“Growth” is pretty much every company’s priority, but what does that really mean?
For some, it is increasing their profit margin, for others it is increasing the number of new customers, and so many other examples.
Along with that, there are many different strategies to achieve the goal, such as pricing, new sales channels, new product offering, and so on and so on.
No matter how you define growth, there is a common foundation that needs to be laid in order to achieve your goals.
The “seed” is your customer and seemingly the first step in planting the seed is to acquire a customer.
However, that is not the first step. The first step before anything else is defining your growth framework and establishing an understanding of how you plan on growing your customer, the seed.
Below is a Customer Growth Model that outlines the path for growing your existing customer base once you’ve acquired them.
We will explain each major section of the model for greater clarity.
Customer Growth Model Summary
You will notice that the “Grow Customers” section is proportionately larger than the “Get Customers” section and this is by intentional design.
Going back to the seed analogy, a plant that is growing above the ground is more valuable than the seed that was first planted in the ground.
The model above illustrates how nurturing your existing customer base creates value that is larger than new acquisition.
Let’s walk through the flow and demonstrate this.
Establishing and executing the various Marketing & Sales strategies are just the beginning.
A stage that tends to be a contributor to early churn is the Activate stage.
This is a crucial stage in ensuring that your newly acquired customers actually become customers by using your product/services. Depending on your specific industry, that could mean different things; however, this is typically when the customer begins paying for your product/service.
For example, you a technology company that offers free trials for your product.
- 10 customers sign up for the free trial
- The free trial period is 14 days
- After 14 days, 5 customers pay and subscribe for your product and the other 5 drop off
In this example, how many customers did you acquire?
At first glance, the answer would be that you acquired 10 customers and were able to retain 5.
However, if we use the definition of a customer as someone who is generating revenue (billable), the answer is different.
The answer is 5 customers were acquired. The other 5 that dropped off were only part of the Acquire stage and never moved into the Activate stage.
And since they did not generate any revenue, they were never a customer, just a prospect.
Activating customers is where the rubber hits the round as this the beginning of executing your Customer Engagement framework.
As well, this is where both Sales and Customer Success work together to move prospects into paying customers.
In our example of a tech company offering free trials, the engagement process is to create a sense of “I’m going to lose all of this” feeling from prospects.
This is where your benefits and pain-removal needs to shine by holding the customer’s hand and continual validation that your product is meeting their needs, even at a “teaser/trial” level.
The activation phase can be its own article as there are many facets to it and the above example should help give you an idea of the effort level, albeit, scratching the surface.
Meeting customer expectations on the current product/service that they bought from you is the lesson here.
Ensuring you have the appropriate level of customer engagement is crucial to this. Over doing it, you become spam and under doing it, you become irrelevant.
Yes, it’s a balance, but one that produces strong results and reduces churn.
Account Management and Customer Success should be working together to ensure that the customer is successful in using your product and services.
This is more than a customer survey that gets sent out every now and then.
This is partnering with your customer and working with them to ensure that they are realizing the benefits and ROI that they are expecting from you.
What we’ve seen across various industries is that customers end up in this black box where they are left to fend for themselves.
Yes, customers do like self-service; however, they also want the safety net of being able to call their “go-to-person” for anything.
Building and maintaining the relationship happens in this stage. They don’t really know you when they first buy, but they get to know you very well when they start working with you.
Continuing with the seed analogy, this is where the seed opens and the small stalk breaks through the soil.
This is where the little seedling becomes the large strong oak tree. Timing is key for the growth stage.
Firstly, you want to make sure that the current product and service is delivering on your customers’ expectations. If not, you will not be able to gain their trust on the new offering.
Focus on solidifying the basics and then move onto the growth stage.
Moving the customer along requires becoming a trusted source for your customers.
This means that you need to really understand what their priorities are and how your new offering fits within that list.
The opportunity here is for you to share your products and services evolutionary roadmap allowing your customers to visualize how you are going to meet their ever changing needs.
The seed is now growing deep roots as the stalk grows taller. It requires more and more attention and nurturing to gain the strength it needs to withstand any of the elements.
In relation to your business, in the growth stage, your customers are more forgiving around issues and the trust factor is strong, allowing you to present new offers and increasing your share of their wallet.
As noted earlier, the Growth stage of the funnel is larger than the Get stage.
To help illustrate this, let’s use the first example of the 5 customers that we just acquired from the trial period.
- Let’s assume that each newly acquired customer is worth $100
- Let’s assume that each customer in the growth stage is worth $200 – $300
For simplicity, we won’t factor in churn rate and just look at it from a singular view.
A customer that has grown with you is worth at least 2x a newly gained customer.
For a more thorough example of how retention is the basis for sustainable growth, please take a look at our Fixing Leaky Bucket insight article.
The holy grail is reaching the Referral stage. This is the lowest cost of acquiring customers and those customers are usually of the highest value and will reach the Growth stage more quickly.
This is just an illustrative guide for growing your existing customer base. Each of the different areas and stages require substantial work, strategic planning, and total alignment of the different groups within an organization.
Focusing on retention and ensuring that your customers are successful at using your products and services is the foundation to increasing profitability and not just top line revenue.
Reach out to us to learn how we can help you achieve your goals.