Few executives realize how much the value of their company depends on profitable growth. In healthcare companies, for example, market expectations of revenue increases account for 58 percent of market capitalization. In consumer products, it’s 42 percent. In fact, generating meaningful revenue gains in a 12 to 18 month period is proven to be the single best route to a) get more love from Wall Street, and b) improve the odds for long-term growth down the line.
In our experience, the most fruitful way to achieve rapid revenue gains is to radically rethink the way you connect with your customers. Customer needs, perceptions and motivations hold the key to answering the two questions that should drive every growth strategy: “Where to play?” and “How to win?” These two questions determine where a company can create lasting customer value and how to deliver it. Today’s competitive realities demand that the search for these answers shouldn’t be limited to customer research and the sales team. Creating customer value should inform all your growth efforts, starting now.
Why quick wins count
While companies love to promise consistent, predictable and profitable sales gains to shareholders, very few deliver them. A study from Columbia University analyzed results from close to 4,800 companies. Only 4 percent managed to increase net income by at least 5 percent for five consecutive years. The odds of consistent success improve dramatically for companies who deliver in the first two years.
What’s more, long-term strategies are often time and capital intensive. Reconfiguring an innovation pipeline can take years and require hefty spending on research & development. Restructuring is no panacea either. Making the transition to new organizational models to eliminate inefficiencies and become closer to the market is an uneven and difficult endeavor that takes time to produce results.
Successful growth leaders don’t rely solely on long term-strategies. At Prophet, we’ve found that you can make immediate impact by unlocking customer insights you already have to quickly deliver new ways to improve the experience, smarten communications and sharpen your selling strategies.
Sniffing out speedy sales gains
Pressured to increase short-term results, most organizations have become adept at cutting costs or using consultants to find hidden efficiencies. We’ve found that when senior executives free line managers to look for opportunities to exploit customer motivations, they embrace the change readily and are excited to uncover a much wider set of rapid deployment growth moves. How can you sell more to your best customers, right now? Raise prices in certain portions of your portfolio? Is there a quick and small improvement you can make to your best seller? A shift in your marketing mix? Is there a way to boost sales of an already-hot product line?
Although line managers are usually willing to embrace a wider set of growth moves it’s still a big shift to systematically uncover, evaluate and execute against growth opportunities. The key? Switching the focus to customer needs, desires and motivations. Try asking…
What does my audience really want?
When Gatorade uncovered that it was losing its edge among hard-core athletes it took immediate action by launching the successful G series, focused on performance hydration. Brunswick discovered that new boating habits and fuel efficiency concerns were driving dissatisfaction with the current engines. Its Mercury Marine Division responded within 18 months, launching a low-weight, high performance engine that delighted its customers. Colgate was able to identify the trend to teeth whitening solutions early. It developed its Optic White toothpaste, one of its biggest successes in more than a decade, in just nine months.
How can I get customers to see me in a new way?
Large financial service companies have millions of customer relationships. But only a select few have managed to convince more than a tiny percentage of their customers to buy more than a handful of the products that they offer. Banks struggle to convince customers who rely on their investment expertise to turn to them for insurance. Insurance companies struggle to sell annuities and mutual funds. Wells Fargo has overcome these limitations to achieve outstanding success in cross selling their portfolio. They have built the perception of wider expertise by concentrating on customer needs at different stages in their lives. USAA has built expertise in understanding and meeting the needs of service men and women and their families instead of expertise in a single product. USAA’s customer loyalty and satisfaction are highest in the industry.
Can I change how I sell?
Sometimes customers don’t need a new or improved product—just a better way to buy it. Avery Dennison, the label maker, found itself increasingly commoditized, bidding for contracts with distributors almost solely on price. In ten months it created segment teams to focus on a different set of buyers, packaging engineers and marketers at the large end customer companies such as Coke or L’Oreal. These engineers and marketers wanted value-added labels that could enhance their products on shelf. They wanted to make purchases based on quality, not price. By reaching out to them Avery Dennison increased unit sales and margins by participating in the part of the market that was driven by value not low price.
These examples of rapid growth moves share a common theme – they all stem from a deeper understanding of customer motivations—the underlying (and often hidden) triggers of consideration and purchase. When customer needs, wants and perceptions define the battlegrounds, new opportunities often emerge, and existing markets are defined more clearly. That makes it easier to target more effectively, create shopping experiences that are more engaging and use marketing and sales tools that are more persuasive.
Goose your company’s strategy-development process
Something else these companies have in common – regardless of size and complexity – their leaders recognize that today’s marketplace requires quick decisions.
They give line managers more authority to develop growth strategies and carry them out. These in-the-trenches leaders ask more practical questions than typical strategists and place greater emphasis on using the assets they already have. They are primarily concerned with improving performance in categories and among consumers where they already compete.
These companies have found that the old strategy development model, where strategists and management consultants determined “where to play” and then handed over resolving “how to win” to division leaders, is simply too time consuming and prone to breakdowns in the hand-off from strategy to implementation.
Of course, excessive emphasis on tactical gains or letting short-term results dictate strategic decisions is a bad idea, distracting companies and brands from their core values. But given the rapid pace of innovation and intensifying competition, growth leaders need to make changes to drive success both today and tomorrow. Unlocking and exploiting customer insights and motivations won’t just power short-term gains. It will also better shape long-range strategies, making your company more responsive to key audiences next quarter, next year, and in five years.