With nearly every market becoming saturated with endless options and closely competing offers, customers now have more power over your business’s success or failure than they’ve ever had before.
This is why—as opposed to sales-led, product-led, or any other strategy—customer-led growth (CLG) is becoming an increasingly popular tactic, and something that many companies are starting to implement as their main go-to-market strategy.
What is CLG, what does it entail, how is it different from what we’ve been doing before, and why is it important for businesses in all areas to start focusing on it? Let’s dive in.
Customer-led growth is a strategic approach that focuses on customer experience, insights, and feedback as the main way to drive business growth.
Essentially, in a CLG-focused business, customers are at the forefront of everything that the organization does. It centers the whole business around customer experience (e.g., businesses that use CLG as their GTM strategy, prioritize all work based on answers to the question: “Does this improve the experience for the customer?”).
The main goal of a CLG strategy is to deliver a consistently great customer experience. Achieving this goal requires quite a few important components and activities, such as:
The outcomes of focusing mainly on fostering a great customer experience (and therefore implementing a CLG strategy) include:
Focusing on CLG essentially helps both the customer and the business achieve what they want from the product or service.
Most businesses tend to obsess mainly over new customer acquisition. They put all their time and effort into acquiring leads (marketing-led growth), getting them to pay (sales-led growth), or activating them (product-led growth).
This makes sense in theory—after all, you do need new customers to grow—but it causes many companies to forget entirely about their main competitive advantage and resource: their existing customers.
This ties into the fact that customers' expectations have also changed quite a bit. Many consumer services do offer personalized, interactive, and immediate benefits to us as consumers, and we’ve become accustomed to that being the norm. CLG is important because we need to meet those expectations at all parts of the customer journey.
By focusing so much on the start of the customer journey, and not enough on the entire customer experience, companies end up with high churn and low word-of-mouth. All the slick marketing and smooth-talking salespeople in the world can’t get someone to stick around and keep using a product with a terrible experience, let alone convince them to recommend it to peers.
Nobody likes being forgotten about, especially if we’re talking about a product or service we pay for.
Pretty much every market is saturated to some degree, which means that people have more and more choices and alternatives to everything. If they feel neglected, or like their experience isn’t being taken into account or actively worked on, they will leave.
65% of people say they have changed to a different brand because of a poor customer care experience. (Khoros)
It doesn’t matter how many new customers you add—if retention is terrible, your business can not grow or thrive. Think about it like a leaky bucket: you can keep adding water to it, but if there’s a hole at the bottom, it’ll never fill up all the way.
Additionally, if your existing customers don’t just leave, but are very vocal about why they left (the reason being bad customer experience), then soon enough, you won’t be getting new ones, either.
13% of customers tell 15 or more people if they have a negative experience. (Esteban Kolsky)
If you have several options to choose from for a new product or service you need, why would you even consider one that you’ve heard something bad about, even if it wasn’t your own experience? Think of it this way—if you’re picking a restaurant for an anniversary dinner, are you going to choose the one with glowing reviews or the one where everyone complains about slow service and rude waitstaff?
All of this is not to say that new customer acquisition is not important at all, but it can’t be the only thing your business relies upon or focuses on. Well, it can, but it won’t end well for you or your customers. By truly prioritizing the existing customer experience and building long-term, solid relationships with the people you already have on board, you can drive legitimately sustainable growth.
Increasing customer retention rates by just 5% can increase profits by 25%. (Bain and Company)
No matter how you look at it, an excellent customer experience is becoming truly crucial, no matter what industry your company is in. If you properly focus your efforts on CX, you will increase customer loyalty and satisfaction, improve retention, patch any holes in your bucket, and grow your revenue in a sustainable way.
Measuring the success of a customer-led growth strategy can be complicated, and there’s really no universally established system for it. It generally involves tracking any key metrics and indicators that reflect the impact of customer satisfaction and engagement on business outcomes.
These metrics can include:
There are a lot of individual data points that you can track to measure your CLG strategy, and you should combine the ones that make most sense for your business. Businesses that pursue a CLG strategy put these metrics onto a regularly updated dashboard to give themselves an overview of the impact their efforts are having.
A new way that we’re looking at customer experience at PartnerHero comes from Craig Stoss, our Head of CX Transformation Delivery, which defines CX as follows:
CX is the value received relative to the friction experienced, during every interaction a customer has with a brand.
Thinking about CX this way means the metrics you track should be used to weight the value of an interaction against its friction. In the CLG world, it's also a way to answer the question we posed earlier about how to prioritize work in a CLG strategy: “Does this improve the experience for the customer?”
If you’d like to learn more about the value vs. friction framework, Craig wrote a whole post about it—check it out!
Generally, a customer-led growth approach can be applied in pretty much any company. However, we know this isn’t a super helpful answer, so let’s talk about it.
Deciding if CLG is right for you depends on several things related to your business model, target audience, and growth objectives. If you’re really thinking about making it your main growth strategy, here are some things to consider:
How customer-centric are you currently?: If your business is already hyper-focused on the customer and providing exceptional customer experiences, customer-led growth may be a natural fit for you.
What is your product or service?: Customer-led growth tends to be more effective for businesses offering high-value products or services that have strong potential to create loyal customers and brand advocates.
Your existing customer base: If you know you already have a satisfied and engaged customer base that is likely to refer your business to others but may just need a little extra push, a customer-led approach can be a powerful additional growth driver.
Scalability: You need to evaluate if your business model can truly accommodate focusing on CLG. Do you have enough resources available to invest in new customer support and success programs and strategies without burning out your team?
Your Customer Lifetime Value (CLV): Take a look at the CLV of your customers to understand their long-term value to your business. Customer-led growth makes more sense when you have a high CLV.
Competition and the market: Think about the competitive landscape and market conditions: would focusing on customer-led growth provide a competitive advantage?
Long-term vision: Why are you really considering this? Think about whether your long-term business goals align with this strategy and if you are willing and able to keep driving that sustainable growth over time.
Also, keep in mind that CLG doesn't have to replace other acquisition efforts. It complements them by leveraging the power of satisfied customers to fuel additional business growth. Many successful businesses combine multiple growth strategies, including customer-led growth, to create a holistic approach.
Getting started with customer-led growth involves a lot of strategic planning, working, and iterating. Here are some things to start thinking about and looking at to help you get started with implementing a customer-led growth strategy for your business:
Really understanding your customers: You need to gain a very deep understanding of your customers, their needs, pain points, and preferences. Think about conducting surveys, analyzing customer feedback, and collecting any kind of data you can get your hands on to identify patterns, trends, and behaviors.
Customer segmentation: Based on your research, you should segment your customer base. This will allow you to tailor your customer support approach and offer more personalized experiences.
Work on providing exceptional customer service: Obviously, you will need to work towards providing excellent customer support through all of your channels. Audit your current support quality and make a plan to patch up any rough spots.
Work on building relationships: You will need to purposefully cultivate strong relationships with your customers. Regularly communicate with them, share valuable content, and ask for (and implement!) their feedback to show that you really do care about their opinions.
Start measuring: Define key performance indicators (KPIs) to track customer success and satisfaction, such as customer retention rate, net promoter score (NPS), customer lifetime value (CLV), and the general value your customers gain from what you are delivering.
Collaborate with customers: Start heavily involving customers in your product or service development and improvement processes. Ask for their input and feedback on new features or upgrades.
Analyze and iterate: Continuously analyze customer data, feedback, and whichever metrics you’ve put in place. Use these insights to refine your customer-led growth strategy and identify areas for improvement.
Remember, customer-led growth is a long-term strategy that requires some thinking about resource management, dedication, a genuine commitment to customer satisfaction, and most importantly: consistency. By consciously putting your customers at the center of your business, you can create a great community of loyal advocates who will drive sustainable growth for your company.