Why Revenue Growth is Best Pursued Indirectly

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Most marketers will say that the “prime directive” of marketing is to drive revenue growth. But in reality, revenue growth is a by-product of creating value for customers and providing great customer experiences. Paradoxically, the best way to grow revenue is by not making revenue growth the primary marketing objective.

In life and in business, some of our most important goals are best pursued indirectly. All of us want to be happy, but we can’t achieve happiness by trying to be happy. Psychologists call this the paradox of hedonism or the pleasure paradox. The psychiatrist Victor Frankl described the pleasure paradox in the following way:  “Happiness cannot be pursued; it must ensue, and it only does so as the unintended side effect of one’s personal dedication to a cause greater than oneself . . .”

Business success is obviously different from personal happiness, but variations of the pleasure paradox also exist in the business world. The British economist John Kay has called one of these variations the “profit-seeking paradox,” which holds that the best way for a business to maximize profits is by not making profit its primary driving goal.

Although they never used the term, Jim Collins and Jerry Porras described the profit-seeing paradox in their best-selling book Built to Last. Collins and Porras compared the long-term financial performance of several pairs of companies in the same industry. In each pair, the core driving objectives of one of the companies (the “visionary” company) were mostly non-economic, while the other company was primarily profit driven. Collins and Porras found that the visionary companies were more profitable than the profit-driven companies. The authors wrote:

“Visionary companies pursue a cluster of objectives, of which making money is only one – and not necessarily the primary one. Yes, they seek profits, but they’re equally guided by a core ideology – core values and sense of purpose beyond just making money. Yet paradoxically, the visionary companies make more money than the purely profit driven companies.”

Another variation of the pleasure paradox – what I call the revenue growth paradox – is particularly applicable to marketing. The existence of the revenue growth paradox means that, like profit, revenue growth is best pursued indirectly, and that the most effective way to drive revenue growth is to not make it the primary direct objective of marketing efforts.

The revenue growth paradox exists because revenue growth is a by-product of doing other things well, the two most important of which are creating meaningful value for customers and providing great customer experiences. Therefore, the most effective way to grow revenue is to find ways to create more value for customers and improve customer experiences.

Marketing can and should be deeply involved in creating value for customers and delivering great customer experiences. When it comes to marketing communications programs, the key – especially for B2B marketers – is to consistently provide what Jay Baer calls “massively useful information.” In addition, marketing – along with sales – should be well positioned to understand customer needs and challenges, and thus help identify opportunities for creating more customer value.

This doesn’t mean that companies shouldn’t have revenue growth targets. But it does mean that marketers and other business leaders must recognize that the key to achieving those objectives is to focus on the conditions that cause revenue growth to occur. Such an indirect approach may not feel comfortable to some marketers, but we have compelling evidence that it works.

For example, a 2018 study by Forrester Consulting found that companies with mature customer experience (CX) practices – what Forrester called experience-driven businesses, or EDBs – reported top-line revenue growth in 2017 of 15%, compared to an average of 11% for the other companies in the study. This research also found that the EDBs had 1.6x to 1.9x higher year-over-year growth in customer retention, repeat purchase rates, average order value, and customer lifetime value, compared to the companies with less robust CX practices.

In many ways, growing revenue is like growing corn or wheat or vegetables. Farmers don’t directly “make” their crops grow. They till the soil, add fertilizer, and sow the seeds. They keep the field free of weeds and insects, and they may irrigate when needed. In other words, farmers focus on creating the conditions that are conducive for the growth of healthy crops. Then they allow nature to take its course.

Revenue growth occurs under the right conditions, and many of those conditions can be controlled, or at least influenced, by the actions of marketers and other business leaders. So the real key to driving revenue growth is to focus on creating those growth-inducing conditions.

Illustration courtesy of OTA Photos (tradingacademy.com) via Flickr CC.

2 COMMENTS

  1. Thanks for giving such cogent arguments to create value for creating wealth, which is the resultant.
    Kotler calls the role of marketing creating customer value
    So you are right. I liked your happiness example which I have used.
    Keep this good work going

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