Do more with the 3 sources of sales growth

I had some push-back from my first Insights email on the 3 sources of sales growth. You remember? ... sales growth can only come from:

• winning customers at a faster rate
• losing customers at a slower rate
• customers buying at a higher rate

"Customers", "buying" and "sales" are just shorthand for terms that vary between different contexts. "Customers" may be subscribers, owners, followers, or recipients of services, e.g. in non-profit or public service cases. Buying may actually mean transacting in a variety of ways - purchasing, yes, but also acquiring, consuming or taking physical, service or information products at some rate. And sales is, in more general terms, the total rate at which those customers are taking what we offer.

"That's way too simplistic!" I heard.
Well, no, but yes.

First, no it's not too simplistic because those are indeed the only 3 numbers that will explain how next week's customers and sales will differ from this week's numbers. (If needed, we can copy the same structure and maths for different customer segments and/or different products, and sum the answers)

... but then, yes it is too simplistic because there is a lot going on behind those three basic numbers.

There are three important extensions to that customers-drive-sales model ...

Winning customers is a process, not an event

We must make potential customers aware, then informed, before they adopt our product and become loyal. The customer choice pipeline is a more rigorous, quantified way to apply the well-known AIDA framework or marketing funnel. See my post on this here.

Customers are not all equal! That 3rd number - customers' purchase rate (the quantity bought per week) changes for any or all of reasons (another '3' !) See my post on this here.

• current customers may decide to buy more next week, and/or
• new customers we win may buy, on average, more or less than current customers, and/or
• customers we lose may not be 'average', but may also buy more or less than that average (... so we would be more alarmed to lose our 'best' customers than smaller ones).

Competitors want customers too! Competitors can hit all three of those sales-growth drivers (yet another '3'!). See my post on this here.

• we may be in a race with competitors to win new potential customers (part of rate-1 above) and/or
• we may be in a fight to steal their existing customers (also part of rate-1 above), and stop them stealing our existing customers (rate-2 above)
• we may be in a tug-of-war to grow our share of sales to shared customers (part of rate-3 above)

Add those extras to extend the customers-drive-sales model

Over the years, I have applied these frameworks and models many, many times to a wide range of cases. Either:

• using the frameworks alone with teams, sketching on a white-board and adding in estimated time-series for how numbers are changing, or
• building digital-twin business models to capture and simulate how and why customer numbers and sales have changed, and how they will likely change in future

The frameworks and models are rigorous and reliable, and help understand why our sales have changed historically, plan marketing and sales strategies and tactics to build future sales, then manage those efforts continuously as the future unfolds.

An example ... If you have not come across digital-twin business models before, they convert principles and frameworks such as these into rigorous, quantified models that play out how the real world works over time. This example shows 2 scenarios for the launch of a pharmaceutical drug product against a competitor that previously had the only approved product in the category.

• in the green scenario our lower price captures physicians faster (but at a cost in lost margin)  
• the physicians prescribing rate drives our sales
• Revenue is sales * price drives revenue ... subtract the unit cost to get the product's gross profit contribution

ignore the 'week 10' note at top left

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Learn how these frameworks can help, in our short online course on Marketing & sales here.
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