We are all besieged by advertisements where a company is trying to gain new customers by
Wow, what a slap in the face to the existing customers who have been loyal for years only to find out that the extra fees they have been paying are now going to augment a discount to new customers only.
We get it, it’s 2022 going into 2023, the world has changed, and things are moving forward. Businesses have accepted the new normal and are evolving their approach to business. As they do that, the typical pressure will be on generating revenues, profit, and cash flow.
In our advanced Advantexe Business Acumen programs, we teach a concept called the Revenue Growth strategy framework. In this simple framework, there are two axes, your customers and your products/services. When you lay it out in a matrix, it presents you with some interesting strategic dynamics. For example, when you are looking to grow your revenues, the easiest and most profitable way is to sell more of your existing products to your existing customers.
The next most profitable is to sell new products to existing customers. It’s harder work and you need to be able to understand the needs of your customers and present to them a value proposition that solves their needs with a new approach and new products/services that didn’t previously exist.
Another way of generating new revenues is to develop new customers. You can do this in two ways; sell existing products to new customers or sell new products to new customers. Both a less profitable because of the R&D and Marketing expenses associated with bringing in new customers but over the long term, new customers will turn into existing customers if you treat them well and deliver on your value proposition.
The wrong way is to discount your way to more revenues. This is a mistake for 3 reasons:
In summary, the temptation to discount your prices to acquire new customers and generate more revenue is overwhelming. It seems like everyone does it. The advice from here is don’t do it. It is simply not an effective approach, especially if your overall strategy of one of customer intimacy or product leadership.