healthy organic snack foods that replace the abundance of junk food marketed relentlessly to kids, your positioning can reflect the health benefits of your snacks and the emotional relief parents gain by knowing they’re not jeopardizing their children’s growth by giving into their demands for unhealthy food. With a healthier but tasty snack food for children, you can expand to niche and geographical markets that promise big growth opportunities for health food and fitness products.
Mind-set is everything. Are you operating from a growth mind-set or a fixed mind-set? Do you understand the impact of each on business growth?
Carol Dweck, a psychologist at Stanford University, developed the mind-set theory in her book Mindset: The New Psychology of Success. Dweck defines growth and fixed mind-sets as follows:
She also maintains that resilience, a key characteristic of a growth mind-set, is a skill you can develop, not an inherent trait you are born with or without.
The authors of a 2010 article in Harvard Business Review analyzed the winners and losers from the 1980, 1990, and 2000 global recessions (see the nearby sidebar “The difference mind-set makes in business”). Their findings showed that companies with a we can overcome and grow attitude substantially outperformed competitors with a hold tight and hunker down mind-set. Of the companies reviewed for the article, only 9 percent grew coming out of a downturn, 80 percent failed to achieve their prerecession growth levels within three years, and 17 percent eventually failed altogether.
The 9 percent that thrived operated with a growth mind-set, balancing offensive actions such as improving efficiencies and seizing new opportunities with defensive tactics like cutting back to prepare for the worst. Here are some examples of what they did:
3.147.70.66