What Is a Growth Strategy? 5 Ways To Expand Your Business in 2023

square blocks stacked on top of each others: growth strategy

There is a common misconception that a growth strategy is basically a marketing strategy. In reality, marketing is just one of many tools you can use to grow your business. A robust strategy considers all potential levers for growth and focuses on those that will work best for your unique business.

Learn about these methods along with how to develop your own business growth strategy.

What is a growth strategy?

A growth strategy is a plan to expand your business. Typically, this means growing your revenue. However, growth strategies can also apply to your number of users, customers, products, market share, or even markets served. The defining aspect of a growth strategy is that its goal is to expand your business’s footprint in the world.

5 types of growth strategies

  1. Marketing-led
  2. Product-led
  3. Market expansion
  4. Product expansion
  5. Acquisition, merger, or partnership

There are five key types of growth strategies to consider:

1. Marketing-led

Marketing-led growth strategies focus on acquiring new customers through marketing. This means a significant investment (over 10% of revenue) and a focus on performance marketing over brand marketing. These growth strategies center on customer acquisition cost (CAC), or how much you have to spend to acquire a new customer. 

If your business can create a system in which your CAC is substantially lower than your customer lifetime value (CLV)—the total amount of money a customer spends with your business—then you have an effective marketing-led growth strategy

2. Product-led 

Product-led growth means identifying parts of the product experience that can help attract new customers. Software-as-a-service (SaaS) companies are known to do a good job of this. 

For example, communication tools like Zoom have product-led growth levers built in. When people are invited to a Zoom meeting, they are asked to create their own free account. Zoom also limits free calls to 40 minutes, prompting users to upgrade to a paid account for longer calls. The strategy of implementing these prompts, constraints, and levers is a product-led growth strategy.

3. Market expansion

Marketing and product-led growth strategies focus on expanding your business by reaching more of your existing market with your existing product mix, while a market expansion strategy grows your total addressable market (TAM) of prospective customers, increasing the overall growth potential of your business.

Market expansion (also known as market development) typically refers to geographic expansion. For example, your business may start shipping to new regions as part of its market expansion strategy. 

Geographic market expansion doesn’t always have to be physical. Brands often expand their market in Canada by translating their website, product experience, and ads into French. They may already sell products nation-wide, but translation and marketing efforts allow them to reach French-speaking customers in a way they couldn’t before. This is also referred to as a market penetration strategy.

4. Product expansion

Product expansion refers to adding new products in order to grow. However, adding new products does not in itself lead to growth. If your new product just replaces one of your old ones in the eyes of your customers, it won’t grow your business. When considering a new product, make sure it achieves at least one of the following:

  • It targets a new audience. For example, if your business is able to introduce a new product at a lower price point, your brand can reach more price-conscious consumers, expanding your overall target audience.
  • It complements your existing products. In other words, your target market would buy it in addition to your existing products, not in place of it.
  • It aligns directly with specific marketing efforts. For example, some brands launch seasonal or limited-release product drops. 

5. Acquisition, merger, or partnership

In the context of a business’s growth strategy, all marketing, product, and geographic expansion strategies above are considered organic growth strategies (even if they include paid advertising). That’s because they rely on the companies’ existing internal resources, such as money or marketing teams. When businesses want to grow faster than their internal resources will allow, they look to acquire or merge with other businesses or establish key strategic partnerships.

One example of a key strategic partnership is when a brand partners with a retailer to create a product specifically for them. For example, SmartSweets creates a variation of its product specifically for Whole Foods, with the agreement that Whole Foods will sell it in more locations.

Mergers and acquisitions used to be the purview only of big business, but the rise in trusted online marketplaces has helped change that. Today, marketplaces like acquire.com and Flippa help enable the buying and selling of businesses for as little as $25,000, making this growth strategy viable for small businesses.

How to create a growth strategy

  1. Define your levers
  2. Set goals
  3. Create a plan
  4. Measure and adapt

Follow these four steps to develop the best growth strategy for you:

1. Define your levers

Start by thinking about your business’s strengths. These strengths are levers that can drive your growth strategy. Strengths can be your team’s skill set or a facet of your business.

If your strength is product development, or how much your customers love your product, you may grow best through product expansion or product-led growth. If you have a strong brand or great skills in digital marketing, a marketing-led strategy might be your key to growth. If your strength is in financial acumen, or you have a strong balance sheet (for example, lots of cash and little debt), acquisition may be a winning strategy.

2. Set goals

Goals give you focus, create budgets, and help you understand if your plan is reasonable. They can also validate that you have the right growth strategy in place. Every growth strategy should have quantifiable, measurable goals for key growth metrics, such as increased revenue, users, or customers. These growth metrics are the lagging indicators of success and are usually measured in months, quarters, or years. 

Great growth strategies also have leading indicators of success: additional metrics that can be measured more frequently (daily or weekly) and correlate closely with success. Leads generated and conversion rate are two examples of leading metrics.

Although every growth strategy is different, in general, the fastest way to grow is through acquisitions, followed by marketing, then market/product expansion and product-led growth. These also align with general cash cycles: acquisition tends to require the most cash upfront, while product-led growth requires the least, since it requires no additional cash expense—just the costs of the team needed to execute it.

Once you know how fast you want to grow and how much budget you can allocate toward your growth strategy, you can make a more informed decision about which route is right for you.

3. Create a plan

To finish your growth plan, you’ll need to consider the strategic growth initiatives you’ll want to apply within your growth strategy. Your plan’s starting point will depend on your growth strategy:

  • Marketing-led growth: Start by defining your buyer persona and use it to inform what marketing channels to target.
  • Product-led growth: Start by reviewing your product experience. Identify the largest points of friction and delight, and consider how these could be turned into growth levers. This often includes a referral marketing strategy.
  • Market expansion: Conduct market research to understand where your greatest new market opportunities are. Hint: If you are already receiving inquiries from somewhere you don’t yet market to, this can signal an expansion opportunity.
  • Product expansion: Develop your product strategy to include new products.
  • Acquisition, merger, or partnership: Start by making a list of your competitors, suppliers, and customers that you’d most like to work with. Reach out to their business development team or browse an online marketplace such as Flippa.

4. Measure and adapt

Once you’ve executed your plan for at least a quarter, check in. How are you growing relative to the goals you set at the start? This will help inform whether the strategy is succeeding. The exercise of measurement will also help unearth opportunities to ask questions and adjust. What elements of your strategy worked best, and which failed to perform as expected?

Ultimately, you will measure the success of any growth strategy by its effect on revenue. Measure your business’s revenue growth in relation to your investment in growth to create a return on investment (ROI) calculation. 

The specific name for the ROI will depend on your growth strategy: for an acquisition, it will be the return on acquisition; for marketing, return on ad spend; for product development, return on research and development; and so on. But the calculation is always the same: total growth in revenue over total spending over any given time period.

Although you won’t want to change strategies quarter-to-quarter, it is valuable to stop and assess. Do a formal review and adapt your tactics based on what works best, as this can help make your strategy lean, data-driven, and as effective as possible.

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Growth strategy FAQ

What are some common challenges to implementing a growth strategy?

The most common challenge in a growth strategy is scaling before validating the market or product. If a product is not performing well in a small-scale campaign, for example, it will very rarely perform well once scaled up.

How often should a growth strategy be reviewed and updated?

A growth strategy should be reviewed every quarter for adjustments, with a more detailed review and update at least once a year. However, the right timeframe for review will change depending on the business needs and strategy.

Can a growth strategy be effective for all types of businesses?

All businesses are capable of growth. However, there is no one-size-fits-all growth strategy. The right strategy for your business will depend on your strengths and goals.