Introducing Earned Growth
What is Earned Growth?
Earned Growth is a really valuable metric for measuring a business’s organic growth rate. Effectively it tells you how fast a business will grow each year even if it doesn’t spend any money on sales or marketing.
It does this by only including growth from retention or advocacy. It excludes revenue from customers acquired through paid channels.
This is an important metric in terms of the economics of your business. A business with a high Earned Growth rate is growing sustainably. It is also a measure of how much your customers love you. If you have high Earned Growth it means that your growth is coming from customers who are coming back, spending more and telling their friends about you. This is the best possible way to grow.
Where did Earned Growth come from?
Earned Growth has been developed by Fred Reichheld, the creator of the Net Promoter Score, and his colleagues at Bain & Company. They first published their thinking on it in the book Winning on Purpose (2021) and they summarised their thinking in a Harvard Business Review article called NPS 3.0.
By measuring and optimising for earned growth, there are multiple benefits:
- Sustainable organic growth: By focusing on earned growth, you sustainably build your customer base through word-of-mouth. You reduce reliance on costly paid advertising creating a more stable and robust business model.
- Enhanced Profitability: The money saved from lower advertising costs can either boost your overall profitability or be reinvested to drive further growth.
- Competitive Edge: Customers acquired through advocacy spend more, refer more of their friends and are more likely to return. Focusing your business on Earned Growth will result in you acquiring more of these customers creating a virtuous cycle transforming the fundamental economics of your business. This in turn will make you more efficient than your competitors.
By integrating earned growth into your strategy, you not only save on customer acquisition costs but also build a more sustainable and profitable business.
Your Earned Growth is a measure of the organic revenue growth of your business - it only counts your revenue due to retention or advocacy. It excludes revenue from customers acquired through paid channels, so it represents your growth in a hypothetical scenario where you spend nothing on advertising.
Let’s split out your revenue over the last 12 months into three origin sources:
- From existing customers: Growth from Retained Revenue
- From new customers acquired via advocacy: Growth from Earned Acquisition
- From new customers acquired via paid marketing channels: Growth from Bought Acquisition
In order to understand the full impact of advocacy, including word-of-mouth outside of Mention Me’s referral programme, we use a customer origin survey to measure how much of your new customer revenue is earned.
All of these revenue numbers are then expressed as a percentage of the prior 12 months revenue, so that you can see how they contribute to your year-on-year growth. This means that:
Growth from Retained Revenue = Revenue from existing customers (including reactivated customer) in the last 12 months / Revenue from all customers in the prior 12 months.
Growth from Earned Acquisition = Revenue from new customers in the last 12 months (estimated from survey) / Revenue from all customers in the prior 12 months.
We work out Earned Growth by excluding revenue from bought customers (Growth from Bought Acquisition):
Earned Growth = Growth from Retained Revenue + Growth from Earned Acquisition - Last period's revenue
All revenue numbers are calculated excluding returns/cancellations. This is currently a data gap for Mention Me. Because the calculation is a ratio, if return/cancellation rates are approximately constant over time and between segments, then these growth metrics will be approximately the same whether or not returns/cancellations are included.
The Earned Growth dashboard
How do I see my Earned Growth score?
In order to calculate your Earned Growth score we need two things:
- At least 2 years worth of continuous historical order data
- A running customer origin survey (we show this to a small percentage of first time customers to determine whether they came through a bought or paid channel) with at least 2,000 responses
Please go to the Earned Growth dashboard (select Advocacy intelligence from the navigation then select the ‘Earned Growth’ tab)
If you don’t have the required data then a notification at the top of the screen will inform you of the next steps to begin collecting the data. Alternatively, email firstname.lastname@example.org and we will be able to take you through the next steps
What can the Earned Growth dashboard do?
It can do the following:
- Track your organic growth rate (i.e Earned Growth score)
- Understand high-level areas to target to improve your Earned Growth score
- Track the impact of any changes you make
Ultimately by tracking, taking action and improving your Earned growth, you will build a more sustainable and profitable business. See ‘How Earned Growth can transform your business?’ for more detail.
What can I do to improve my earned growth score?
- Work out what is happening: identify whether the problem is with Growth from Retained Revenue or Growth from Earned Acquisition by looking at the breakdown of these two metrics in the dashboard
- Understand why it is happening: In order to improve your earned growth you need to improve customer experience so that customers are more likely to come back to purchase with you (improves growth from retained revenue) and advocate (improves growth from earned acquisition).
Look at the Sentiment Analysis feature in the Mention Me platform to understand pain points customers might be having
This is just the beginning of the journey! The Mention Me platform will evolve further with even more capability to help you diagnose and take action and ultimately improve your advocacy and therefore your Earned Growth score. Watch this space!!
I can’t see my Earned Growth score on the Earned Growth dashboard, what should I do?
Depending on your exact circumstances there are different actions you need to take in order for the dashboard to fully populate. The good news is that if you follow the instruction at the top of the dashboard and click the 'contact us' link the Mention Me team will be in touch with you to advise you on the next steps.
The notification you will see will most likely be one of the below:
In addition, the understanding earned growth chart & the revenue projection chart are displayed with dummy data so you can get a deeper understanding of what earned growth is and the impact it can have on your business.
This calculator provides an illustration of the benefits of improving your earned growth. It projects gross profit (revenue - marketing costs) over the next 5 years. 2 adjustable scenarios demonstrate the value of increasing your score in direct financial terms.
Over time, a higher earned growth score improves your customer base by increasing the proportion of advocated customers. These customers are more likely to be loyal and to refer additional customers, creating a virtuous circle that improves marketing efficiency.
Where available, actual values are used for revenue, earned growth, growth from retained revenue, growth from earned acquisition and growth from bought acquisition.
- Revenue from bought new customers stays the same over time. i.e. no growth in paid marketing.
- Earned customers are 50% more likely to refer, spend 20% more, and are 20% more likely to be retained, when compared to bought customers.
- The same proportion of existing customers are earned in the current year as in the previous year.
- Margin of 20% for bought customer revenue.
How do you recommend engaging c-suite/ senior stakeholders with Earned Growth?
Share Earned Growth insights with your senior stakeholders during weekly and monthly reporting (i.e. trading meetings) to emphasize the value of the metric and any trends you are seeing over time
- For example taking snapshots of the graphs and highlighting any changes such decline or increase in rate
- Earned Growth is also a great way of showing the value of advocacy to senior stakeholders
How do you work out which customers come from bought channels vs which customers come from earned channels?
- Set-up a customer origin survey that shows post-purchase to a small percentage of all of your first time customers
- The Customer Origin survey asks the the following question and customers can pick from the responses listed
- ‘A recommendation from a friend/family member’, ‘An online review’, ‘brand reputation’ and ‘Used your product or survive previously‘ is classed as earned growth
- ‘Promotion or advert or search engine’ is classed as bought growth
- Other allows customer to enter a verbatim, this will be classed as either bought or earned depending on the response
Some points to note:
- After choosing a response customer will get the opportunity to refer
- Initial data shows that referral cannibalisation is minimal
I already have a customer origin survey, why should I use Mention's Me version?
Mention Me are the only platform that is able to calculate your Earned Growth score, other tools will not have this capability.
In the future, we will introduce benchmarking. Using the Mention Me platform mean the question will be consistent across all clients which will mean we can introduce reliable & accurate benchmarking.
In addition, we have seen high engagement from customers wi th a 50% response rate. All customers that respond will then go on to see referral.
What package is Earned Growth available on?
It's available across all of packages as an open beta from September 2023.
Will the customer origin survey work with smart experiments?
Yes, if unsure on the exact set-up, please contact email@example.com
How do I provide feedback?
Contact your CSM to send feedback or reach out to our product team directly firstname.lastname@example.org
This is just the beginning. As of September 2023 we are at the open beta stage. There are further iterations planned which will cover the below
- Earned growth as a framework: the Mention Me platform will evolve further with even more capability to help you diagnose and take action and ultimately improve your advocacy and therefore your Earned Growth score. Watch this space!!
Earned Growth is a service mark of Bain & Company, Inc.