Supporting Double-Digit Growth

By Lain Ehmann

Companies don’t have to resort to voodoo or questionable accounting practices to chart great numbers. Michael Treacy, chief strategist with GEN3 Partners and author of Double Digit Growth (Portfolio, 2003), says businesses that consistently sustain high levels of growth, year-in and year-out, have several common characteristics. “Companies that grow steadily at double-digit rates have a very simple, commonsense management philosophy on how to create growth” says Treacy, in which the sales team plays an important role. The primary way to achieve stellar growth, he says, is simple: Stop shrinking.

“For many, many companies the single biggest opportunity for double-digit growth comes from doing a better job on customer retention,” says Treacy. Just look at the numbers: If your business is experiencing 15% churn yearly and wishes to record 10% growth, that means you actually have to expand 25% to net that 10% growth. But if you can hold on to the customers you have, any expansion you experience is pure gravy.

When it comes to customer retention, forget about loyalty, says Treacy. “Customers buy from you again and again for only one reason – because they feel they’re getting better value,” he explains. The secret to holding your customers, then, is to create a value proposition better than the one offered by other companies. Because you have an existing and hopefully positive relationship, says Treacy, “You’ve got the incumbent advantage.”

In terms of creating value being the incumbent puts you not just one step, but three steps ahead of the competition. First, assuming your relationship with your customers is positive and you’ve done a good job positioning yourself as a partner, you’ve earned some measure of influence over your contacts. Second, as the incumbent you enjoy an economic advantage – your customers would incur the inconvenience and transaction costs involved in changing suppliers were they to break ties with you.

The third – and most neglected – area of incumbent influence, says Treacy, is your access to deeper, more complete customer information than your competitors have. “Few companies actually collect and leverage all the information they have access to,” says Treacy. “Any sales organization can implement a system to gather information about the customer and use it to construct a better value proposition than the next guy.”

Double-digit growth comes down to the basics. Use the relationships you currently have to offer the best value to your existing customers. “It’s purely about winning a competition for better value,” says Treacy.

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