Wednesday, March 14, 2018

Growth Strategies for Risk-Averse Organizations

I recently received this question from a blog reader: What are the most effective marketing and growth strategies for risk-averse organizations?

First, one must assess the source of the risk aversion. Often it is insularity. The organization doesn't know any markets other than the ones it is currently serving or it doesn't know how to produce any products other than the ones it is currently producing. It could be that the organization has too many fixed costs associated with a very specific production process and would find it prohibitive to reconfigure or set up a new production configuration. Sometimes, when a company is privately owned by a prominent member of the community, that person is more concerned about his or her reputation and is worried that a risky growth move might cause an embarrassing setback. Sometimes, the organization is just run by a risk-averse person or group of people. 

There are a few ways to identify risk aversion. One is the unwillingness to invest capital. Another is the percentage of revenues that come from new products or markets. A slow or declining growth rate may also be a symptom of risk aversion. And finally, some organizations perform an inordinate amount of marketing research to identify potential problems. A related tell-tale sign of risk aversion is how many decision-making steps are present in the new product development process of the organization (if they even have a new product development process).

So, what are some of the best ways to grow despite risk aversion? The easiest way is to expand distribution geographically or through new distribution channels. Another way is to hire additional salespeople or to create new sales channels. You can also make your brand more accessible by selling it online or by extending store hours. 

Risk adverse marketing approaches include (low cost) publicity, targeted online marketing, providing additional sales support and tracking the cost of generating sales leads and tracking which of those leads results in new business. Co-marketing with other non-competing brands stretches marketing dollars. Offering co-op marketing budgets to retailers if your product is sold through retailers is another option.  

While these are some of the approaches that may be easiest to to "sell" to risk-averse organizations, these are not necessarily the most risk-averse approaches. Often, the best way to assess the potential of new products, services, revenue streams and marketing approaches is to test them in some markets and, based on the results, modify and expand the approach/offering or pull the plug on it. But this is more the sign of an organization that is willing to take calculated risks. 

I found this to be an interesting question. I hope it has helped you think about the topic.

1 comment:

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