Growing the Top Line. Cliff Farrah
Kevin Watters is blazing fast in every sense. Physically, he’s a marathoner who is a top competitor for his age group. He processes information quickly and insightfully. He is quick to offer his help, and his fast‐tracked career is an incredible success story. Currently retired and an adjunct professor at Tulane’s Freeman School of Business, Kevin started his career in consumer packaged goods working for Proctor & Gamble, where he received his “MBA on top of an MBA” through their training program. He then went on to dip his toe in entrepreneurial waters, got married to his amazing wife, Fern, had their first child, and then he needed to go back into the corporate world. He found his way into the world of online banking in 1999 and never looked back. He joined Bank One, and was noticed by Jamie Dimon, who asked him to take over as President of their Consumer Internet Group. From there Kevin took over wholesale banking. When Bank One was acquired by JPMorgan Chase, he took over as CEO of business banking and grew it to over a billion‐dollar business. Being one of the few businesses that managed credit well through the Great Recession, he was asked to fix the wreckage that was the mortgage portfolio, which he did. In his final role at JPMorgan Chase, Kevin took over as CEO of their credit card business. We talked about the true value of customers in the world of financial services.
Banking is a little bit interesting. It doesn’t matter what age you are when you go into Starbucks and you buy a latte. Whether you’re 25 or 65, your latte is the same price. Well, in banking chances are if you’re 65, you’ve got a lot more money than when you were 25. So part of the game is for your existing customers to stay with you, with the more money they have. In your 30s you’re borrowing for your mortgage, in your 40s, your investment account is growing so great, let’s make sure we’ve got your mortgage and your investment account. You know in your 20s, I want to make sure you’ve got a credit card and I have your checking account, but I’m getting everything else as you grow. Within your life I’m growing with you, and then I’m getting your retirement account. I’m growing up with you, which is a little bit different than other products where you know, like you’re buying your latte if you’re 25 or 65, is still $4 and thanks. Much different in the banking world.
I loved the insight Kevin’s example gave. This is just one industry. Every industry and business has their own version of this.
As strategists, there are a few important things to consider when you think about customers that I want to talk a bit about. Some basic rules of thumb:
All money comes from your customers.
All customers are not equal.
Customers buy differently.
All Money Comes from Your Customers
Sounds obvious, but unless you are a business owner, or tasked with top‐line growth, it is very easy for businesses to lose sight of this simple fact. Why? Because you get wrapped up in your everyday work process, and you can’t see the clear link between your customers and your paycheck. At Starbucks, it’s easy to see how customers fuel the business. It’s a direct transaction: A customer orders a latte, swipes a card, and gets a latte. Any employee can see how that customer relates to their paycheck.
However, in some industries there are indirect customers whom you serve. Healthcare is a great example. Depending on where you live in the world, most providers are reimbursed from either a public or private “payer” (insurance company). Money doesn’t come from patients, right? Well, ultimately, Medicare, Medicaid, and military insurance programs are funded through tax dollars. In those public programs, taxes come from the country’s citizens, who are, effectively, its customers. Private insurers are paid by employers or individuals, so even though it’s indirect, the customer still pays the bills. These are extreme examples, but you get the point.
We also have many clients who worry about their customer’s customer. That is, let’s say you manufacture a radio component that is part of the Tesla system. You aren’t really designing functionality for Tesla; you are designing for Tesla owners (the end users) or your customer’s customer. So even though your bills are paid by Tesla, without Tesla’s customer base you won’t get paid for very long. That means you likely work to understand the end user’s wants and needs. As we consider the source of all revenue – our customers – we have to be sensitive to the indirect trail that the money may flow through.
All Customers Are Not Equal
Every business has preferred customers. Starbucks has their regular early morning work crowd, and they also happen to serve any out‐of‐town tourists who strolled in that day. Amazon has major named accounts that spend billions with their Amazon Web Services (AWS) business, and they have Cliff Farrah, who spends a whole bunch during the holidays, but is otherwise pretty much a non‐event to their business. All customers are not equal. As a strategist it’s important to understand and grow the best sources of our revenue and make sure we are focused on them.
Customers Buy Differently
Not every customer acquires in the same way. Some pay cash, others use credit. Some want to own, some want to rent. Some pay by the month, some pay by the drink. As strategists, we have to make it easy for all our different customers to provide us with revenue.
Now let’s shift to the second question: What do the customers buy?
Goods and Services
If all money flows from customers, what they buy is driven by the goods and services that you offer. There are some great books about how to market and sell goods and services, and the experts we’ve interviewed throughout this book will give you real insight into best practices to maximize growth, but before we go swim in the deep end, I’d like to make sure we are aligned on some basic thoughts about goods and services and why they are procured.
Some goods and services fill a market need; many fill a want.
Goods and services are definable, measurable offerings.
They are things that can be valued.
Some Goods and Services Fill a Market Need: Many Fill a Want
As a formally trained economist, I still think in terms of utility and supply and demand. These principles are based on having something of value that is sought in the market. There are lots of ways that products are created, and we talk about a number of examples later in the book, but at the end of the day, we buy things that we need (food, water, shelter, clothing), and things that we want, but don’t really need. Sometimes it’s a want that is strong enough to make them frivolously spend money. Let’s face it, the latest AirPods Pro aren’t a need, but nutritious food is. We don’t have to have ice cream cones, but we do need clean water. Wants have very different challenges in driving growth than needs. Realize what you are offering as you consider how to grow.
Goods and Services Are Definable, Measurable Offerings
In order to transact, you have to be able to bound your offering. People need to know what they are getting for what they are paying. In some markets this is pretty straightforward. You go to a shoe store and buy a pair of shoes. Definable/measurable. When you get into services, things get much harder to bound. Toss in “as a service” and you’ll find that lawyers are making a lot of money bounding definitions of what you are and are not buying, as well as your rights to any data produced by your usage. Understanding what you are selling, especially as companies move to offerings that marry product, service, and software, is really important.
I talked about this a bit with my good friend Ray Ausrotas. Ray is one of Boston’s successful trial attorneys, a twice‐published author of Lexis practice guides, and has helped me several times throughout the years as Beacon has protected much of its own proprietary and confidential information. He is smart, tireless, fierce, and yet kind and reasonable. Killer combination. I cannot recommend him highly enough