richhall asks:

I have read that getting new customers in the pipeline is the most important goal for companies.  I have also read that client conversions and up-selling are imperative to growth.  Which is true?

Mr BizPlan answers:

You questions surrounds two major philosophical mind sets among marketing experts today.  One camp believes that top line growth can solve all of a companies problems and that means making investments in branding you company and heavily marketing your products/services.  The other camp believes that concentrating on converting more of your leads and then working selling a higher average ticket, whether it be through up-selling, packaging or ancillary products. 

I believe that both are important…but should be used at different times in a company’s life-cycle.  When you are a new company with a limited customer base then loading up the top of the funnel is where you should concentrate your efforts.  Marketing experts have determined that a client will have to see or hear your ad about seven times before they respond to it.  This means that new companies have to invest a large amount of their budgets into marketing and branding efforts. 

Once a company’s brand becomes well known then the focus should shift to conversions and up-selling.  Converting more clients from the leads that your company receives costs less and provides a higher rate of return than generating more leads.  Then, once your leads are converted to buyers up-selling will generate higher profits.  This concept is illustrated in the 21st Century Marketing system by Richard Johnson below:

Focus On Top Line Growth

Focus On Top Line, Conversions & Up-Selling

Generally, increasing conversions of leads into clients and up-selling requires less investment in marketing and promotion.  In addition, for companies with a long cash to cash cycle top line growth can actually be detrimental to a company’s cash flow because there is a ramp up of inventory costs, labor costs and overhead before cash is collected on accounts receivable.  Slow company growth with provisions made for working capital preparations will help your company grow successfully and profitably.

I hope this helps!

Mr BizPlan
www.diybizplan.com