A question that most business owners have to deal with. It is the eventual goal of any business – to expand.
Nkem Paul, a business consultant and strategist rightly put it when he said
“For Business and life, if you are not experiencing growth, you’re possibly dying.”Nkem Paul
But in order to achieve growth, let’s first look at the idea of running a business objectively.
Why does your business exist?
What is the purpose of your business? While the simple answer is to earn you money. If that is the only goal you have, then you are more likely to go down a very sad path of an eventual burnout. If the only goal was to make money then you’d try to squeeze out as much money as possible out of every paying customer. But you don’t do that, do you? Hopefully not 😉
The hawker example:
In India, most of the streets are crowded with hawkers selling a host of items – predominantly fruits and vegetables. The hawkers in the street are so accustomed to haggling from their customers, that they keep their prices slightly inflated to accommodate for the bargaining. When you do not haggle with them or just pay the asking price, few smart hawkers voluntarily discount your bill or slip in one or more units of the same item. This was not expected by you, this was not required of him. But that smart hawker is very much aware of the purpose of his business.
Peter Drucker, an American management consultant succinctly noted the following:
“The purpose of a business is to create and keep a customer”, that’s it.Peter Drucker
That is how you should approach it. That’s the purpose of your business, the hawker’s business or for that matter, Google’s or amazon’s business. All that a business strives to do is to create customers and retain them.
So even though, the benefit of running the business is that it makes you money, DO NOT confuse it with the purpose of running a business.
The purpose is and will always be to get more and more customers and to retain as many of them as possible. Now that we are clear on that, let’s talk about the means of achieving the purpose. Peter put it this way:
“Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation.
Marketing and innovation produce results; all the rest are costs.
Marketing is the distinguishing, unique function of the business.”Peter Drucker
This brings us to our original question of how to grow your business. A business grows, when your customers increase. The two main activities to achieve this are Marketing and Innovation. The money spent on these two parameters is not your expense, it is your investment. In fact, everything else can be considered a cost.
What’s more important – Innovation or Marketing?
Innovation distinguishes between a leader and a followerSteve Jobs
History is replete with examples of how companies and businesses have used their out of box thinking and brilliant strategies to turn tides the other way round using innovation. Companies managed to become an overnight success by strategizing and implementing sometimes risky sometimes unthinkable maneuvers. Innovation generally does not cost you much – up until it has gone wrong. So you need to tread carefully. Innovation, in essence, is generally something never tried before, so there is a reasonable amount of risk involved in it. And not all businesses can afford to innovate to expand continually.
The next behemoth is marketing. Though marketing feels like a logical step, once you set up a business you want more customers. To get more customers you do marketing, but unfortunately, businesses often fail to understand the importance of it. I’ve seen businesses drag their operations while bleeding long enough that at one point they could no longer gather enough finances to invest in proper marketing. It is important to note that marketing IS NOT an optional facet of your business but rather it is a means of survival in this highly competitive world.
What’s more important – Innovation or Marketing?
That is similar to asking what’s more important for your vehicle, fuel or oil?! Having said that, let me elaborate my stance with the help of an example.
A case study involving Marketing, Innovation & Business Growth
Coca Cola is the most recognized brand in the world. It has around 44% market share and still keeps spending billions in advertising. In 2018 itself, the total money spent on advertising worldwide by this brand was a whopping $4 Billion. You are probably thinking that since it earns a lot, it spends a lot. I beg to differ. In my opinion, corporations have understood their priorities and spend their money accordingly. Coca Cola has definitely upped its marketing spend now, but the percentage of their revenue allocated for marketing expenditure remains around the same standard. Check out the example below:
The era of the 70s and 80s saw some stiff competition in the soft drinks industry. Coca Cola which was almost a 100-year-old brand by now started enjoying widespread acceptance and this resulted in a number of copycat products sprouting up and competing for market share. Among all the copycat brands, was a relatively big brand called RC Cola which had around 10% of market share then. It had some very loyal customers and it was high on innovation.
Did you know RC Cola was the first to introduce soda in aluminum cans, caffeine-free soda, 16-ounce soda, diet cola & also conducted nationwide tests pitching their drink against Pepsi and other Colas?! The widespread success of almost all the innovative ideas was helping the brand tremendously. Then, unfortunately in the year 1984, a billionaire businessman called Victor Posner acquired the company and for the next 9 years kept slashing the marketing budget. He had disagreements with the board about the direction of the company and stubbornly kept imposing his decisions. He was anyways convicted by the government on tax evasion charges and was later investigated for insider trading as well.
In the meantime, Coca Cola and Pepsi poured in millions of dollars in marketing arms race. Both the companies allotted huge budgets for mudslinging at each other. To the consumer it appeared as though, the two companies were trying to destroy each other, the reality was different. What the cola wars actually did was promote those two brands as the only two leading brands of the country. The war took away sales from almost all other brands which were not Coca Cola or Pepsi. People were so amused by the constant advertising and competition between the two brands, that those brands were the only brands on their mind when they thought of a beverage.
And today, the results are obvious.
RC Cola is almost like a wiped out beverage company and Pepsi and Coke have managed to maintain their market dominance. All the innovation of RC Cola could not save it from its competitors due to the unrelenting marketing tactics employed by the competitors. Probably the clichéd Indian adage ‘jo dikhtha hai wo biktha hai’ (‘What gets seen, gets sold’) has strong foundations and proves itself time and again.
Of course, innovation is required. But leaving behind marketing would be a very costly mistake that not all businesses can afford. A car does need both – fuel as well as oil. But Marketing is like the fuel which is to be supplied constantly to help spread the word of the business. Innovation can come from time to time just like oil to ensure that customers still find you offering good value in exchange for their money.