How losing money has helped large firms to enter right in penetrated / under-penetrated market?

From Apple to Starbucks to Lego, these highly successful companies of today battled huge losses before coming out on top!

Failure is an inevitable part of business world. There are very few businesses that are seen to succeed in one go or make it big without experiencing considerable number of failures. Rather, when we talk about some of the popular and biggest businesses such as Apple, Lego, Starbucks, FedEx, and Marvel; the one shared thread that we recognize amongst them is that how these companies had to face huge failures and lost their valuable money/investment before carving a landmark success story for themselves in the business world.

Let us now dwell a little further and understand what exactly went wrong with these businesses and what growth strategies they adopted which eventually helped them to bounce back again.

# APPLE

“The market penetration strategy adopted by Apple is all about amalgamation of ingenious product development along with powerful marketing, pricing strategy, and community leveraging”

The first name that comes to mind which turned its tables from being on the verge of getting bankrupt to being the most successful companies in the world is certainly APPLE. The success story of Apple is nothing less than an inspiration for many entrepreneurs world over. The company reached an early momentum with coming up of truly unique and innovative products, but eventually experienced a major fall and started losing its market. This was mainly attributed to the exit of its founder Steve Jobs coupled with lack of innovation and falling short of customer’s needs; resultantly popularity and demand of its products plunged.

Rather, in 1997 Apple was on the brink of bankruptcy. But, then with implementation of right growth strategies which focused on market penetration it bounced back and today has become the first $1 trillion company. Basically, the company focused on coming out with its famous core product, the iPhone and developing the strategy for increasing its sales every year. For this it focused on amalgamation of innovation along with powerful marketing and pricing strategy and of course community leveraging.

Over the years, it has consistently introduced new versions of iPhones with added enhancements and upgrades, including releasing its high-end iPhone X. As a result of its market penetration, Apple has a larger market share than all of its competitors combined with over 50 percent market share in 2021. Understandably, Apple focussed on developing a loyal customer base with powerful marketing strategy and emotional engagement with its customers. And, so whenever the company comes up with a new iPhone model every year, these loyal customers (who have become fully dedicated to the brand) are the early ones to buy the phone; even though the product price is higher as compared to other competitor models.

To add to this, with successful rebranding campaign, launch of new products such as iMac, iPod, and iPad and the constant revamping of consumer expectations, Apple has gradually turned itself around to become one of the biggest tech organization in the world. However, this happened, only after a 12-year downward period and several product flops.

# STARBUCKS

“The market penetration strategy of Starbucks is based on quality based differentiation, customer orientation, embracing of technology to engage customers better, and offering sales promotions.”

Another one such example to consider is that of STARBUCKS which though today is one successful coffee giant, but it once faced a serious financial crisis. This happened in 2008 when owing to extensive overexpansion plans, growing coffee competition, cheaper options for customers and higher cost of dairy products, the coffee giant witnessed a huge slump in business. However, it quickly took action by focusing on quality based differentiation (enhanced coffee quality), ad campaigns, reorganizing of supply chains and even closing number of outlets, which helped in turning things in its favor. Another thing it did was reworking on its market penetration strategy to understand where it was going wrong. So, it started customer oriented products, such as premium coffee, tea, cappuccino, and espresso, building personal relationships with customers, embracing technology to engage customers better, and offering sales promotions such as a free Frappuccino which worked in its favor, thereby reigniting the brand trust.

Resultantly, today it has become one of the prime coffee brands in the world. As on date, Starbucks boosts of having presence in more than 80 countries with over 32,000 stores worldwide. In order to grow and maximize its revenues in these current markets, the brand implements market penetration by opening more Starbucks owned outlets or licensed and franchised cafes.

# LEGO

“The market penetration strategy implemented is based on knowing the targeted audience, innovative products to appeal all customer segments, digitalization, and entering new markets with existing products”

And lastly how can we forget not to mention the case of LEGO which went from nearly being bankrupt to becoming the most powerful brand in the world today. The company found itself in financial calamitous state in the early 2000s, with the company even selling some products for less than they cost to manufacture. One of the major reason was LEGO losing it sight in identifying of its target audience; resultantly they made groundless assumptions leading to coming out with products which were not at all in sync with their customers’ needs and wants.

But, then a corporate restructuring, well-researched innovative products based on targeted audience along with resorting to streamlined operations, helped LEGO to regain its focus, thereby making it one of the largest brand comebacks of all time. Further, implementation of new market penetration strategy which focused on offering plethora of products specifically designed to appeal all the customers segments in order to reach out to substantial range of customers coupled with entering new markets such as China and India with exiting products really helped in making things work rightly in its favour. And, today it is at the top again!

“We need to constantly become better, or otherwise there will be someone out there who will catch up to us.” - Knudstorp, former CEO of LEGO

Besides, in order to ensure that existing customers keep purchasing its products, the company reintroduces 60-65 percent of their existing sets every year. They also offer several large and complex sets targeted to teenagers and adults to increase their sales.

Failure is not the end of the road, even if it seems like it!

While, undoubtedly failures or let-downs in business can indeed be discouraging and at times making one feel that that you have hit the end of the road, but such is not the case. Just take a look at these businesses who failed miserably before becoming a success story.  Failures, on the contrary if taken in a positive stride, provide valuable lessons and experiences that can pave the way to the success road. It is just a sign of what you have been doing wrong which could be with regards to not listening to your targeted audience, over expanding of your business too soon, wrong spending of resources or maybe not finding your product-market fit. The underlying principle is to understand as to what went wrong and what needs to be avoided or altered in the future in order to avoid a recurrence. As Henry Ford rightly said, “failure is the opportunity to begin again more intelligently”.

So, which of the growth strategies of these three biggest brands of the world has impressed you the most? Comment Below.

4 key factors that can impact business profitability

 From incorrect pricing to ignoring overhead costs: what is stifling the profitability of your business?

Running a business can be a challenging endeavour, especially when it comes down to making profits. And the fact of the matter is that even if you have the best of the products and services to offer and reasonably good sales as well, but if your business is not generating consistent profit, it will eventually face closure.

Rather, the businesses earning large profits are often termed as the most efficient and successful in the market. Besides, a reasonably good profit earning business is able to secure a better image in the market and can easily attract more customers while also enticing much desired investment or funding from investors, and all these are incremental in further re-fuelling the business growth. So, it would not be wrong to say that achieving a sufficiently high level of profit is (and should be) the primary goal of every business as it effects its growth and long-term survival in the market. Though profit margin varies from industry to industry, but as a general rule of thumb, “a 5% is a low margin, 10% is a healthy margin, and 20% is a high margin”.

“Business is all about solving people’s problems – at a profit” - Paul Mardsen

However, unfortunately, it is seen that many at times businesses end up discontinuing its operations within the first few years itself this could be pertaining to a start-up or even for an established business which penetrated into a new market. And, this is largely attributed to inability in generating a sufficient profit margin. As quoted by Sigmon, the author of the book, ‘Six Steps to Creating Profit’, “nearly two-thirds of small and mid-sized businesses either don't make a profit or fail to increase their profits from the year before”.

So, exactly what stifles businesses from being profitable? To answer this, we have listed out the four major factors that typically influence the ability of a business to being profitable.

#1 Incorrect pricing of product or service

It is seen that at time entrepreneurs are not able understand the basic of properly pricing of the product that eventually results in non-generation of profits. Supposedly, if you set the product prices too low, though more customers will reach out to you to buy your products; however, the price set by you might be so low that you are hardly able to make a profit. Conversely, if you set your prices too high, then of course fewer customers will buy your products owing to non-affordability factor and again it will not generate you much of profits. The bottom-line lies in considering your margins carefully and then appropriately pricing your product. You can also consider performing a proper market/pricing analysis, so that you are able to have a complete understanding when pricing your products.

Key Takeaway: Consider your margins while pricing your product. Do not hesitate from charging for quality!

#2 Aggressive competition

Another problem that is critical in lowering your profits is the degree of competition in the market. Sometimes, it happens that even though the pricing is right but owing to too much of existing competition, the profits get narrowed down. But you can overcome this by branding yourself in a better way than your competitors or come up with a differentiation strategy that could set you apart from other competitors. Also, you should definitely consider taking up competitor benchmarking analysis to identify your competitors and monitor their strategies on regular basis.

Key Takeaway: Gain a competitive edge by adopting a unique differentiation strategy!

#3 Ignoring overhead or hidden costs

It is also a possibility that you are overlooking the relative costs involved in business such as rent, raw material, and labour increase as these all predictably lower down the profit. Say for example, you might by spending too much of amount on a huge office space which might be not a need of the hour or might be some of the staff that you have hired is not required. This simply means, you need to cut down on any of the overhead costs as this will indeed burn a hole in your (profit) pocket. Besides, it is also required that you take into consideration of all the hidden costs that may arise in future such as increase in labour costs, insurance costs, tax costs etc. and even periodic variables like utility costs etc. so that at the end you do not have to cut down your profits to take care of these.

Key Takeaway: Do not overlook any kind of overhead or hidden costs!

#4 Marketing Strategy

In today’s cut-throat competitive era, it has become essential for every entrepreneur to market its product by adopting various new marketing strategies on regular basis in order to attract more customers, and in turn increasing the profitability of business. However, this also means directly putting burden on the profits of the company. So, you need to ensure that whatever marketing strategy you are adopting is not only based on your target market and customers but also should be in sync with increasing the revenue sales and profits, and does not depreciate it.

Key Takeaway: Make certain that your increased promotion and advertising strategy is in sync with your increased profits!

Act now and discover the core issues affecting profitability of your business!

The bottom line is that profit is inevitably the lifeline of any business be it large, mid-sized or small. Every business dream to earn more and more profit by increasing its sales and minimizing its cost; however, at times certain problems can turn this dream into nightmare. So, the faster you can discover your core issues, the faster you can reduce or stop your profit outflow!

Feel free to share any other core issue that you feel obstructs business profitability?

Do you know what is common between global biggies Apple, Lego and Starbucks?

Well, all of these battled huge losses before coming out on top!

So, what exactly these highly-successful companies did to ensure solid positioning for themselves and consistent growth again?
➢ they didn’t quit
➢ they took risks
➢ they were proactive
➢ they accepted, assessed and re-strategized
➢ they acknowledged change
 
The point of matter is if you have hit a set-back in your business, then it’s okay to be disappointed but ‘do not just give up’.

Analyze and evaluate the areas that will require more attention and might be even re-working which could with regards to your targeted audience, marketing, revenues, to name a few. And, more importantly ‘embrace change’.

And, finally, ensure there is no recurring of the past slip-ups in future. Keep in mind that failure is where growth and change happen!

As Malcom Forbes righty said, “every failure is a step to success.”

Do you agree? Comment below.

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What comes first: the product or the market?

 This is the question most of the entrepreneurs face with when deciding to come out with a new product. To make this easier to understand, let us consider an example.

You have come up with this unique and astounding software product development idea, and subsequently after undertaking market research, numerous discussions with your team, listing out multitude of product features, you finally get down to your Minimum Viable Product (MVP) and approach your friends, associates, acquaintances, and start sharing about your product. And, what more everyone loves your product & provides great feedback.  

Now, you share your software product with them, but after sometime you are surprised to find that these people do not seem to use it, and basically are not really that interested or zealous about your product.

And, this could be simply because of the fact that though your idea was innovative but you overlooked to consider that does it really solves a problem which the market really wants to get solved; and most often the problem is not that significant or big enough.
Now, this is a sign that one does not have a ‘Product-Market Fit!'.

End of the day, it does not matter how excellent your idea is or how good you think your product is; it is all about whether someone needs it, and whether someone is eager to pay for it. As Marc Andreessen, the first person to define it rightly said, “Product-market fit means being in a good market with a product that can satisfy that market”.

So, to avoid reaching the wrong product-market fit scenario, make sure you understand the pain points that your product intends to solve as well as the challenges your customers are seeking to solve. And, this can essentially be done by focusing on the five key ways which will help in making your product "market fit":-
➡ Determining your target customers
➡ Identifying underserved customer needs
➡ Defining your product’s unique value
➡ Specifying your Minimum Viable Product (MVP) feature set
➡ Creating MVP Prototype of your product & getting feedback

Understandably, it is not possible to find product-market fit on the first go itself, so there is absolutely no need to feel panicked. The key lies in testing it till the time your product meet the needs, demands and pain points of your targeted customers.

And, believe me, once you have achieved your product-market fit, rest assured you will end up with a successful product which will be ready to capture the market and your customers!

So, have you found your product-market fit or still searching? Let us know by commenting below. 

For Any Business, One of the Most Challenging Aspect is When Its Valuable Employees Quit

 And why do employees do that?

What is it that drives this behavior?

To understand this, look at this scenario, a large business enterprise recruited few employees who came out to be bright and talented in the interview conducted. The first few months they performed exceptionally well, but things took a turn when the interest and initiative of most of them at work started going downhill. They started limiting themselves to only to what they are expected to do; a big potential quitting warning sign.

To address this an ‘Employee Engagement Survey’ was undertaken by the HR department to understand the satisfaction level and pain areas of their employees. And, to their surprise they found out a common answer that came from most of their newly recruited employees was that though they liked the job but didn’t enjoy working in the current company atmosphere anymore.

So, why are the employees not liking coming to work anymore?

And, in such cases what should the enterprises do to keep them satisfied and engaged?

Well, to begin with, as also cited in this case, enterprises need to select an appropriate matric – which could be the traditional Employee Satisfaction Surveys or the tried-and-tested Employee Net Promoter Scores (eNPS) – to get insights on the satisfaction level of their employees and what are pain areas that require attention.

Once this is done, they can devise an action plan to overcome those areas. Here are the five simple but actionable tactics that can be adopted to increase employee satisfaction in your organization.-

Regularly recognizing and rewarding employees’ achievements and success.

Provide them the role clarity of their objective in the department, desired deliverable.

Building a strong company culture making employees feeling a part of the organization.

Providing employees with opportunities for professional development and growth.

Positive and flexible work environment.

These are just a few but key ones that we have mentioned above, but yes there are indeed plenty of strategies that you as an entrepreneur can employ depending upon the pain areas that your employees are or could be facing.

Nonetheless, the underlying premise is that when employees are happy and satisfied, it not only helps in retaining staff but also they put their best effort to make the company successful.

What other tactics do you think can increase employee retention? Please share your thoughts in the comments section below.