As a customer success manager or B2B marketer involved in post-sale engagement, you may be hearing more about customer-led growth (CLG), especially as a counterpoint to product-led growth. In the past few weeks, we have seen an uptick in interest about CLG in the questions we receive as analysts.
What Is CLG?
Many definitions abound, but most focus on how customer-led growth strategies prioritize customer insights to guide business decisions and product/service strategy. It strives to create exceptional customer experiences that inspire loyalty, trust, and advocacy.
The top three aspects of CLG that you should care about are:
- Customers are/will be your most valuable path to revenue growth. Blame it on the economy, market change, or increasing competition, but as it becomes more difficult and costly to acquire net-new customers, keeping and growing the ones you have will be a top priority in 2023. CLG is a strategy for doing that.
- CLG is a team sport. Each step of the post-sale journey can create or destroy customer value (subscription required) through interactions across all customer-facing employees. Sales, customer success, product development, customer experience, and post-sale/lifecycle marketing must work together as a unified team to deliver valuable experiences for customers and to achieve shared growth goals.
- CLG requires technology that enables successful business strategy. Firms that take a customer-led approach to technology investment can reconfigure business structures and capabilities quickly to meet future customer needs and changing business goals with adaptivity, creativity, and resilience. Our research shows that these firms grow 1.8 times faster than their peers.
Why You Should Care
Whether you are just hearing about #CLG for the first time or are a seasoned expert, it is important to realize that some CLG ideas bandied about today risk becoming overhyped when focused narrowly on companies with a subscription-based go-to-market model. Software-as-a-service (SaaS)-specific CLG approaches can overlook a wealth of other proven market experiences that may be a better fit for your situation.
As you consider CLG recommendations, keep in mind that, when it comes to B2B companies:
- Customers are always a major source of revenue. Non-SaaS, non-startup companies that sell to other organizations typically obtain a majority of their revenue from a minority of accounts. They know exactly which customers they must manage and retain, and woe to any who lose one of these strategic accounts. CLG places more emphasis on the customer’s experience as the way to better retention, growth, and loyalty. It also stresses actively using customer data and feedback to inform business decisions. But for most B2B companies, the idea of sourcing revenue from current customers is nothing new.
- It’s more profitable to sell to an existing customer. Fred Reichheld demonstrated 20 years ago that selling to existing customers is more profitable and less costly — that a 5% increase in retention rates can increase profitability by 25%. Unfortunately, few software/tech companies learned this lesson back when Fred was teaching it, since the majority of marketing budgets and effort still go toward net-new acquisition.
- You must operate and structure your firm in a customer-obsessed way to thrive. Here’s where Forrester has some deep expertise. For more than 10 years, we’ve published research showing how putting the customer at the center of your leadership, strategy, and operations enables your company to sense and respond to market circumstances and then intentionally invest where necessary. Bottom line: We agree that being customer-led/customer-obsessed is the path to predictable, sustainable growth.
- Not every company manifests customer obsession in the same way. Forrester’s research shows that surveyed customer-obsessed firms (subscription required) grew 2.5 times faster than non-obsessed ones and retained 2.2 times more customers per year. And no one would disagree with the idea of putting the customer at the center of business decisions. The challenge is operationalizing obsession — answering questions about “Who should do what?” “How long will that take?” and “How much might it cost?” — and then crafting the right strategy based on your company’s strengths and what your customers truly value. Tackling the idea of how obsessed to become requires work, not just hopping on the CLG bandwagon.
While CLG approaches appear attractive, you may need more help adopting one than you first realize. If you are a Forrester client and need help getting started, contact your account team to schedule a guidance session to discuss CLG further. Having successful customers who want to share their experiences — and from whom you can learn and grow your approach — is also a good place to start.