For private equity organizations, the cup runneth over.
The post-pandemic period has been a boon for PE markets, with more than a trillion dollars flowing into portfolios in 2021 alone. However, in the face of an uncertain economic environment, it will take more than legacy practices to keep fueling the PE fires.
With the unending tasks of assessing, aligning and optimizing their portfolio companies’ performance to maximize growth opportunities, marketing is one line item that often gets short shrift at PE organizations. But no longer: Simply relying on the existing talent within a portfolio organization can increase the risk of achieving the same old, same old — leveraging historically ineffective approaches while hoping to yield better results.
It's time to learn from the behaviors of the past, along with what’s working elsewhere, to ensure continued positive growth. Indeed, it’s a great time to build — or tune — your growth engine. With a team of experienced growth executives and data analysts, your company can begin to see increased performance and ROI in a matter of weeks; below is an outline of what such a team must do.
How the marketing/growth engine can work for you
- Conducting a growth analysis at every phase of the investment cycle
From the initial assessment of performance and staff capabilities to ongoing growth optimization or preparation for an exit, your growth/analysis team must conduct a deep performance analysis at each stage. This will add value by helping you to understand current inefficiencies and untapped opportunities, while reducing and reallocating budgets/costs.
- Identifying and eliminating siloed operations and performance reporting that are limiting success
The age of big data has brought with it the age of complex operations. So, while marketing is focused on leads, operations is focused on prospect contact and conversion, and IT on data. Coordinating these efforts is the best way to ensure that the alignment of these three silos happens. Without integration, optimized operational performance within the silos will result in reduced overall efficiency.
- No longer mistaking performance reporting for performance analytics
Without fail, every portfolio company will claim to have a unified view of the customer, an understanding of their prospect’s contribution to the company’s ROI, and a team devoted to reporting and analysis. Experience begs to differ, however. Such a unified view of the customer is as elusive as Sasquatch. Without dedicated reporting efforts in place, you risk failing to define — and understand — the key metrics related to the prospect’s contribution.
That’s why the starting point of any analytic approach is having dedicated resources for understanding and reporting on operational performance. In this age of AI/machine learning, charts and graphs from Excel or a dashboard, while foundational, fail to provide the prescriptive insights needed for performance optimization. While most companies cannot afford or even require a full-time data statistician to do predictive modeling, you likely can get the needed insights from your growth and analytics team.
- Digital transformation requires companies to align resources with opportunity/potential to maximize return.
While resource allocation and treatment differentiation should span your portfolio company’s entire operations, here are a few critical examples:
- Prospect value: It may be as easy as conducting a Pareto analysis — assigning value by customer and ranking from high to low value to find the elusive 20 percent, which delivers the lion’s share of value. This is even more critical than ever in the digital world of “look-alike" ML media targeting.
- Variable spending: Now that you know who likely makes a difference and who may not, aligning resources accordingly while disinvesting in low value customers will make a significant increase in overall value.
- Channel optimization: By nature, optimization will put an end to making decisions on the average. If you don’t focus on the 20 percent from the 80/20 rule, and instead optimize towards the 80, you may end up with a target you’re not interested in. The key will be to dig deep with data unified across marketing and operations.
The power of these approaches can be staggering, sometimes bringing about multi-million-dollar annual increments. All a firm must do in today’s ready market to see precisely such results is to set a team in place who are knowledgeable and experienced enough to follow the guidelines above.
