A product growth strategy can be helpful in a number of ways. It can help a company to develop a product that is more appealing to customers, to increase the market share for a product, and to generate more revenue. Aligning the entire organization around your product growth strategy will help all the teams work together and meet a common goal. This blog talks about the most powerful product growth strategies with examples. You can also upskill with Great Learning’s PG Program in Product Management and Analytics and learn more.
Let’s get started!
- What are product growth strategies?
- Types of growth strategies
- Examples of product growth strategies
- Closing Thoughts
What are product growth strategies?
A product growth strategy is a plan for how a company will increase sales and grow its business. This can include new product development, marketing campaigns, and expansion into new markets. It can be a long-term or a short-term plan.
You can include the following components in your product growth plan:
- Goal: What do you wish to achieve?
- People: How will the goal impact people in your company?
- Product: Will the product help you achieve your goal?
- Tactics: What is the plan of action to achieve your goal?
Once you are clear about the product growth strategies that you wish to use, your teams can work in a clearly defined manner to help achieve success. Mailchimp has an estimated annual revenue of over $700 million, all because they had a clear plan of action in place.
Types of growth strategies
Each company, product, or service would require a different strategy depending on its end goal or requirements. There are four basic types of growth strategies that you can consider using. They are as follows:
1. Product development strategy
As the name suggests, this type of strategy is about how you develop new products to serve your customers and grow your market share. A new product should work towards solving a new problem or aid in solving a problem that your current product already solves. Developing or enhancing the current product at hand also comes under a product development strategy.
2. Market development strategy
A market development strategy is a plan to identify new market segments and/or new geographic markets that the company can serve. To grow your business, you need to work on expanding your market share. To do so, you can expand your product user base or develop a new customer segment. The market development strategy is sales based.
3. Market penetration strategy
A market penetration strategy is a plan of action designed to increase sales and grow market share for a particular product or service. The goal of market penetration is to achieve a larger share of the target market than the competition. There are several ways to execute a market penetration strategy. The most common is to lower the price of the product or service in order to make it more affordable and appealing to potential customers. This can be done through discounts, coupons, or other promotional offers. Additionally, companies may offer free trials or samples of their product in order to generate interest. Other ways to penetrate a market include increasing marketing and advertising efforts, increasing distribution channels, and improving the product or service itself.
4. Diversification strategy
A diversification strategy is a strategic plan to enter new markets and products with the goal of reducing business risk. Instead of working towards expanding the current product or service, you work towards entering a new market. It can be risky but can reap great benefits if successful.
Now that we have looked at the different types of product growth strategies let us learn with the help of some examples. You can apply these strategies by understanding more about the customer lifecycle, such as – acquisition, activation, advocacy, and retention. Depending on the stage in the customer lifecycle, one can choose to apply a specific plan of action. For example, “How can we work towards increasing customer acquisition in order to achieve market development?”.
Examples of Product Growth Strategies
Each company has different requirements and goals, so while we can’t copy-paste a success story to our own strategy, we can always learn from them and implement what we have learned from each.
1. LinkedIn grew its user base through inviting connections
The concept of importing your contacts was fairly new at the time LinkedIn used this strategy back in 2004. They built an Outlook plugin that would go through a LinkedIn users contact list and used email marketing to reach out to these contacts. If you were an early adopter, you might have been at the receiving end of this email marketing strategy. This became a cycle as in when a new user signed up and synced their contacts, this new set of contacts would receive the email. LinkedIn found that the number of emails sent before a user signed up for the platform was four. This strategy worked well for LinkedIn, increasing its user base from 500,000 in 2004 to 2 million in 2006.
Key takeaways: Looking for innovative ways to use your current user base and draw new users to your product.
2. Airbnb continued to scale by simplifying user reviews
In one of the most infamous growth hacking tales, Airbnb founders Brian Chesky and Joe Gebbia engineered their own integration allowing hosts to double post their ads to Airbnb and Craigslist at once. This allowed them to kick off, but now they had to grow their brand. This is where user reviews came into the picture. The review system became a critical part of attracting new customers and growing their products. Hosts that had more than 10 reviews were more likely to receive bookings. By simplifying the feedback or review process, they encouraged users to provide feedback, thereby growing its authenticity and authority.
Key takeaway: Identify areas of friction and work towards building a trustworthy product.
3. GitHub grew its users to 100,000 in a year by nurturing network effect
GitHub, which began as Git, is a software development tool designed to solve a problem that coders were facing by allowing multiple developers to work collaboratively on a single project. The founders realized that the issue wasn’t about collaboration or a software problem but that the community was missing a communal factor. This was when they decided to develop the community side of the product, where they introduced an open-source repository. Here, coders could brainstorm projects and solve problems collectively.
With the introduction of this feature, GitHub turned into a form of social network for coders and gained 100,000 users in a little over one year from its launch. Within four years, they were able to secure $100M in venture capital. The more developers that joined, the better the tool became.
Key takeaway: Build a community for your product and allow users to come together.
4. How BuzzFeed grew visitors with their golden rules of shareability
BuzzFeed is constantly churning out content and getting 2.4 billion content views on a monthly basis. Their key product growth strategy was to pursue virality in everything they do. BuzzFeed CEO Jonah Peretti started listening to his readers. He realized that readers wanted to be able to share content with their community and were disappointed when they weren’t able to do so. The key metrics used by BuzzFeed were social shares and traffic on social media sites. Thus, they created the Golden Rules of Shareability and analyzed viral content to build content that is shareable.
Key takeaway: Identify the criteria that attract the audience to your content based on feedback or data and give the people what they want.
5. StitchFix used algorithms to personalize the shopping experience
StitchFix wanted to build an online styling service that allows users to have a more personalized shopping experience. They started asking users to fill up a questionnaire during the sign-up process, where they gathered data about body type, most wanted items, lifestyle, and more. This data was then fed to the algorithms that helped understand customer preferences and thus provided a more personalized recommendation. They delivered a product that was based on data and facts but felt personal to the users. Their active clients have been increasing 17% year-on-year, thus reaching 3.5 million in 2020 Q2.
Key takeaway: Provide customers with a personalized experience.
As we have seen in the above examples, each team was able to find a small loophole or potential area where they could improve their process and build their strategy. Whether you wish to retain customers or attract new ones, pinpoint one such area and build a plan accordingly. Listen to your users and build a plan that works for you.
Source: GreatLearning Blog