I was talking to a prospective client the other day and we got into an interesting conversation about Revenue. The long and short of it was that he felt all revenue was good revenue. I was helping him see a different perspective that is much more in line with the world we live in today. It was such a different way to look at things that he actually suggested I blog about it because as he said, “You need to tell other business owners about this because this is game changing when you get your head around it.” So here’s my post on revenue per our discussion…
It’s actually a pretty straight forward concept when you approach it from a different perspective. And once you see how it works and the potential impact it has on your business, it’s quite an eye-opener.
It’s about being more strategic as a company and defining why you do what you do as a company and who you want to be. When you start with the answers to these questions, you have a clear picture of your business and what you want it to look like well into the future.
The key question to answer is “WHO ARE THE BEST CUSTOMERS THAT CAN GET YOU THERE AS QUICKLY AND PROFITABLY AS POSSIBLE.” This is the most important question a leader can ask his/her team. Someone will always say, “Anyone that is willing to pay us money.” This is absolutely, positively the wrong answer…it worked in the 80s and 90s and maybe 2000s but it’s a dead answer today. And here’s why…
Let’s say you have 6 customer segments that pay you money. Rather than do the traditional 80/20 analysis of which 20% of our customers pay us 80% of our total revenue, approach it from a different angle. Ask your team, “Which of the 6 customer segments we identified would help us achieve our vision and strategy FASTER, MORE EFFICIENTLY, WITH THE GREATEST REVENUE PER CUSTOMER. This is a critically important question because in many situations, it may not be your top customers today!
Now re-prioritize the list starting with the top customer segment you identified that will help you get there…do this all the way down to number 6 on your list. Draw a line under number 3 on the list and cross these last three segments off the list. If you really want to be focused and bold, cross off number 3 as well so you are left with just 2 primary customer segments. These are the top 2 that will get you to your vision and strategy faster and more profitably than any of the other segments. You’re halfway there at this point.
Now comes the hard, yet fun part of the process. This is the most critical step to making this strategy work the way you want…the execution of your strategy. Start by designing a Customer Experience that these 2 Segments (and their Personas) will absolutely love…find incredibly amazing…and can’t wait to tell all their friends…who also happen to be in these two segments. This is the MAGIC FORMULA…you deliver an experience that will get talked about (in person and on social media) and they will tell others JUST LIKE THEM. The part that makes this highly leveraged is the fact that we all know and interact with people like ourselves. So your customers attract other highly desirable (top 2 segments) customers for you…that’s right, they attract and bring them to you…free of charge.
This will transform your business.
Now you and your employees have a huge sense of purpose around why you do what you do and who you do it for. Now you can continue to build on this and create a group of customers that you really want and will help you grow your business faster and more profitably than being “all things to all customers.” For the majority of companies, it simply doesn’t work any longer to serve so many segments that everyone is confused by who you are and who you serve.
As a leader, you should ask “Why do we serve this customer?” If your team can’t tell you how this customer helps you achieve your vision and strategy, fire them. Find the ones that will help you get there and they will love to be on the journey with you…and pay you handsomely for the experience. If all your employees knew exactly why we are serving these customers, they would have purpose, understand why, and be able to truly help them be successful. This formula has never gone out of style…only today, they tell all their friends about you…which happens to be in the thousands thanks to social media.
I like that result…and so did the prospective client. It was eye-opening to think about his business from this perspective. Maybe it will be for you as well…I sincerely hope it will.
