Monday, January 28, 2013

The Leaky Bucket

Years ago I was involved in business development for a large advertising agency. We engaged an outside consultant and formulated a team of business unit leaders (account managers, copy, art direction, media, research and so on) to address the challenge of growing our business. The consultant introduced us to a metaphor that is a great way to look at so many business scenarios - The Leaky Bucket.

Your business is a leaky bucket, because you are losing business every day. The leaks are all of those areas that have to do with retention of existing business. It’s almost always easier to grow your existing clients than it is to win new customers. Ironically, the routine repair of the leaks that mitigate the loss of business is less glamorous. It’s about operations, customer satisfaction and net promoter scores (a measure of the likelihood that you will be recommended for additional business). It has to do with customer satisfaction. It has to do with innovation that allows you to earn repeat business. It has a lot to do with understanding the marketplace, competition and recognizing hundreds of small innovations to routine activity.

Of course the leaks prevail in spite of your best efforts. Filling the bucket is acquisition of new business. Here is where you put on your sincere suit and pitch capability. You want to play to your strengths, but you also want to feature things that will allow customers to consider your value proposition. The quest is exciting and often dynamic and creative, because the goal is to form new relationships. Winning, especially winning big, is high profile stuff. Frequently the cost of winning is significant. Ironically, it is the routine retention efforts (preventing the leaks if you will) that allows the win to pay off over time.

In summary, consider your own leaky bucket. Acquisition is important and worthy of significant investment. Retention, on the other hand, is the best and most cost effective way to grow.

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