A brand’s growth strategy is divided into two consecutive phases, early growth and late growth, the second and third types of brand lifecycle strategies, right after brand launch strategy.
Brand Lifecyle Curve with Growth Strategy Focus
A growth strategy during the early and late growth stages of a brand’s lifecyle focuses on the strategic opportunity of penetration and position respectively.
Please note that any growth strategy’s long-term emphasis would involve consumer acquisition, especially during the growth phase of the brand life cycle.
Brand loyalty and tribe is a lever that can be used to drive the bottom-up marketing funnel for awareness and resultant consumer acquisition. While you can always drive growth by increasing the share of the wallet of existing consumers, you do need to penetrate the market as a balancing act to manage the churn, which is inevitable, and grow volume and profitability.
Early Growth Strategy
Post-Launch: Early Adopters to Early Majority Stage
As a result of product-market fit achieved, at the cusp of early adopters and early majority, the sales go through the roof, and you have to hire resources to keep up with the orders and business.
The market/category is attractive at this stage.
During this phase of the brand lifecycle, the brand crosses the second chasm into the early majority from early adopters.
Repeat early adopter consumers turn into loyal consumers; brand-market fit is achieved beyond product-market fit, meaning brand messaging is resonating with early majority consumers yielding trials.
Brand-market fit ensures that the brand’s competitive position is strong within an attractive market at this stage.
NMC(net marketing contribution) is positive. Existing retailers show increasing interest in supporting the brand, and consumer churn is acceptable with a high net promoter score. Bigger retailers and influencers are knocking at your door.
During the latter half of the early growth strategy, the brand enters the rapid growth phase, reducing the consumer acquisition costs.
Move from early adopters to penetrating the early majority, the first entry into the mass market, and achieve rapid growth.
5-Step Brand Growth Strategy Framework
1.Who(Target): Early Majority-Pragmatists (34% of the market)
The early majority consumer is very well aware of the experience with the brand through go-to people in their circle. The circle could be personal, professional or extended, for the respective category.
The early majority needs proof that the brand has crossed the chasm from the emerging market into the mass market. They have a low inclination for risk and need to be fully convinced to adopt a new brand.
They are also more likely to search for a brand on google to both see its availability in channels and stores they visit and feel comfortable while reading reviews and testimonials on third-party retailers and reviewers.
The brand needs to offer a consistent and perfect experience of the core promise at every touchpoint.
2.Source of Power
Move from Brand Awareness to Brand Preference for Penetration and Profitability
Focus on brand preference for the right fit distribution with the right pricing, cost or volume strategy for higher profitability, and not just sales.
Why brand preference? Because there will be a big gap between brand awareness and trials at this stage due to entry into the mass market, with a low-risk appetite.
Gone are the days with invest now to profit later. Consumer preferences and markets are evolving fast due to the connected economy. There is every chance to be displaced if not disrupted in the future.
Focus on brand preference to maximize conversion of awareness into sales and higher profitability.
Channel Fit and Profitability
Early growth and rapid growth require considerable investments in resources, whether capital or labor. Focusing on high profitability potential channels is the key. Use the below equation to evaluate the profitability potential of a particular channel:
Volume*(Consumer price(1-%channel margin)-COG)-M&S Expenses=NMC(net marketing contribution) for a particular channel.
Penetrate existing channels
During the early growth stage, the actual market share index is far below the potential share index.
Maximize distribution and profitability within “niche and specialty” retailers and move to “multi-category” retailers focusing on customer profitability.
Re-evaluate price if not done so before. Rework and improve your Quality/Price=Value depending on your brand story and competitive pressure both for the share of voice and at point of sales in a particular channel.
Consumer Loyalty and Lift
One mistake brands make is ignoring loyalty and lift(revenue/consumer) during the early and rapid growth stage. A brand needs to keep these at the minimum acceptable levels while focused on penetration.
Move from scarcity/exclusivity to social proof to drive brand preference for trials and purchase.
For social proof, leverage consumer testimonials, percentage satisfaction levels, and penetration details in all marketing communications.
For brand preference, both inform and educate consumers to increase their purchase intent and trials.
For social proof and brand preference, go beyond Instagram to include search on google as part of your media strategy.
Use focused media with higher budgets and collaborate with retailers and influencers to multiply the content and advertising reach disproportionately.
Channel-Existing and New
Leverage social proof with both placement, merchandising, and point of sales communication.
Launch incremental innovations aligned with the core of the brand story. Provide adequate support to the existing products and innovations for penetrating the wide distribution you would have achieved by now.
Incremental innovation can be priced at a premium to deliver higher revenue and profit/consumer.
Create storytelling campaigns educating and communicating the core message comprehensively, with CTAs to make them think. Use the new consumers’ (early majority) testimonials on their complete journey and satisfaction with the brand.
Partner with the channel for promotions targeting a higher share of visibility.
Create basic funnels for DTC buyer, and focus on maintaining loyalty beyond repeat purchase.
Jump in trials (new consumer acquisition) and awareness/reach.
Virtuous cycle of channel/brand profitability contributing to a rapid increase in % of brand awareness, preference, and purchase.
Higher volume via market share increase contributing to NMC(net marketing contribution) such that NMC>>>M&S Expenses.
Late Growth Strategy
Post Rapid Growth Stage (the latter half of early majority) to Late Majority(before maturity)
New consumer acquisition slows down for the same level of investment in growth strategy. You would have achieved maximum penetration within the existing market with specialty retailers and achieved significant penetration with multi-category retailers, and launched a decent range of line extensions and new products under the master brand.
The split of existing distribution: potential distribution has become 80:20 within the current geography and customers.
To further penetrate the existing distribution, you need to convince the skeptics who adopt at a slower rate.
The market is still attractive but slowing down. Since, the consumer adoption preferences are extremely risk-averse, a brand needs to improve its competitive position to generate sales and improve profitability.
5-Step Brand Growth Strategy Framework
Late Majority-Conservatives(34% of market)
Beyond social proof, which works for the early majority segment, this consumer segment will give in to social pressure to adopt the brand.
They would feel compelled to buy the brand when the majority within their circle has adopted.
They are not well-informed about new products, but do observe the new products used around them, meaning these consumers are not typically on Instagram looking for new or even following brands.
They would seek recommendations from their inner circle before trying out a new brand.
They are highly risk-averse, skeptical, and very sensitive to pricing and privacy. The demographic depends on the product category, but this segment is usually older.
2.Source of Power
Differentiation Advantage-Price Strategy to Improve Competitive Position
Focus on offering higher value with higher margins to convert the late majority consumers and improve profitability and sales.
For higher value, you could either offer much higher quality at slightly higher price vs competition or slightly higher quality and the same price as competition.
Cost Advantage to Improve Competitive Position
Cost strategies like process innovation, functional efficiencies, discretionary spending, economies of scale and scope for reducing the cost of goods sold, and improving marketing productivity would help increase the value offered to the late majority, while enjoying higher margins, to acquire them.
Strategic for Late Growth Stage for Existing Consumers and Late Majority
Brand Funnel Strategy
Focus on visible loyalty to attract the late majority. Observing others use or talk about the brand, the late majority is more likely to try and adopt it.
Higher Value|Perceived Value
Without diluting pricing and margins( by this time there would be a good deal of competition for you) offer higher value/perceived value to the late majority.
You could opt for growth by launching premium, incremental innovations for the existing consumer, to increase their wallet’s share.
Improve Consumer Loyalty and Retention
When the value proposition to the skeptical late majority is not very competitive, it will impact the brand’s margins and profitability because of both the slow rate of sales growth and the inability to charge price premiums. It makes sense to then focus on existing consumer loyalty by moving consumers along the funnel and rewarding repeat purchases and loyalty.
Strategies for Late Growth Stage beyond Existing Consumers and Late Majority Consumers, but within the Existing Market
Enter Adjacent Market Segments
As mentioned above, if the brand is not as competitive in value proposition to the late majority of the market, a brand could enter an attractive higher or lower-priced segment, with an endorsed brand architecture or independent of the master brand and increase both sales and profitability.
Expand Market Demand
Acquire new consumers with higher perceived value and availability in existing Geos to invite those new consumers who won’t otherwise have considered the brand, who buy substitutes or don’t find the benefits attractive or products are incompatible.
Masstige brands like Elf Beauty, The Inkey List and The Ordinary use the expanding the market demand strategy to good effect.
This strategy also helps you acquire the conservatives(late majority) right ahead in your lifecycle curve.
Luxury brands use this strategy. When they realize that their new consumer acquisition is slowing down, and they are nearing maturity, they launch low-priced products to attract new consumers into the market and then upsell them.
Social pressure as well-accepted within the inner circle will help negate the price pressure. More focused on purchase intentions and CTAs around offerings.
Point of sales push within the mass channels with promotions and merchandising would help convert the late majority consumers.
Visible Loyalty Tactics
Collaborate with online customers, partners, and influencers to prioritise the brand for SEM and their SEO.
Leverage brand tribe to create campaigns showcasing the brand’s penetration into a typical consumer’s daily life as a ritual for creating the social pressure for the late majority.
Penetration into higher perceived value segment within the same category(market), as evident from success with mass distribution channels: late majority.
Acquiring consumers with masstige products, low dangling carrots, and upselling them premium and even core products. You would invite both the late majority as well as adjacent and substitute categories.
Creation of emotionally charged consumption rituals by the repeat and loyal users with a common theme across consumers. The brand drives this by leveraging brand tribe.
Online retailer’s SEM features your brand’s offerings for the desired keywords.
Market share and volume for higher profitability. Market share by itself should not be the end goal as it is likely that increase in market share comes at the expense of profitability.
It is very important that in an attempt to acquire the late majority conservatives, a brand does not reduce its profitability nor suffers the opportunity cost of the alternative demand profitability, which means increasing the real and perceived value of the brand to penetrate into more of the early majority segment as well as adjacent, higher-margin segments.
Early Growth and Late Growth Strategy Summary
What Happens When Growth Stalls
Sales growth is not an accident and needs deliberate fueling. An in-depth study of 500 major US global companies showed that, during their lifecycle, 87% of them experienced a stall in their sales, as shown in the chart 3 above.
Surprisingly, the sales during the stall year was higher as compared to the year prior. But for 15 years post the stall year, sales growth rates were way below the growth rates prior to the year of stalling.
As authors of the study “when growth stalls” summarized, “after a burst of energy, growth does not descend gradually; it drops like a stone.”
Equally startling is the fact that not all the companies with strong historic records recover fast.
As shown in the chart 4, only 46% of the 87%, that experienced a stall in sales, we’re able to rebound fast. A whopping 54% carried on with slow or negative growth for quite a few years. Out of the 54% with slow or negative growth, just 7% ultimately recovered to pull off decent to high growth, whereas 26% continued to realize sluggish growth or decline in sales, and shockingly 67% ended up becoming bankrupt, became private or were acquired.
The bottom line is that most of the brands or companies will encounter a stall in their sales growth at some time, and when you do, swiftly create and execute a growth strategy to turnaround.
A sharp decline in sales growth is a big indicator of the need to turnaround the brand and business, as a decline in profits usually accompanies the sales decline.
Declining sales and profits, decline in market share, lower prices because of competitive pressure or rising costs due to supply exceeding demand, and stakeholders & competitors becoming stronger.
New technologies, shift in consumer demand and trends, media and channel preference shift, regulation, competitive disruption, strategic errors. Exercise a deep dive with a comprehensive 5C analysis to dig out the key issue behind the decline.
Multiple Strategies Possible for Turnaround
Sales and profitability could stall at early growth, late growth, or during the maturity stage of the brand lifecycle, whether the category has matured or not. The root cause, the key issue, needs to be dealt with for reversing the trend.
The exact turnaround strategy would depend on the core issue uncovered through the deep dive exercise and the brand’s lifecycle stage.
A turnaround has to be quick, within 1-2 years maximum, or there is a risk of never recovering.
Also, any turnaround strategy needs to deliver quick wins by plugging cost drains and generating higher sales and profits with focused initiatives to both invest back in the turnaround and create a winning culture.
Few classic mistakes that a brand makes when the sales growth stalls are to incur more and heavy debt without figuring out the key issue and developing a strategy to overcome, increase pricing across the board without any brand or market justification.
Other mistakes are frequent price cuts to increase volume, and creating long-term turnaround plans without short-term wins and success signals or leading indicators.
5-Step Brand Strategy Framework for Turnaround
Existing Consumers to New Consumers
Every turnaround strategy should first preserve the business by focusing on existing consumers and deliver quick wins in doing so.
For a turnaround to build momentum, you need to add new consumers and bring back lost consumers as there is always a churn of consumers. As Professor Byron Sharp suggests, esp. for brands that have entered the mass market, loyalty % hits a limit for every brand.
The ideal route is to start from and create quick wins with existing consumers and then go after new consumers.
2.Source of Power
Back to core brand fundamentals: brand vision and purpose, core strength, and core consumers first.
Don’t wait and watch, turnaround fast, reduce complexity, and adopt a leaner organizational structure to move closer to the market and action, are few common leverage points of all brand turnarounds.
Offensive Growth Strategy
The selection of a particular strategy would depend on the key issue identified as a result of a deep dive with comprehensive 5C analysis of consumer, competitor, category, channel and company.
The key issue then needs to be studied in the light of the brand lifecycle stage to craft the exact strategy.
Identify and execute quick wins with focused projects on a short-term basis, e.g., quarterly, with limited scope but in line with the new strategy.
Exercise discretion in expenses, fix cost drains that add little value and invest on the new strategy.
Quick wins within months of implementation.
Progress in brand health measures.
Increased support from channel and influencer partners.
Improvement in employee morale.
Increase in yearly sales and profitability, improvement of brand health and company morale.
A brand should always turnaround light without any excess baggage.
Example of a Brand Turnaround-Elf Cosmetics
Elf Cosmetics had just crossed $270 million in 2017 and was growing 18% year on year, with a big part of sales from the website, that had close to 28 million visitors in a year.
In sharp contrast, 2018 sales declined far below the trend and expectations. The online business was impacted heavily with color cosmetics bearing the biggest brunt.
In its existing markets, elf was in the late growth stage of its lifecycle.
As I have said before, a year of sales slump, after years of continuous growth, can be drastic for a brand as quite a few never recover.
To provide innovative prestige beauty to women at very affordable prices |Democratize beauty.
Elf’s 5-Step Brand Strategy Framework for Turnaround
Women of all ages that seek minimalist and prestige beauty without killing their wallet.
2.Source of Power
Back to basics-core strength that helps take the brand toward the vision.
3.Key Opportunity|Key Issue
Forgot about vision and adopted launching products fast as a growth strategy. Brought over 100 products to the market in one quarter without adequate screening for brand-fit, aligned with the vision of bringing prestige-level products at affordable prices, and without adequate support to make the innovation succeed.
Loss of profitability in close to two dozen standalone stores due to slump in color cosmetics overall, with stores diluting focus away from digital-first brand.
Expand Market Demand, Revenue/Consumer, and Loyalty
Focused on fewer but game-changing innovation, prestige level products at affordable prices, such as Poreless Putty Primer at $8, to generate higher return on innovation and expanded the category.
The masstige products expanded the existing markets by entering the early majority market for non-consumers who did not go for the alternative options such as Tatcha’s Silk Canvas at $52, while at the same time increasing revenue/existing loyal consumers.
Cost Advantage for Stronger Competitive Position
Leveraged economies of scale and outsourced manufacturing to offer higher quality at highly attractive price.
Brand Funnel and Consumer Loyalty for Higher Perceived Value
Personalisation strategy for digital DTC by going beyond the skin and makeup enthusiasts and creating over 60 different consumer segments based on their online behaviour, to offer relevant content and journey to these consumers.
The above is an example of creating a higher perceived value for the late majority consumer, which is one of the strategic opportunities mentioned for the late growth stage of a brand lifecycle.
Focused on its loyalty program during the pandemic resulting in over 2 million Beauty Squad members, a 40% increase over the previous year.
Closed stores to free up capital to support the marketing of innovation, like with the tiktok brand challenge, and to support the digital and wholesale business, improving overall profitability( net marketing contribution).
Elf was able to amply support the innovation launch in the first quarter of 2019, and received higher channel support to deliver much higher sales and profitability for the particular innovation.
Converted consumers who were mere visitors before the implementation of the personalisation strategy into buyers.
With focused and game-changing innovation for the rest of 2019, aligned with its vision, and adequate support behind every innovative launch, the brand sold more per current consumers, both loyal and infrequent buyers, and acquired new consumers by developing the masstige category.
Elf also acquired the late majority consumers, who are well aware of the brand because of penetration within their circle and are attracted to the high value offered by the masstige products, leading to an increase in channel/innovation profitability.
The loyalty program delivered 70 % of DTC sales, buying more often with much higher order value versus rest of the consumers.
In 2019, the brand delivered 4 quarters of increased sales and profitability, faring far better than the makeup competitors.
According to Nielsen, Elf cosmetics was the only mass cosmetics brand to post growth during Q2 in 2020, with its color cosmetics sales up 3% year on year vs. an average of 20% declines for other brands.
Elf Turnaround Strategy
Took focus away from the vision of offering game-changing, prestige products at affordable prices, and a digital-first brand.
Strategic Imperative 1
Expand market demand and acquire new, early majority consumers with game-changing innovation, aligned with the vision, while offering adequate support, including from channel partners, behind every new launch to deliver higher innovation/channel profitability.
Strategic Imperative 2
Improved competitive position with higher perceived value, loyalty and revenue/consumer to increase the sales of existing products to existing consumers and the new late majority consumers along with offering innovative products to existing consumers delivering higher margins and profitability.
Strategic Imperative 3
Implemented a personalisation strategy by creating over 60 different segments for the online site visitors and consumers, going beyond the loyal fans and skin/makeup enthusiasts, personalising their site experience and content, and saw close to 20% s in eclick through rate for the site visitors, leading to higher conversions and profitability from non-skin and makeup fanatics.
Closed 22 unprofitable retail stores to invest the saved money behind marketing new innovation.
Leveraged the mass appeal of tik tok to create awareness and reach for the brand and the new masstige launches for higher net marketing contribution.
Personalised sales campaigns and product catalog recommendations aimed at different online segments.
The growth stage in a brand’s lifecycle has 2 phases, early and late growth. Early growth includes rapid growth followed by slower, late growth.
During the early growth stage, the target consumer is the early majority, tempted to buy after the early adopters in their circle have tried and tested the brand, and the experience is perfect.
A brand needs to focus on building brand preference during the early growth stage and use it to penetrate existing distribution channels. The communication strategy needs to move from exclusivity to social proof while covering all bases, not giving a reason not to buy for brand trials.
The late growth strategy targets conservatives, who are very price-sensitive and buy out of the social pressure.
It makes sense to create a higher perceived value to further penetrate existing geographies and distribution channels and build market demand by developing the category. Communication needs to focus more on purchase intention and CTAs with higher perceived value offerings and leveraging the social pressure to buy the brand.
Finally, every brand, at some point in their lifecycle, would hit a sales and profitability slump, while the category is still growing and the brand hasn’t reached maturity. The slump is usually sudden. While quite a few do make it back, a big % of brands can never reverse the trend and are either acquired, go bankrupt or go private.
To overcome the decline in sales and profitability, a brand needs to create a turnaround strategy, which takes no more than 1-2 years to reach healthy growth goals.
The turnaround involves quick fixes and wins, with quarterly impact on sales and profitability, and a strategy to address the key issue causing the slump. Common to all the turnaround strategies is the renewed focus on the brand’s vision, core strength, and reduced unnecessary complexity.
Need a free consultation on growth strategy? Talk to me here!
ROHIT BANOTA, Founder of StorySaves, has transformed dozens into envied beauty brands for sharp and profitable growth, kickstarted from day 1 with “strategic brand story” and “story-led brand strategy” & powered by digital.
He has over 17 years of marketing and business experience growing consumer packaged brands including with startups and MNCs like P&G Beauty and Grooming in North America, Europe and rest of the world.
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