In the past 6 months I’ve been having the same conversation again and again with clients. It’s clear to me that existing client renewals, and/or growing existing relationships are keeping these executive leaders up at night. Essentially, how do we continue to provide irreplaceable value to existing accounts, and, when applicable, up-sell these accounts? This approach seems to less risky than trying to acquire new accounts these days. Almost every sales person or account manager this past year has dreaded the call from an existing client stating that they may not renew business, or they need to renegotiate pricing. Typically they fall into one of the following conversations:
- “I’m sorry, but we’re going through a vendor consolidation and need to compare you to X”
- “We don’t have any justification to renew the business. Without hard justification, we’re dropping the service and doing it ourselves.”
- “We need the deal of the century or we’re leaving. Something is better than nothing, right?”
- “That new project is on hold right now as the finance committee is reviewing all new expenditures, and moving forward with only mission critical, high ROI projects.”
- “What can I do? Your competitor just offered what looks like the same solution, for half the price, and will even throw in free services.”
- And the one no one can help “We’ve just been bought.” or “We’re going out of business.”
It reminds me of that conversation we’ve all had at the end of a personal relationship. Instead of “It’s not you, it’s me,” the client says “it’s not me, it’s the economy”. Things are hard enough when you can barely meet quota with new business, but when the bread and butter a company expects to come through each quarter misses the mark, it affects everyone from the sales person to the CEO.
According to Gartner, it costs five times as much to find a new customer as it does to keep an old one, which estimates the cost of customer acquisition to be $280 a head, versus a mere $57 a head for customer retention. Traditionally most marketing, sales, and sales operations efforts are focused on generating new business; however in this economy we’ve seen a shift. Analyst Eric Schmitt at Forrester backs this up, “It’s especially important to focus on retention during slow economic times. In this economy, retention is absolutely the right strategy,”
Also, eMarketer recently stated that one of Marketers’ top priorities for 2010 will be customer retention and growth. About half of marketers polled said their top priority would focus on retaining current customers, and 37% said their highest priority would be customer expansion/up sell. This is a big change from years past, especially by marketing teams who have typically focused heavily on lead generation.
There’s no silver bullet for 100% retention, nor should efforts shift to a Cold War perspective of not going outside and solely defending existing business. What is 100% clear in many saturated markets is that displacing a vendor is the only way of growing, and in every market competitors are laser focused on stealing your clients’ business.
I’d love to hear creative ways sales, marketing, and solutions teams are tackling this challenge. Part II of this blog will be solely focused on winning strategies to execute on client retention and growth.
Jarrett thanks for kick starting this conversation. It’s very timely.
Many companies are having a hard time getting their sales teams to make the changes they need to make, quickly enough, to address their new market conditions. Mainly, the new buying or budgeting / contract renewal reviews / processes of their customers and prospects.
Old value propositions are no longer working, that’s crystal clear. ( both for retention and new business growth )
What is clear is some sales reps, managers, teams and marketing groups are getting this right and seeing outstanding results. In todays climate if you can really develop a highly relevant, clear value proposition that can be articulated by the sales team and marketing jointly you’ll really have a winner. Combine that with an actual planned out retention process and you’re going to see outstanding results. It’s time for companies to treat retention like major account selling / new business development of the past.
I also think sales and marketing needs to help drive varying messages within different levels of their customers today. Previously a rock solid relationship with an end user might have been enough to get you that renewal. Now, you need to be able to deliver an entirely different and much more compelling business case to a much broader ( and skeptical) audience. Your internal advocates are much less likely these days to put their necks on the line and your old methods of “arming” them with the information they need to make the case won’t work.
Remember, when they hear we have to cut back, their reaction is we have to cut everything. What upper management is really saying is our old payback standard used to be x, now its’ y. They’re also saying we better be executing on the back end of these purchases and contracts…if we’re only getting 50% of the value or payback because we only executed half way, this project is dead.
So as hard as it sounds and as boring as it might be to a traditional new business development rep, it’s time to make sure your customers are actually using what you sold them to its maximum potential, getting not only the payback they had hoped for but actually reaching the new raised bar of roi. Get back in front of your customers and do the work, don’t take it for granted or blame them for it only be ok vs. great.
If you don’t they’ll be saying it’s them and not you – but you’ll know the truth it was you and your laziness to get in and make it great that lost you the account.
It’s time to arm our sellers, customer service and marketing teams with the information they need to raise the bar on customer outcomes…how are others doing it, why does the same guy at the sales meetings have the best case studies every year, why does that field engineering team always have the most unique customizations that differentiate them from the competition.
It’s time to find out the answers to those questions and get the word out to the entire organization so they too can raise the bar on customer success.
Sellers & marketers need to quickly harness their internal knowledge from those people and teams that are doing this effectively, and replicate that success across their organization in a way that is highly relevant, easy to execute and always kept up to date so their message and approach keeps working in a dynamic marketplace.
I think it’s also important to get more proactive with retention – often two words that didn’t go together in the past. Arming your sellers with a process, the tools, insights,messages, collateral and competitive information ( both direct competitors and alternative approaches that you’re losing to, plus the do nothing objection )
Thanks again Jarrett.
Thanks for the response Stephen. You bring up some great points about how sellers need to get off their heels and be proactive about when they engage, what the message is, and who they are delivering it to. Stay tuned on other best practices we have seen that clients use to execute on retaining and growing existing business. I’m also curious to learn about strategies companies use to get higher in an existing accounts, as to your point, the same value old value prop to a low level audience is extremely risky, if not a recipe for disaster. For example, how do we reach the executive leading the vendor consolidation effort, possibly before they have that initiative, and what message will drive enough value and ROI to be one of the last vendors standing?
Jarrett. I think its a mindset change first. Reps used to pray the phone would ring…inbound leads. Now when the phone rings most are scared.
I think the message is the same – but the situation is different. Stop waiting for the phone to ring! Get out there and make things happen…your customers need your ideas more than ever, they need your help to execute, they need you.
Just like waiting for the phone to read for leads used to mean crowded playing fields – competitive bids….less chance for differentiation and less margins.
Now waiting for the phone to ring means playing defense, gut wrenching panic filled days…and black eyes because you can’t possibly block that many punches.