Reprinted from
BUSINESS
OF
JOURNAL
STRATEGY
The Magazine for the Corporate Strategist
SOWING GROWTH IN
YOUR OWN BACKYARD
Growing a business in tough times isn’t easy, but it can be done.
By Bob Lurie and Toby Thomas
rowing a business seems next to impossible in tough
G
economic times. Your customers aren’t buying as much
or as frequently as they used to, and the usual programs
don’t seem to work as well anymore. And that’s frustrating,
because the benefits of growing your core business are clear.
Nothing creates greater shareholder value or builds a more
vibrant organization than generating higher and higher levels of
growth in your principal business.
But sowing growth in your own backyard is hard to do—really
hard to do. Even talented and seasoned managers blessed with
boom times have toiled with this problem year after year. They
have broken their analytical picks trying to make sense of the
complexities of their market, they have harvested all the low-
hanging fruit, and even when they do spot promising new
opportunities, their organization often rejects them in favor of
business-as-usual programs. The reward for their hard work:
frustration and tepid growth.
And yet, even in really tough times, and perhaps especially
in tough times, there lies a golden opportunity. Slowdowns
compel managers to take a hard look at their organizations, to
challenge conventional wisdom, and to reconnect with their
markets (lest they fall further out of step with it). To make the
most of the unfreezing of the way their company thinks and
acts, they need a fertile, concrete approach to guide their
thinking. Actually finding golden opportunities doesn’t require
access to a silver bullet, just the discipline of employing the
tried and true growth principles that deliver in good times and
in bad. In fact, these principles consistently serve to double
Reprinted with permission. Copyright ©2002 EC Media Group
January/February 2002
Volume 23
Number 1
and triple growth rates. Throw out the fads and begin the
hard work—a cornucopia lies in your own backyard.
Take a Closer Look
The first step is to look more carefully at the parts of your core
market in which you have not traditionally participated. You
may find the most attractive sources of growth in places where
you haven’t looked before, or where you’ve looked but haven’t
seen. Managers often fail to notice all the potential sources of
growth in a business. No surprises here. Every company has its
reflexes, its biases. It looks at the sources of growth that have
worked in the past—say, poaching new customers from big
competitors—not necessarily at those holding the most promise
for the future—for instance, stimulating existing customers to
use more of the product.
For example, in the late 1980s, Fujitsu had an active busi-
ness customizing its PCs for sales-force automation tasks at
companies that sold big-ticket, information-intensive products.
Salespeople at these firms would typically make two or three
sales calls a day; then, at five o’clock, they’d enter the day’s
activity into their home PCs, using Fujitsu’s software.
But this method made little sense for the salespeople who
supplied, say, snack foods to convenience stores and might
make as many as 70 sales calls a day. They couldn’t possibly sit
down at a PC and write memos about each call. And in the
late-1980s many of them didn’t own PCs and were unaccus-
tomed to using them. Fujitsu helped address the problem by
building a portable, task-specific computer for Frito-Lay’s sales
force. Ultimately, this gave rise to a huge new product category:
hand-held devices for sales and delivery workers, used routinely
today by such companies as FedEx and UPS.
Break the Mold
Top managers need to undertake a careful, disciplined search
for every opportunity to expand sales in the company’s core mar-
ket. To lend structure to this task, we’ve divided all growth
opportunities into five types. Running through this list one by
one, and writing down as many growth opportunities as possible
of each type, can help you break out of tradition-constrained
thinking. The five types of growth opportunity are:
1. Retaining uses by existing customers (reducing attrition is
the same as growth);
2. Stimulating more uses by existing customers seeking to
satisfy the same basic needs as they have in the past;
3. Generating new uses by existing customers seeking to
satisfy new needs or a different combination of needs;
4. Stealing new customers from your competitors; and
5. Bringing in customers who are totally new to the product
category.
To see how the categories work, consider the case of Cobra
Golf. In the early 1990s, Cobra doubled its sales in just three
years, by recognizing huge growth opportunities in categories 3
and 5—while other golf club manufacturers continued playing a
zero-sum game in category 4. First, Cobra’s managers observed
that many women were taking up golf, but Cobra’s competitors
were focused on their traditional market of young and middle-
aged men. So Cobra redesigned its clubs to suit the needs of
novice women and enjoyed considerable success. This was a
type-5 growth opportunity.
Around the same time, Cobra introduced an oversized club
with a graphite shaft, which helped older golfers drive balls as
far as they had when they were younger. Customers who had
bought new clubs mainly when the old ones wore out suddenly
started buying clubs to satisfy a new need: the need to continue
playing their old game after reaching a certain age. As a result,
Cobra enjoyed sales growth of type 3.
Whatever you do, when you look at categories 1 through 5,
don’t limit your thinking to the growth opportunities that seem
most “realistic” based on past experience. The whole idea is to
transcend your experience, so write down all growth opportuni-
ties that occur to you.
Focus on a Specific Goal
You will need to figure out how much effort (or, equivalently,
money) it would take to realize each of these opportunities.
Here, it’s important to focus on the specific customer behaviors
that would have to change if each opportunity were to be real-
ized—because no matter what, the problem always boils down
to getting a particular customer segment to change its behavior
in a particular way.
For instance, Listerine’s current ad campaign tells customers
to “use Listerine for 30 seconds two times a day.” This is much
more effective than just telling them to “use Listerine to have
fresher breath and fight plaque,” because it identifies a desired
behavior and tells customers why they should adopt this behavior.
Similarly, if you are selling Internet connectivity to businesses,
then trying to get your customer’s IT manager to give everyone
at his company Internet access is much better than lecturing
him in general terms about the benefits of T1 lines. Again, it
aims for a particular type of behavior.
A word of warning here: You may find that your company
lacks the kind of data on customers and end-users that would
enable you to figure out which of their behaviors will result in
the most growth. Either your data will not be sufficiently
detailed, or you will have detailed data on customers and on
end-users, but no way of matching the two up so that you can
see all the way down the distribution pipe.
For example, say you’re a manager at Xerox, interested in
improving sales of your company’s premier optical character
recognition software. You may see an opportunity to bundle
your OCR software into fax/printer peripherals manufactured
by companies like HP. You may already have detailed data on
Organize your market research, your
customer profiles, and your growth strategies
around segments that your company can
somehow act on.
HP—from previous interactions with that company. But
that’s not enough. You must also collect detailed data on HP’s
customers, and on how each customer segment uses HP’s
fax/printer bundle. If you can convince HP that some of its
customers would be more likely to buy the HP peripheral
if OCR software was a part of a bundle, then you can con-
vince HP to change its behavior—by bundling your OCR
software with a particular line of products, by advertising the
OCR feature, and by working to make it more compatible
with HP machines.
In short, you may have to identify a desired change in the
end-user’s behavior if you hope to promote some other behav-
ioral change in your direct customer. And you can’t do this
unless you know which end-user segments go with which direct
customers, and vice-versa.
Set Priorities
Let’s assume that you’ve managed to get detailed data on your
own market segments, and on the corresponding end-user seg-
ments. Now you should be able to pair each growth opportunity
on your list with one or more specific changes in behavior—
changes in your customers’ behavior, and in some cases corre-
sponding changes in their customers’ behavior.
Against each of these behavioral changes you will find that
there are barriers. These could be internal barriers within your
company, or they could be practical barriers in the outside
world, such as existing customer preferences or the lack of a
distribution channel to reach the desired customer segment.
And, of course, overcoming each barrier will take effort and cost
a certain amount of money. Thus, one can assemble a cost/ben-
efit analysis for each growth opportunity: (1) Here’s how much
growth I can expect, and (2) Here’s how much it will cost to
remove the barriers that now stand in the way of the behavior
change that will trigger that growth.
 You can assign probabilities, take expectation values, con-
struct decision trees, and so on. But ultimately, the goal is to
use some sort of cost/benefit analysis to prioritize your list of
growth opportunities. And if one or two on your list have a huge
demonstrable upside, you may find that your organization is
suddenly willing to do what it takes to topple the barriers pre-
venting you from realizing those opportunities.
Know Your Customers Inside and Out
Many companies, even if they do identify great growth opportu-
nities, have a dreadful time trying to capture them. The problem
here is often the lack of a fine-grained understanding of cus-
tomers—which is indispensable if one hopes to influence par-
ticular customer behaviors.
You can address this problem by crafting an in-depth picture
of the type of person who comprises a certain customer segment.
The process starts with a description of that customer’s social,
organizational, and physical environment. What constraints and
opportunities set the context for this person’s behavior? Is she in
a hurry? Is she at leisure? Is she with a family member? And so
on. Next, we try to describe the desired experience that this cus-
tomer associates with a particular product or service, bearing in
mind that people really buy “bundles of experiences” more than
they buy products. For instance, affluent teenage boys might
visit Barnes & Noble not so much to purchase books as to be
seen purchasing certain books—say, books by Albert Camus,
Ayn Rand, and the like. And Barnes & Noble would want to be
aware of this if these boys comprised a significant customer seg-
ment. Finally, it is helpful to assemble a profile of the customer’s
beliefs—beliefs about himself, about the relevant product cate-
gory, and even about particular products.
These three factors—the customer’s environment, the sort of
experience he is seeking, and his beliefs—combine to form a
concrete explanation of his behavior: Why he buys what he
buys, and why he does not buy what he does not buy.
Tell the Whole Story
The goal is to investigate your customer segments so thoroughly
that you can truly “crawl inside the heads” of their constituent
members. Managers at Barnes & Noble discussing “the seg-
ment of affluent teenage boys” should all be able to envision the
17-year-old budding intellectual as if he were sitting right across
the table from them. They should recognize this young man in
their friends’ kids, in their own kids—perhaps in themselves.
They should know him not just in broad generalities, but in inti-
mate detail. He spends weekday afternoons in a coffee shop
(the local chain, not Starbucks). He supports environmental
causes. He listens to Korn. He resents being under the thumb
of his banal high-school teachers and fantasizes about the inde-
pendence that will come with college admission. And what
about his books? Well, they are not merely his “pastime,” they
are his badge of alienation, of independence, of his status as an
intellectual.
If Barnes & Noble managers can see this customer, and the
segment he represents, at that level of detail, then they will
know how to market to him. For instance, they might want to
promote CDs by college bands near the store’s philosophy sec-
tion. And if you as a manager can picture this kid, then the peo-
ple who run your marketing, sales, and operations will be able to
picture him as well. Everyone at the company will be working in
unison, because they’ll all have the same understanding of the
sheepish, alienated, spoiled-rebellious teen who finds himself in
your marketplace.
So ask yourself: Can you tell this kind of story about your
customers? Can you relate to them, spot them at trade shows,
guess what kind of bank they might use? If not, you may have
trouble inducing the sorts of behavioral changes you will need to
generate growth. Behavioral change is an intimate business. It
occurs at the level of the human being, not at the level of “men
between the ages of 27 and 35.”
This lesson applies to those who sell to businesses, as surely
as it applies to those who sell to consumers. Consider the gas
pipeline business. Pipeline operators sell long- and short-term
contracts that give their customers the right to use their pipe
capacity to transport gas from point A to point B. Simple
enough. You might imagine that this is a pure commodity busi-
ness, in which the sale always goes to the pipeline operator with
the lowest price. Well, it can be that sort of business, but it
doesn’t have to be—not if you’re a pipeline operator who has a
nuanced understanding of his customer segments.
For instance, think about the segment of “arbitrage mar-
keters.” These professional traders buy, re-sell, and deliver gas to
their customers when they see a higher than normal price
imbalance in the market. If the price of gas in Eastern Ohio is
20 basis points lower than it is in Upstate New York, an arbi-
trage marketer knows, if he’s quick enough, he can make
money. In a matter of minutes, he must find someone who will
sell him the gas, persuade someone else to buy the gas, and
then contract with a third person to transport the gas. If he’s not
quick enough, gas companies might adjust their price, or worse
still, a competitor will beat him to the punch. Arbitrage mar-
keters need information about gas availability and pipeline
capacity and to talk to a decision maker at the pipeline company
who can quickly say yes or no to a contract.
Traditionally pipeline companies have regarded arbitrage
marketers as nuisances and have been slow to respond to their
requests, focusing instead on established relationships and long-
term contracts with local distribution companies. A pipeline
operator who takes the time to understand the arbitrage mar-
keter might behave differently. He would learn how much time
No matter what, the problem always boils down
to getting a particular customer segment to
change its behavior in a particular way.
arbitragers spend trying to find the market information they
need to concoct the deal. He would learn that most of the arbi-
trager’s requests come first thing in the morning, precisely when
the pipeline operator typically holds his staff meetings. He
would also realize that if you tell an arbitrage marketer “I have to
check with our gas control people, we will let know later this
afternoon,” the arbitrager will hang up, hit the speed dial but-
ton, and contact a competitor. He would also understand how
much the arbitrage marketers resent the way most pipeline
companies treat them.
 If the pipeline operator acts on this insight and does an
about-face, giving the arbitrage traders more information than
they ever could have hoped for and making key decision makers
available when the arbitragers call, he wins their business then
and there. In the long run, the pipeline operator will be the first
number the arbitrager will call, enabling him to sell more of his
excess capacity, translating into higher margins—effectively a
price premium relative to competitors.
Create Meaningful and Actionable Segmentations
Traditional market segmentation can succeed in identifying
groups of customers who share the same basic needs and
beliefs, but it’s often done in such a way that no one can ever
find them. For instance, say you commission a study that con-
cludes that “You have tremendous growth potential among ‘feel-
gooder’ types,” or “You need to use a different pricing strategy on
‘self-assured’ young women.” Well, these assertions may be
quite accurate, and “feel-gooders” and “self-assureds” may be
perfectly well defined groups in a laboratory setting. But many
managers will sensibly ask: “Where does a feel-gooder shop?”
“What advertisements do self-assureds see?” In short: How do I
find these people? Too often the answer is, “We don’t know,”
and the manager is left with an honorary Ph.D. in psychology
rather than a growth strategy.
The lesson here is always to organize your market research,
your customer profiles, and your growth strategies around seg-
ments that your company can somehow act on. If your company
and its distribution channels cannot isolate a particular type of
customer—speak to him, market to him, and price to him—
you’re never going to influence his behavior, no matter how inti-
mately you understand him. The game is to find customer seg-
ments that are relevant to the realities of your company—its
organizational structure, sales capabilities, distribution channels,
and so on—and also economically well-defined, in the sense that
all members of the same segment have similar needs and experi-
ences concerning your product. In other words, your customer
segments must be both meaningful—in that those customers
exhibit distinct behaviors, needs, and beliefs—and actionable, in
that your company can conceivably do something to affect their
behavior. One of these without the other won’t work.
The right customer segments are not always the obvious
ones. For instance, studios that make animated films for chil-
dren often gather their market data according to standard demo-
graphic categories, such as “mothers with young children.” But
it turns out that this segmentation is not meaningful: The
movie-going needs of a working mother and a stay-at-home
mother are so different that they render a single customer pro-
file useless. In particular, the life of a working mother is often
filled with notions of being tired, feelings of guilt toward her
children, and a desire to share with them special, potentially
educational experiences, such as going to see an animated
movie. The stay-at-home mother spends half her life carting her
kids from one activity to the next, and regards children’s movies
as no more than a discretionary diversion. Subdividing the seg-
ment into “working moms” and “stay-at-home moms,” gives you
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categories that are far more meaningful, but still actionable.
Why actionable? Well, it turns out that working moms are far
more likely to show up in the opening weeks of a movie’s run,
while stay-at-home moms, spared the guilt that plagues working
mothers, save the movie for a rainy day. The lesson: If you want
to get people to attend the first run, pitch your message at work-
ing moms; target stay-at-home moms for later-run shows. Who
would have guessed?
Align Your Organization for Growth
You also need to design your organization itself for growth. Every
department of your company—marketing, product design, even
finance—must target the desired customer behaviors. Internal
factors that can retard growth range from organizational struc-
tures that focus on products rather than customer needs, to
inconsistent reward-systems, to a growth-averse company culture.
It’s also helpful to organize you company’s growth budget just
as you would organize your growth plan itself: around particular
behavior changes in particular customer segments. You start by
budgeting specific amounts of money to change behaviors:
“$2.8 million to persuade the segment of office secretaries to
buy their office supplies on line.” Only later do you allocate that
money to particular departments and product lines. Finally, if
you lack data on key customer segments, you may have to seek
out data specifically on those segments. Packaged-goods makers
have reams of scanner data from large retailers, but if the people
in the chosen market segment do their shopping at mom-and-
pop stores, the companies might as well use their scanner data
to paper a birdcage.
To summarize, if you want to generate superior growth year
after year in your traditional lines of business, you need to do
the following things:
1. Divide your market into segments that are both actionable
and meaningful;
2. Use the five types of growth—1 through 5 above—to help
identify the most important growth opportunities;
3. Make sure you understand all the economic activity of
each segment;
4. Focus on customer behaviors you need to change to take
advantage of those opportunities, and on the barriers that you
must overcome to effect the desired behavior changes;
5. Create a holistic, fine-grained picture of the relevant cus-
tomer segments, to bring the customers to life for the whole
organization;
6. Insure that your organization has a growth-orientated
structure and mindset.
Successful growth-oriented firms work on all of these tasks at all
times and know how to integrate them so they work in harmony.
Hard work? It certainly is. But it’s well worth the effort. ◆
Bob Lurie is CEO of Market2Customer (M2C), and managing director
and global account manager of Cambridge, MA- based Monitor Group.
He can be reached at bob_lurie@monitor.com. Toby Thomas is an offi-
cer and global account manager in M2C, and can be reached at
toby_thomas@monitor.com.