When it comes to growing your business, there are three essential engines of growth:
1. Paid Engine of Growth: Most entrepreneurs consider this the only engine of growth. Often this takes the form of paid ads on websites or advertising on T.V. to attract lots of eyeballs to your product or service. The more targeted the service is to your market segment, the higher the cost of the ad. The paid engine of growth could also include paying others to get customers. Paying for outside sales functions or commissioned sales are examples of paying others to get customers. Other times, the paid engine of growth is paying higher rent for locations with larger and more targeted traffic.
2. Viral Engine of Growth: The viral engine of growth is based on increasing awareness of your product or service by using your existing customers. The viral engine includes engaging customers as affiliates to help sell to their friends and associates. Pampered Chef is an example of a company that encourages its customers to host a party to help sell their products to their friends in exchange for free or discounted products.
Another version of the viral engine comes in the form of apps that are pointless without others in your network adopting them. Venmo, Voxer, and Facebook are examples where the more friends you get to use the app, the better it is for you.
When it comes to viral engines of growth you need to make their adoption free of worry or friction. Demonstrating a product to make it clear how to use it properly or making an app free and easy to download aid in the adoption process. See my previous post ”The Secret to Viral Product and Services” for more information.
3. Sticky Engine of Growth: Since it is cheaper to keep a customer than it is to acquire a new one, this engine is focused on maintaining low customer attrition so you only need to acquire a few new customers to continue to grow. Once you have a customer, it is necessary to keep them by making your product or service sticky based on its high switching cost.
Remember the days when your cell phone provider owned your phone number? Changing carriers made switching costs painful since you would have to contact everyone in your contact list to provide them with your new number.
Another example is chip manufacturers. Chip manufacturers help their customers design their chip’s functionality into their customer’s product, making it very difficult to simply go with another supplier. Employing the sticky engine of growth often means you can ask for higher margins since switching costs are paid for by the customer.
Which engine of growth do you employ and are there opportunities to employ one of the others more effectively?
Note: this article originally appeared at www.SteveBizBlog.com.