Every sales executive and sales representative needs to make an annual revenue goal. It’s no secret that the easiest path to “making your number” is to keep your existing business and sell more to an existing account. Why? The easiest customer to sell to is one that already buys from you. Current accounts know your company and your product. Therefore, they are the most receptive to buying more from you whether it is an existing or new product.
Following this pathway, sales representatives should sell an existing product to a new customer followed by a new product to a new customer.
This is because there are only four ways to generate revenue:
- Sell a new product to an existing customer
- Sell a new customer an existing product
- Sell an existing product to a new customer or
- Sell an existing product to an existing customer
Why Customer Churn is Problematic
While sales organizations and representatives need growth through new customers, the holy grail of sales is customer retention. Customer churn or the loss of customers can derail your ability to make plan for the year.
As an example, let’s assume that you are expected to increase sales from $100M to $120M next year. An increase of 20%. If you have a $10M churn with your existing accounts, you would lose $10M in revenue. Now you need to grow from $90M to $120M or by 25% and $30M in revenue. This is a much more daunting task.
Benefits of Customer Retention
Research shows that it is 6-7 times more expensive to acquire new customers than to resell to existing ones. Additionally, there are five other significant benefits.
- Price Premium: Often sellers benefit from a price premium because loyal customers recognize the product’s value and are less likely to request discounts.
- Referrals: Satisfied and loyal customers are more likely to provide referrals.
- Reduced Operating Cost: With a base level certainty of the number of units to be sold organizations can streamline their manufacturing or service delivery levels to maximize profit.
- Increased Purchase Potential: Existing customers are more likely to buy more from their existing sellers when demand increases.
- Base Level of Profit: Being able to predict or book an existing level of business allows the organization to know their minimum level of projected profit.
Three Things to Know!
There are three things to know about every customer:
- Why they chose to do business with you.
- What you are helping them accomplish, fix or avoid.
- Which senior level contacts understand the value your company provides.
Customer Retention Strategies for Sales Professionals
Customer service, loyalty and retention are enterprise-wide responsibilities shared by all. With that said, there are several steps that sales professionals can take daily to retain existing customers. Here are a few examples.
- Service: “Over deliver” and “under-promise.” Be careful what you claim and deliver what you promise.
- Measurement: Routinely use customer loyalty surveys.
- Routine Inquiry: Ask the customer if you are meeting their expectations and what you could do better.
- Moment of Truth: Consider each customer encounter a moment of truth. After each in-person meeting, telephone call or Email evaluate your performance.
- Promptness: Respond to operational difficulties quickly and resolve them promptly.
- Thank Them: Always remember to thank your customers for doing business with you. Don’t take them for granted. The simple act of thanking them will differentiate you from all other sellers.
- Share Insights: Provide important information on their customers, market, technologies, competitors etc.
- Proactive: Be proactive in requesting organizational resources to resolve issues or answer questions.
- Joint Review: Agree on metrics and KPIs and be a partner in the review process.
- Communicate Frequently: Make it a point to have on-going communication. Write out a formal cadence. It’s easy to forget about a good customer and take them for granted.
Parting Thoughts
The pathway to making your annual revenue goal is to not dig yourself a hole by losing existing business. It starts by protecting the core of existing business. This requires a proactive strategy with good time management. Sellers should remember that customers have choices, their expectations change frequently and there is always a competitor trying to take the business away. The number one question every sales professional should ask themselves is “what would I do to take this business away if I was the competitor.” The answer may be frighteningly simple.
