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Identifying the Growth Stall

No matter the size of the company, inevitably a growth stall occurs at some point.  The reasons for this stall can span the entire gamut and breaking through it can seem daunting.

In my experience, there are 3 areas that drive the majority of growth stalls.

Customer Churn.  We all know it is far less costly to keep the customers you have than it is to acquire a new one.  What is it about your product or service that is reducing your retention?  Have your competitors outrun you?  Has your backend service degraded?  Did you, for a short-term cost save, reduce or eliminate customer loyalty to your brand?  If you want net new growth, you need to understand why customers are leaving.

  • I will use a personal example of where I have significantly reduced my repeat purchases and consider myself “no longer brand loyal”.  There is a rather large coffee chain that used to get all of my business.  In the beginning, I saw nominal price increases.  Zero impact on my purchasing behavior.  Next I see that my loyalty program is drastically reduced at the same time they install tipping in the app.  That raised my eyebrows. Lastly a massive cost increase.  The value I used to get from this company has evaporated. And frankly, the coffee isn't that good. So I greatly reduced my spending there.  I bought an espresso machine and have significantly better coffee and cost/value. You would think my significant reduction in spending would trigger some form of outreach to understand why?  Based on my math, and their average ticket, it would take 362 net new transactions per year to make up for the loss of me. Wouldn’t it be cheaper to ask me why I reduced and am on my way to eliminating their product?  I am guessing you can apply the same lens to your customer churn and see why this would be crazy to not want to learn.
  • Ensure you use your data to review the results of your decisions. For every decision, you need to review your customer data to understand what was a triggering event for them to reduce usage or leave entirely.  This enables you to either reverse the hemorrhaging or at least expect it based on the next decision. And why not ask your customers what it would take to come back?

Stagnant Value Proposition. Has your product been refreshed lately?  Have you conducted a real competitive review to see if your product is still at the top?  Have your customer expectations and/or behaviors changed since launch?  All things that are very important to review.

  • You are all tired of this example, I am certain.  But it is the most illustrative example of this issue and it showcases that a value proposition is not just something for advertising copy.  What happened to Blockbuster Video?  They believed their value proposition was superior.  Their price/value was average but their distribution strategy was not aligned to customer expectations among a myriad of other issues. Not stagnating growth, simply gone.
  • Remember when it was a battle between Napster and iTunes?  Now Spotify has double the market share of Apple Music.  Apple had the dominant position but missed the mark on consumer expectations of cost and portability.
  • When you think you are at the top of your game, re-evaluate. The only constant in this world is change.  There will always be a new entrant in the market.  Customers will always expect more.  You can choose to ignore that and perish or embrace it and capitalize on it.

Misaligned KPIs to the Mission/Vision. At almost every company I have worked for, there is a core set of KPIs that are evergreen and then there are flavor-of-the-year KPIs that get inserted to meet near-term objectives.  The most common ones that throw a wrench in growth are cost-cutting KPIs that are teed up as productivity & profitability measures.  The cost-speed-quality triangle is one that needs to be carefully balanced.  If your mission is grounded in quality but 50% of your KPIs just became productivity, you need to evaluate what had to give to make room for those KPIs.

  • The coffee chain I mention above, their mission statement is about human connection yet they are pushing mobile ordering and drive-thru business with KPIs that only focus on productivity.  If I am a store manager and my compensation is at risk based on how many times my screens show red, am I truly focused on creating an environment for human connection? Was anything improved in the environment to enhance that human connection as an offset?
  • Insurance companies sell you a promise.  A promise that in the event something bad happens, you are covered.  But when they encounter a year or two of multi-billion dollar losses, their focus shifts to coverage denial and cost/benefit reduction.  And that cascades through the entire organization.  When a claims representative has a target average claims settlement or speed of claim closure metric to ensure they have a job, the customer is no longer the priority.  And when customers feel that, their loyalty plummets.
  • Not everything can be an “AND” conversation. You cannot simply say “I want a 95 NPS, with 20% growth and I need you all to cut 20% of cost out of the system”.  Really take the time with employees at all levels of your organization to discuss the implications of new KPIs.  Ask them for help and guidance before you simply install a top-of-the-house cost-cutting measure.  In my Servpro venture, my business partner and I were exact opposites; the exemplification of the CMO vs CFO battle.  I would say “you cannot save your way to prosperity” and he would retort with “we can’t spend what we do not have”.  We balanced out and made better decisions for it.  But, as a Founder or CEO, you may not have that confidant that you are bouncing your ideas off of.  And your edicts may cascade through the organization creating massive unintended consequences.

Business is certainly more complicated than I outlined above but, customers are fickle and don't care about your complexity. Without a doubt, yes, there are times when you need to cut the fat out of the system or even focus solely on profitability to stay afloat. But, you need to know the "cost" of the actions you are taking which is not an easy undertaking.

If this is an overwhelming idea, this is what we do for our clients. Want to learn more? Send me a note or visit www.mahdlo.net to read more about what we can do for you.