If a company is planning to grow its turnover on a given market, it should craft a detailed marketing strategy. Below I will describe three main strategic directions for revenue growth. Please note that this excludes the cases when a company is moving to a new market or expanding its product offer to achieve sales growth.
First, let us define what a market is: a sum total of all buyers and sellers for a commodity or a service in a certain area or region. So, the important criteria include: the presence of buyers (potential buyers), the presence of sellers and the ability and desire of both parties to exchange goods, services and monetary equivalents.
By definition, markets are often limited by geographic borders (however, this is becoming obsolete in times of digitalization and globalization). Furthermore, there is time aspect as markets tend to go through significant changes over time and even disappear.
When talking about markets we start at the level of available market (that is the total number of available buyers on the market, e.g. people living in a certain area).
The market potential is the sales that could be generated from the customers who are not currently purchasing the product but would buy it if the company applied the sufficient marketing effort. With this in mind, there is always a share of customers who would not be profitable to acquire or who would not buy the product at any rate.
Customers who are already purchasing the product comprise the current market volume, which, in turn, consists of the company own market share and that of competitors.
As you can see on the diagram, there are three main strategies to achieve revenue growth:
- Market exploration: attracting the customers from the “potential market” segment. This is a good strategy if the market is relatively new or less attractive to the competitors so that there are a lot of opportunities to expand.
- Market invasion: in this strategy, the company tries to capture the market shares of the competitors. This is a viable strategy for declining or aging markets with a lot of market players and high competition.
- Market deepening: turning towards the existing customers in order to grow the revenue (increased product usage or cross-selling and upselling). This strategy is often used as a complementary way of achieving revenue growth in addition to the two strategies mentioned above.
Let us look at the example of a chewing gum market. The exploration strategy would involve targeting the customers who are currently not buying chewing gum (explaining the product benefits, etc.). The invasion strategy would be competing with other producers of chewing gum for the same customers. The deepening strategy will try to market a larger amount of product to the same customer (e.g. suggesting using two strips of chewing gum instead of one or using the chewing gum after each meal).
Using one of these strategic directions (or their combination), a company can create a more detailed marketing strategy to achieve a growth in revenue over time.