Strategic planning sets the stage for the rest of the firm’s planning initiatives. Many small businesses fail to outline a plan and run into cash flow or other problems as a result. Bankruptcy is the ultimate failure due to a lack of planning. To prevent this outcome, a strategic plan must be developed that provides a clear company mission, objectives and strategies for growth.
There is considerable overlap between company strategy and marketing strategy. The company exists to satisfy customers’ needs and must continually evaluate the firm’s ability to satisfy customers better than the competition.
Described below are strategies you can use to identify growth opportunities and increase sales for your business.
1. Market penetration
Selling more of your current products or services to present customers (or market segments), without changing the product or service. To increase sales, you may reduce prices, increase advertising, get your products into more stores and/or obtain better display locations.
2. Market development
Identify and develop new customers or new markets for your existing products or services. This could include a new geographic market or a different group of customers.
3. Product or service development
Offer modified or new products or services to existing customers. This may include new service offerings, service enhancements, and/or products in different styles, colours or sizes.
Start or acquire another business, different from your existing business. A restaurant owner acquires a fitness studio.
Generally, there are three market-coverage options.
Undifferentiated market coverage is when a company goes after an entire market with one product that is mass produced. The key drawback to this form of marketing is the difficulty in today’s marketplace to develop a product or service that satisfies all consumers. Also, because this approach targets the largest market segment, you may find yourself competing with many large firms for this segment. As an entrepreneur, you may find it difficult to obtain the necessary resources to compete with larger established firms.
This strategy involves targeting several markets and designing separate products for each. A good example of this is automobile manufacturers. Offering similar products to different market segments often achieves higher overall sales and a stronger market position in each segment, because the company is serving unique needs. However, reaching numerous market segments requires more focused promotional costs (since each market is different) and require varying levels of service. This strategy requires many resources which start-up companies may find difficulty assessing.
Many companies with limited resources use this strategy. A company chooses one market segment (a smaller market) with a focus on obtaining a higher share in that market. The risk of concentrating on a particular market is the possibility of strong competitors entering the market or the demand for your product/service decreases or diminishes. However, a company with a loyal client base and a strong market position may be able to utilize their resources and serve their market segment better than their competition, building a prosperous business.