May 23, 2018
Are you Missing Out on These Four Opportunities for Growth?
Company growth strategies run the gamut from entering new markets and developing new products to reducing supply chain costs and increasing profit margins. Most often, companies are so focused on over-the-fence opportunities that they don’t see the goldmine of opportunity inside their own existing customer base. These are the best kinds of opportunities – low risk, backed by data, qualitative, and easily scalable for the long term.
Part of the reason companies can overlook a home field advantage is that they are basing their growth strategy on emotion and assumption. Emotions cloud judgment and assumptions can hold you back. We have a saying around here, “Data don’t lie.” Sometimes data reveals a necessary wake-up call companies don’t want to address. But mostly, when you know where to look, it reveals low-hanging fruit that can drive profitable growth with remarkable results.
Following are four of the top missed opportunities we often identify within companies after a data-driven diagnostic review.
Missed Opportunity No. 1: Customer Defection
Have you calculated your annual customer defection rate lately? Customer defection is the number and the percentage of customers you lose each year – they cancel service, go to a competitor, go radio silent. It is sometimes easy for a company to rationalize these losses by saying these customers were not a good fit; the lost revenue will be easy to replace, or it was an uncontrollable loss. But once you see the true impact these losses have on your revenue, it may be time to look for patterns that show a lapse in quality, difficult customer service, confusing communication, sales neglect and more. The bad news –you may have driven them away. The good news – you can invest in improvements and make a double-digit difference by reducing the defect rate in the future.
Missed Opportunity No. 2: Customer Decline
Like defection, customer decline represents a revenue loss. Unlike defection, it is more of a warning sign than an actual goodbye. Data can show us how they decline: some may stop buying partway through the year, some just decrease their buying frequency, some stop buying particular product categories, while others may start buying different products from you. Understanding the nature of customer decline can be a step toward understanding how to repair the relationship. If a customer is buying less of one product, they could have changing needs that you can address with a different product, or they could be buying from your competition. If you flip the analysis to look across product lines instead of customers, you may be able to spot areas that an extra effort from the sales force is needed.
Missed Opportunity No. 3: Retained Customer Growth
Building upon a revenue analysis of customer decline, now look at the positive of retained customer growth. How are existing customers increasing their spending with you and why? What percentage of your customers increased their spending in the past year? What percentage of your revenue does the growth represent? Next, look at the profile of the customers that are growing. If you can understand where the growth is concentrated – industry segments, company size, specific product category buyers, etc. – you can create a target customer profile to replicate that growth.
Missed Opportunity No. 4: New Customer Acquisition Ratio
Now that you know which clients you don’t want to lose, which clients could buy more, and how you can improve internal quality processes, it is time to think realistically about the percentage of business you want from new customer acquisition. Many businesses don’t realize how many new customers they need to acquire to stay even. The purpose of this exercise is to ensure that the new customers are incremental growth, not just an offset for lost business. Start by identifying the profile of an ideal new customer, then set a goal, and build targeting strategies and processes to achieve it.
Every day you are faced with competitors who rise and fall, increasing market threats, and the constant evolution of what customers are buying and how they want to buy it. Take a deeper, more honest dive into the state of your current business. The result will be data-driven strategies that help you go to market smarter with trust, quality, and sustainable, profitable growth in mind.