Growth Strategy: 5 Powerful Approaches (with Concrete Examples)
We need to grow faster! This is the motto and #1 goal for every startup I know of. Although the reasons for getting a higher growth rate are generally clear to everyone in the product management space, you may be wondering how to reach your growth goal and which strategy to use for it.
As a senior product manager who has worked in rapidly-growing environments, I'm about to share some of the best growth strategies out there that will make you look like a hero to your stakeholders.
The Importance Of Growth For Digital Products (Especially Startups And Small Businesses)
I know, I know. It’s kind of obvious why you should grow your existing product and business in general. But I wanted to talk a little bit about the role of growth in the lives of startups.
If you are a small startup, the chances are high that you are not making any money and you burn your investor funds instead. This is absolutely fine in the early stages of any company and that is why you get money from investors in the first place.
But, your investors will provide you with these resources only if you are able to prove that you are growing fast enough. This is because venture funds and individual investors don’t care about the dividends that they will get from your product once you become cash-positive. What they want is for you to grow exponentially and for their shares in your company to become 10, 100, or even 1,000 times more valuable.
The Difference Between Product Growth Strategy, Business Growth Strategy, And Marketing Strategy
Before we begin looking at our growth plans, let’s first clarify the terms (and the types of growth strategies they represent) that you might stumble upon when learning about growth.
- Product Growth Strategy: The processes and actions that you take to increase sales revenue or the user base of your specific products.
- Business Growth Strategy: Unlike the first one, here you are concentrating on the business and its bottom line overall which can have multiple product lines.
- Marketing Strategy: The marketing toolset (e.g. referral marketing, life cycle, content marketing initiatives, etc.) in the hands of your marketing team to ensure product or business growth.
To be clear, the strategies that we will talk about today are product growth strategies, as they focus on increasing the user base of your products.
Now that we're all squared away with the terms, we can begin with our first strategy (which is also the most important one IMHO).
Product Development Strategy: Taking The Product-first Approach
Our first approach focuses your growth efforts on the product itself. The philosophy here is that people use your products because they receive some form of value from them. Therefore, if you want to gather a larger user base, you should tamper with the value you provide to become appealing to a larger market (or even enter entirely new markets).
In terms of the tactics themselves, we can separate a couple of ways that you can achieve growth by developing your products. Let’s look at two of them.
1. Increasing the main value you provide to your users
No matter how diverse your features are, and the various types of value you provide to your users, your product will certainly have a single main value.
Dropbox, for instance, will let you edit your documents collaboratively online or give you easy sharing capabilities. However, its main value (and the main reason people buy it) is to provide cloud storage space.
The tactic we have here is about providing more of that main value to your users, thus making your product more appealing to your target market.
There are two ways of achieving this:
Direct Value Increase: In this case, you are altering your core features and user journeys to help your users get more of it compared to what they had in the past.
A typical example of a direct increase would be if you were in charge of Grammarly, and you enhanced its algorithms so much that it could automatically correct your mistakes.
This would lead to a strong increase in the main value that Grammarly provides (help you write better) as you would not have to go through your document and fix each mistake manually.
Indirect Value Increase: While the first approach was about improving your core flows, this one is more about adding new secondary “side features” that can assist your users to get more value out of your product.
The example for this one would be if you were leading the development of an email marketing tool similar to Mailchimp and you built a feature that could analyze your email content and tell if it will go to your recipients’ spam folder.
While this feature would not be part of the main flow (sending bulk emails), it would still contribute to the value your users are getting from your product by increasing the chances that the recipients see and open your email.
2. Modifying your product to access new markets
Apart from tweaking your product to make it more appealing to your current market, you can also consider entering new markets by adding features that are a 'must' for this new group of potential customers.
The chances are high that there are many new customers out there (and markets they represent) who strongly considered purchasing and using your product, but they found one or more dealbreakers and did not go forward with the deal.
If you've already found these markets and identified the reasons why they didn't buy in, then congratulations—you’re about to grow with relatively low effort. All you need to do is remove the dealbreakers!
Let’s look at an example to illustrate this point a bit better.
Imagine that you are the growth product manager of Miro, you have successfully penetrated the small business market and people love using your tool. However, there are very few (if any) large enterprise businesses that sign up for Miro.
After a couple of discovery interviews with enterprise companies, you find out that they love Miro's UI, but they passed on it because has no Single Sign-On (SSO).
You learn that SSO is something that these enterprise companies use for all of the tools they have in their stack and the security department will immediately reject anything that does not support this technology.
Voilà, you just found a low-hanging fruit—all you need to do is create an action plan to implement SSO in Miro and these enterprise businesses are yours!
Continuing with the topic of Miro, let’s see how it has used a product development strategy to grow.
Product Development Growth Strategy Example:
How Miro tripled its users every year (thanks to its templates)
Miro is a whiteboarding and visual collaboration tool that has become increasingly popular in the last couple of years. In fact, 'popular' is a gross understatement. Miro has grown exponentially since its launch back in 2011 with a staggering 300% YoY rate.
Apart from the many things that the talented folks behind Miro did right to reach these impressive results, the most important one was their focus on templates.
You can find a template for nearly every use case on Miro. Do you want to do a Scrum Retro meeting? There’s a template for that. Do you want to build a roadmap? There’s a template for that, too!
Templates have become the key value that Miro is providing its users as a product, and the strong focus on populating the template library has significantly increased this value—resulting in lots of new users joining Miro to try these templates out.
With the product-led growth strategy clear, let us move on to discussing others that are relying more on marketing and sales instead of the product itself.
Market Development Strategy: Flexing Your Sales And Marketing Muscles
In the case of market development strategy, your product and its features are static. At least that’s how we're looking at it now in terms of your growth.
Instead of tinkering with the product, you choose the path of pure sales and marketing and try to advertise your product to new people, do customer acquisition, and conversion.
There are many ways you can run your marketing, but these two are the main paths that businesses take:
1. Developing and entering a new customer segment in your current market
In this case, you are staying in your current market but focussing your marketing and sales initiatives on specific segments (e.g. a new niche or demographic) to increase your visibility and attractiveness to them and bring in a paying customer base.
Here’s an example: Let’s assume you are leading Monday.com, and you see that the majority of your existing customers come from small media outlets and there are very few larger publishers there.
In order to enter this new segment in your current market, you can direct your marketing and sales teams to appeal to these big publishers by telling them how Monday.com will streamline their processes and increase efficiency.
2. Entering completely new markets
Sometimes your market expansion strategy is not limited to only a single niche or segment and you want to get entire new markets and diversify. Usually, these are new geographic markets either inside your country of operation or outside.
For example, imagine you are in charge of Trello.com and, after conducting market research, you ask your team to translate the tool to Japanese, direct your marketing resources toward obtaining partnerships in Japan, and target Japanese users to try to conquer the existing market there.
In both cases above, we need to make an important assumption that the features you have in your new product are already good enough for the new market or segment you want to target.
Market Development Growth Strategy Example:
How Spotify kept sustainable growth by going global
Spotify is the pioneer of music streaming and one of the most successful companies in that industry. Thanks to clever product and marketing efforts, the company has shown steady, organic growth since its inception.
Back in February 2021, when the team at Spotify understood that they are reaching the peak of their growth potential in their current geographic markets, they decided to launch the streaming service in 80 new countries and try growing there instead.
As we can see from the graph above, this tactic was successful as it has allowed them to keep the growth pace.
So that's the "marketing and sales" way to grow. But those aren't our only options, as we have only discussed how you can increase the pie. There is also the option to take chunks of that pie from others.
Market Penetration Strategy: Getting Competitive
You are never alone in the market. There are always either direct competitors (Pepsis to your Coca-Cola) or indirect competitors (Search Ads to your Social Media Ads) trying to get rid of you and keep the pie to themselves.
So, if you want to penetrate any market, you will need to start competing as well. But apart from staying afloat in the market, competing with others is also a popular way of growing your new business.
I will not go too much into the details here as competing in a market is something well-known to many of us on the basic level and the advanced aspects of it will definitely not fit into a single article (maybe a book or two would be sufficient enough).
So, let me instead introduce you to an exceptional framework for interacting with your competitors called Michael Porter’s Five Forces of Competition. These five forces are:
- Threat of Substitution: Is it easy to find alternative products on the market that solve the same pain point?
- Threat of New Players in the Market: Are there many new companies entering the market? Are there any barriers to entry?
- Buyers’ Bargaining Power: Can your buyers dominate the negotiations?
- Suppliers’ Bargaining Power: Is it your suppliers who hold the power in the market?
- Rivalry in the Market: Just how fiercely is everyone competing with each other now?
By asking these questions, you get a general overview of what is going on in the market from the point of view of the competition and get a sense of some of the potential tactics you can use to compete.
Market Penetration Growth Strategy Example:
The state of the game console market when Microsoft decided to enter it with XBOX.
Instead of telling the story of growth as I did with previous examples, I want to illustrate the 5 forces framework to you by analyzing the game console market at the moment when Microsoft was deciding to introduce XBOX.
Back then, the game console market looked like this:
- Threat of Substitution - Medium. There were other ways of entertaining at home, but none were as interactive and fun as game consoles.
- Threat of New Players in the Market - Low: Creating a game console was no easy feat, as you had to attract game developers to create content for your system and build an entire ecosystem that would support your players.
- Buyers’ Bargaining Power - Low: Buyers could not really demand low prices and it was a mass market (it is usually the enterprise buyers that have high bargaining power).
- Suppliers’ Bargaining Power - High: You needed games and really good ones if you wanted people to buy your console. So, the game studios had strong bargaining power and would set their prices and demand better cuts from sales.
- Rivalry in the Market - Medium: There were several systems in the market at that moment, but the majority of players were underdogs with tiny market shares and there was only one dominant company present - Sony with its PlayStation.
By looking at the state of the market above, Microsoft was able to make a couple of key decisions that helped them enter the market and successfully compete with PlayStation.
Probably the most important decision they made was to use DirectX in XBOX, making it very easy for PC game developers to port their games to XBOX (thus, weakening the high bargaining power of suppliers).
Growth Is King
No matter if you are a small startup or an established enterprise company, showing a steady growth rate is one of the best business health outcomes that you can have.
I hope that you have found a strategy from the list above that you can use in your company. Good luck making your investors happy!
But don’t go yet, there are many other great guides that you can check out in our blog, such as:
- Troy Webber on the 5 Things Needed to Create a Highly Successful App.
- 12 Key Product Success Metrics by Marta Lee-Perriard
- Successful Product Differentiation by Klaas Hermans
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