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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Economic Downturn and Company Truths

I wrote a book last year entitled Strategy from the Outside In: Profiting from Customer Value. The central premise of the book is that companies are often managed with a focus on priorities other than customers. A range of reasons rooted in “insight-out thinking” include satisfying the stock market, lowering costs, or extracting all the value from existing capabilities. Companies that approach strategy from the outside in begin and end with the customer. In the words of Stephen Haeckel, these companies manage using “sense and respond,” not “make and sell.” (more…)

Social Media and Strategy: How to Integrate

In the social media integration report card, I offered a set of company behaviors that we can use to diagnose how well a firm integrates social media into its strategy. These behaviors range from integrating social media with customer management, brand management, and innovation management to monitoring information flows within the company. (more…)

A Social Media Integration Report Card

Is your company being strategic about social media?

The August 2011 CMO Survey reported that companies are increasing spend on social media (from current levels of 7.1 percent of marketing budget to 10.1 percent over the next year and to 17.5 percent in the next five years). (more…)

How Does Your Company Grow?

The most recent CMO Survey asked approximately 500 top marketers to describe how their companies have grown in the past 12 months and how they will grow during the next 12 months. Marketers were asked to divide 100 points across four well-known growth strategies that are differentiated on two dimensions. The first dimension is whether the company is growing by deepening purchases from existing customers or entering new markets. 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 called the Ansoff Growth Matrix which was first described by Igor Ansoff in a Harvard Business Review articles over 50 years ago!

Here are the results for each strategy for the past 12 months and for the next 12 months:

  • Existing products or services in existing markets: Market penetration (54.1% to 48.7%)
  • Existing products or services in new markets: Market development (15.3% to 17.0%)
  • New products or services in existing markets: Product/service development (19.8% to 22.5%)
  • New products or services in new markets: Diversification (10.8% to 11.8%)

Most companies continue to grow through market penetration. However, this number is expected to decrease. Taking on more risk, companies are expected to increase the use of the remaining three growth strategies. This is pretty impressive during such tough times. If you can grow and take on more risk, you should. When your competitors may be sitting on their hands, there may be an opportunity to leap ahead and enter markets or solidify relationships with customers.

A study published in the International Journal of Research in Marketing shows that only some firms view recessions as opportunities to strengthen their businesses. Those companies that “see” recessions in this proactive way invest aggressively and establish advantages over weaker competitors. Companies that don’t tend to cut back and hunker down until the recession passes. This study also describes characteristics of the companies with a proclivity to see the opportunity in a recession more than others. Firms that have a strategic emphasis on marketing, an entrepreneurial culture, and slack resources (cash on hand) are more proactive in their marketing activities during a recession. Most importantly, firms that have a proactive marketing response in a recession achieve superior business performance even during the recession.

Back to the growth strategy results. It is important to note that these figures vary considerably by different economic sectors. In the next 12 months, B2C services companies will use market penetration more (59.6%) than B2B product companies (42.4%). Product companies that are either B2B or B2C will use market development strategies more (27.3% for B2B and 24.4% for B2C) compared to B2B services (20%) or B2C services (15.3%) companies.

I also observed big differences in industry sectors with energy showing the greatest willingness to diversify (20.8%), consumer packaged goods with the highest levels of product/service development (32.9%), consumer services (72.5) with the greatest levels of market penetration, and mining (30%), consulting (19.6%), and healthcare (19%) the most focused on market development.

Complete survey results can be found at www.cmosurvey.org/results.

 

The most recent CMO Survey asked approximately 500 top marketers to describe how their companies have grown in the past 12 months and how they will grow during the next 12 months. Marketers were asked to divide 100 points across four well-known growth strategies that are differentiated on two dimensions. The first dimension is whether the company is growing by deepening purchases from existing customers or entering new markets. 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 called the Ansoff Growth Matrix which was first described by Igor Ansoff in a Harvard Business Review articles over 50 years ago!

Here are the results for each strategy for the past 12 months and for the next 12 months:

· Existing products or services in existing markets: Market penetration (54.1% to 48.7%)

· Existing products or services in new markets: Market development (15.3% to 17.0%)

· New products or services in existing markets: Product/service development (19.8% to 22.5%)

· New products or services in new markets: Diversification (10.8% to 11.8%)

Most companies continue to grow through market penetration. However, this number is expected to decrease. Taking on more risk, companies are expected to increase the use of the remaining three growth strategies. This is pretty impressive during such tough times. If you can grow and take on more risk, you should. When your competitors may be sitting on their hands, there may be an opportunity to leap ahead and enter markets or solidify relationships with customers.

A study published in the International Journal of Research in Marketing shows that only some firms view recessions as opportunities to strengthen their businesses. Those companies that “see” recessions in this proactive way invest aggressively and establish advantages over weaker competitors. Companies that don’t tend to cut back and hunker down until the recession passes. This study also describes characteristics of the companies with a proclivity to see the opportunity in a recession more than others. Firms that have a strategic emphasis on marketing, an entrepreneurial culture, and slack resources (cash on hand) are more proactive in their marketing activities during a recession. Most importantly, firms that have a proactive marketing response in a recession achieve superior business performance even during the recession.

Back to the growth strategy results. It is important to note that these figures vary considerably by different economic sectors. In the next 12 months, B2C services companies will use market penetration more (59.6%) than B2B product companies (42.4%). Product companies that are either B2B or B2C will use market development strategies more (27.3% for B2B and 24.4% for B2C) compared to B2B services (20%) or B2C services (15.3%) companies.

I also observed big differences in industry sectors with energy showing the greatest willingness to diversify (20.8%), consumer packaged goods with the highest levels of product/service development (32.9%), consumer services (72.5) with the greatest levels of market penetration, and mining (30%), consulting (19.6%), and healthcare (19%) the most focused on market development.

Complete survey results can be found at www.cmosurvey.org/results.