By Lauren Keller Johnson

Getting the top line headed north without sending the bottom line south is the ideal, but it’s difficult to realize.  According to Dominic Dodd and Ken Favaro, authors of The Three Tensions: Winning the Struggle to Perform Without Compromise (Jossey-Bass, 2007), there’s only a 40-percent probability that a company’s revenue or market-share growth will be profitable. How to increase those odds?  Dodd and Favaro—director and managing partner, respectively, of New York City-based Trinsom—recommend focusing on customer benefit, which they argue is the common bond between growth and profitability.  To maximize your company’s chances of achieving growth and increasing profitability, implement these practices:

1. MAKE ‘CUSTOMER BENEFIT’ YOUR MANTRA. Dodd and Favaro advise emphasizing customer benefit: the rewards customers receive from using your products or services. When customers benefit from your offering, they’re willing to pay through higher prices or larger market share. As you increase customer benefit, your growth and profitability spiral upward together.

Dodd and Favaro recommend asking three questions about every major growth or profitability initiative you’re contemplating.

§          Will this initiative increase customer benefit?

§          If yes, how will it do so?

§          How will we confirm that it has increased customer benefit?

Consider Dow Jones’ decision to thoroughly redesign the printed version of The Wall Street Journal. It not only overhauled the paper’s banner, spacing and typography; it also began laying out cover stories differently—so that each article finished in the same place on a page spread. The move was intended to increase customer benefit (question 1) by helping readers navigate more quickly through the paper to find the information they wanted (question 2). Advertising revenues and circulation rose: proof that customers (advertisers and readers) were willing to pay for the improved benefit (question 3).

The increased revenues from advertisers and the larger market share from the expanded subscriber base more than paid for the costs associated with the redesign. Thus, the initiative spurred both growth and profitability.

2. GROW YOUR MARKET, NOT JUST YOUR MARKET SHARE. When you focus on growing your market share, you concentrate on your competitors. But when you focus on growing your market, you concentrate on your customers—and the benefits you’re providing them.

Consider confectionary and beverages giant Cadbury Schweppes. As Dodd and Favaro explain in The Three Tensions, the company set out to grow the US chewing gum market, which had begun stalling in the late 1990s. Cadbury noticed that most incumbents focused on gum’s ability to freshen breath, so it decided to emphasize a different customer benefit: sugarless gum’s ability to clean teeth. Cadbury also noticed that the US market “had a much lower proportion of sugar-free gum than other similar markets.”

Cadbury stepped up advertising to promote its sugar-free brands Trident and Dentyne. The company’s efforts paid off: “Since 2003,” Dodd and Favaro write, “the US gum market has grown at 7 percent to 8 percent per year with consumption of gum increasing along with its average price—[proof of] greater consumer benefit. Meanwhile, Cadbury Schweppes’ share has grown from 27 percent to 31 percent.”

3. GO FOR MARKET STRENGTH, NOT MARKET ATTRACTIVENESS. How can you ensure that any growth in your revenues or market share is tied to customer benefit—and therefore is profitable? Avoid “growth” markets where your offerings can get lost in the crowd, recommend Dodd and Favaro. Instead, build on the strong position you hold within your current markets and offer new customer benefits.

In 2000 Barclays Global Investors (BGI), the firm’s investment management business, had a whopping £435 billion under management—but a slim £65-million operating profit. The company considered spinning off the business but then decided to leverage its strengths in the industry.

Specifically, BGI had enormous scale—and therefore lower unit costs than competitors. It also had established a strong position in exchange-traded funds, which offered customers a major benefit over traditional indexed funds in the forms of lower costs and higher returns. BGI invested heavily in accelerating growth in this market—and its profits grew tenfold in just five years.

Boost growth & profitability–at the same time

Getting the top line headed north without sending the bottom line south is the ideal, but it’s difficult to realize.  According to Dominic Dodd and Ken Favaro, authors of The Three Tensions: Winning the Struggle to Perform Without Compromise (Jossey-Bass, 2007), there’s only a 40-percent probability that a company’s revenue or market-share growth will be profitable.

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