The only three ways to grow customer revenue

We tend to overcomplicate things in business.

That is especially true for most startups' go-to-market strategy. We see all the things competitors and larger companies do and feel like we need to do all of those things, too.

We need to be active on all social media platforms.

We need to do SEO.

We need to run PPC.

We need to launch a podcast and then build a media brand.

Your GTM team doesn't NEED to do any of these things. The only thing they need to do is generate revenue.

The main goal of every good GTM team (sales, marketing, customer success, product, and leadership working together) is to generate revenue.

All of the tactics mentioned above are just that—tactics that may or may not help us eventually generate revenue.

But when you simplify things,?there are only three ways to increase customer revenue in a B2B business. In this post, I'll walk through each in detail.

1. Acquisition: Increase the number of customers who buy from you

Acquisition is usually the first thing growing companies think about. Increasing the number of customers who buy your product or services will increase your revenue.

You can pull two core levers to increase the number of customers: grow your top-of-funnel and increase conversion rates.

Lever 1: Grow your top-of-funnel

Growing your top-of-funnel means "getting more leads" that become paying customers. There are a million channels and tactics you can experiment with to do this.

Will you target existing or new market segments?

Before diving into which channels to try, you need first to decide which market segments to target:

• Existing market segments: Prospects similar to your existing customers
• New market segments: Prospects different from existing customers

Most startups try to target too many market segments too early, hurting their growth.

A good rule of thumb:

• If you're under $1M in annual revenue, you don't have the resources to effectively target more than one market segment.
• If you're under $10M in annual revenue, you probably can only target up to three segments effectively.

In other words, if you have repeatability selling to a market segment, your goal should be to find more customers who look like that segment.

Remember the 95:5 rule

You must also keep?the 95:5 rule?in mind when growing your top-of-funnel.

The 95:5 Rule:

• 95% of your target audience is not yet ready to buy but may be in the future.
• Only 5% of your target audience is "in market" or ready to buy today.

If you only focus on the 5%, your close rate will be lower, and your customer acquisition costs will be higher because all your competitors also focus on the 5%.

That's why a strong GTM strategy focuses on the 5% AND the 95%.

Lever 2: Increase conversion rates

The second lever you can pull to increase the number of customers who buy from you is increasing the conversion rates of existing prospects already in your funnel.

Find your GTM funnel bottleneck

To improve your conversion rates, first identify your funnel bottleneck:

1. Map out the most common steps customers take for each of your funnel's six stages. ??????????????????, ??????????????????????, ????????????????????, ??????????????, ??????????????, ????????????????????
2. Define the key metrics associated with each stage of your funnel. Look especially at conversion rates between stages. (Ex. Lead to deal or deal to close)
3. Identify which conversion rate is weakest. Compare metrics to previous quarters or?industry benchmarks.
4. Focus your GTM team on improving this bottleneck. If there is no clear bottleneck, you should focus first on improving the bottom stage of the funnel and then work backward up the funnel.

You could do this activity each quarter to ensure your GTM team focuses on the most impactful activities.

2. Monetization: Increase the average amount each customer pays you

To increase the average amount each customer pays you, you can increase prices or sell more products/services to each customer.

Lever 1: Increase prices

When you charge more, you make more. Pretty simple.

Yet, this is one of the most underutilized yet impactful levers to pull to increase revenue.

Patrick Campbell, the founder of Profitwell,?found?that companies that update their pricing at least once every six months see nearly double the ARPU gain than those who upgrade their pricing only once yearly or longer.

If it's been a while since you spent time thinking about pricing, this is an excellent place to start to increase customer revenue.?Here is an excellent guide on pricing strategy?written by Patrick Campbell and his team if you want to go deeper.

Lever 2: Sell more products/services to each customer

To sell more of your products or services to each customer, you need to focus on packaging and/or expansion.

Update your packaging

Changing packaging can increase the volume of products/services new and existing customers purchase. Here are a few ways to update your packaging:

• Remove lower-priced packages or tiers.?This is a quick way to increase your average revenue per customer. Just be careful that the potential increase offsets the loss in revenue from removing the lowest tier.
• Change to usage-based or value-based pricing.?There is a reason Mailchimp's pricing changes based on the number of email contacts you have. Since their product becomes more valuable, the more contacts you have, they can charge more and make more money than they would with flat-rate pricing.
• Bundle multiple products or services.?This is selling a "combo meal" rather than an "a la carte burger." If you have multiple products or services customers often purchase or use together, this is a great way to sell more.

Drive expansion with existing customers

Many companies think about doing this, but only some execute it well.

But if your customers love your product/service, working with them to find ways to expand can be an incredibly impactful way to increase the average amount each customer pays you.

There are many great resources about best practices for this so that I won't get into any additional specifics in this post.

3. Retention: Increase subscription length or purchase frequency

Improving retention varies based on whether you sell a subscription or not. For a subscription business, retention is usually about decreasing customer churn. For a non-subscription business, retention is generally about increasing repeat purchases.

Lever 1: Decrease churn

If your average customer subscribes to your product/service for six months, increasing that to 12 months will double your revenue.

Increasing the contract length for your subscription by removing your "monthly" subscription option and only selling "quarterly" or "annual" options is one way to do this. For example, creative-as-a-service provider?Superside?only sells a 12-month minimum subscription contract.

Again, be careful that the possible increase in revenue offsets the potential loss from removing shorter-length subscription options.

But often, increasing your contract length is only a temporary "Bandaid fix" for addressing churn. If you have underlying retention issues, it's only delaying the inevitable churn. Instead, focus on finding out why customers are churning in the first place and addressing the underlying issues.

Lever 2: Increase repeat purchases

For companies that don't sell subscriptions, retention is usually about increasing the frequency of repeat purchases.

There are many ways to do this: loyalty programs, special offers, reaching out at the right time, and promoting product/service updates.

But ultimately, all of these things come down to delivering a great product/service experience and then doing relevant customer marketing to incentivize repeat purchases.

Conclusion

Want to grow your small business? These are the only three ways that I know of to increase your customer revenue. The key is to understand what to focus on and when.

Especially as a small business, you can only do some of these things effectively simultaneously. Choose a lever to prioritize improving and reevaluate it each quarter. That is the path to growth.

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