How Community-Led Growth Can Benefit Investors

credit: Dmitry Molchanov/Shutterstock

Community-led growth (CLG) is a powerful way to grow a business. People who are enthusiastic about your company and what you have to offer are an invaluable tool. Harnessing that enthusiasm can help with customer acquisition, retention, brand sentiment, expansion, and more. But you (and your company) are not the only ones who can benefit from community-led growth.

It can benefit your investors as well.

What is community-led growth?

Here’s a quick recap. It’s a business strategy that leverages a company’s community of users, customers, and fans to drive growth and engagement. At its core, it’s an evolution of the growth strategies that preceded it: Sales-led and product-led. A successful community-led growth strategy centers around building a community that not only contributes to your goals as a company but your users as well. 89% of responders in the 2022 Community Index Report agreed that community is
critical to their company’s mission. 79% said that community has had a positive impact on their organization’s objectives, and 62% said that their organization will be increasing their investment in community.

7 benefits of CLG that impact investors

1. Increased revenue growth:

While communities take time and effort to build, the energy is worth it. Community-led growth can drive customer acquisition and retention, leading to increased revenue growth and stronger financial performance.

2. Higher customer lifetime value:

Customer lifetime value is an important metric that helps indicate the total revenue that a company can expect from a single customer throughout their relationship with the company. It’s a valuable metric because it allows you the power to leverage the value of every single customer throughout their journey. Because CLG can result in higher levels of customer engagement and loyalty, this can lead to a higher customer lifetime value.

3. Improved margins:

By being engaged with your most enthusiastic customers, you can get direct feedback from them. Feedback on the customer experience, directly from your customers can lead to a more cost-effective acquisition process, improving margins.

4. Stronger brand:

Building a strong community of loyal customers can increase your brand sentiment. Word of mouth is a powerful tool, and the larger and stronger your community grows, so does your brand. Positive brand sentiment reflects well on investors as well as the company.

5. Better returns:

By focusing on building a strong community, CLG can lead to better returns for investors as the company’s financial performance improves and its market position strengthens.

6. Increased customer loyalty:

Connection is important, especially when it comes to creating loyal, lifelong customers. Community-led growth can lead to increased customer loyalty, as users feel a strong sense of connection and community with the product or brand.

7. Reduced customer churn:

This growth strategy can reduce customer churn, as customers are likelier to stick around and continue using the product due to their involvement in the community. A strong customer base is appealing to investors. Happy and engaged customers are loyal customers, so why not build an entire community out of them, right?