We all love the feeling of winning new accounts. It’s a great rush, there’s tremendous peer and management recognition, celebrations-a-plenty, plus there’s the ultimate satisfaction of unseating an incumbent competitor and no doubt anticipating the compelling financial rewards coming your way.
And rightly so.
Because winning new accounts is hard work, and getting harder. Customers are putting up more barriers to entry, doing their research online and avoiding salespeople more effectively as each year goes by. But I still see many sales leaders banking heavily on new account business to achieve growth goals, for many, winning new business has become the shiny object of the sales world.
There is little doubt that businesses and executives need to make a huge effort in that area, but it should be part of an overall strategy that puts customer retention and growth directly at the centre. There’s an increasing recognition and body of thought that the path to profitability and sustainable growth is through maximising your existing accounts first and foremost. Here are nine compelling reasons why.
1. Less effort/Less cost.
According to a number of studies, securing new customers is 5-25 times more effort and cost than driving sales from existing customers. Salesforce estimates that it is 6-7 times more expensive to gain a new customer than it is to keep an existing one.
2. Higher profitability.
There’s a lot of leverage to the bottom line by growing existing customers. According to research undertaken by Bain, increasing customer retention by 5% can impact profitability by between 25% and 95%!
3. Better close rates.
Close rates are substantially higher for existing customers versus new customers – 60-80% close rate for existing customers compared to 10-30% for new accounts. This will obviously flow through to sales productivity and profitability.
4. Account acquisition is getting tougher.
New account acquisition has been getting progressively harder in the past few years, as buyers become more adept at avoiding salespeople. Did you know that buyers are now completing 70-80% of their buying journey without ever meeting a salesperson? With so many sources of information for product research, reviews and references, customers simply don’t need a salesperson until the final stages of the buying process. And, by then, it can be too late to really influence their direction.
5. Creates a strong and sustainable business.
Existing customers should always be a large part of your business. According to Gartner, 80% of your revenue will come from just 20% of your existing customers.
6. A powerful differentiator.
Many organisations, read ‘your competitors’, do not get this right and take existing customers for granted. We know from our own experiences that there are few companies that do this really well.
7. Build your war chest.
Having a growing and satisfied account base helps you build the profitability to be aggressive on the account acquisition side. You will need deep pockets to sustain acquisition efforts and unseat entrenched competitors. New accounts are getting more difficult and expensive to win, so this needs to be funded by serving existing customers extremely well.
8. It’s mandatory for survival.
If nurturing and growing your relationships with existing customers is the path to growth and profitability, then the inverse is also true. Lose good, valuable and profitable customers on a regular basis and your business will be negatively impacted. Thinking that you can replace lost customers with new ones all the time is like pouring water into a leaky bucket.
9. A powerful referral and reference engine.
Satisfied and growing existing customers are the best source of referrals and reference sites – this is the most powerful lead generation engine for winning new accounts! Again, this is even more critical, as the barriers to winning new business get higher.
Nothing is harder than gaining new customers, but few things are as important as retaining existing ones and looking after those clients you already have. Hopefully, these nine compelling reasons should have convinced you that having a major focus on growing your existing customers is key.
Even if you’re in startup mode and acquiring new accounts, you already need to be thinking about how to manage and retain them, as the accounts you sign now should be the backbone of future revenues. You work hard to gain them so don’t let that effort go down the drain.
So, what’s next and how do you make it happen? I’ll follow up in future posts with important tips on how to get your retention program humming and delivering results. In the meantime, leave a comment below and share your thoughts with me.
If you are looking for assistance with your sales strategy and structure, feel free to get in touch with me at [email protected]. I’d be more than happy to have a short introductory discussion to understand your situation and where we might be able to assist.