The only way to grow revenue is through more volume. It’s a total fabrication: more activity, more leads.
Now, whilst that is a way to grow your business, it is often a very expensive, it’s a really difficult, and a really unpredictable way of growing your business.
What you need to understand is what smart growth looks like. Smart growth appreciates that you probably don’t have a lead problem; you have a revenue engine problem.
What you need to understand is how your business generates revenue. What does this revenue engine look like? And how can you allocate your marketing budget in a way that supports the revenue engine, not just leads at the top of the funnel?
So, let me explain how this revenue engine works.
The Growth Levers That Drive Revenue Growth
What you have is four growth levers that can drive revenue growth in your business.
The first lever is lead generation, and it’s a really important one.
The second lever is the conversion rate.
The third is the number of transactions, and the fourth is the average order value.
By understanding that there are four levers, not one, and by using your marketing budget and resources intelligently, you can accelerate the rate of growth in your business.
By increasing each of these four areas by just 5% over 12 months, you can increase your revenue by 22%.
If you can increase each of these areas by 10% over 12 months, oh my god, you will increase your revenue by a massive 46%. Wow.
And that’s because you have a compound effect.
If you can get this working, if you can understand it, and if you can put things in place that actually move the needle, you can grow faster without relying on expensive unpredictability.
So, let’s take a look at the growth levers and understand what you can do to make improvements in each of the areas.
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How Lead Generation Can Help Improve Leads?
So, in terms of lead generation, that is the obvious one, which is the one that most people are focused on.
But so many businesses do lead generation poorly, and that’s because they don’t have a proper understanding of their ideal customer, and therefore, they are trying to be too many things to too many people.
They don’t speak to their ideal customer with one voice, with clarity and with purpose.
As a result, their messages don’t resonate, and they don’t get the traction that they need in their marketing.
You must understand your ideal customer profile in order to understand what their pain points are, what they value, how you should speak to them, and where to find them.
By getting that bit right, marketing can do its job in driving more inquiries into your business.
How Does Marketing Improve Your Conversion Rate?
So, how does marketing improve your conversion rate?
Well, if marketing can do the job of educating your customers and building trust before they get in touch with your business, then that is going to have a massive impact on your conversion rate.
It’s going to make the sales team’s job so much easier because the marketing has done the heavy lifting.
If you want more ways to improve conversion rate and conversion value.
How Some Transactions Work?
So, the next lever is your number of transactions.
The number of transactions is all about getting your customers to come back to you more often.
Marketing can support that by making sure that all of your customers know about all of the different products and services that you offer.
One of the most frustrating things to hear is a customer say, “Oh, I didn’t know that you could do that.” Right after spending a chunk of cash with one of your competitors.
Marketing needs to make sure that it is communicating all of the different things that you do, and that it is keeping you front of mind.
It reminds your customers that they’re making a good decision by continuing to use you.
That is really, really important.
The Average Order Value
The next growth lever is average order value.
So, how does marketing help increase average order value?
Well, first of all, if marketing is doing its job properly, it will be attracting the right types of customers for you.
Customers choose you not just because of price, but because of a bunch of other things.
That should have an impact on your margins because it’ll either reduce the need to discount and promote, or it’ll allow you to charge a little bit more.
Your marketing should also be educating your customers on the different bundles and options, the different upsells, and the value that they get from doing that with you.
How to allocate your marketing budget
So marketing should really be focused on generating new customers, but also getting more from your existing customers, about 50/50.
50% of your marketing budget and effort on new, and 50% of your marketing budget and effort on your existing customers, because, as I said, they already know and trust you.
So by getting clear on these different areas, by getting clear on how to allocate your marketing resources and your marketing budget across these areas, you can get exponential results.
Get clever, get smart, and get growing
So stop chasing leads and start getting clear on where you have gaps in visibility across these four numbers.
Where do you not have enough understanding of what these numbers actually look like for your business?
Get clear on which levers represent the biggest opportunity for your business, and more importantly, understand what percentage increase you need across the board in order to deliver your growth goals.
If you get that level of focus, you can engage your team in the right activities.
You can make sure that resources are going to the right places.
And you will get there faster, without all of the heartache and unpredictability.
So get clever, get smart, and get growing.
See you next time on “Mind Your Own Business”.
