Before discussing small business growth strategies, let's first learn about the growth stages in the context of small businesses. We know that humans go through different stages from birth to death. We have also studied and we know that products also go through different stages of their life; In marketing terminology, this is called the "product life cycle (PLC)". Also, new and small businesses go through certain phases of their life.
This is called the project life cycle (ELC). The project life cycle is broadly classified into five phases: inception, growth, expansion, maturity, and decline. Although it is not always necessary to follow this classic path, most companies show sufficient evidence of having gone through more or less similar stages during their growth stages.
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Business life cycle 5 stages
Each stage has distinctive characteristics with the development and development of projects on time. The strategies needed to deal effectively with each stage also differ. This requires a proper understanding of each stage to allow entrepreneurs to adopt the right strategies for growth.
Below is a brief description of each of the 5 stages:
1. Preliminary stage
The introduction phase begins when the new product is first launched. Therefore, this stage is also known as the "initiation stage". The introduction stage takes time. Production takes place in a limited range; Selling tends to be slow and limited to a small area.
The organization does not face any kind of competition during this stage. At this stage, compared to other stages, profits are negative or low due to lower sales and higher distribution and promotion costs. It is even possible that no profit will be made during the start-up phase.
The main concern of the entrepreneur at this stage is trying to get more and more customers for the product. Therefore, more and more money is being spent on promotional activities such as sales promotion and advertising. It also takes a lot of money to attract distributors to a product and create inventory.
Promotional measures are specifically designed to inform potential consumers of the new product and influence them to prepare to try it. The product is just launching and therefore no concern about the refinement of the product is shown. The entrepreneur places more emphasis on buyers who are more willing to buy the product.
Since a good start is considered half of the success, the entrepreneur must therefore launch his project with great consideration and interest. He must realize that the initial strategy is only the first step in a broader marketing plan for the entire product life cycle.
If pioneers choose their launch strategy to make money overnight, they are likely to sacrifice long-term income for short-term gains. The entrepreneur also needs to design different marketing strategies at different stages of the product life cycle. The marketing strategy in the introduction stage is characterized by "try my product".
2. Growth stage
If the new product satisfies the market, the product enters the next stage called the "growth stage." During this stage, the project is known and accepted by the market. Early adopters continue to buy the product, and potential buyers begin to follow suit, especially if they hear favorable word of mouth from existing buyers.
As a result, production and sales begin to rise rapidly, but the supply is much less than the demand for the product made by the entrepreneur. Higher production provides the benefit of economies of scale by reducing the unit cost per product. As a result, profits increase.
New competitors attract the market with profit opportunities. To survive and prosper in the competitive market, competitors will present the product with new features. This will expand the market and increase the number of distribution points.
Sales are increasing at roughly the same price or slightly down. The promotional expenses are approximately the same level or slightly higher. Market education remains an important objective, but now the entrepreneur must face competition in the market. Therefore, the entrepreneur at this point is trying to change his business strategy "buy my product to test my product."
The entrepreneur uses various strategies, such as improving product quality, adding new product features and models, and shifting the focus of advertising from creating product awareness to creating product and purchase conviction. By following the above strategies, the entrepreneur can take a dominant position in the product market and obtain maximum profits.
3. Expansion phase
This is the stage in which the entrepreneur strives to expand his business by opening his branches and introducing new production lines. The project transforms from a single-line company operating in a limited market to a multi-line company penetrating new markets with new products and services. Product and service lines are expanded through innovation and development.
Business activities are diversified at this stage to obtain maximum benefits from the business opportunities available in the market. The delegation of authority occurs during the expansion phase. The entrepreneur must be able to accept leadership roles that are quite different from his fundamental roles. One of these roles requires a vision of leadership that is evidenced in a higher level of aggressiveness.
4. Maturity stage
At some point in the product life cycle, the sale of the product begins to slow down due to increased competition. As a result, profits tend to fall. This stage is called the "maturity stage." The maturity stage is usually longer than the previous stages. As such, most companies are in the maturity stage.
At this stage, fringe companies that are difficult to support begin to explode and eventually leave the market. Different organizations adopt different marketing strategies to overcome the challenges that the maturity stage presents. Some companies adopt methods such as "trading" to survive for some time in the market.
Businesses can try redesigning their marketing enhancements. They can improve sales by changing some elements of the marketing mix. They can also lower the prices of their products to attract new customers and competing customers. They can develop and launch a better ad campaign or use powerful sales promotions such as trade deals and contests.
Companies can also move to larger market channels by using bulk merchants, if those channels are growing. Finally, companies can offer new or improved services to our buyers compared to what competitors offer. Although many products are in their mature stage, they appear to have remained unchanged for long periods.
In fact, most companies at this stage are trying to evolve to meet the changing needs of consumers. Product managers must do more than simply defend or defend their mature products - a good offense is the best defense. They should consider adjusting the market, products, and marketing mix.
In market adjustment, the company tries to increase consumption of the existing product. Looking for new users and market segments, as Johnson & Johnson did when targeting the adult market with baby powder and shampoo. Amazon.com sends permission-based emails to your regular customers, notifying them when their favorite authors or artists release new books or CDs.
Another way to increase the sale of a product is by modifying the characteristics of a product change such as quality, features or style to attract new users and inspire more use. It can improve the quality and performance, durability, reliability, speed and taste of the product.
It can also enhance the design and appeal of the product. For example, automaker Hyandai is revamping its i10 to attract buyers who want a fresh look. Similarly, producers of food and consumer household products introduce new flavors, colors, ingredients or packaging to stimulate consumer purchases.
The company can even add new features that increase the usefulness, safety, or convenience of the product. For example, Sony keeps adding new styles and features to its Walkman and Discman lines, and Volvo is adding new safety features to its cars.
5. Regression stage
This is the last / last stage of a project's product life cycle. In this stage, companies find it difficult to survive either by gradual replacement of the company's product or by some new innovation due to change in customer behavior. Sales of most products drop sharply and brands eventually drop.
The immersion can be slow, as in oatmeal cereal, or fast, as in phonograph records. Sales may drop to zero, or they may drop so low that it lasts for many years. Sales can decline for more than one reason, such as technological progress, changes in consumer tastes, and increased competition. Businesses begin to incur losses at an increasing rate.
In such cases, some entrepreneurs prefer to withdraw from the market and close their shutters. This is the description of the "withdrawal phase". Some of the remaining entrepreneurs may begin to cut back on their product offerings. They can also choose to lower promotional measures and lower the prices of their products to stay in the market.
There may be entrepreneurs who decide to keep the brands of their products unchanged in the hope that some competitors will leave the market. Procter & Gamble provides an example that it made good profits by staying in the liquid soap business, where some competitors exited the market.
Most entrepreneurs abandon products that have reached their weak position, that is, falling sales. The reason is that carrying a substandard product during this period can cause one type or another of costs for the entrepreneur. While the decrease or negative cost is overt and easy to see, there are also hidden costs.
This can include too much management time, frequent price and inventory adjustments, more attention to sales promotion, and most importantly, a failed product reputation can cause customers to worry about the organization and its offerings.
Therefore, bearing the highest cost may be a weak product in the future. Additionally, keeping products weak also delays product replacement, creates an unbalanced product mix, hurts current earnings, and weakens the company's foothold to stay in the market in the future.
Not all products have to go through the previous life cycle stages and will remain for the same period in each stage. It is found that most companies dissolve in the early stages of the first and second stages.
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