What are the challenges faced during Growth stage of an internet business?
Identifying Growth Stage problems
In this stage, an internet business having established product-market fit and product-market-channel fit, seeks to rapidly expand its market share.
The issues that arise in this stage are often related to a new dimension: the speed of scaling.
Isolating problem dimension:
The very first step is to ensure product-market fit and product-market-channel fit.
That is to say: from the outside, a business might seem to be in growth stage. But, in reality, it might be trying to scale through brute-force, without having established a clear need for the ICP and/or a relevant & efficient distribution channel to reach them.
If PMF or PMCF is not in question, the key dimension then is speed of scaling.
While initial market share gains come rapidly and efficiently through early adopters, incremental market share gains start getting costlier.
A common situation might be that the key channel for an internet business is profitable when acquiring 1,000 customers per month, but is very unprofitable when trying to acquire 10,000 new customers per month. So, what are the solutions?
Common solutions:
2 common solutions are:
☞ Diversifying channels of reaching the ICP. This ensures that incremental cost is not too steep while scaling. This, however, requires, PMCF across multiple channels. This needs planning in advance, and experimenting to measure PMCF across multiple channels.
☞ Increasing awareness in the ICP, in advance. While purchase journey happens through stages (awareness -> consideration -> conversion), rapid scaling might seek to jump stages, leading to rapidly increasing marginal acquisition costs.
In absence of channel diversification or required awareness levels to support the growth rate (both stemming from lack of growth planning), an internet business should look to reduce growth rate till PMF and PMCF are restored.
To avoid such a situation in the first place, an internet business should build awareness in advance for its conversion campaigns, as well as experiment with different channels to identify those with PMCF, for diversifying to.