Although there are many different ways to grow your business, fundamentally everything
fits into 4 key options.
First, you can sell more of your current product or service to your current customers.
Second, you can develop a new product or service.
Third, you can sell your current product or service to a new market.
And fourth, you can develop a new product or service and sell it into an entirely new
market.
This model is known as the Ansoff Matrix or Product/Market Expansion Grid and it’s a
useful guide to help you sort through your ideas.
Let’s look at each of the four areas briefly. There’s a diagram of the model online if
you want to follow it.
The first option, which is also the easiest and least risky way to grow your business,
is to sell more of your existing products or services to your current customers, or
people like them.
This is known as Market Penetration.
You could do this by promoting your business more widely so that you reach more of your
target audience. And you could offer a special price or promotion to encourage them to buy.
You could consider introducing a loyalty scheme to current customers and rewarding them if
they buy more or buy more frequently. You may be familiar with companies that give points
to customers for every purchase and convert these points into a discount off future purchases.
Or the offers from restaurants where you get a free main meal on your fourth visit.
This option offers opportunities to work in partnership with complementary businesses.
This is covered later in this module.
The second option is to develop a new product or service and sell it to your current customers.
This is known as Product Development.
Whilst developing new products and services is risky, the advantage is that you already
know your customers. You know what motivates them and the sort of products and services
they may want.
It’s also very much easier and more cost-effective to go back to satisfied customers and sell
them something new, than it is to find completely new customers.
Here are two examples of product development.
First a plumber who targets people who want a new kitchen or bathroom may offer a tiling
service. And secondly, a specialist delicatessen may introduce a range of chutneys to complement
their cheese and cold meats.
Have a look at the Creating New Products module for more on this option.
The third option is Market Development. This means selling your current product or service
to a new market.
You could target a new geographical area and perhaps open a new shop or salon in a different
town.
Or you could use a different channel to get to your customers. For example, if you sell
from a shop, you may decide to also sell online on your own website.
Exporting is another way to gain access to new markets and a larger pool of customers.
Whilst this is high risk and can take some considerable time, there is also potential
for a high return. Get advice from your Business Wales business adviser if you’re considering
exporting.
Another option to expand your market is franchising your business. Franchising is a way to multiply
your business and extend into new markets. You give a licence to another business owner
which allows them to trade as their own business under your brand name following your proven
business model.
There’s detailed information about franchising available from The British Franchise Association
or your Business Wales business adviser.
The fourth option is diversification. This is the highest risk strategy for growing your
business. It can help your business weather tough times if your original market dries
up, stops growing or is hit by competition.
It’s proved to be an effective strategy for many farmers. As their traditional business
declines, they’ve looked at perhaps developing holiday-cottages or leisure facilities such
as mountain biking or even golf courses.
Each of these options requires different strategies and actions, as well as different skills and
resources. Consider the risks as well as the benefits before deciding which is the most
appropriate to grow your business.