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Anyone who has picked up a marketing text book or self-help manual will know that there is a massive differential in the cost of acquiring net new customers when compared to winning new or incremental business from existing customers. The multiple varies wildly depending upon which study you look at but they all agree, successfully keeping customers and growing revenues with those customers will have a profound and positive impact on a company’s ongoing profitability.
The UK Chartered Institute of Marketing (CIM) estimates it to be between 4 and 30 times more costly to sell a new product or service to a new customer than to do the same to an existing customer. The multiple depends upon many factors, complexity of sales process, product lifecycle, market dynamics and many others, but the principle is incontrovertible.
All start-up businesses must overcome the initial challenge of the fundamental requirement to win their first customers. Most Business Plans have detailed sections on markets, customer segmentation and sales process, but very few differentiate the sales process into net new business acquisition and existing customer retention and growth. The skills required and the commercial offerings for the two disparate groups however differ fundamentally and the really successful businesses approach and manage them separately.
In most enterprise sized businesses, new business and account or customer management teams are all part of the same salesforce but they have different line management and totally different skills training programmes and personal development paths. Yes, the sales all roll up into the same sales number, but there is an absolute recognition that ultimately, the new business ‘hunter gatherer’ is not always successful at ‘farming’ existing customers.
Of course, the make-up and skill set of your sales resources is not the only thing that will negatively or positively affect your organisations retention and growth of its customers. There are many factors that a business needs to manage to maximise success in this aspect of its operation. One thing is clear however, achieving success in retaining and growing customer revenues is at least as important as winning new customers. The result of success in this area of your sales activity will however positively impact your bottom line profitability far more.