Across markets, customer groups, products and channels, where to compete? Where not to? Defining your market space is a strategic choice that answers these key questions.  

After all, right alignment is the secret to brand growth.

As you’ll see in Figure 1 below, defining your market space is an exercise in mapping: 

  • customer segments (to whom?)  
  • their needs (for what?) 

This construct informs strategic growth areas, helping to hone alignment with marketplace requirements. Of course, having a clear strategy and plan for choosing the right areas to invest in is key to successful upstream marketing. 

3 Levels to Figure Out Where to Focus Business Growth  

How do you determine where to focus business growth? You’ll want to think about a few levels of strategic decision-making and corresponding frameworks: 

  • Level 1 considers whether to pursue “closer in” or “further out” opportunities. Should your emphasis be on the core business, adjacent areas, or diversification? 
  • Level 2 groups customers using traditional market segmentation methods—geographic, demographic, behavioral and attitudinal. 
  • Level 3 is the domain of upstream marketing. It draws on a proprietary customer demand framework to determine precisely where to focus, that is, which customers, needs and offerings?  

Figure 1 describes these three levels:   

Growth Strategy

Figure 1

Start at Level 1: Classic Growth Strategies

This article focuses specifically on Level 1. (Stay tuned, because we’ll be exploring levels 2 and 3 in later articles.)

At the base level, there are four classic growth strategies a company can pursue, hinging on whether:

  • the markets are new or established
  • the company chooses to fill needs through existing or new products

Figure 2 below illustrates this concept. It is derived from the Ansoff Matrix, which is a framework that helps executives, senior managers, and marketers develop strategies for future business growth through a strategic planning tool.

Figure 2

Amazon’s 4 Chief Growth Strategies

We’ll use Amazon as an example of the Level 1 framework. Over time, Amazon has expanded well beyond its initial business to adjacent and diversified areas. Here’s a breakdown of their four primary growth strategies:

1 – Market Penetration

Market Penetration involves increasing market share by filling the needs of existing markets with existing products. Once launched as “Earth’s biggest bookstore,” Amazon spent its early days establishing itself as an online alternative to traditional book retailers. They effectively expanded book titles and over time, made consumers comfortable with a new way of shopping. Then, the company focused on downstream marketing. They pulled all the classic marketing levers: creating awareness, tweaking the product, and improving communication. What if Amazon had decided to fixate here? As you can imagine, it would not be nearly the company it is today.

2 – Product Development

Product Development involves identifying additional needs in existing customers, then satisfying these needs through new offerings. Jeff Bezos drew up a list of twenty potential products he would sell on the Internet, including software, CDs, and books – even before he started Amazon.

Once the company established its core infrastructure with books, other product categories would eventually be sold online. Amazon has also created its own products and services, including Kindle, Fire, Echo, and original content. These provide existing customers with new ways to experience content and other offerings.

3 – Market Development

Market Development entails finding new markets for existing products through segmentation and targeted communication. Just as Amazon disrupted traditional bookselling, it did the same with textbooks. Recognizing the high cost of textbooks and students’ constrained budgets, Amazon introduced new programs to develop this market, including renting, selling, and repurchasing schoolbooks.

4 – Diversification

Diversification involves hitting new markets with new offerings at the same time. For example, Amazon established Kindle Direct Publishing (KDP), directly targeting authors to both publish and promote their books. Initial draft copies of our own book, Upstream Marketing, for example, bypassed traditional publishing and used KDP instead.

As you may have guessed, diversification offers the highest upside – and it’s also the riskiest strategy. That’s because the further away a company moves from its comfort zone, the greater the uncertainty. However, diversification can lead to substantial new revenue when it’s successful.

Drawbacks of the 1st Level Growth Matrix

The benefit of the first-level growth matrix? It’s simple – and it works. The 2 x 2 framework describes broad, strategic choices to focus marketing. It isn’t without its drawbacks, however. While the model is strategically and managerially helpful, it’s too far removed from end customers to provide truly rich insight and inspire lasting growth.

Plus, many companies are trapped in the lower-left, downstream quadrant, asking: How do we sell more of the same stuff to the same people? The remedy to this involves an expansion of thinking to discover market-based opportunities. Thus, next-level customer insight is needed.

In today’s ultra-competitive, ever-changing business world, wouldn’t it be a game-changer to learn more innovative strategies to help you grow your own brand? Great news! We are offering a download of the third chapter of our best-selling book, Upstream Marketing. It’s easy to access your download right here.