Existing customers may be fastest route to ROI
Guest Post by Brent Holloway
Ever hear salespeople referred to as hunters and farmers? Hunters “hunt” for new business outside the fold; i.e.: they convert prospects to customers. Farmers till the soil within, growing revenues from existing customers. It’s easy for companies to be enamored with their hunters, because they bring in the “big game” (big new deals), while farmers, who tend to close more, smaller transactions, often work relatively unrecognized in their shadow.
I’d like to suggest that you may be missing out on big revenue by focusing too much on big game.
I know every business is different and no single sales model is right for all, but your answers to the following questions might mean you should hire more farmers and consider putting them on quota. And maybe, just maybe, you should fit your hunters with a pair of overalls and teach them how to farm.
Answer “yes” to these…focus more on the farm.
- Does more than 50% of your annual revenue (or some other % you consider significant) come from existing customers?
- If you offer a wide range of products and services, do you find many of your customers only use one or a few?
- Do you hear too often that your customers feel neglected, that they no longer receive the level of partnering or engagement they did when they first became customers?
- Is your customer attrition or turnover rate higher than you would like it to be?
- Are you losing more customers to the competition than you’re winning in return?
Answer “no” to these…you could be missing big revenue.
- Do all customers have an assigned salesperson?
- Is each customer contacted frequently enough?
- Do you survey lost customers to find out why they were lost?
- Have your salespeople run a gap analysis to assess which products and services each of your customers is using today?
- Do your customers really know what you have to offer? (If you were to run a customer education campaign on the breadth of your product/service portfolio, you might be surprised how often customers say, “Oh, I didn’t know your company did that.”)
Of course you can’t ignore hunting. You’ll always need to offset some customer attrition and competitive loss. But the impact of optimizing sales to existing customers might be several times that of new business acquisition.
Here’s just one example. If 80% of your revenue last year came from existing customers and the other 20% from new customers, then a 10% increase in sales from existing customers would have the same impact on revenue as a 40% increase in sales to new customers (8% company growth from either scenario). In this case, the opportunity to hunt on the farm is greater than in the jungle.
Five ways to grow customer revenue
In closing, here are five suggestions to grow revenue from your existing customer base.
- Targeted campaign offers just for your installed base
- Adding dedicated customer-focused sales resources (and putting them on quota)
- Targeted price increases, where price sensitivity is low or inelastic
It’s often said that a company’s employees are its most important “asset,” even though they don’t show up on a balance sheet. I would argue its customers are an equal, if not more valuable, asset of this type.
What is your business doing to optimize the value of your customer base?
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Brent Holloway, a Sales 2.0 leader (@Sales20Leader), is Sales Director for Verint Systems and my co-author on Sales 2.0 ¬ Improve Business Results Using Innovative Sales Practices and Technology. Thanks, Brent, for helping us see the forest from the trees, or should I say, “the farm from the jungle”?