Maximizing Growth Opportunities with Your Current Customers
There are two ways to grow your business. The first is by acquiring new customers. The second is retaining your current customers and increasing their ongoing revenue stream.
Many companies focus their strategic marketing initiatives on finding new markets, new customers, and new applications for their current product offerings. While this focus is essential, many companies lose sight of their best growth opportunities … their current customers. Current customers allow you to grow your revenue without the increased costs associated with new client acquisition activities.
According to Marketing Metrics, increasing customer retention by five percent can increase profits between 25 and 95 percent. Providing exceptional customer service that creates long-term and loyal customers is a sound strategy to grow your business. Upselling or cross-selling current customers is significantly more effective and cost-efficient than securing new clients.
Here are eight ideas to get you started:
1. Create a list of your customers and determine their growth profile
It is essential to understand the importance of each customer based on their revenue volume, margin level, and growth opportunity. Understanding your customers’ growth profile helps determine their significance to your organization. This lets you choose how to focus your sales and marketing efforts on each customer.
I consulted for a B2B services provider to improve their customer support performance levels. They needed a strategy to service their customers based on their customer profile. They were providing the same level of service to all of their customers regardless of volume, price quality, or growth potential. They could develop support programs explicitly based on different customer profiles by plotting their customers within different growth quadrants. This initiative improved their customer support capabilities without increasing overall support costs.
2. Plot Your Customers within the Growth Profile Quadrants
Once you have determined your customer growth profile, the next step is to place each customer in one of four quadrants based on how you want to market and sell to them. The quadrants are as follows:
Quadrant #1 – Managed Customers
Customers that are your best “bread & butter.”
- They have higher than average volume but lower than average margins
- They are good customers that are consistent and easy to work with
- They don’t have substantial growth opportunities, but they help “keep the lights on.”
With these customers, your strategy should be:
- Keep them happy (continue to provide a high level of service)
- Provide other incentives to lock them in for a more extended period
- Work to improve the margins of this business
- See if you can move up or down their value chain to find other opportunities within the account
Quadrant #2 – Milk or Fire Customers
- Customers with low volume and low margin
- Demanding customers that are many times “not worth the effort”
With these customers, your strategy should be:
- Implement a price increase to increase margins
- Reduce service efforts
- Minimal sales efforts
- Selectively/strategically “fire” them if necessary once your capacity is fully loaded
Quadrant #3 – Growth Customers
- Customers that have lower-than-average volumes
- Customers that have higher-than-average margins
- Customers where you think we might be able to grow their future business
With these customers, your strategy should be:
- Increase the Sales focus
- Increase Marketing Efforts
- Increase pricing incentives or tiered discounts to grow the business
- See if we can move up or down their value chain to find other opportunities within the account
Quadrant #4 – Platinum Customers
- Customers that have higher-than-average volumes
- Customers that have higher-than-average margins
- Customers that have higher-than-average growth opportunities
With these customers, your strategy should be:
- Name them as “Strategic Accounts” and let them know their premium importance
- Top Sales Level – provide them with an “Executive Sponsor.”
- Provide Premium Level Service
- Perform Quarterly NPS Surveying to ensure their satisfaction
- Increase your marketing touchpoints
- Schedule regular Senior Management Contacts
- Schedule regular Collaboration Meetings
- Look to develop Long Term Contracts
- Increase pricing incentives or tiered discounts to grow the business
- See if we can move up or down their value chain to find other opportunities within the account
3. Expand your product and service offerings
Your customers and their needs constantly evolve. Therefore, so should your product and service offerings. Focus on your customers’ long-term needs. Be aware of industry trends that will enable you to anticipate their future needs and position your company to service them.
I worked with a client that had an aging product line. It no longer offered the same value to its ideal client as it had in the past. They needed to keep up with the industry trends. However, they were lucky that they spotted the trend early. Fortunately, they developed new features to regain customer traction and improve sales. They then implemented a process to perform regular product offering audits to ensure that their product was always on the lead edge of industry trends.
This methodology will allow your company to be first-to-market and a potential industry disruptor.
4. Move Up the Value Chain
All businesses operate along some value chain. Your business is somewhere along the value chain, from suppliers to distributors to marketing and sales. Moving up the value chain involves identifying ways to take over more of the customer’s processes. From the customer’s perspective, moving to higher- and higher-value work makes it possible to command a higher margin. Moreover, customers often see this higher-value work as more “strategic,” allowing its provider to move from a commodity supplier to a trusted advisor.
5. Move Down the Value Chain
Instead of accepting the conventional wisdom, some companies should consider taking a different path and moving down the value chain. What is the value of this strategy? It can help you make your operations more effective by developing organizational efficiencies to manage the lower-margin sales segments. In addition to improved efficiencies, moving down the value chain can open new ways to grow. Most importantly, it can help you defend against attacks from below. Often, your competitors are the firms honing their capabilities by operating in low-end markets. They can move up the value chain as they learn the skills.
**Maximizing Revenue Growth Through Value Chain Positioning Strategies**
In today’s competitive business landscape, companies are constantly seeking ways to maximize revenue growth and gain a competitive edge. One effective strategy that businesses can leverage is positioning their products and services up or down the value chain. By moving down the value chain, companies can defend themselves from new players seeking to attract their prized customers. This strategic approach can lead to significant revenue growth with minimal effort, making it a valuable tool for businesses looking to renew their revenue streams.
### 1. Understanding Value Chain Positioning
Value chain positioning refers to the strategic placement of products and services within the value chain. The value chain encompasses all the activities involved in the production and delivery of a product or service, from raw materials sourcing to customer delivery. By strategically positioning products and services along the value chain, companies can enhance their competitive advantage and capture more value from their offerings.
### 2. Leveraging Downstream Opportunities
Moving down the value chain involves exploring opportunities to provide additional services or products that complement existing offerings. This strategy allows companies to capture more value from their customer base and strengthen customer loyalty. By expanding into downstream activities, companies can create new revenue streams and differentiate themselves from competitors.
One example of leveraging downstream opportunities is bundling services together. By selling customers a package of complementary products or services, companies can increase customer retention and lock in recurring revenue. This bundling strategy can create a sticky customer base, making it harder for customers to switch to competitors.
### 3. Case Study: The Power of Bundled Services
A client in the hardware industry realized that their customers were purchasing hardware from them but sourcing installation and maintenance services from other suppliers. By developing an aftermarket services division, the client was able to offer a complete service package to their customers, leading to a significant increase in both revenues and profit margins. This bundling strategy not only enhanced customer satisfaction but also created a recurring revenue stream for the client.
### 4. Capitalizing on Customer Relationships
Staying in regular touch with customers is essential for maximizing revenue growth. By maintaining open communication channels and engaging with customers through various channels, companies can strengthen relationships and drive repeat business. Regular communication through websites, social media, and email marketing can keep customers informed and engaged, leading to increased brand loyalty and customer retention.
### 5. Case Study: Thought Leadership Campaign
A client in the predictive maintenance services sector implemented a thought leadership campaign to enhance their brand positioning and lead generation activities. By sharing industry insights and expertise, the client was able to attract new customers and increase annual revenue by over 15% within two years. Thought leadership can be a powerful strategy for building brand equity and attracting ideal customers.
### 6. Establishing a Customer Referral Program
Customer referrals are a highly effective but often overlooked strategy for driving revenue growth. Research shows that customers acquired through referrals have a higher retention rate, making them valuable assets for businesses. By creating a formal referral program, companies can harness the power of word-of-mouth marketing and turn satisfied customers into brand ambassadors.
### 7. Conclusion
In conclusion, positioning products and services up or down the value chain can be a strategic way to maximize revenue growth and defend against new competitors. By leveraging downstream opportunities, staying connected with customers, and implementing referral programs, companies can drive sustainable revenue growth and strengthen their market position. It’s essential for businesses to focus on their existing customer base and explore innovative ways to capture more value from their offerings.
**FAQs**
1. How can companies benefit from moving down the value chain?
Moving down the value chain allows companies to defend themselves from new competitors and capture more value from their customer base. By expanding into downstream activities, companies can create new revenue streams and differentiate themselves in the market.
2. What are some examples of downstream opportunities?
Bundling services together, staying in touch with customers, and implementing customer referral programs are examples of downstream opportunities that can drive revenue growth and enhance customer loyalty.
**In conclusion, positioning products and services up or down the value chain is a strategic approach that can lead to significant revenue growth and competitive advantage. By leveraging downstream opportunities, staying connected with customers, and implementing referral programs, companies can drive sustainable revenue growth and strengthen their market position. It’s crucial for businesses to focus on their existing customer base and explore innovative ways to maximize revenue growth.** Title: The Rise of Remote Work: How Technology is Changing the Way We Work
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