Market growth occurs when the total sales revenue for a particular industry increases compared to the previous time period. An industry experiences market growth when more people want to buy a particular product or service (market size increases) and/or when the current customers want to spend more money within that industry (market value increases). Market growth differs from market share, which looks at only one company's sales as a percentage of the total industry's sales.
Small-business owners who wish to maintain a competitive advantage should keep a close eye on market growth and industry trends in order to quickly take advantage of new market opportunities. Analyzing government policies, economic changes and social trends can clue you in to potential market growth.
What Causes Market Growth?
Markets can grow for many different reasons, including as a result of new laws. For example, if the government issues subsidies to manufacturers or producers, the price of their products can decrease, which means more people can purchase them (the very definition of market growth). Any policy that increases consumers' income also has the potential to cause market growth, such as tax decreases, minimum wage increases and even paid leave extensions. What policies could the federal, state or local governments enact that would affect your specific market?
The economy as a whole can also cause industries to grow since a booming economy often means that companies can afford to pay their employees more. However, if pay raises don't keep up with the high prices of inflation, then market growth may not occur since the extra wages do not qualify as disposable income. Paying attention to stock market trends and your competitors' stocks in particular can clue you in to economic and industry growth.
Finally, social factors can cause a market to grow if your product or service is suddenly trending. For example, beauty trends could cause market growth in the tanning industry or hair extension industry. Kids are also capable of creating their own trends (just take a look at the VSCO hydro flask phenomenon), so pay close attention to the consumer behavior of kids if you want to be one step ahead of your competitors.
Be Ready to Pounce
Remaining competitive means staying alert for all opportunities and quickly taking advantage of them. Otherwise, your more aggressive competitors will beat you to the punch and rob you of a share of the market growth.
Be ready to seize an amazing opportunity by knowing exactly who needs to do what, when and where they need to do it and how much funding they'll need to pull it off. Get your team together and throw around some market growth scenarios and develop an action plan now so its implementation runs smoothly.
Example of a Growing Market and Action Plan
The pet industry represents an example of a booming market growth rate. According to the American Pet Products Association, sales figures for the pet industry have doubled in the last 10 years. More people are becoming pet owners and becoming interested in buying products and services for their pets.
If you're in the pet industry but don't feel like these overall statistics are reflected in your own sales growth, perhaps you're not reaching the new audience. Your team should perform fresh market research to identify any new market segments, as this will influence the marketing strategy you choose in order to reach your growing customer base. If a large percentage of new pet owners are retirees, you may benefit more from TV commercials than from social media ads, for example.
Then, you can scale up your business accordingly: increase production capacity, design brand-new products to better meet the needs of your new audience, open a new location, hire more staff, etc. Be sure to balance your enthusiasm to scale up your business with your ability to attract more customers in order to avoid a budget deficit.