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Marketing Growth Strategies Definition
Marketing growth strategies are part of marketing planning.
Strategic marketing planning is the process managers use to ensure that the company's goals are aligned with its marketing activities.
For strategic marketing planning to be successful, the company has to define its mission and objectives and understand how it can leverage its capabilities in a changing market. The process of strategic marketing planning is as follows:
Define corporate mission and purpose,
Define company objectives,
Analyze the external and internal environment,
Assess the company's portfolio,
Set marketing strategies.
Our focus in this explanation will be on steps four and five - the business's portfolio and market strategies.
To learn more about steps one through three, check out our explanation of Marketing Strategy.
We can define marketing growth strategies as follows.
Businesses implement marketing growth strategies to expand their market presence and reach a broader range of customers.
Marketing Growth Strategies in Business
To set marketing growth strategies, a business must first examine its portfolio.
A business portfolio includes all the businesses, brands, and products a company owns.
The business needs to review its portfolio to evaluate strengths and weaknesses and identify opportunities for business growth. This process is known as portfolio analysis. During portfolio analysis, the company decides which brands and products to keep or stop investing in.
The first step of portfolio analysis is determining strategic business units (SBUs). Depending on the company's size and operations, an SBU could be an inter-organizational team working on a product line, a brand, or a single product. After identifying all essential SBUs, the company will determine which product line presents the most opportunities and should receive more investment.
A popular tool for portfolio analysis is the Boston Consulting Group Matrix (BCG Matrix). Figure 1 below shows the main components of a BCG Matrix, which includes rating SBUs based on their market share and growth.
Fig. 1. BCG Matrix, StudySmarter Originals
The BCG Matrix divides SBUs into four different categories:
- Stars: These products/brands have high market growth and market share. Stars present vast growth opportunities for the company and are worth investing in. However, stars also require high levels of investment to finance their growth.
- Cash cows: These products/brands have a high market share but present lower levels of growth. Due to their established nature in the market, they require less investment from the company and deliver a constant stream of revenues. However, it is unlikely that cash cows will experience high levels of market growth in the future.
- Dogs: These products/brands present low market growth and market share. Dogs may or may not produce enough revenue to sustain themselves, and the business should avoid further investing in these products.
- Question marks: These products/brands have low market share but high market growth. Question marks require high levels of investment to maintain or increase market share. However, if the company implements effective marketing strategies, question marks have the potential to turn into stars. Therefore, it is up to the company to decide whether to invest further in them.
Of course, the company might have several SBUs in each category. For example, there are two stars, one cash cow, and five question marks in its portfolio. It is up to the company to decide which strategy to pursue with each SBU. It can use a build strategy to increase market share through investment or a hold strategy to keep the SBU at current levels. It can decide to harvest the SBU to maximize revenues in the short run or to divest it by completely halting production.
It can often be difficult to measure market share and growth accurately. As a result, companies may opt for using various methods for portfolio analysis.
Marketing Growth Strategies Stages
Let's now take a look at the marketing growth strategies stages.
Companies can use various marketing planning tools that help them assess market opportunities. After the business portfolio has been assessed, the development of marketing growth strategies begins. To identify and evaluate growth opportunities, the company can use the Ansoff Matrix. The Ansoff Matrix is also called the product/market expansion grid (see Fig. 2 below).
Fig. 2. Ansoff Matrix, StudySmarter Originals
Marketing growth stage 1: market penetration
As a growth strategy, market penetration can be used by companies that want to increase the market share of one of their existing products in existing markets. This strategy involves the least risk as the business is doing what it already knows best. Rather than developing new products or entering new markets, the company can 'grow' the product through various marketing mix adjustments.
For example, the company could refurbish the product's design or packaging and run a new communications campaign to advertise a product (e.g. by using different messages or media forms).
Marketing growth stage 2: market development
Market development is another type of marketing growth strategy. When using this strategy, the business attempts to find new markets for its existing products. A market development strategy involves higher levels of risk as the company is trying to enter unexplored markets. As a result, marketers must conduct extensive market research when employing this strategy.
Check out our explanation Market Research to find out how businesses research new markets.
For example, a company might have noticed that its product is successful within older demographics but less with younger ones. Therefore, it undertakes extensive market research on Millennial and Gen Z consumers to learn more about their buying behavior in an attempt to appeal to this target segment and grow in the new market.
Marketing growth stage 3: product development
The third option for growth includes product development. When pursuing a product development strategy, the business will develop new products to sell in existing markets.
This strategy presents higher levels of risk as the business must develop a unique product. As you might already know, new product development involves spending on research and development (R&D), new communications campaigns, etc. If the new product fails in the market, there is no way for the business to recover its costs (sunk costs). However, if the product is successful, there is high profit and growth potential.
Marketing growth stage 4: diversification
Finally, the business might consider diversification. The company may develop new products or purchase new businesses to enter new markets. This strategy involves high levels of risk as the company is entering untapped markets and developing products in areas it is not yet familiar with. A diversification strategy may offer high returns; however, the business must consider how it positions its new product or brand.
To learn more about the issues that arise with overextension and positioning, read our explanation Brand Management.
Marketing Growth Strategies Examples
Let's finally look at some marketing growth strategy examples.
The Coca-Cola Company has used various marketing growth strategies during its journey toward becoming one of the largest global brands. In 2022, Coca-Cola was the most valuable food and beverage brand, with an estimated brand value of around $89 billion US dollars.1
How did Coca-Cola achieve these figures? The answer is thanks to its development and diversification strategies.
Coca-Cola is known to use market penetration strategies whereby it targets existing markets with its existing products. The company does this by changing product packaging every so often, changing the size of its bottles, and running numerous innovative campaigns.
However, Coca-Cola is also known for using a diversification strategy whereby it acquires businesses in new markets and thereby enters untapped markets. For example, in 2016, Coca-Cola made a 40% equity investment in the Nigerian Chi Ltd. dairy and juice company.2 This investment allowed the company to diversify its portfolio by expanding and establishing itself in the Nigerian market.
Another example of marketing growth strategies can be observed through the Dutch beer manufacturer Heineken.
In 2018, Heineken entered a long-term partnership with China Resources beer to diversify its operations. By partnering with a local manufacturer, Heineken benefited from its Chinese partner's local market knowledge and capabilities. As a result, Heineken's competitiveness and market share increased significantly in China.3 Thus, Heineken successfully diversified its portfolio to include the Chinese market.
Marketing Growth Strategies - Key takeaways
- Strategic marketing planning is the process managers use to ensure that the company's goals are aligned with its marketing activities.
- Businesses implement marketing growth strategies to expand their market presence and reach a broader range of customers.
- A business portfolio includes all the businesses, brands, and products a company owns.
- A popular method of portfolio analysis includes using the Boston Consulting Group Matrix.
- Marketers can use the Ansoff Matrix to determine business growth strategies.
- Market growth strategies include market development, market penetration, product development, and diversification.
References
- Kantar Media. What are the most valuable global brands in 2022?. 2022. https://www.kantar.com/inspiration/brands/what-are-the-most-valuable-global-brands-in-2022
- Trefis Team. How Coca Cola Is Continuing Its Portfolio Diversification Strategy. 2016. https://www.forbes.com/sites/greatspeculations/2016/02/25/how-coca-cola-is-continuing-its-portfolio-diversification-strategy/?sh=1ce6e4412adf
- HEINEKEN. HEINEKEN and China Resources sign definitive agreements to join forces in China. Heineken Company. https://www.theheinekencompany.com/newsroom/heineken-and-china-resources-sign- definitive-agreements-to-join-forces-in-china/
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Frequently Asked Questions about Marketing Growth Strategies
What are the 4 marketing growth strategies?
The four marketing growth strategies include market penetration, market development, product development, and diversification.
What are examples of growth strategies?
An example of a market growth strategy can be observed through market development. For instance, a company might have noticed that its product is successful within older demographics but less with younger ones. Therefore, it undertakes extensive market research on Millennial and Gen Z consumers to learn more about their buying behaviour in an attempt to appeal to this target segment and grow in the new market.
What is market growth in marketing plan?
Market growth is part of strategic marketing planning. Strategic marketing planning is the process managers use to ensure that the company's goals are aligned with its marketing activities. The last step of strategic marketing planning includes setting marketing strategies. As a result, businesses implement marketing growth strategies to expand their market presence and reach a broader range of customers.
What is the best growth strategy in business?
There is no particular growth strategy that is best for all businesses. Businesses should determine their growth strategies based on their industry, product, and capabilities. A business must also consider its objectives and current portfolio to assess which growth strategy is best suited for its operations.
What are the three main types of growth strategies?
The three main marketing growth strategies include penetration, development (market or product), and diversification.
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