The Four Quadrants of High Growth
The Four Quadrants of High Growth is a highly effective sales strategy that enables B2B companies to optimally deploy their limited marketing and sales resources to maximize revenues. The model divides a company’s total addressable market—first vertically into two halves of customers and non-customers, and then by product into existing products and new ones.
Unlike other segmentation strategies that mostly focus on non-customers and can be difficult to implement, the Four Quadrants system ensures that Sellers look at the entire potential market for growth–including their existing customers, and new markets that they can enter.
We discuss each of these highly targeted strategies in the sections below:
- Quadrant 1: Increase usage
- Quadrant 2: Introduce new products
- Quadrant 3: Increase customer base
- Quadrant 4: Find new lines of business
The end result is four quadrants representing different levels of risks and relationships:
- Quadrant 1: Selling existing products to existing customers. Here we are selling more of the products that our customers are already buying from us.
- Quadrant 2: Selling new products to existing customers. Here we are launching new products within our existing customer base.
- Quadrant 3: Selling existing products to new customers. Here, we are selling our standard products to non-customers.
- Quadrant 4: Selling new products to new customers. This is the same as entering a new market.
Quadrant 1 has the lowest perceived risk from the buyer’s perspective, followed by Quadrant 2, 3, and lastly 4. What we need to do in terms of marketing and selling is also quite different from one quadrant to the next.
In Quadrant 1, the seller hardly needs to educate customers on the company or product since they are already very familiar with both. At the other extreme is Quadrant 4. This is a totally different market from the one(s) to which the seller has traditionally sold, and the likelihood that Quadrant 4 buyers have adequate familiarity the company or its products is quite low.
Therefore, using the same approach for all quadrants will not work—marketing and sales efforts will likely be overkill in Quadrants 1 and 2 while insufficient in Quadrants 3 and 4.
By segmenting our total addressable market into four quadrants and optimizing our messaging, offerings, and resources for each, we are more likely to maximize revenues at the lowest costs possible, thereby maximizing our net income.
The Four Quadrants approach is one of the foundational strategies of the Predictable Revenue Model; it’s designed to position a company to achieve a consistent High Growth rate.
Companies that out-perform their competitors do so primarily because they execute a defined strategy. They don’t try to go after everyone with the same message, product, or offering. They segment — then tailor everything they do to fit that segment.
Segmentation makes it easier to isolate the right opportunities for a given company and highlights the right strategies to win those opportunities. Because you have the right message and the right offering for the right customer, you can shorten your sales cycles and increase your closing ratios. Effective B2B marketing naturally leads to effective B2B selling.
This is the essence of strategy – focusing limited resources on the best opportunities in the most optimal way to maximize results.
The Four Quadrants approach makes the segmentation process more intuitive. It also makes execution simpler and more full-proof.
Each Quadrant is Different
We all know that if we really want to sell our products and services, we have to tailor them to our customers’ preferences. What we tend to forget is that this is just as true regarding how we market and sell our products. We must tailor our sales and marketing according to how customers want to buy.
Marketing/selling to existing customers is totally different from marketing/selling to non-customers. And even for existing customers, the kind of marketing/selling necessary to get them to order more of what they already purchase is different from the strategy that gets them to try new products they haven’t used before. We know this is true from our own direct experience as customers.
Sometimes the right strategy is just to automate and make it simple for customers to order whenever they want. Why slow them down by having them talk to a sales rep?
At other times, there is a great need for consultation before sales can happen. Case studies, demos, and references are all a necessary part of reassuring a skeptical buyer that she won’t regret her purchase. And while the high-powered consultative sales rep is essential with a new customer buying for the first time, he would be expensive overkill for a simple reorder of a product a customer has purchased dozens of times before.
The essence of Four Quadrant selling is matching a company’s limited resources to the type of selling opportunities a company has and doing this as an everyday process – increasing sales, while keeping the costs of selling low.
- Quadrant 1 is about customers who buy a given product. Your goal is simple — get them to buy more of what they are already buying. How do you get them to do that?
- Once you have maximized your revenue from Quadrant 1, the only way you can get more business from existing customers is to get them to buy some of the other products you sell. That is how you get growth in Quadrant 2. What is the best way for you to do that?
- As mentioned above, there is only so much you can sell to existing customers. And sooner or later, for one reason or another, you are going to lose some customers. You must acquire new customers not only to continue to grow but also to replace those you lose. That’s what growth in Quadrant 3 What is the best way to achieve this?
- And if you are very successful and grow fast, you will eventually saturate a given market segment and can’t sell more there. We will need to find a new market segment where you can continue to expand, which is what Quadrant 4 is about. How do you do that?
When you look at it this way, it is apparent that your sales and marketing strategies in each quadrant need to be sufficiently different.
However, it is not just the strategies that need to be different. Systems, processes, assets, and people you use in each quadrant also need to be optimized for that quadrant to achieve the best result in that quadrant. Just as you look for a specialist when you want to see an eye or heart doctor, you also need specialists if you need to grow each sector on a consistent basis. You need people who are experts in each quadrant.
End Goal–Predictable Revenue Growth
If you have one-size-fits-all marketing and sales strategy, you will see mixed results. You want reliable, predictable revenue growth. That is why you have to optimize sales and marketing for each Quadrant.
We discuss these highly targeted strategies in the sections below: