A few weeks ago, I was at a conference where some of the latest McKinsey & Company research was presented describing how sales in the 21st century is different from selling in the previous century. For most of us that live in the sales and revenue generation ecosystem, the findings make complete sense and are consistent with what we know to be true. For example, in the past, salespeople cold called their way to success. Today, most organizations have set up reasonably sophisticated demand generation functions. Personal judgment and gut have been augmented by predictive analytics. This also rings true. However, one of their findings did trouble me. They suggested in the prior century, the focus was taking care of existing customers, while today, the focus is all about obtaining new clients.
While this may be true for many firms, it does strike me as an opportunity missed. Most organizations today undervalue their current relationships over the acquisition of new customers. This is not just a casual issue. It is a systemic, cultural, and resource-driven breakdown. In most organizations, the most talented people, the most lucrative rewards, the highest levels of recognition and promotion opportunities – all are disproportionately directed at new client acquisition and to those that are engaged in this pursuit.
While I am not suggesting that the relentless pursuit of new clients is bad idea, I am arguing that many firms would be able to drive more growth, sustain better long-term customer relationships, and drive higher levels of overall firm profit if they managed to place an at least an equal emphasis on developing and implementing strategies to take better care of and grow their existing customers. This sounds simple, but for most firms operating in the 21st century it involves a substantial cultural shift. The data and research on this point is clear; growing existing customer relationships has a much higher return on invested time than does obtaining new clients, and that realizing growth in existing customers is more profitable than the acquisition of new logos. However, most organizations are not set up in a way that is reflective of these facts. The most important disconnect between what is verses what should be becomes clear when one recognizes the reality that many organizations have established a culture, intentional or not, that has the more talented sales resources, the more talented sales leaders, and most likely, even a greater quantity of sales resources focused on generating new wins as opposed to maintaining and growing existing relationships. Account management does not get the same engagement, mental horsepower, and Board focus as does the never-ending pursuit of “new new.” Even the terms “hunter” and “farmer” come with a value judgment aspect; hunters are typically considered the elite team, farming is a considered a lower level and less valued activity.
It is difficult to find the level of enthusiasm and excitement for customer success or account management that it rightfully deserves. For most CSOs, this topic of account management is not “front and center” of their strategy and planning. Yet, taking care of, and selling to existing customers will do more to drive profitable growth than implementing a strategy that is disproportionately focused on the acquisition of new clients as opposed to selling to existing clients. The cost of selling to a new client is typically 10% of the cost of obtaining a new client relationship. Further, because you already have an existing relationship, much of the friction and pressure that comes from procurement processes and RFPs are often not part of the equation, hence margins are generally better than what a firm is able to garner with new customers where price generally figures to be a more important part of the purchase equation.
So, some suggestions to consider as you do your planning for 2019.
- Examine your culture to ensure that taking care of and selling more to existing customers is celebrated and rewarded within your firm. If the culture does not recognize the importance of customer success, growth from existing customers will suffer dramatically.
- Be sure that effective account management and the organizational commitment to upsell to existing customers is a Board Room topic and deserving of the strategic focus it deserves.
- Insure you have some of your most talented and motivated team members focused on this channel in both individual contributor and management roles. Implement a talent management process that places assignments in account management as part of the development path for high potential personnel as opposed to the career graveyard it often is in many companies today.
- Insure that thorough account and opportunity plans are created and managed for all of your strategic accounts. Review these plans at least quarterly, at levels consistent with the importance of the revenue that can come from these relationships. Celebrate new wins coming from existing relationships with equal enthusiasm as deals closed with new customers.
Like any lever for driving growth, a greater focus on more effective account management is not a panacea. Cultivating new relationships is essential for any growing company. However, most organizations will enjoy greater levers of growth and success by rebalancing the emphasis, both from a cultural perspective as well as reallocating resources between the pursuit of new relationship and account management.