We recently spoke at an event for startup founders about forecasting realistic customer growth. At the end of the talk, a founder asked: “what is the top priority to maximise customer growth?”

This is a very valid question and in our experience, it’s not asked enough. 8/10 times, the conversation with a startup founder focusses only on questions like “is my budget better spent on Facebook ads or PR?” Essentially, “how can I get in front of the most people?”.

It’s easy to see why filling the top of the funnel as fast as possible is often the priority. Both investors and the competition encourage a “grow at all costs” mentality. It’s much less common that we get questions about keeping customers happy, and this is a problem. While on the surface it might look great to have acquired a tonne of new customers, when you dig deeper and look at the profits, that falls away fast.

Take the on-demand cleaning start-up Homejoy, for example. After starting out with a period of explosive growth, they abruptly collapsed after 2 years. Amongst a slew of other factors, a fundamental contributor was poor product-market fit. It pushed up the cost of acquisition and heavily affected their profits. Focussing on growth above all else meant that any efforts to address retention fell to the wayside. There’s a great article which goes into more detail about it here.

Rather than thinking about marketing as just piling leads into the top of the funnel, startup founders should think about the entire customer lifecycle. To illustrate this idea, here’s the difference in output when the top of the funnel is prioritised compared to the bottom of the funnel.


A useful framework to support this thinking replaces the idea of “marketing” with that of a “growth engine”.

What is a growth engine?


This video was recorded at a WeWork Labs event for startup founders.

Much like an engine consists of a number of parts that work together efficiently to convert fuel into motion, the growth engine components also work collectively, to convert prospects (the fuel) effectively into sustainable growth (forward motion).

Here’s a brief overview of each part of the engine.

1. The customer success component

Whilst it’s tempting to give more attention to prospective customers, making sure existing customers value your product or service should always be the first priority. If your customers aren’t successful, you won’t survive. Your customers are the ones who will become your advocates and help you grow; a paid search campaign alone isn’t nearly as impactful. Finally, your customers will provide insights to refine your growth strategy and improve product-market fit.

2. The lead generation component

We’ve seen a lot of approaches to lead generation that follow the spray and pray philosophy (although it’s never admitted). By leveraging insights from customers, personas can be validated and improved upon. That means more accurate targetting and lower acquisition costs. In other words, fewer, but highly qualified leads are more likely to convert and turn into successful customers.

3. The customer conversion component

Freshly generated leads are not always ready to buy. For the best chance of converting into them into customers, they need to be kept engaged through messages that resonate with them and their buyer journey stage. It’s amazing how often this function is covered by just a sales team with a limited capacity to manage the needs of each lead. By using insights from the customer success component, the right tactics and messages can be used.

None of these individual concepts are new, but thinking of them together as a growth engine promotes joined-up thinking. If you can fluidly connect each of the 3 components, you have a much better chance of growing your customer base and increasing customer lifetime value. Here’s that diagram again:



 

How to move towards the growth engine model


Anything worth having takes time. Transitioning to a growth engine model requires a commitment to undertake two fundamental long-term projects. To balance that and help build momentum, here are some quick win suggestions too.

Fundamentals: Long-term projects

Implement a flexible CRM:

In an ideal world, a CRM holds all relevant customer and lead data. It should map basic behavioural information like site visits, email opens, ad clicks and video plays to a contact. For this to happen, it must have tight integrations with all relevant touchpoints (that’s where an open API becomes very important). This information builds a strong picture of where a contact is on the buyer journey and therefore how best to interact with them.

Most importantly, a CRM tracks the transition of leads into customers. This facilitates accurate attribution and the CRM can be mined for insights and trends. A CRM only needs to be as sophisticated as your business; there are plenty of free or low-cost options. We like HubSpot and Salesforce.

Validate personas:

It's common sense to understand the people you’re trying to sell to. It’s also remarkable how often this is lacking, considering it underpins the entire messaging and positioning strategy.

Identifying the traits and drivers of your best customers so you can find more of them is a piece of live research to regularly add to. A well-maintained CRM comes in mighty handy for running this kind of analysis. Once you have a list of objective demographic and behavioural characteristics of successful customers, you can apply them further up the funnel to target, score and qualify leads.

Quick wins: short-term projects

Set up a review programme:

Online reviews have a high impact on sales. Set up a simple automated email asking customers to leave you a review on your chosen platform.

Assign personas to new leads:

If you already have a good sense of your personas, you can ask leads to self-identify through a form or chatbot. For example, add a field asking “What is your biggest challenge?” and provide pre-set answers which correspond to different personas. Then tailor the follow-up using the new persona knowledge.

Collect customer feedback:

Set up a pop-up survey visible only to customers on the website or in-app to take a quick pulse check. Limit to 3 closed-ended questions. More about website survey best practice here.

Find out why customers leave:

Ask customers to provide a reason for leaving your product/ service. An automated email will work, or it can be built into the subscription cancellation process.