Profitability is good. Growth is also good. But is one better than the other? Do you have to sacrifice one in order to get the most out of the other?
Thankfully, it is entirely possible to have both these days. There’s just one little obstacle: skeptics. There are many marketers out there who insist that profitability is the opposite of growth because it means you’re acquiring fewer users (compared to the growth-at-all-costs approach). However, focusing on profitability is NOT counterproductive for growth teams. On the contrary, it actually lays the foundation to supercharge growth efforts.
Your team will operate more strategically
There’s a lot of strategic thinking that comes into play when focusing on profitability. Most people are quick to assume that this approach is solely focusing on acquiring high-value users, or even only focusing on users that will convert. That isn’t the case at all. It’s more about building your marketing budget to match the goals of your company. When enforced correctly, your company will pay more for high-value users and/or users that convert, while paying less for users that are less likely to convert. That’s a godsend amid these turbulent times, factoring in the global rise in customer acquisition costs.
The whole strategic element behind focusing on profitability makes the role of a growth marketer comparable to that of a stock portfolio manager. It really isn’t much of a stretch, when you consider how paid campaigns are like a bundle of investments that include risk factors, ROI (or rather, ROAS), and a payback/maturity period. Additionally, growth teams that put profitability first tend to factor diversification strategies in paid marketing, which is mainly due to high- and low-risk campaigns. This is why ad budgets need to be spread across different campaigns with adequate user segmentation. Much like a stock portfolio manager, it is all done for a more balanced, and comprehensive risk profile, in addition to profitability.
You will have a better balance between new/existing customers
When focused on growth, sure you will have frequent spikes in conversions, but those impressive numbers will come with a downside: many of those users will end up churning way too soon. For long-term success, there needs to be a better balance between new and existing customers. Quick wins don’t fit the bill here, as revenue can take some time to unveil when focusing on customers who would be more inclined to stick around for the long haul. They are naturally worth the wait, because they retain higher levels of interest in your product/service, and will also have stronger retention.
You will save your team’s time and energy
It goes without saying that when you’re focused on growth, a lot of time and energy will later be spent trying to convert prospects to paying and high-value customers. And it can’t be done at the quick push of a button—it’ll have to be done using a variety of approaches, and perhaps even some collaboration with other departments. It’s not the best use of time, especially when considering the availability of solutions such as predictive marketing and automation that can take on these tasks more efficiently.
Your team can enhance existing growth loops
When you’re focused on profitability, you won’t only place focus on your profit, because you will also prioritize your customers’ gain. This is inherently done by targeting users who will enjoy your products for years to come. If there are growth loops set in place that approach users who already are, or are inclined to be engaged—it will become further enhanced. That’s because you will place special attention on people who will prove to be more loyal, and profitable for the long term.
The growth marketing space has seen many changes in recent years. These days, it has become crystal clear that a balance needs to be maintained between growth and profitability going forward. It is the most surefire way to secure futureproofed scalability. Sophisticated data-driven teams can lighten the load by turning to predictive modeling, for more accurate LTV and user-based models that help keep CAC and CPA on the lower side while the target customer base continues to grow. Regardless of company size—now is the time for growth teams to acknowledge that focusing on profitability will lead to more impactful results on the growth front. Why leave money on the table? Focus on profitability and grab that market share!
Also published here.