Which Customers Generate Profitable Growth

In every discussion of organizational growth, we ask two questions about customers: “Who are your best customers?” and “Why do they choose to do business with you?”

Would you be surprised to learn that most companies can’t answer those questions based on any specific data? If they feel comfortable offering an answer it is usually anecdotal. Often, clients define best customers as those who create no hassles—order new product and pay on time—rather than customers that contribute to profitable growth. Many times they don’t know which customers are contributing to profitable growth, and when they figure it out are surprised it is not the ones that they expected.

As far as why those customers are buying, organizations generally rely on their view of their own strengths or sales feedback. Why don’t companies know this information?  Most people inside the organization are interested in doing a good job and that often means keeping things running smoothly. Most companies don’t have a department called “growth” or “profitability” so the job becomes the task rather than the outcome.

Organizations that establish accountability by tasks rather than outcome, are less likely to collect robust market data about their outcomes beyond financial metrics such as revenue and profit. Understanding which customers generate profitable growth and why they become loyal to the business is essential to high performance and stability.

You often hear me talk about thinking “outside-in” rather than “inside-out”. Businesses that are run with the market in mind and focus on producing outcomes are much more likely to achieve their goals and experience profitable growth on a regular basis.

If you are going to start thinking “outside-in” and answering the two key questions above, what do you need to know about the customer? Here is a link to a previously published blog that identifies 14 things that every business should know about its customers.

Hope you enjoy it!

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