Product Development

 The next growth strategy we will be going over is product development. This strategy focuses on creating and positioning new products into a market that is already occupied by your business. New products are introduced into markets when you determine that the new product may offer advantages over existing products in the market. You must determine whether the new product will offer sufficient advantages over existing products in order to become successful in the market. This strategy offers benefits to the business in the form of familiarity: you and your business are already familiar with the market. This familiarity with the market enables you to properly position a new product in order to achieve maximum success. This strategy is considered to have medium risk, since your business is already familiar with the market, but is handling a new, unfamiliar product. You can take advantage of this strategy to increase revenue in markets in which they are already established.

We will look at how product development helped Netflix become one of the largest players in the movie distribution market. Product development was the strategy that Netflix employed when it began its popular movie streaming service. The company originally began as an online, mail-order DVD rental company. The company decided to create a new product, online movie streaming, and market it to its current DVD rental customers in 2007. Netflix's use of a new business model that focused on online streaming enabled it to quickly become one of the top companies on the movie distribution business.

Netflix released its new streaming product in 2007: a prime example of the product development strategy. The implementation of this new product played a major role in the company's success. It caused a sharp increase Netflix's annual revenue, from $997 million in 2006 to $1.2 billion in 2007 (Netflix Annual Report 2008). This was a growth of nearly 20% in the first year the product was implemented. There was an additional increase of 14% in revenue from $1.2 billion in 2007 to $1.36 billion in 2008. The implementation of the product development growth strategy proved quite valuable to Netflix, and contributed heavily to its success in a constantly evolving market.

You can implement in on a smaller scale, in order to attempt to achieve good growth within your business. In the next installment, we will go over how positioning an existing product into a new market can be used for success. Check back soon for this, and many more updates!

Market Penetration

Today I will begin a 4-part series on Ansoff's Product Market growth strategies, starting with Market Penetration. This strategy is used when a business attempts to increase the sales of an existing product or service to a market that it already caters to. This is often accomplished through the use of promotional techniques to drive the increase in sales.

The advantages of this technique are quite easily apparent. Since market penetration utilizes existing products in existing markets, it often requires the least investment from your business. Your business is also familiar with both the market and the product, which is beneficial to you, as you will be better able to determine how to undertake this strategy in order to succeed. It is considered the least risky of Ansoff's strategies, because it does not rely upon the uncertainty of new products or new markets. For these reasons, this is one of the first strategies that you can take into consideration when looking to expand.

By looking at a case study of Domino's Pizza, we can see a real-life implementation of this strategy, and just how successful it can be. Bear, in mind Domino's is a multi-billion dollar corporation, but the same strategies can be applied to your business.

Domino's Pizza, Inc. used this strategy in late 2009. Although Domino's already had a major share of the pizza sales and delivery market, they strove to increase their sales further by revamping their pizza recipe. This is clear demonstration of the market penetration technique, as Domino's is targeting an already utilized market with a similar product. Although the result is a completely different style of pizza, the product is still the same at its core: pizza. This overhaul of their recipe was coupled with a new promotional campaign in order to drive up sales. Their promotion focused on flaws of older recipes that were indicated by previous customers. In their advertisements, Domino's targeted dissatisfied customers, and promoted their new pizza recipe, which was designed to remedy the flaws that were inherent in the old recipe (Domino's Investor Relations). These advertisements played a major role in Domino's revenue increase.

This new promotional campaign was implemented in December of 2009. The results of this campaign became apparent in the 2010 fiscal year. Domino's total revenue for 2009 was 1.404 billion U.S. dollars. In 2010, Domino's revenue saw an increase to approximately 1.571 billion dollars. There was an increase of nearly 12%. The net income of the company rose from $79.7 million dollars in 2009 to $87.9 million dollars in 2010. (Domino's Annual Report 2010) The net income showed a jump of nearly 10%. These increases can mainly be attributed to the use of the new marketing campaign, and show how effective this strategy can be.

Hopefully, by reading about this real-life example, you can better understand the strategy and how to implement it so that it is the most effective for your business. Next time, we will go over the market development strategy, so keep stopping by for more updates!

Growth Strategies

Growing your business is a vital part of ensuring its success. By increasing its customer base and revenue, the business is more likely to survive and even thrive. There are many strategies that you can use to increase your business, but a few basic ones were suggested by Igor Ansoff in 1957. In Ansoff's Product-Market Growth Matrix, he shows how using new or existing products and markets in order to grow a business.

Ansoff's Product Market Growth Matrix

As shown in his this chart, there are four main ways to grow a business: Market Penetration, Market Development, Product Development, and Diversification. Over the next few weeks, I will go further in depth into each of these strategies, and how you can implement them in your small business. Check back soon for more updates!

Small Business Success

If you are new to the world of small business, or are considering starting off in the field, you may have asked yourself, "How can I make sure that my business will turn a profit, or even survive?" This is not uncommon, as millions of other entrepreneurs have faced the daunting task of running a small business. Although many start-ups have failed, this should not deter you. What will help you succeed is to create a practical business strategy.

My aim for this blog is to create a valuable resource that will help small business owners in their journey of running a business. I will provide strategies that you can implement in your business, as well as resources you can make take advantage of while running your business. Thanks for joining me, and keep checking back often for updates!