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What Do High Growth Businesses Do Differently?

Over the past 5 years the importance of the “High Growth Business” and how this relatively small group of businesses disproportionally impa...

Monday 12 May 2014

Does Spending More On Marketing Equal More Success ?

There is no doubt that many surveys show that an increase in marketing spend leads to an increase in growth. However there seems to be only a limited correlation. Take this statistic for example; if we compare at High Growth businesses (defined as growing at 20%+pa for 2 years or more) with average growth companies we get a radically different picture. The figures collated from a recent survey on High Growth businesses by Hinge Marketing is that an average business, that is one that grows at less than 20% per annum, spends about 5.1% of its turnover on marketing. At the top end of average businesses marketing spend can be as much as 12% of sales. The average of the high growth firms surveyed showed their average spend was 4.9% of sales. Slightly lower than the median for the average business! A bit of a surprise given that they are growing up to 5 times faster than the top spenders of the average business and spending much less on marketing.

That leads to the obvious question. Why? In short its to do with how High Growth businesses address their market. For one thing they are much more focused on meeting clients needs than the average business. For another they have a much clearer understanding of who they were selling to and what their needs are. Basically these high growth businesses have recognised more than the average business, that their clients and prospects are only interested in themselves and concentrated on answering two questions: 

What problem do I solve for my customer?
Why should my customers buy from me rather than my competitors?

These High Growth businesses seemed to have recognised two things. Firstly that customers are selfish and are really only interested on what suppliers can do to help them overcome their own problems. Secondly High Growth businesses have spent a considerable amount of time and effort answering the question why me? 

High Growth Businesses Spend Less on MarketingThis really sets them apart. In a recent workshop I asked the 20 or so participants to answer the question “why should my customers buy from me rather than my competitors?” and without exception they all struggled. Some actually admitted they couldn't answer it at all. 

This was further demonstrated when the same survey rate the elevator pitch. They asked each CEO to give us their brief elevator pitch. They then rated their response on a 5-point scale based on three criteria:

1) Clarity of the firm’s capabilities and purpose
2) Clarity of the target market
3) Articulation of the firm’s competitive advantage

High Growth businesses scored an average of 72.7%
Average growth businesses scored an average of 45.2%

What this signifies is that successful sales and marketing has more to do with the clarity and uniqueness of your proposition than the size of your wallet.

To get a full copy of the report from Hinge Marketing go here

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Exigent Consulting provides specialist services to the Small and Medium Business including Managing High GrowthBusiness Turnaround, and Mentoring. We help business owners improve the profit performance of their business.