Growth is an infinite game, with the revenue line limited only by your ability to convince new or existing customers to buy the products or services you currently or will produce.
Ever think about how to bound the question of growth? Iâm a growth strategist, so I worry quite a bit about the sources of growth. Where does growth come from?
Turns out the question has a simple answer.
All revenues come from two variables: (1) customers and (2) the goods/services they buy. Full stop. Itâs really that simple: who buys and what they buy. Every business, from the first fish seller bartering his daily catch for salt to the worldâs biggest consumer goods company, grapples with these two fundamental questions. Letâs talk about customers first.
Customers
There are all kinds of customers and they have different values to companies when considered over a time period.
Kevin Watters is blazing fast in every sense. Physically, heâs a marathoner who is a top competitor for his age group. He processes information quickly and insightfully. He is quick to offer his help, and his fastâtracked career is an incredible success story. Currently retired and an adjunct professor at Tulaneâs Freeman School of Business, Kevin started his career in consumer packaged goods working for Proctor & Gamble, where he received his âMBA on top of an MBAâ through their training program. He then went on to dip his toe in entrepreneurial waters, got married to his amazing wife, Fern, had their first child, and then he needed to go back into the corporate world. He found his way into the world of online banking in 1999 and never looked back. He joined Bank One, and was noticed by Jamie Dimon, who asked him to take over as President of their Consumer Internet Group. From there Kevin took over wholesale banking. When Bank One was acquired by JPMorgan Chase, he took over as CEO of business banking and grew it to over a billionâdollar business. Being one of the few businesses that managed credit well through the Great Recession, he was asked to fix the wreckage that was the mortgage portfolio, which he did. In his final role at JPMorgan Chase, Kevin took over as CEO of their credit card business. We talked about the true value of customers in the world of financial services.
I loved the insight Kevinâs example gave. This is just one industry. Every industry and business has their own version of this.
As strategists, there are a few important things to consider when you think about customers that I want to talk a bit about. Some basic rules of thumb:
- All money comes from your customers.
- All customers are not equal.
- Customers buy differently.
All Money Comes from Your Customers
Sounds obvious, but unless you are a business owner, or tasked with topâline growth, it is very easy for businesses to lose sight of this simple fact. Why? Because you get wrapped up in your everyday work process, and you canât see the clear link between your customers and your paycheck. At Starbucks, itâs easy to see how customers fuel the business. Itâs a direct transaction: A customer orders a latte, swipes a card, and gets a latte. Any employee can see how that customer relates to their paycheck.
However, in some industries there are indirect customers whom you serve. Healthcare is a great example. Depending on where you live in the world, most providers are reimbursed from either a public or private âpayerâ (insurance company). Money doesnât come from patients, right? Well, ultimately, Medicare, Medicaid, and military insurance programs are funded through tax dollars. In those public programs, taxes come from the countryâs citizens, who are, effectively, its customers. Private insurers are paid by employers or individuals, so even though itâs indirect, the customer still pays the bills. These are extreme examples, but you get the point.
We also have many clients who worry about their customerâs customer. That is, letâs say you manufacture a radio component that is part of the Tesla system. You arenât really designing functionality for Tesla; you are designing for Tesla owners (the end users) or your customerâs customer. So even though your bills are paid by Tesla, without Teslaâs customer base you wonât get paid for very long. That means you likely work to understand the end userâs wants and needs. As we consider the source of all revenue â our customers â we have to be sensitive to the indirect trail that the money may flow through.
All Customers Are Not Equal
Every business has preferred customers. Starbucks has their regular early morning work crowd, and they also happen to serve any outâofâtown tourists who strolled in that day. Amazon has major named accounts that spend billions with their Amazon Web Services (AWS) business, and they have Cliff Farrah, who spends a whole bunch during the holidays, but is otherwise pretty much a nonâevent to their business. All customers are not equal. As a strategist itâs important to understand and grow the best sources of our revenue and make sure we are focused on them.
Customers Buy Differently
Not every customer acquires in the same way. Some pay cash, others use credit. Some want to own, some want to rent. Some pay by the month, some pay by the drink. As strategists, we have to make it easy for all our different customers to provide us with revenue.
Now letâs shift to the second question: What do the customers buy?
Goods and Services
If all money flows from customers, what they buy is driven by the goods and services that you offer. There are some great books about how to market and sell goods and services, and the experts weâve interviewed throughout this book will give you real insight into best practices to maximize growth, but before we go swim in the deep end, Iâd like to make sure we are aligned on some basic thoughts about goods and services and why they are procured.
- Some goods and services fill a market need; many fill a want.
- Goods and services are definable, measurable offerings.
- They are things that can be valued.
Some Goods and Services Fill a Market Need: Many Fill a Want
As a formally trained economist, I still think in terms of utility and supply and demand. These principles are based on having something of value that is sought in the market. There are lots of ways that products are created, and we talk about a number of examples later in the book, but at the end of the day, we buy things that we need (food, water, shelter, clothing), and things that we want, but donât really need. Sometimes itâs a want that is strong enough to make them frivolously spend money. Letâs face it, the latest AirPods Pro arenât a need, but nutritious food is. We donât have to have ice cream cones, but we do need clean water. Wants have very different challenges in driving growth than needs. Realize what you are offering as you consider how to grow.
Goods and Services Are Definable, Measurable Offerings
In order to transact, you have to be able to bound your offering. People need to know what they are getting for what they are paying. In some markets this is pretty straightforward. You go to a shoe store and buy a pair of shoes. Definable/measurable. When you get into serv...