High growth firms are different. Compared to low growth firms, the manner in which they do business is different. Internally you see differences in their objectives, culture, operations, recruitment policies, remuneration structures and so on.
Externally, they have a different view of the market. They focus on high compelling needs, growth niche markets, scalable products and services and innovation as a competitive advantage. That being the case, we should expect their marketing strategies to be different.
Unlike lifestyle businesses, high growth entrepreneurial firms are different because they have an intention to grow and their businesses models, business processes, products and services are characterised by novelty, creativity or innovation. Even if they are in a commoditised market, the manner in which they go about doing business will have interesting characteristics which set them apart. They will develop different forms of selling, pricing, delivery, service or distribution. They will always be seeking ways to differentiate and to create additional customer value.
While many firms, such as most professional practices, personal service organisations, retail and hospitality establishments are content to remain relatively stable in size, entrepreneurial firms set out to increase in size, employ more people and service more markets and customers. Growth intention is part of the DNA of the entrepreneur. Entrepreneurs grow through organisational growth rather than just personal trading or speculation.
Because their orientation to the market is to drive high growth, the marketing strategies which they employ are different from low growth firms. The fundamentals of product, place, position and price are the same but the way they implement these is heavily influenced by their desire to leverage their high growth potential.
The differences between the strategy and marketing approaches of low growth firms compared to high growth firms are significant, and the results speak for themselves. In their book Spiraling Up – How to create a high growth, high value, professional services firm, Lee. W. Frederikson and Aaron E. Taylor (Hinge Research Institute, 2010) gave the following results:
There is a group of professional services firms that grow nine times faster and are 50% more profitable than average.
These firms actually spend slightly less than average on sales and marketing and typically receive premium valuations in the marketplace.
What they demonstrate in their book is that it is a combination of strategy and marketing which gives these results.
Before we embark on an examination of high growth marketing, we really should start with a high growth corporate strategy, that is, a longer-term view of the business. If I was taking a corporate strategy approach and a longer-term view, I would be interested in questioning the fundamentals of the business. In a more wide ranging investigation into the firm, we should be asking questions about what product we are selling or should be selling, what problems we are solving or should be solving and so on. We should be looking at what changes in our product/market interface we should be making which provide greater growth potential. For those entrepreneurs interested in driving higher growth in their ventures through a systematic review of corporate strategy, including the questions of which products to sell and which problems and customers to focus on, my book Venture Growth Strategies (Breakthrough Publications, 2010) should be examined.
It is not my intention to provide a comprehensive marketing textbook for entrepreneurs but instead to provide a high growth marketing framework which can be used to examine the effectiveness of the product/market strategies – that is, the way in which the firm presents itself to the market around its current problem/solution set. This framework can then be used to examine the effectiveness and efficiency of the marketing and sales activities in existing products in existing markets. It does not set out to change what is being sold and the markets in which they are being sold, only to make the current interface more effective. My objective is to show how this framework can be used proactively by entrepreneurial firms to develop sales and marketing strategies which will increase their profitability, resilience and growth rates. It is in this context that I am going to discuss marketing strategies.
Much of current marketing literature focuses on the marketing of existing products as if there was a single answer and once implemented, the marketing strategy work is done. The literature is very large corporation focused and very much a big budget view of the world. It is often sterile in its approach, providing insightful descriptions of marketing issues but not offering guidance on what to do. More often than not, it is hard to implement this style of marketing in the high growth entrepreneurial firm where budgets are tight, funding is scarce and the business is changing dramatically due to its growth rate.
In conventional marketing, the marketing objective is to drive near-term sales. But, if you want to achieve high growth, this approach is sub-optimal. High growth firms know that repeat sales and referrals underpin high growth and that the initial sale is merely the start of a customer relationship. Almost without exception, what you see in high growth firms are marketing strategies which take a long term view of the customer relationship.
The high growth entrepreneurial firm needs to design a marketing strategy which puts its focus on creating and extending the customer relationship not the initial sale. It is this approach which we will examine in this book.
To ensure that our operational decisions for marketing and sales are consistent with our growth objective, we need a mission statement for marketing and sales which allows us to judge each marketing and sales tactical decision we make. I refer to the marketing mission statement as the “end game”. The “end game” informs our strategy and keeps us focused. It makes it easier to make operational decisions and keeps us all on the same page.
Our “end game” mission statement guides our marketing messages, our interactions with our customers and the orientation we have to delivering customer service. In my opinion, the best ‘end game’ for high growth entrepreneurs is “to create a customer experience which results in repeat sales and referrals”. Nothing proves you are on the right track than a satisfied customer who wants to do business with you again and is willing to recommend you to others.
Using the high growth marketing framework, I propose to examine the way in which products and services create satisfied customers. What this will show is that the quality of the customer experience directly impacts on the level of satisfaction, which in turn influences repeat sales and referrals. Improving the rate of repeat sales and referrals directly improves the efficiency of marketing and sales resources.
To improve the growth rate without expending more resources in marketing and sales means that you have to capture more initial sales and subsequently, convert more of the initial sales to repeat sales and referrals. We improve repeat sales and referrals by improving customer satisfaction levels. I will show that we can significantly impact satisfaction levels through our marketing strategies.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
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