Examine your business model before changing your growth strategy

Over the past five years CEOs and owners of small and medium-sized companies have had to deal with economic fluctuations, increasing labour costs and shifting market demands.

Despite these obstacles, the companies led by CEOs who completed our business growth programs have experienced substantial growth, well above the national average.

How did they achieve success? By analysing these five elements of their business model and implementing strategic changes enabling them to grow.

1.      The CEOs asked: “What need, want or problem does our product or service solve?” and identified “Who wants it solved?” They understood both business to business (B2B) and business to customer (B2C) customers will pay for solutions to alleviate their problems. The CEOs asked customers what they needed, wanted and valued. They stopped selling “the product” and began selling “solutions” to their prospective customers’ problems.

Revlon's success, for instance, did not come from selling “cosmetics”. It came from understanding women wanted to be beautiful. Revlon created ads featuring beautiful women wearing Revlon cosmetics. Once women believed that cosmetics would make them beautiful, they bought increasing amounts and Revlon became a market leader.

Charles Revson, founder of Revlon said: "In our factory we make cosmetics; in our stores we sell hope." People don’t buy cosmetics to put colour on their face, they buy in the “hope” cosmetics will make them look beautiful, like the women in the Revlon ads.

2.      Our CEOs analysed and identified who was most likely to need, want and value their solutions. They did market research, identified new markets and analysed the cost of entering them. They developed new promotions and tested price to see how much customers valued their products and services. This strategic alignment ensured marketing efforts were targeted to those most likely to convert, maximizing return on marketing spend and product development.

3.     The CEOs differentiated themselves by emphasizing their unique value propositions. By understanding why customers chose their products over alternatives, they refined their offerings to customer preferences. Continual reassessment of market trends and customer feedback allowed them to stay agile and responsive to evolving demands.

4.     The CEOs optimized their marketing strategies to reach and engage their target audience. They used both direct and indirect marketing to broaden their reach. By crafting compelling messages for their customers, they captured attention and, over time, fostered loyalty.

5.     The CEOs scrutinised operational expenses and looked for opportunities to streamline processes and reduce costs. They measured their employees on performance and values, encouraged the misfits and non-performers to leave and focused on culture.  They developed and implemented plans. They asked employees to map current business processes and look for ways to improve inter-departmental communication. They outsourced non-core functions and focused on what they did best. They maintained customer-focus and increased revenue and profitability without compromising quality.   

Over time customers’ preferences, needs and wants will change. While people continue to hope and buy cosmetics, Revlon is no longer market leader. Its competitors are using more natural ingredients, recyclable packaging and emphasizing a more natural look to appeal to customers.

Once a year you need to ask: What problem are we solving and who wants it solved? Who is our target market and are their needs changing? Are our marketing strategies delivering the right messages to our target market?

Have we differentiated ourselves from the competition and are we optimizing our operations? By continually testing your business model and adapting to changing market dynamics, you’ll also be able to boost the revenue and profits of your company.

Dr Jana Matthews is ANZ Chair in Business Growth and founding Director of the Australian Centre for Business Growth at UniSA Business