Refresh customer strategies to drive growth in tech

 

Expectations are on the rise. After the pandemic boom, many tech companies had to cut their costs — now, their investors are expecting them to show growth again.

 

“For the last two years, companies have been cutting internally and operationally,” said Grant Thornton Growth Advisory Principal Erik Wilterding. “There might still be some cuts they can make, but chances are they’ve exhausted that — now, the focus is on growth.” But it can be hard to regenerate growth after cuts.

Andrea Schulz

“Companies have re-rationalized which products or service lines should get their focus. We've seen some of them exit their bets in certain markets.”

Andrea Schulz

National Managing Principal, Technology Industry,
Grant Thornton Advisors LLC
Partner, Audit Services, Grant Thornton LLP

 

“A lot of what happened is that companies have re-rationalized which products or service lines should get their focus,” said Grant Thornton Technology Industry National Leader Andrea Schulz. “We've seen some of them exit their bets in certain markets.” So, many companies need to drive growth from a now-reduced list of products and services — but how?

 

If you revise your list of B2B products and services, you need to revise your customer strategy. That helps you accurately align your current products to customer markets and identify which innovations will yield the best returns. “Ask yourself if you’re looking at the right customers and really being true to your product market fit,” Schulz said. “And tech companies need to be incorporating innovative technologies. Investors will ask: How are you making sure that you won’t be disrupted, and ultimately answering customer demands for more advanced capabilities?”

 

Meanwhile, tech companies and their customers both want to make sure that innovations drive real business value. “Customers are being critical about where they invest in advanced technologies — they want to see ROI for them,” Schulz said.

 

Wilterding said this is a difficult mix of market factors. “Are customers more price-sensitive? Yes. Are customers looking for improved operations and service? Yes. Are investors looking for increased growth? Yes. These are competing tensions that, at the heart, come back to how well you understand your customers, how well you are serving your customers and how you are generating demand from those customers.”

 
 

Refresh your strategy

 
 

“To get profitable growth, you have to consider whether you’re targeting the right customer segments and pursuing the right opportunities,” Schulz said.

 

“You need to get to the heart of who your customer is, track what they're doing, what they want and what they need,” Wilterding said. “Proactively address those needs to start generating the demand that's ultimately going to lead to growth. Then, keep your eye on disruptions and uncertainty in the market that might shift over time.”

David Koppy

“If you have a flat budget and a flat headcount but you want to grow, you need to evolve your operating model to deliver more effectively. The real tangible integration between marketing functions and sales functions is an imperative part of this.”

David Koppy

Principal, Growth Advisory Services
Grant Thornton Advisors LLC

 

To update and act upon your customer strategy over time, your organization might need a new approach. “Think about using a deep understanding of customer segments and groupings to serve up content and data that actually leads them on a curated journey, from awareness all the way to purchase and advocacy,” Wilterding said. “Then, you need really rigorous tracking and analysis to determine how effective those efforts are, and how they result in additional sales, consumption or revenue for the organization.”

 

But, if tech firms recently cut their resources, how can they develop customer insight and growth?

 

“If you have a flat budget and a flat headcount but you want to grow, you need to evolve your operating model to deliver more effectively,” said Grant Thornton Growth Advisory Principal David Koppy. “The real tangible integration between marketing functions and sales functions is an imperative part of this. Ultimately, the two functions have some natural points of intersection as well as collision.” Koppy said that many organizations do not integrate these functions well — the ones that do are the ones that understand the impact of demand generation efforts. “That impact is when sellers are able to sell more, and activate more, as a result of the efforts that marketing and other demand generation functions have made.”

 

“Really, it requires making sure that the functions understand where to connect and that neither one of them is better off alone,” Koppy said.

 

More customer strategy industry insights

 
 
 
 
 
 

Connect your data

 
 

The connection between marketing and sales comes down to data. “In other industries, most companies don’t have enough customer data,” Wilterding said. “Most tech companies have data, but they need to make sense of it, clean it up and tie it into the right processes. Marketing and sales have to be treated as one organization. The only way that one is going to be successful is if the other is helping to drive innovation, find customers and homing in on the value proposition that differentiates you.” Wilterding added that, while this integration is not a new concept, marketing and sales need to do more than work together; they need to think of themselves as one go-to-market function. “They're feeding each other information, data and feedback.”

 

Once teams unify their customer data, they can clarify and prioritize key metrics. Companies often track customer acquisition costs to demonstrate profitable growth. “Make sure that number is as efficient as possible,” Schulz said. A second popular metric is customer lifetime value — the revenue a customer will generate over their whole relationship with the company. Another leading metric is churn rate, especially among SaaS providers.

Eric Wilterding

“You should think deliberately and intentionally about the data you need, the hypotheses you have and then how to run an analysis. It’s important to be comfortable it's never going to be perfect, but you need to plant the flag, try an experiment and move on.”

Erik Wilterding

Principal, Growth Advisory Services
Grant Thornton Advisors LLC

 

Over time, these or other key customer metrics will help you test, analyze and refine the theories behind your strategies. “You should think deliberately and intentionally about the data you need, the hypotheses you have and then how to run an analysis,” Wilterding said. “It’s important to be comfortable that it's never going to be perfect, but you need to plant the flag, try an experiment and move on.”

 

When companies acquire more customer data, leaders can become overwhelmed. They can get stuck in trying to perfect their analysis and understanding across all of the data before they move ahead. The truth is that any understanding must evolve, and the only way to evolve is to identify what you know, test the best theories and improve over time.

 

“Get comfortable that you won't ever make perfect sense of everything, but you can make a decision and say, ‘We're going to experiment with a particular path forward, and then let's change course if we need to,’” Wilterding said.

 

As you learn more about your customers, you should also learn about the product and service innovations that will reach them and drive revenue growth.

 
 

Align your innovations

 
 

“Investors and clients want to see what improvements you're making, to help differentiate your product and provide value,” Schulz said. “Companies are willing to cut a check when new technology capabilities help them improve returns or save money with back-office headcount. They want to invest in technology that will set them up for the next inflection point with innovation.”

Andrea Schulz

“A lot of investors are expecting investment in AI and asking, ‘What's your AI story?’ At the same time, investors, management and the board are saying, ‘Whether new capabilities include AI or something else, make sure they actually have a business return.’ ”

Andrea Schulz

National Managing Principal, Technology Industry,
Grant Thornton Advisors LLC
Partner, Audit Services, Grant Thornton LLP

 

It's important to maintain a practical business mindset — even in a storm of buzzwords.

 

“A lot of investors are expecting investment in AI and asking, ‘What's your AI story?’ The SEC is even watching for AI-washing right now,” Schulz said. “At the same time, investors, management and the board are saying, ‘Whether you’re getting new capabilities that include AI or something else, make sure they actually have a business return.’ So, it’s not about saying you have a general-purpose AI feature, it’s about how you’re using AI to address an issue they’re experiencing.”

 

That cost scrutiny has also led many companies to look at how they can consolidate tech providers. “Cost control measures brought to light a lot of the inefficiencies in spending,” Schulz said. “Now, customers are thinking maybe they don't need all the nuanced options from various providers.”

 

That makes it even more important to tie your differentiation to real returns for customers. “It goes back to fundamentals — showing that your product solves a specific problem and, most importantly, being able to demonstrate ROI to your potential customer,” Schulz said.

 

In crowded and competitive tech markets, it can be difficult to maintain differentiated business value that will impress customers and drive growth. To do it, you need efficient coordination across your organization. “If you think of it as a Venn diagram, you have your corporate strategy, your product strategy, and your operating model, all of which need to be in sync,” Wilterding said. “Those are the three big circles, and in the center of that is your customer.”

 

“You need to carve out a unique value proposition — a way that you're serving that customer group differently than others are,” Wilterding said. “It is going to be a fight for customer attention and customer wallets going forward.”

 
 

Contacts:

 
 
 
David Koppy

David Koppy is a Principal within the Grant Thornton strategy practice focused on growth strategies.

Bellevue, WA

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