Growth and value. You need both, yet my experience they shows they’re often at odds.
Growth means onboarding a significant amount of new users/customers. Why? To
– gain clout in the market,
– push towards a leadership position,
– play the law of numbers (more users means more paying customers).
It seems like a short view strategy – gain users today to survive tomorrow.
Value means looking to add value and not chasing users. Why? So
– that you add so much value that existing users become fans,
– that you are extracting the most bang for your buck (each user pays a lot),
– that each user today keeps adding revenue in the long run.
It seems like a long view strategy – pay more today to gain even more tomorrow.
Both require their own type of investment. I’ve talked about this before. Each approach has its weaknesses. Growth can mean onboarding users that have no short or long term value (what good is your app if you have 1,000,000 registered users that never use it or spend on it?). Value means you’re spending capital up front for presumed future value, but time and capital are often scarce in organizations.
So which do you chase? Maybe the approach depends on what stage your business is at. I believe there is a five stage cycle in growing a business (I say cycle because once you get to stage five, you need to figure out how to go back to one):
1. Product – figure out your product and product market fit. Without a product you’ll have a hard time making money.
2. Brand – once you have a decent product you can focus on getting known through partnerships, marketing, advertising, etc.
3. Customer – once you’re known you can focus on onboarding customers.
4. Sale – once you have users/customers you can focus on monetizing them. How to get them to pay you.
5. Profit – once you have paying customers you can focus on the ones that add the most value and ignore the lower value ones. This is a Pareto principle thing really.
(A few side notes: once you hit the profit stage you should start thinking of product again (new products, new features, new markets, etc.). Also each stage isn’t mutually exclusive: you can’t ignore product or marketing while focusing on sales…it’s just a question of focus. Finally, I’m sure there are a ton of exceptions that prove the rule – overlapping stages, reversed stages, etc.)
Although, you can “growth strategy” your way through the 5 stages just like you can “value strategy” your way, I think overall, you can see where value works best and where growth works best. Stages two and three are mainly growth focused with a value undertone. That means the investments are really geared towards getting more users, customers, presence, etc. Stages one, four and five are primarily value focused with a growth undertone.
Is the trick then is knowing your plan and were you currently are so you aren’t aimlessly chasing one strategy.
(Photo credit: Susana Fernandez)