On Growth
Through the eyes of a customer value manager
Growth is a key factor for a company’s success in the long term.
Although, the term ‘growth’ can be used in a wide variety of contexts.
Depending on who you ask and where their focus lies — you’re going to get different answers — and consequently, their growth strategies and action plans will vary:
Finance: “We’re increasing our market share from 20% to 25%.”
HR: “We’re scaling the company from 50-100 employees.”
Sales: “We’re acquiring twice as many B2B clients this year compared to last.”
Product: “We’re expanding the user base by +75% through product-led growth.”
Customer Value operator: “Hold my beer.” 🍺
The growth paradox
Many people seem to take for granted that growth is always a good thing that should be pursued at pretty much any cost.
“Growth first, Profitability second” seems to be a popular idiom, especially in the start-up and scale-up world. Furthermore, it seems quite reasonable to expect a positive correlation between these variables:
Customers → Sales → Revenue → ProfitOn this basis, should we expect that the faster the company scales, the better and more easier things will become?
Contrary to popular belief about growth, as the company scales things do not get easier — they get harder — and what is often forgotten about is the cost of growth.
With higher customer volumes follows not only a financial cost, but also pressure on resources, service operations, process complexity and customer experience.
Paradoxically, when something grows ‘too quickly’ it can lead to a lot of internal pressure and stress on a company, in particular on their financial cashflow.
Ironically, our admiration and emphasis on rapid growth might end up being directly harmful to some businesses, which could ultimately lead to its own demise.
The customer lifecycle = Growth stepping stones
‘Growth’ practitioners will be heavily focussed on Sales and New Customer Acquisition. This is considered the start of the customer lifecycle.
What follows are a series of post-sales lifecycle stages:
(Onboarding)
Activation
In-Life
Decline/Inactivity
Retention/Attrition
(Win-Back)
Think of these lifecycle stages as stepping stones or a staircase. The success or failure to drive performance in one lifecycle stage will often depend on how well the foundations were laid in the preceding lifecycle stage.
As a Customer Value operator in post-sales environments, what is slightly different is that I take a more holistic view across the business and have a different starting point.
When I think of how to increase business growth, I start with PBT (profit before tax) and then work my way backwards and up through the P&L (profit and loss statement) to figure out what the profitability metrics need to be, the costs, the customer KPI performance numbers, the headline revenue number and the overall sales volumes etc in order to hit the desired numbers/forecast.
In other words, I start at the opposite end of the customer lifecycle (Retention) and at the bottom of the financial statements and then work my way backwards to develop a course of action to drive customer and commercial value.
There is a lot to consider here with many moving parts and different potential levers to pull, but the key is to keep things simple and focus on a few key KPIs and priorities that will materially ‘shift the needle’ in your P&L.
This brings me right back to the single most important thing — the customer.
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Customer growth and segmentation
Customer growth typically refers to expansion of the customer base in volume terms.
Something we need to think about here is that not all customer volumes are equal, as clients come in different shapes and sizes.
There are consumers, SMEs, mid-market, corporate and enterprise customers are so on. It’s pretty obvious that this is like comparing apples and pears, because the revenue per client will be very different.
We now have two dimensions to growth: volume and value.
I’m not necessarily saying that bigger is better — it goes back to what was discussed earlier in the ‘Growth Paradox’ section — hence why you will need to consider the cost to acquire the customer (marketing, sales, onboarding) and to serve the customer (customer service, customer success).
Also, building on the segmentation argument, there might be a case for looking for customer segments within the segments.
For example, let’s say a company decides to pursue growth in their important Consumer segment and they have 1 million customers on book. Volumes are growing at +20% per year and customer spend at +100%. In examples like this, it is very easy to jump to conclusions and assume that for each Consumer client that we recruit, Spend growth will be 5x the customer growth rate.
The problem with this thinking is that the volume-value relationship is based on average assumptions. Once you start slicing and dicing the customer data, it is quite possible that the customer value dynamics will look very different between the bottom and top of a chosen customer segment.
Two key concepts that you might find useful are:
Decile analysis. Take your entire customer portfolio and slice it in 10 equal parts and look at each one individually and study the volume/value relationship. There will be customers who do not engage at all and have zero activity / value and vice versa, those who are highly active/engaged and are your company’s true fans.
The Pareto Principle. Also known as the 80/20 rule. In customer value management (CVM), this would equate to that 20% of your customers generate 80% of your value. Within your completed decile analysis, can you spot the two most valuable deciles? Chances are they’ll make a significant proportion of the overall value.
How can post-sales teams drive growth?
As the name suggest, a post-sales environment is what comes AFTER the initial sale and once the new customer will be treated as an existing customer. For example, this is when a Customer Success team might spring into action.
They’ll be focussing on things like:
Welcoming and onboarding the customer
Driving product adoption and usage
Relationship and account management
Educating the customer about features and new technology
Upselling and cross-selling
Proactively engaging the customer
Renewals & attrition management
Here’s the unexpected twist:
It’s equally important to influence what happens outside of the post-sales environment, e.g. within the pre-sales and sales environments. I am not referring to operational involvement, but to ensure that the Voice of Customer is represented in Marketing, Sales, Product and Operational activities before the responsibility of customer ownership migrates to post-sales teams.
This can be done by working proactively with these teams and in partnership with your internal stakeholders from these departments. We want the post-sales teams to not only function as a tactical execution resource for existing customer activities, but also as a strategic partner that can help advise other teams on customer-led thinking.
This shift in mindset can be incredibly powerful for three different reasons:
It gives the post-sales management team a seat at the table and an opportunity to discuss and shape the plans of a wider set of company activities that will impact both current and future customers.
It provides an opportunity to ensure a solid foundation at the beginning of the customer lifecycle (e.g. Sales processes and customer targeting
→Onboarding stage) by for example feeding in client feedback, existing customer performance and information on customer pain-points.Rather than thinking of the different stepping stones in the customer lifecycle as independent units (or silos), we need to consider how they are linked together and how different teams interact.
It’s a good idea to put in place a working ‘Cadence’ across the different teams. This is to ensure that there is proper planning and co-ordination across the full customer lifecycle to ensure we are putting in place solid building blocks for the customer journey, as opposed to having departments operating in silos and focussing solely on their individual objectives.
By placing your post-sales management teams at the heart of the strategy & planning processes, involving them in activities which are also outside of the post-sales environment will ensure a logical construct of carefully laid out stepping stones and result in a customer journey and experience that both performs well and works well in the eyes of the customer.
By driving and maximising the value for the customer — in turn — the customer will start to act and behave in a way that will ultimately maximise the value for the company.