An Organic Revenue Growth Protocol

Vic Hunter
Vic Hunter
Vic is founder and president of Hunter Business Group LLC. He is nationally know
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Apr 24 Customer Retention 0 Comment
Organic revenue growth is built on delighting customers. Delighted customers stay active, engage more buyers and products overtime, and yield increased revenue dollars.

Yet, most companies do not begin with a customer centric view of revenue growth.  Most businesses monitor and forecast product lines, channels, and regional performance.  Few, track active customers within meaningful customer segments over time.  This is  Basic Direct Marketing 101- but somehow over time we lose interest in the basics.

An Organic Revenue Growth Protocol begins with retaining and growing active customers. Here is what makes this protocol for organic revenue growth work:

1. Define meaningful customer segments that meet the following criteria
   1.1.   The segments define most of the revenue
   1.2.   The segmentation criteria are available
   1.3.   The segmentation provides a balanced view of the business

2. Define an active customer
   2.1.   Active measured in dollars and / or orders
   2.2.   Active measured in periods of time

3. Count the active customers within segment over each of the past four years
   3.1.   Calculate the average product lines purchased by each set of customers
   3.2.   Calculate the average dollars purchased by each set of customers

4. Gather customer feedback within each segment, segregating into groups by changes in purchases over time
   4.1.   Informed by customers who have defected
   4.2.   Informed by customers who are at risk
   4.3.   Informed by customers who have become more valuable
   4.4.   Informed by new customers

5. Extrapolate out the historical trends within each segment into active customers and revenue that is expected in the next year
   5.1.   Start with the expected active customers
   5.2.   Extend active customers to dollars. CAREFUL: Forecasting based on changes in product line penetration is more dependable than changes in average revenue per customer.

6. Based on the Customer Feedback, set a Plan for the coming year by making informed adjustments to these projections. THE KEY: Each change in the Plan from the extrapolated trends must be documented with informed and actionable assumptions about planned changes in the coming year. The Plan is now defined by:
   6.1.   Planned Active customers within each segment
   6.2.   Planned average product line penetration within each segment
   6.3.   Planned average dollars per customer within each segment
   6.4.   Delineated activities and outcomes that will allow the plan to improve over the expected performance

7. Monthly, each measure is tracked as a 12 month moving average against Plan

8. Activities and outcomes are judged on their impact on Extrapolated to Planned results.
   8.1.   NOTE: Management of At-Risk and Apparent Defectors takes special sales and marketing attention.

Of course, delighted customers at any cost may not be a good practice for a sustainable business model. Therefore, active customers must be periodically measured for their economic value. Investments in “Delight” must then be balanced to the increase in customer value.

Customers are a business’s most valuable asset.  Retention and cultivation of active customers becomes a customer asset acceleration plan.
 
Organic Revenue Growth


About the author

Vic Hunter

Vic is founder and president of Hunter Business Group LLC. He is nationally known for his expertise in business-to-business direct marketing and service to the nation's leading companies.

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