The Customer Flywheel That Funds Your Business
You're wasting effort on the wrong customers. There are only 3 that actually matter.
You’re wasting effort on the wrong customers.
If you want to make it easy for your business to generate revenue and grow your customer base, you have to stop spending time catering to your worst fans and customers.
It’s unfortunately a common misconception that the only way to earn more revenue is to get more customers. And that is one way to scale, but it's a very linear scaling function. And the more customers you have, the more the fulfillment and customer service burdens weigh on you.
But there are more efficient ways to scale your customer base and income than just finding new people to buy your offer.
Certain types of fans and customers are more valuable than others, and if you’re trying to streamline your business to make it as profitable as possible, there are only three that are really worth your time and attention.
These people simultaneously contribute to audience growth and revenue growth. By focusing your efforts on cultivating these three customers, you are extending the longevity, sustainability, and compounding growth of the business.
I call these The 3 R’s of Community, because community is by far the number one capture mechanism that allows these three to contribute to their full potential.
In this article, I’ll break down why each of the three is important and how to build your community properly to cultivate these members naturally, with minimal effort.
First, let's start with the customers that have the most direct impact on your bottom line.
And, I should say that there are other ways to increase your revenue, such as making larger offers available and/or more of them. This article is focused specifically on the types of customers that contribute to business growth and longevity.
Part 1 - The 3 R’s of Community
“Your fans don’t treat you equally, and you shouldn’t treat them equally either”
The First R
Likely the most obvious of the three are the Repeat Customers. If the desired outcome is to generate more revenue, these customers are generally the number one contributor.
These people bought a product or service from you and decided it was so effective at solving the problem, they either bought it again, or trusted you enough to purchase another solution to a different problem from you.
This is good because the more of your offers these customers have purchased, the more likely they are to purchase the next one, which is not only great from a revenue perspective, but also from a product validation standpoint. These customers let you know your product is effective, and there is demand for it.
Most of the value of repeat buyers comes from recurring revenue, and this can be simplified with a subscription model. The caveat here is that you have to use it ethically.
If you’re selling a digital product like a PDF guide, don't charge a monthly fee for the customer to maintain access to the guide, just make it a one-time purchase. If there's anything people hate, it's a recurring fee for a one time product.
Generally, subscription models work best for things like premium memberships, ongoing coaching, software products that require continual or recurring usage, and any other services regularly provided by the business.
Please, for the love of god, if your product is a tangible thing that is exchanged once, do not use a subscription model. There, I said it.
If you can use a subscription model ethically, it’s a great way to increase customer lifetime value. Even just a $9/mo subscription makes that member worth over $100 per year. If you’ve read my other essay, You Don’t Need Millions of Followers, you know the significance of that number.
While the impact of repeat buyers mainly manifests in the form of customer lifetime value, the next set of members is valuable to your business in a much different way.
The Second R
This group of members has a tremendous impact on your business, specifically your reputability. When you start catering your community to the raving reviewers, they have the potential to improve reputation, brand awareness, social proof, and even community value.
Most of these members have purchased a product so they’re already contributing to your business in the form of revenue. But that's not the only contribution.
Raving reviewers also review your products, and rave in those reviews (thanks Capt. Obvious). These people really appreciate finally having found the solution they’ve been looking for (or finally realizing there was a solution), so they're adamant about your ability to help them solve the problem, or your solution’s ability to solve the problem.
A nice byproduct of this is that they tend to be quite vocal inside the community. These are people who have had enough success to want to help others implement your solution.
That means they post in the community, provide value, and help members, which adds to the value of the community, giving your members even more reasons to join and stay. These people create a positive community environment and relieve some of the hosting pressure from you.
And while providing quality products and direct assistance to your members is the best and most important way to cultivate raving reviewers, you can also implement an engagement incentive system to accelerate this type of behavior even further.
We’ll go more in depth on that in the final section. But first, let's cover the final, and arguably most impactful, group of the 3 R’s.
The Third R
Think of Serial Referrers as raving reviewers on steroids.
They also appreciate having their problem solved, and are just as adamant, if not more, that people seeking the solution should come to you. While the role reviewers play is incredibly valuable, the main difference between these two groups is that reviewers talk the talk and referrers walk the walk.
Referrers are actually sending people to your community actively. They’re just as passionate about helping people solve the problem as you, which is huge.
If you’ve read the Selling is Serving essay, you know the main purpose of a business is to solve a problem. The secondary purpose of the business is to generate profit. The profit helps the business solve the problem more effectively and efficiently at scale.
So it's best to build a business around a problem you are passionate about solving for people. When you do that, you stop worrying so much about the money and focus more on helping your people implement the solution.
These serial referrers share that passion for the problem. They experienced the pain or frustration of the problem without having the solution. Now that they’ve found you and implemented your solution, they can’t imagine life without it.
So much so that when they encounter other people dealing with the same problem (especially people close to them) they can't help but suggest the solution that worked for them.
These referrers tell them, not only that there is a solution, but the exact solution that solved the problem for them. Yours. They know it’s in this person’s best interest to implement your solution and eliminate the problem, so they’ll do the educating and convincing for you.
The best serial referrers even go as far as sending the person in need a link to your offer or community. This makes it as easy as possible for the new member to join and see the solution for themselves. It also makes your life much easier, because now you are getting new members with zero additional effort.
It’s essentially free marketing.
And just like with engagement within the community, you can also create an incentive structure to reward referrals and catalyze community growth even further still.