When Growth Eats Margin: The Illusion of Creating Value
Why customers’ view of value decides whether your growth is profitable
80% of CEOs believe they deliver superior value; only 8% of customers agree. That gap is at the root of both margin pressure and strategic uncertainty.
Inside the Club today:
Are your competitors about to turn off your taps?
Customer value, margin, and uncertainty
The CEO lens
CEO’s hidden trap
Improvements you can make in under a month
Are your competitors about to turn off your taps?
CEOs often ask me why I write so much about customers. For them, customer issues are like dust on the shelves—they see themselves as architects, not housekeepers.
One CEO put it this way: “Customers are like a water tap for revenue. If I need more ‘water’, I just need a bigger tap—or one more tap.”
This philosophy works perfectly—but only until you wake up one morning to find that bold competitors have turned off all the taps.
This is what taxi companies thought before Uber arrived. This is how retail chains felt before Amazon launched. Traditional banks believed this too, until the birth of neobanks (in some countries, they’ve already taken up to 40% of the market from traditional banks).
Young, bold startups arrived and offered their customers radically new ways to meet their needs.
In my study, CEOs rarely spoke about customers. They are more worried about tariffs, inflation, external shocks, and uncertainty.
They feel they know exactly where they are going. Their job, as they see it, is simply to make sure the plans are delivered. They feel that customer needs and customer value are the responsibility of marketing and product development.
They are wrong. 80% of CEOs believe they deliver superior value; only 8% of customers agree. That gap is at the root of both margin pressure and strategic uncertainty.
As a CEO, making sure your business solves your customers’ Big Customer Problem and creates Unique Customer Value is on you personally. It’s a task you simply can’t delegate. That is, of course, if you want your business to thrive.
Because customers are your only source of revenue. And the customer value you create is the only way to keep them as customers.
You might see customers as a ‘tap’—but the source behind that tap is not bottomless.
Customer value, margin, and uncertainty
Here are three examples from my own experience. Two CEOs underestimated the importance of customer value. The third used it to build a stronger business.
1. A children’s goods manufacturer, Europe. The CEO complained that the tariff policies in his markets were always shifting. “Tariffs go up, and we are no longer competitive,” he said. “Our customers leave us for local producers or Chinese imports. We have to shut down in countries where we have invested a lot of time and money.”
The customer value lens: The truth is, the company does not create enough value. The customers simply do not care whose products they are buying.
2. Business services, Europe. The CEO expanded his successful business from his home market into neighbouring countries. But once there, as he put it, “demand was lower than expected.”
The customer value lens: Customer needs change from one country to another. What counts as “value” at home is not necessarily value somewhere else. The CEO simply overlooked this.
3. A pizza chain, Eastern Europe and Central Asia. The company creates strong customer value, and this matters deeply to its top employees. They do not leave for larger competitors, even when they receive very attractive offers. They simply do not want to be “cogs in a machine” there.
The bottom line:
Customer value is more than just a slide in a strategy presentation. It is how you protect your margins as you grow and your best antidote to uncertainty.
What could be better for a business than customers who keep paying, even during a crisis? If you have created true Patrons—genuine fans of your product—then external shocks won’t stop you. Numerous studies prove this, including this one.
Money can’t buy you love. But your customers’ love brings you money.
The CEO lens: run a quick test
Is your business highly dependent on external factors?
Your product solves a customer problem that the buyer can easily put off. For example, if you sell cars, your business will suffer if customers decide that changing cars every three years is an unnecessary luxury and start buying a new one every five years instead.
Your product has cheaper alternatives of similar quality. For example, you sell expensive European brands, but there are acceptable alternatives from Asia on the market.
The customer problem you solve affects only a small number of people or businesses. If that number drops even slightly, it can hurt your business. For instance, if you supply expensive, highly specialised 3D printers, losing even one deal can be very costly.
Economists would call your product ‘price elastic.’ This simply means that demand jumps or falls sharply, even with a small change in price.
Your product has proven itself in one region and with one customer segment. But you don’t know if you can scale it beyond your home market.
If you recognise yourself in any of these points, your business is likely vulnerable to uncertainty. You also risk losing your margins as you grow.
And this is not just ‘the responsibility of marketing and product development’—it is your responsibility as CEO.
As Jeff Bezos said, “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.”
CEO’s hidden trap
Many CEOs tell me: “We have a strong product. We analyse the market and we don’t see any real competitors.”
But that does not mean they aren’t there.
You cannot see what your competitors’ R&D teams are working on. You don’t see the new technology being developed in Silicon Valley that could make your product irrelevant tomorrow.
By the time you see your customers walking away, it will be too late. Uber, Amazon, and neobanks caught established businesses completely by surprise. To stop this from happening to you, ask yourself these questions regularly:
What could kill our main products tomorrow?
How can we make them even better?
Your customers today will be someone’s customers tomorrow. The question is: will they still be yours?
Hands-on Tactics for the CEO: Improvements You Can Make in Under a Month
Speak to 3–5 customers personally. Get your senior team to do the same. It is an eye-opening experience. CEOs spend no more than 3% of their time talking to customers—that is simply not enough.
Ask your marketing team to record two or three video interviews with upset or even furious customers before every quarterly meeting. It helps you see the numbers in a different light.
Tell your CMO to rank your products by market strength—how unique they are to the customer. Demand solid proof. Marketers should rely on customer feedback, not their own assumptions or the opinions of the sales teams.
Create a map of your regions, your main products, their market share, and their market strength. The more “weak” products you have, the higher your strategic risk.
Use this map for your quarterly and annual planning.
Step up your efforts to build the market strength of your products—their Unique Customer Value:
Regularly measure your market strength and conduct customer research.
Add customer satisfaction metrics (such as CSI or NPS) to the strategic dashboards that you review personally.
Make customer needs and value a central part of any discussion about market changes—whether you are launching new products, entering new segments, or growing sales in your home market.
You might not care if your customers are happy with your products. But you can be sure your competitors do.
Good companies talk to customers about their products. The best companies talk to customers about the customers’ own challenges.
Conclusion
Many CEOs separate qualitative growth from quantitative growth. To them, qualitative growth happens in leaps. New products, services, and business models appear only occasionally. But quantitative growth—increasing sales and entering new markets—is continuous.
Big mistake.
Look at how often the apps on your smartphone update. Developers do this for a reason. They know their competitors are just one click away from their users.
Your competitors are likely just one call, email, or click away from your customers, too. Your margins won’t only suffer because of growth—you could see them drop tomorrow if you don’t make qualitative development continuous as well.
Growth is a process, not a project.
Make staying close to customer needs and creating new value a permanent part of the key processes you control. And do not forget the Feedback Loop—if you aren’t personally hearing from your customers on a regular basis, you won’t know what risks you are facing.
If you want to find out how well your business handles uncertainty—and if it is still creating the value your customers expect—I can run a stress test for you. Just reply to this email to get started.
See also: Work with me. Visit my website.
My mini-book, Create Customers No Competitor Can Steal: The Strategy That Makes Market Uncertainty Irrelevant, is finished and is currently being proofread. Soon, paid subscribers and founding members will receive it for free—and before anyone else. You can also upgrade your subscription now to get your copy early. Later, it will be available for general sale.
Svyatoslav (S.B.) Biryulin
I'd like to add my two cents: if you’re doing business with a B2B organisation, don’t just focus on what it requires; familiarise yourself with its B2B or B2C customers and consider their needs, too.