We have included the eight most frequent questions to get answers to address possible hesitations.
Question 1: Will the implementation of Earned Growth at our company be challenging?
Question 2: Won´t our company struggle to gather the data we need to calculate earned growth?
Question 3: How to classify customers as earned or bought?
Question 4: Won’t asking customers why they came can create misleading data?
Question 5: If implemented, will EGR have an impact on key company performance metrics?
Question 6: Who should be responsible for EGR implementation and for the metric results?
Question 7: Won’t Earned growth set up the organization for conflict rather than collaboration?
Question 8: Is EGR or parts of it widely deployed today?
Question 1: Implementing Earned Growth at our company will be challenging.
Answer 1: While NPS has been successful due to its simplicity, it also limits its validity and value for the company. Earned growth is much more complex and its biggest challenges lie in that companies don´t have experience in implementing them and there aren´t external organizations, that have enough experience. But even if it may take longer and needs to be adjusted, the value is much higher. For the first part – Net Revenue Retention you need a few mandays from your finance department. For the Earned New Customers, the lead time is longer, since you need to finalize and implement the questionnaire across channels. But the first data after four weeks you can already start to extrapolate for the full year and the same for the first quarter. So that you can benchmark after a month and then decrease the margin of error as more data come in. After having the benchmark you can switch to improve the result step by step. Should you have questions or need help, don´t hesitate to reach out to hello@monetize.cx.
Question 2: Won´t our company struggle to gather the data we need to calculate earned growth?
Answer 2: Companies may face difficulties obtaining per-customer revenue data. In some industries, the subscriptions or contracts aren’t implemented yet or irregular purchases (FMCG, hospitality, or automotive) may have difficulties identifying if a customer is still active in the firm´s business. But there are mostly ways to do basic analytics and set the benchmark. Should you have questions or need help, reach out to us.
Question 3: How to classify customers as earned or bought?
Answer 3: We suggest asking each new customer what was the primary reason to join. The reason is to determine whether a customer is bought or earned. We acknowledge, that the purchase reason might be complex, as is the acquisition journey. However, you can start small and use our guiding questionnaire as an example to start. For example, customers who select “online ratings” or “recommendations from friends” are considered EARNED. Customers who choose “product pricing”, “helpful salesperson,” or “advertisement,” are considered as BOUGHT. The questionnaire requires adjustment to the company context and also a pre-test with the customer for understanding and meaningful choices.
Question 4: Won’t ask customers why they came to us to create misleading data?
Answer 4: Not all customers will answer the questionnaire about why they bought and not all customers will choose the true primary reason (subconscious decision). So they may underestimate the impact of being marketed to and overestimate the impact of recommendations. A deploying company should count on variance as we have to with any other customer experience metric (including NPS) which can be improved by sample size vs. population or then calculated through margin of error.
Question 5: If implemented, will EGR have an impact on key company performance metrics?
Answer 5: Earned growth improvement can have a positive impact on a company’s top and bottom line KPIs, including:
- Revenue: Earned growth improvement can lead to increased revenue by increasing cross- or up-sales, expanding into new markets, or developing new products or services.
- Profit: Earned growth improvement can also lead to increased profit by reducing costs (cost to sale) or improving efficiency by deploying via negativa (removing all non-customer important parts).
- Earnings per share (EPS): EPS is a measure of a company’s profitability per share of common stock. Earned growth improvement can lead to increased EPS by increasing revenue, reducing costs, or both.
- Free cash flow: Free cash flow is the cash flow available to a company after it has paid for its operating expenses, capital expenditures, and debt payments. Earned growth improvement can lead to increased free cash flow by increasing revenue, reducing costs, or both.
- Return on equity (ROE): ROE is a measure of a company’s profitability relative to its shareholders’ equity. Earned growth improvement can lead to increased ROE by increasing revenue, reducing costs, or both.
Question 6: Who should be responsible for EGR implementation and for the metric results?
Answer 8: If the Customer Experience (CX) department is data-driven, this is a good chance to lead this initiative. But it might be also Customer Insights or even the Marketing department. All this depends on how (de)centralized and mature the CX in the organization is today. However, if EGR implementation and improvement is a company-wide initiative, we strongly recommend it to be part of a monthly management business review and thus have a concrete position to be responsible for it.
Should you have questions related to this, reach out to us.
Question 7: Won’t Earned growth set up the organization for conflict rather than collaboration?
Answer 7: In our consultancy, we´ve experienced better communication and collaboration between sales, marketing, product, finance, and customer experience departments. And better communication can lead not only to opening up important topics but also to better outcomes. Organizations spend valuable time discussing how much to invest in advertising vs. getting and nurturing superfans and finding the new healthy balance. All this means quality time.
Question 8: Is EGR or parts of it deployed today?
Answer 8: Net Revenue Retention (or Net Dollar Retention) is one of the most important metrics for fast-growing companies. But not only them. You can check here the examples of this metric in US companies. Let´s imagine, that your yearly revenue is 1 000 000 EUR and your NRR is 120% by keeping the customers and also cross and up-selling them. You can grow by 200,000 EUR in yearly revenue without adding a single new customer. For the Earned New Customers, there are more and more companies, that are starting to create business cases on decreasing the investment into advertising by 20% year over year 10% into product development/improvement, and 10% into improved customer experience processes to create superfans and ignite them. This will have a very positive outcome on the balance sheet in the mid and long term and lead to increased shareholder value.
Experts believe that EGR will become increasingly important as companies face a more challenging economic environment. In order to maintain their growth, companies will need to focus on increasing sales, reducing costs, and improving productivity where EGR can significantly help.
Should you have any other questions, you want to get answers to, don´t hesitate to reach out to us: hello@monetize.cx.
