Craig Apatov / Strategic Marketing Practice Leader
“If a window of opportunity appears, don’t pull down the shade.” – Tom Peters
Business is about offense and offense in business is about generating revenue.
That said, revenue is about demand and demand is all about marketing. This is because before someone buys something (sales), they first have to want it and that’s what marketing does… communicate and drive demand. Marketing must be, therefore, the relentless pursuit of revenue – getting more people….to buy more…more often!
$ = More Customers + More Purchases + More Often
Astute strategic marketers, therefore, look at three key vital metrics in their planning and accountability processes:
- Net Customer Growth (more customers)
- Revenue-Per-Customer (more purchases)
- Frequency of purchase (more often)
$ = Net Customers (acquisition minus attrition) x Revenue/Customer x Frequency of Purchase
Of these, the most important is Net Customer Growth.
Net Customer Growth is the difference between new customer acquisition and customer attrition. Without sustained net customer growth, there is no sustainable business. All too often, businesses focus on new customer acquisition but pay less attention to the “hole in the bucket” – customer attrition.
It matters little whether a company is acquiring customers at a robust rate, if it is losing as many or more than it acquires.
Take America Online (AOL), for example.
In 2001, the number of dial-up subscribers was growing. Growth, however, plateaued by mid-2002 and then began a slow, yet precipitous decline due to competition from new internet service providers (ISPs) and the marketplace transition to broadband access despite an aggressive customer acquisition plan.
Simply put, AOL had a large and expanding hole in their bucket. The company’s rate of acquisition was being out-paced by its rate of attrition, their efforts misplaced. While AOL tried to acquire more dial-up customers many were choosing faster or cheaper web access alternatives. In the end AOL was never able to recover its position as the most dominant online player.
It is said that it costs five times more to acquire a new customer than to retain an existing customer. Acquiring customers may be expensive, but losing customers is the most costly mistake most companies can make. As AOL painfully learned, this can eventually become a futile and expensive exercise.
Revenue Per Customer is simply total revenue divided by the number of customers over any given fiscal period. If this trend is static or declining, it means margins are eroding as the cost of doing business increases over the same period.
Frequency is how often customers purchase your product or service. Greater frequency means greater revenue. Less frequency likely means customers are taking their business elsewhere.
Again, marketing is getting more people… to buy more things… more often.
This requires a smart organization which has four key disciplines – vigilance, curiosity, recognition, and imagination.
Vigilance is a prerequisite of success, since things change and change relentlessly. What was nothing yesterday, is something today, and could be significant tomorrow.
More often than not, however, industries are incestual – vigilant only of their own performance and that of their direct competitors. The competitive threat to many brick and mortar businesses, for example, was not other brick and mortar businesses, it was the internet. The competitive threat to typewriters was not better typewriters, it was word-processing and ultimately the personal computer.
“We keep moving forward, opening new doors, and doing new things, because we’re curious and curiosity keeps leading us down new paths.” – Walt Disney
Curiosity, by definition, is “a strong desire to know or learn something”. The old adage, “necessity is the mother of invention” is just that, an old adage.
Today, curiosity is the mother of innovation. Curiosity is about posing questions:
– Why is this happening?
– Is it important in the scheme of things?
– Is anybody else doing this, and if so, how are they doing it?
– Can we do it better, faster, more efficiently?
– Should we do this at all?
– If we do, what are the benefits, and if we don’t what are the consequences?
Smart, strategic enterprises recognize opportunities and threats. This is different than just being aware. Note awareness is passive while recognition is assertive. One can be aware of a situation, but not recognize its significance.
Brick and mortar businesses, for example, were aware of the internet, but did not recognize the impact on their respective business models….often until it was too late!
It’s the classic “coulda, woulda, shoulda” expressed in 20/20 hindsight – companies that were aware but did not recognize the need to take action until it was too little, too late…too bad.
“Imagination is more important than knowledge.” – Albert Einstein
Information must be distilled into knowledge; further distilled to intelligence; and still further distilled to proprietary insights.
Insights are the fertile ground of imagination and imagination is the incubator of innovation. It is not important just to know something; a company must know something that the competition doesn’t know. With proprietary insights, an enterprise must be able to imagine the new, the different, the ultimate game changer – something that gives the enterprise the competitive advantage.
“Action speaks louder than words but not nearly as often.” – Mark Twain
All the planning in the world is irrelevant if proper strategic and tactical actions are not taken to capitalize in a timely manner. Some companies not only have difficulty “pulling the trigger”, they have trouble simply “getting the gun out of the holster”.
In summary, astute and successful companies are the ones that always have their focus on aggressively moving forward. They believe playing defense only delays the inevitable which is ultimately losing competitive advantage. The best performing organizations are always re-examining their competition and war gaming their own business plans. They look for chinks in their organizational armor and they never get complacent.
As former CEO of Intel Andy Grove once said “Only the Paranoid Survive”!