The hidden Knowledge tax you pay on your business growth – The Growth Tax Newsletter #7

growth tax, noun

A hidden cost or inefficiency that slows down a company’s growth rate, reducing its potential to expand and succeed in the market.

Every successful business needs a plan and strategy that shapes action, and defines growth goals. It should morph and change as your business and market evolve, but it provides the knowledge to set direction and   context for making the right decisions for your business.

At Open Velocity, we approach marketing strategy much the same way: a marketing strategy gives you the knowledge and insight to guide your marketing decisions. We read the market, understand your customers and use data to inform your next steps. We give you the knowledge you need to optimise your marketing activities.

At the extreme, knowledge gaps can destroy a business. Blockbuster’s failure to pivot as customers shifted to online streaming and postal rentals – and Netflix’s rise in their place – is a classic example. Blockbuster’s lack of customer and market insight led directly to their downfall. 

Many businesses we speak with are so focused on daily execution and short-term marketing ROI that they lack the knowledge needed to build lasting success. They haven’t explored the need for multifaceted strategies to sustain growth – plus they’re under constant pressure to deliver – reinforcing a short-term mindset. Whilst rarely catastrophic (like the Blockbuster’s case), failing to address  knowledge gaps leads to revenue stresses and inefficient spend – it’s a knowledge tax on growth.

Knowledge Tax, noun

The costs incurred when your brand makes sub-optimal decisions, or mistakes, through the use of inaccurate data, mismanagement of data or the wilful act of ignoring its insights.

How do you know if your business is paying a knowledge tax?

If your team can’t clearly articulate the value of your marketing activities, explain their performance, or pinpoint which channels or campaigns deliver the best returns, you’re likely incurring this hidden cost. 

Your ability to build knowledge and use it to inform your marketing actions is fundamental to delivering growth. In our experience here’s the most critical knowledge gaps companies often have:

1. Know your customer

To make effective marketing decisions, knowing who your customers are and what they value most about you is a firm foundation for getting your messaging right:

• What pain points are you solving?
• What value do you bring to your customers or clients?
• How does what you offer fit their needs?
• Why you, versus one of your competitors?

Your go-to-market strategy needs to identify customer best-fit, know which marketing channels they use, and how you can grab their attention, making your marketing activity easier to effectively execute.

2. Understand how customers buy and what influences them

Every customer goes on a journey to buy—long or short, there are multiple stages to them making their decision. Having the knowledge that gives you the ability to influence decisions, ultimately increases conversion. 

• Have you mapped your customer journey?
• Which channels engage them most? 
• What influences their choices?
• Who’s involved in B2B decisions (each will have their own concerns and criteria)?

Supporting customers with the right information at the right time, removes barriers and boosts confidence. Without this insight, you risk missing opportunities and creating unnecessary friction.

3. Have the data to critically evaluate your marketing performance

Measuring marketing performance is not just about collecting data, it’s about using the knowledge the data gives you as a guide. Accurate performance data allows you to identify the most effective strategies and channels, allocate budgets wisely and pivot quickly when needed.

• Are your online activities driving traffic and engagement?
• How do your different channels and activities convert? Where are your weak points?
• How much revenue does each pound of ad spend generate?
• Does your acquisition cost pay-back over the lifetime of a customer?
  

Building knowledge from your marketing data allows you to spot trends, identify underperforming areas, and adjust strategies to continuously optimise your activity and reduce customer friction, essential for sustained growth.

How to Reduce Your Knowledge Tax

Take time to fill any knowledge gaps before you start increasing your marketing investment – have the right marketing strategy building-blocks in place to help guide your day to day decisions.

Learn from bigger brands who are executing marketing best-practice day in, day out and establish relevant best-practices within your own business. Knowledge-driven brands like Amazon, Starbucks and Spotify adopt consistent behaviours that fuel their learning:

Customer insight: Monitor and analyse on-going sources of insight, such as rating and review data, social comments, journey conversion data and complaints.
Performance measurement: Track key metrics across your customer journey such as engagement, conversion, retention, and customer lifetime value to assess effectiveness.

Meaningful KPIs: Define what success looks like for each campaign and channel, and track progress against your goals.

Regular reporting: Monitor and report on marketing performance regularly to keep everyone informed and hold yourselves accountable.

Iterate & learn: Treat knowledge as a dynamic and on-going process – build knowledge, put it into practice, learn from the results, and iterate continuously.

A final word

Knowledge is the engine of long-term marketing success. While short-term tactics may deliver quick wins, real growth is fuelled by a deep understanding of your market and customers, and consistency in aligning your efforts with their needs.  A focus on long-term value creation, ensures that marketing compounds over time, rather than fading out as campaigns come to an end. 

Knowledge is an essential ingredient for delivering sustainable ROI on any marketing investment – a key to clarity, direction, confident decision-making and agility.

If you missed our last growth tax newsletter, you can read it here. And if you want to talk to us about any of the topics in our growth tax newsletter series and how they relate to your business, drop us an email.

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