By Jessica Bubenheim, on 14 February 2018
80% of new leads never translate into sales. But, companies that excel at lead nurturing generate 50% more SQLs (sales qualified leads) at a 33% lower cost. To get, keep, and grow customers it takes a holistic analysis of your product market fit, customer relations and customer channels.
In this article we'll dive into each of these actions and explain how you can begin to get, keep, and grow customers.
Basic Building Blocks
Let’s begin with the basics, starting with The Business Model Canvas. Alex Osterwalder’s Business Model Canvas is used globally to describe, design, challenge, and pivot your business model.
For marketers, the most relevant sections spans from value proposition to customer segments and everything in between. This article will touch on all 4 of these components (value propositions, customer segments, channels, and customer relationships) and how the get-keep-grow funnel can be applied to each.
Before diving straight into the customer journey, it's important to ensure that you are clear on your product's value proposition. Albert Einstein said, “If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”
Do you have a solid understanding of your customer's problem? Is it clear how your products and services serve as a solution for your customers? Determine if your product or service is a gain creator or pain reliever. The following questions will help you better understand your products value proposition and therefore help you understand your customer journey of your buyer persona.
Pain Reliever Questions:
- What will your products or service reduce or eliminate? Wasted time? Costs? Negative emotions? Risks? Answer this: Do you produce savings? Do customers feel better using your services, how? Are you fixing bad solutions? Do you impact social consequences? Do you eliminate risk for your customer?
- How do your painkillers rank? On a list of your customer's top concerns, is your product reliving pain point #1 or #50? Most human beings only tend to worry about their top 3-5 problems. When identifying your product as a pain reliever, put pain in context of other pain points customers have. Do you understand the intensity and frequency of your customer problem? How important are the pain relievers you are providing in the list of overall customer needs?
Gain Creator Questions:
- What makes your customer happy? Saving time? Saving money? Less effort? Better outcomes? Delight? Answer this: Does your offering exceed current solutions? How does your offering make the customers job or life easier? Are the further positive consequences created by your offering?
- How do your gain creators rank? Do you know how each of your product and services create gains? How do these gains rank according to customer relevance?
Having an answer to these questions will allow you to better step into your prospective customer's shoes and understand why they would choose your brand.
Customer Segments allow us to understand the buyer persona. Here we put complete focus on the customer- not the product. Remember, customers don't exist to buy from you. You exist for them. Understanding the customer segments section requires emphasis on “Who is your customer?” and “Why would they buy from you?”
Figuring out your niche and understanding why you are the best fit to serve this specific niche makes it extremely easy to promote and then sell. Developing a buyer persona is a way to understanding the details of who your customers are - geographically, socially, demographically. Developing a buyer persona is the basis to understanding your customer's pains, gains and jobs to be done. Make sure all buyer persona data is validated and tested with real human interaction and customer engagement.
Customer Gain Questions:
- What benefits and outcomes do they expect and what would go beyond their expectations? Answer this: How would you delight? What do your customers value: quality, features, performance? What positive social consequences do they desire: looking good, status, power?
- What would make your customers life or jobs easier? Answer this: What type of solution are they looking for: cost based, quality focused, fun, design? More services? A flatter learning curve? Lower cost of ownership?
Customer Pain Questions:
- What’s keeping your customer awake at night? In other words what are your customers main difficulties and challenges? Answer this: What are their undesired costs, situations, risks, negative emotions? How are existing offers failing to serve as pain killers: lacking features, performance?
- What barriers exist for customers to adopt your product or service? Is it the upfront investment costs? Is the learning curve too steep? How resistant are they to change?
Keep in mind, you may have various customer segments. The types of marketing that attract each segment will be different, which is why it is crucial to understand. The tactics you use to get customers will be different than the tactics you use to keep them and grow them. Only by understanding your buyer persona will you begin to understand which tactics you should use and when.
Customer Archetype and 'Day in the Life'
To have a clear image of the various customers you target, construct personas/archetypes that can be printed out and put on the wall. Visually representing your customer segments will ensure you know who to talk to, help you determine how to market to those customers, and guide hypothesis formation during business development.
The next step is a full 'Day in the Life' diagram. This diagram will include what a customer does from the moment they get up in the morining like, what they read, what products / services they use, where they go, etc. 'Day in the Life' diagrams generate customer empathy and ensure the customer remains the firms focal point. The more you interact with your customers, the better you will understand this day in the life, and the more targetted your marketing communications will be.
As your business develops over time, go back and continuously develop your definition of who your customers are. Has the business evolved since the last customer evaluation? What new and relevant painkillers and gain creators have been added to our offerings? Do new offerings address the same archetype?
A customer archetype is really just profile of your buyer persona - who are your customers? Key points are position/title, age/sex, role in social context, motivations, role models, and discretionary budget.
This last point, discretionary budget, deserves additional attention as this is freuently overlooked when understanding the customer context. Often, there is a difference in the ‘user’ of your offering and the ‘payer’. In other words the person consuming your product/service and the economic buyerwhich imposes constraints and limitations on how the pruchasing decision is made. This is especially relevant for B2B, where the list of people involved in a purchase can include:
- decision maker
- economic buyer
- saboteurs (who's jobs feel threatened by the service the offering company is providing)
In complex B2B sales insights to the archetypes for each one of the players in the game are important to influencing the purchase decision. Outline the context in which a job is done, that may impose constraints or limitations. Answer this: who are your users? Who are your economic buyers?
A Relevant Case Example for Marketers: Hubspot.
Hubspot is selling a business marketing and sales software to various businesses. Depending on the firm, there will be various players in the purchse decision for hubspot software:
- user: marketers (using hubspot reports and analytics)
- influencer: marketers (remember, the people who use are product are not always the people who pay for or even reccomend our product)
- recommender: line of business management
- decision maker: CMO or CIO
- economic buyer: CFO
- saboteurs: existing business intelligence group within the firm (that may be trying to build a similar software and reject change in fear of job loss)
Multiple Customer Segments
Customer segments are not always as clear cut as the business model canvas makes it out to be. Customer segments can include various customer archetypes, various different ‘Day in a Life’ diagrams, and increasingly are becoming multi-sided. As a case in point let’s have a look at google.
Google’s value proposition for users is a free search bar. Google’s search engine requires a vast amount of resources (in terms of software, developers, user base) and costs (data centers, software development). So how is it possible that such a complex, costly, and resource heavy product is provided for free? And, how is it that google search is still one of the most profitable businesses? The answer is a 2 sided customer segment market of ‘users’ and ‘payers’.
google’s customer segments section includes:
- user: anyone searching web/mobile
- payer: advertisers
A case in point where customer context matters- and users are not the same as payers. Google has been acquiring users whilst advertisers have been paying. For the customer segment users, the value proposition is a free search bar. For the customer segment advertisers, the value proposition is google AdWords. The big idea here is that the revenue module is different for users and payers.
The key learning from the google case is that multiple customer segments requires that each has its own value proposition and that each has its own revenue stream. One segment cannot exist without the other. Users with no payers is not a business, yet payers with no users would also not work, as their is no incentive for the advertisers. These effects are also known as positive cross side network effects and are the crux to multi-sided platforms.
How do you want to get your product to the customer? Channels are what get our product from our company to our customers. With the emergence of the web, we increasingly place emphasis on web and mobile channels as apposed to physical channels. Marketers have learned over time, multi-channel distribution is costly, time consuming, and often results inefficient. As a growing business it’s difficult to afford multiple channels from day one. We’ll be analysing the various web/mobile channels along with their respective advantages and disadvantage. In this section let’s focus on the question, “What is your core channel?” and for those looking for expansion, “What are channels in which it would be beneficial to expand into for you?”
6 Web and Mobile Channels Pros and Cons
- Dedicated e-commerce. This means having your own website and distributing your products / services directly via this site.
+ Main Pro: easy to create, complete control of price, presentation, inventory
- Main Con: you bear all challenges and costs of traffic-building and converting visitors into buyers
Mobile app commerce. This is a platform such as the app store or google play which is a platform dedicated solely to application software.
+ Main Pro: massive reach in a fast growing distribution segment, explosive business opportunity
- Main Con: costly intermediaries, file-size constraints, product presentation and payment challenges, operational complexity
Two Step Distribution. This is a distributor such as amazon that has major web presence where you can sell both physical and virtual products.
+ Main Pro: fast way to get national distribution at a variable cost with little upfront spending
- Main Con: little control of on-site promotion or product visibility, except with some extra spending
Aggregator. This is a website taking a vertical market approach such as lending tree or Zappos.
+ Main Pro: fast way to get national distribution at variable cost
- Main Con: hard to get visibility, on-site promotion and marketing can get very costly
Social Commerce. This is where you sell predominantly through social media platforms such as Facebook, Twitter, LinkedIn, Google+, Youtube, Pinterest, Instagram, Snapchat, etc. Zinga is a great example of a firm using predominantly social channels.
+ Main Pro: fast potentially viral distribution, great for product launches awareness building
- Main Con: platforms take 50% margin or more of sales, how to get viral in the first place?
Flash Sales. This is is a discount or promotion offered by an e commerce store for a short period of time, an example being Groupon.
+ Main Pro: Fast and massive distribution
- Main Con: Painfully expensive, discounts up to 90% and site costs
Customer Relationships ❤️
Through thick and thin, healthy customer relationship management with various buyer personas is essential in sustaining business performance and competitive advantage. Customer relationship management can be broken down into 3 sections based on Steve Blank’s customer relationship funnel; get, keep, grow.
- GET. How you acquire customers and get them to purchase products.
- KEEP. Keeping customers for long periods rather than loosing customers you've spent time, money and resources acquiring. It’s a lot more expensive to get customers than to keep and grow them.
- GROW. Sell existing customers more products and gain more engagement.
Customer knowledge drives the get-keep-grow. To understand this, it is vital to refer back to the value proposition canvas (defining the problem you are solving), your customer archetype and understanding who is your customer- in context.
4 question customer recap:
- What's their role? (Customer's role within their different responsibilities of life)
- Who are they? (Within a company, What organisation do they work for, Who influences them)
- How do they buy? (Players in the buying decision. Economic buyer? Users?)
- What matters? (What pain is being solved, what gain is your product creating?)
source: Steve Blank
Demand Creation Activities
Get is all about how do I get my customer interested, and this is where the previous sections (value proposition, channels, and customer segments) come into play. Looking at web and mobile customer relationships, earned and paid media is what drives the customer into the funnel. Diagramatically, this is the left part going into the funnel representing all the demand creation activities, all designed to feed the sales funnel. Activities that attract customers into the funnel are known as demand creation activities. These can be further broken down into paid and earned.
Paid demand creation activities:
- public relations agency
- advertising agency.
- SEM & SEO (google Adwords, facebook ads, etc)
Your paid demand creation activities will depend highly on the type of content your archetype consumes. Content marketing strategies must consider if they are into blogs, news, tech journals, radio, television, etc. For example if you notice you’re customers rely heavily on blogs your are going to want to place emphasis on getting the correct keywords for your own blog and position banners and ads on blogs where your most likely to find your customer. The key point here is match your demand creation activities to what you know about your archetype. When you are paying for demand creation, make sure match what you know to what you are going to be paying for.
Earned demand creation activities
- publications in journals
- conferences/ speeches
- guest blogs
- guest articles
- social media (Firm social media pages: Facebook, Twitter, LinkedIn, Instagram etc …)
Your earned demand creation activities are for free. These are all activities that you can do for free that will get the attention of your key customer archetypes and helps drive them into your acquisition activities.
Acquire & Activate
Acquiring is how we want to get customers to out site, mobile, or cloud app. This is strongly related with earned and paid media which drive customers to have a look at you.
Once acquired you want to see action. To become active, customer pay for something, sign up, become a user, engage with the web or app and do something. As we saw with the google example, increasingly users are just monetised by getting payers to pay for the fact that we have many users.
For our revenue model, the real metric we are interested in is the customer acquisition cost (CAC). How much is it going to cost us to acquire a customer on the right hand of the GET funnel? How does it work to get an activated customer, and how much does it cost?
Simple example for a web mobile channel:
- Visits: You’re using google Adwords are paying €0.30 (pay per click). The campaign at €0.30 each gets 5,000 people to visit your site. Total cost for visits is then €1,500.
- User Activation: However in this case visits is not your goal here. Your goal is to get them to the end of the funnel. You want to get your customers in a position where the customer will pay for and use the product. The goal is to activate the customer.
- Freemium User Activation: Assume that just 10% of the customers acquired are activated and try out your ‘30 day trial period’ and are now part of your freemium product scheme. So you’ve got 500 users on the freemium product, but the goal is to get customers to actually pay for it.
- Paying User Activation: Assume 5% of activated freemium users actually end up paying for the full package. This means that we started with 5,000 user visits (at the cost of €1,500). Then we got 500 people taking a freemium version, and at the end of the day 25 are actually paying for the product.
- CAC: Initially 5,000 user visits for €1,500 may look good given the €0.30 cost per click. Later we can see the actual CAC is €60 to acquire one paying customer.
- Key Metric: The key metric to keep in mind in your GET section is customer acquisition cost: CAC.
Keep is all about keeping customers engaged and keeping churn to a minimum. Key tools to implement in keeping cusomters include:
- loyalty programs
- contests and events
- social media
Growth is all about selling to existing customers., Remember that it is a lot cheaper to sell more to existing customers than it is to acquire new customers.
4 questions to your growth strategy:
- Can I unbundle some of the packages? Unbundling meaning, can I somehow decompose the product into several pieces with different charging schemes. Most people just want the base product. Make use of this and put a premium on your premium features.
- Can I up-sell the product? This is based on understanding your customer archetype’s aspirations. Think about the quality and the features of a product and creating an up-sell strategy specific to your customers aspirations. How can you exceed their expectations?
- Can I cross sell my products? Are there any accessories or companion products that your customers are aware of?
- How can we get satisfied customers to refer us? This generates the outer viral loop. Happy customers are a great way to bring in new customers through word of mouth.
Customer lifetime value (LTV) is a key concept in customer relationships. To effectively calculate how much you can spend on customer acquisition on the left of the funnel, you need to understand the customer lifetime value. The concept depicts how much customers will spend with you. from the beginning to the very end of the relationship. Customer LTV can be increased through reducing churns and growing sales with existing customer.
When your considering your GET, KEEP, GROW, there is a balancing act involved in CAC and LTV. It’s about getting the ratio right of how much larger lifetime value ideally is than acquisition costs (CAC<LTV).