Growth IQ summary

Growth is all about acquiring new customers, right? Well, not quite. In fact, the obsession with expansion often leads businesses to neglect their existing customers, causing all sorts of problems down the road. That means your best bet is to make sure you’re taking proper care of your customer base.

According to an article published in the Harvard Business Review in 2014, it’s certainly the most efficient approach. Winning new clients costs anywhere from five to twenty-five times more than retaining an existing customer. The key to getting the most out of your customer base is data. If you know what your customers like and need, it simply makes sense to focus on them and work toward enhancing their experience and expanding the range of products they buy from you. Repeat customers are both more likely to try out new products and forgive your company when it makes a mistake.

Say you’ve cornered your niche market and your business is doing pretty well. What’s the next step? Well, it might be time to enter a new market and start selling your products to different people in different locations. That’s called market acceleration.

The key to pulling it off is careful planning. If you want to enter a new market, you’ll need to have a well-established brand that you can use as a launching pad. Take it from Under Armour, a sportswear business founded by Kevin Plank in 1995. The company’s aim was to provide an alternative to standard short and long-sleeved cotton sports t-shirts. Its first product, a synthetic shirt designed to keep athletes cool and dry, targeted a very specific market segment: American football players.

The needs of your customers are changing all the time. If you want your business to thrive, you’ll have to change with them and learn to anticipate and meet these new needs. The best way of doing that is to adopt a product expansion strategy. That goes for both young and established companies.

Take Kylie Jenner, a social media star who used her massive following to build the wildly successful cosmetics brand Kylie Cosmetics in 2015. The business focused on expanding its product line from the get-go and quickly became a household name. By adding new cosmetics categories like eye shadows and eyeliners as well as SnapChat tutorials and special thematic collections to its portfolio, Kylie Cosmetics built up a revenue base of $600 million within two years!

Product expansion and market acceleration strategies will help your business grow, but you can’t rely on them indefinitely. So what can you do once you’ve exhausted those avenues? One option is customer and product diversification. That basically means rethinking what it is you’re selling and to whom your selling it. The strategy isn’t without its risks, but the potential benefits are huge. It all comes down to market context.

Take Marvel, a comic book publisher founded in 1939. By 1993, it was struggling. People had lost interest in comic books and trading cards and the company’s managers couldn’t find an answer to their problems. In 1996, Marvel filed for bankruptcy. One year later, Marvel Enterprises Inc was created in its place. After a period of treading water, the company realized something important: what made the brand valuable wasn’t its traditional product – comic books – but the characters it had created.

Knowing what to sell and to whom is the bread and butter of successful entrepreneurship, but it’s not enough on its own. You also need to know how to sell your product. That’s all about optimizing sales, a strategy geared toward making sure your customers have a positive experience when they interact with your company.

Convenience is king in the modern business context. If companies want to make the most of the opportunities associated with the internet, they need to understand how to make the technology work for their customers. That means making the buying experience as smooth and effortless as possible. Walmart took that lesson to heart when it expanded into e-commerce in 2016 after purchasing jet.com. It was a good move. Within a year Amazon announced its entry into the grocery market by buying Whole Foods. Had Walmart hesitated, it would’ve been entirely unprepared to meet this formidable challenge.

As we’ve already seen, acquiring new customers is much more expensive than retaining your existing ones. That means the cheapest way of avoiding growth slumps is improving your customer-retention rates. Put differently, you need to minimize your churn.

That said, you can’t eliminate churn entirely. Some of it is simply part and parcel of running a business. Customers move on for all sorts of reasons. Things change and they no longer need your products or services. That’s obviously not something you can do anything about. What you can control is product quality and customer experience. Spotify provides a great example of how thinking carefully about these kinds of things can help a company retain customers. So how do they do it?

Expanding into new markets or diversifying your portfolio can be complicated and expensive. But you don’t have to go it alone. Partnerships are a great way of making your life a whole lot easier and minimizing your costs. Say you want to sell your product in a new market. Why not set up a deal with a retailer that’s already active in that market? It’s a win-win situation and, most importantly, it helps you avoid overstretching yourself.

Take GoPro, the manufacturer of action cameras designed for use in extreme conditions. Founded in 2004, the company quickly grew thanks to a series of well-chosen partnerships with big retailers like Best Buy. The deal benefited both partners. GoPro generates 17 percent of its total revenue through Best Buy outlets while the availability of GoPro cameras in its stores has helped Best Buy bring in new customers. GoPro established a similar deal with Red Bull in 2016, a partnership that’s helped both companies expand their customer bases as a result of cross-promotion campaigns.

Business is usually depicted as a vicious, dog-eat-dog world of endless competition. But that’s not always the case. In certain situations it actually makes a lot of sense to bury the hatchet and cooperate with your competitors. Call it coopetition.

Take the car industry. Shaking up a whole industry is usually beyond the ability of a single company. Recognizing that, Fiat-Chrysler, BMW, Intel and Mobileye joined forces in 2017. Their aim? To revolutionize the industry by introducing self-driving vehicles. Initially, only BMW, Intel and Mobileye had been on board, but they quickly realized that bringing in a giant like Fiat-Chrysler would help them bring their product into the mass market for cars.

There are two types of companies – those that simply sell their products and those that want to do something bigger. There’s nothing wrong with the former, but they’re not nearly as exciting as businesses that try to change the world around them. That’s why you might want to consider adopting unconventional strategies. Few things are as likely to inspire your customers as pursuing a unique mission.

Take Toms Shoes, a company founded in 2006 with a unique selling point: for every pair of shoes sold, it donates another pair to children who can’t afford adequate footwear. Within six years, Toms had an annual turnover of $300 million, allowing it to ramp up its support of charitable causes. In total, the company has donated $70 million and provided 175,000 weeks of clean water to impoverished areas. That makes it incredibly attractive to consumers. Today, its model of “conscious capitalism” is becoming ever more popular.