Between my own company and my work as a business efficiency consultant, I've worked with hundreds of businesses across nearly all industries. I've noticed that the vast majority of them are making one crucial mistake when it comes to their marketing and revenue generation: They miss out on massive growth by focusing on attraction, conversion, and retention in the wrong order.
The Three Components of Growth
When you look at any business, there are three components to consistent growth: attraction, conversion, and retention. I like to refer to these with the acronym "ACR." It comes down to:
Attracting new leads through external marketing.
Converting those leads and turning them into customers.
Retaining those customers for sustained revenue.
Most businesses approach these three categories in the order above. They first employ a marketing strategy to acquire new leads. Then, they focus on converting those leads. And only then do they make an effort to retain their current customers.
The problem? That's completely backwards.
You should only focus on external marketing after you've mastered retention and conversion. After all, what's the point of attracting leads if you can't convert them? And what's the point of converting prospects if they're going to leave in a month? It's not only inefficient--it's illogical.
Focusing on retention, conversion, and attraction--in that order--is the most cost-effective and efficient way to create a consistent, sustainable revenue stream for your business. How do I know? Because, like many business owners, I was doing this wrong at my own company for years. When I flipped the order around, everything started working.
Retention: The Secret Weapon
I've said it before, but I'll say it again: revenue is a vanity metric. In most businesses, client retention and churn rate (the rate at which you lose clients) is a far more important metric, as it can show the quality of your product and how much revenue you're leaving on the table.
If you're losing 20 percent of your client base every month but you're gaining another 20 percent through marketing, is that really a sound strategy? Increasing your client retention by just 10 percent would increase your bottom line and safeguard your business from losing revenue during underperforming months and times of crisis. The best part? Retaining current clients is virtually always easier and more cost-effective than going out and finding new ones.
Jay Abraham, one of the most prolific marketing consultants in history, has a marketing theory (and book of the same name) called "Getting Everything You Can Out of All You've Got." The idea here is simple: the vast majority of companies are already sitting on untapped potential--they just don't realize it.
Capitalizing on that potential means 1. retaining your customers for as long as possible and 2. pulling as much revenue out of them as you can before focusing on external marketing. It's far easier and more lucrative to expand the revenue of your current clients with up-sells and additional products than it is to go out, find new leads, and convert them.
People often talk about "hot" and "cold" leads... The reality is that most companies are already sitting on a treasure trove of red hot leads--their current customers.
Conversion: Setting Yourself Up for Success
Too often, I see companies invest in shiny marketing strategies without any idea of how they'll convert their leads once they get them. Here are a few of the most basic things you should have in place before turning on your marketing efforts:
A conversion-optimized website that will produce results when leads arrive on it.
A trained sales team with a clear strategy for handling sales calls and other situations.
An automated follow-up system to attract missed opportunities back to your company.
Think about the low-hanging fruit sitting right in front of you. At Leverage, many of our clients want to increase their list size, yet they only have a 10 percent open rate on their emails. Increasing that open rate is a far more efficient use of time compared to bringing new leads into a flawed system.
There's no sugarcoating it: Implementing a marketing strategy without a well-thought-out system for converting leads is a complete waste of money and time. There needs to be a strategy--don't just expect leads to convert themselves.
Attraction: The Final Step
Only once you've mastered retention and conversion, should you turn on your external marketing efforts.
I liken it to a broken sink that's overflowing. You have two options: Either mop faster and bring in more towels, or fix the pipe and let the water drain. Focusing on marketing before mastering retention and conversion is like choosing to mop faster instead of fixing the pipe. It just doesn't make sense.