The CMO Survey Blog

Economic Pessimism and Strong Company Performance Promote Risk in Growth Strategies

The August 2012 CMO Survey finds that company growth strategies will take on more risk in the coming year. Looking at Table 1, we can see that there two types of risk familiar to marketers—targeting new markets and offering new products or services. Combining these two, there are four general types of strategies that range from market penetration, which is the lowest risk because the company targets current markets with current offerings, to diversification, which is the highest risk because the company targets new markets with new offerings.

Table 1. Types of Growth Strategies

Similar to past CMO Surveys, growth spending over the past twelve months reflects a dominant focus on market penetration with an average of 51.7% of spending focused on this strategy. This is followed by product/service development (22.8%), market development (15.7%), and diversification (9.7%). However, as shown in Table 2, these figures are expected to shift significantly in the next twelve months. Growth spending on market penetration is expected to drop by 11.6% to 45.7% while all three of the other strategies are expected to increase by nearly 10% or more! These changes are consistent with a longer-term trend The CMO Survey has observed during this post-recessionary period.
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How Does Your Company Grow?

The CMO Survey has been tracking company growth strategies for four years. Respondents allocate 100 points among four well-known growth strategies to reflect what their companies have done over the last year and plan to do in the next year.

The four growth strategies are differentiated on two dimensions. The first dimension is whether the company is growing by deepening purchases from current customers or entering new markets (new from the standpoint of the company’s portfolio). The second dimension is whether the company is growing by trying to sell more of its current products and/or services or by offering new products and/or services. These two dimensions produce a 2×2 matrix of growth strategies (Table 1) called the Ansoff Growth Matrix.

Table 1. Types of Growth Strategies

Table 2 shows the percent of company expenditures for each strategy for the past 12 months and for the next 12 months. Most companies continue to grow through market penetration. This low-risk strategy usually yields more certain but lower returns. However, this number is expected to decrease. Companies are expected to take on more risk by increasing use of the remaining three growth strategies with an emphasis on product/service development (developing new offerings for existing markets) and diversification (targeting new markets with new offerings).

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