Note: This article first appeared in Forbes CMO Network (https://www.forbes.com/sites/onmarketing/2017/02/21/how-brands-can-transform-in-a-slow-growth-environment/#56387acf4bb9)
Declining growth may be just the time to initiate transformative ventures. New business models can create high growth when you truly understand the types of experiences your customers value and pursue your company’s purpose from that perspective.
The recent headlines from retailers on holiday season earning reports, as well as the continual trend towards online shopping, would suggest that any significant growth for brick and mortar stores is a thing of the past. And since growth is what Wall Street rewards, it is not surprising that retail stock values have been beaten up.
But a recent study published in HBR offers a potential path forward. According to the authors, who studied the top 37 retailers, slow growth can be predicted, and, shifting strategies and leadership accordingly can be done to manage it profitably.
Shift focus from the top line to the bottom line, efficiently do what you do best and everything will be just fine. Small changes, not big ones.
But any organization can be transformed if it knows what experiences it’s customers prefer and reframes it’s purpose in that context.
Consider Starbucks and one of the simpler measures provided by the HBR study - if the average revenue per store is declining then growth probably is too.
Looking at these figures for Starbucks from 2005 to 2015 shows that their company owned stores went from making about $7 million a year to just over $1 million. That clearly passes this test for shifting to a slow-growth strategy, and no big changes.
Yet Howard Shultz at Starbucks is recalibrating his attention to rolling out an entirely new offering from the brand in the form of upscale roasters and cafes. They will be significantly larger, more heavily staffed and offer a much more premium array of delicacies then the current stores. On the surface these new venues seem to have nothing in common with the brand that has enamored so many people for decades except that they all serve coffee.
That’s a big change.
But any student of the Starbucks brand knows that it has never been just about coffee. Rather they are in the business of providing culturally progressive, culinary experiences. From this perspective they are not competing with Dunkin’ Doughnuts and Krispy Kreme for sweet treats and morning coffee, because their customers value something bigger.
So while coffee shops are a wonderful vehicle for delivering the ‘Third Place’, upscale cafés offering a premium experience that includes coffee, spirits and other gourmet treats is not only perfectly suited, it also provides an avenue for the kind of growth that can transform a brand, and the bottom line.
This sort of transformation doesn’t require moving up the price chain with a premium offering. Amazon’s recent announcement to participate in the urban food delivery initiative, Snap, demonstrates the very same modern marketing principles in a low-price model.
As we have all watched Amazon evolve from books to apparel to brick-and-mortar stores, it is clear through this transformational lens that their purpose to make shopping easy for customers who value experiences on their own terms is able to cut across markets. Expanding into delivering healthy food to hard-to-service, under-privileged, and urban neighborhoods is a viable high growth, transformational strategy.
Staying ahead of the competition has never been harder, and shoppers’ expectations only promise to accelerate. Determining what experiences customers seek out beyond the transactional nature of the business provides insight into what they truly value. In this view a company’s purpose can be channeled into many new, and big, opportunities.
