Current customers are often the best – most overlooked – source of revenue for a Company. Many organizations and sales leaders have a "one and done" mentality. They close a sale and move on quickly to the next opportunity. That often leaves no one in the organization accountable for selling into the base for incremental revenue opportunities. This happens especially when managers perceive there to be a "greenfield" opportunity with a new product or service and race off with a land grab mentality. "Let's grow our installed base first and worry about incremental revenue opportunities later" is the often unconscious logic. While growing share initially is likely to be very important with a new product or service, not making the effort early on to embed the ethos of customer expansion is an opportunity lost. What most managers don't realize is that if you aren't growing a client, you are losing a client.
Most companies don't focus on the revenue opportunities associated with existing clients until such point as new sales begin to get harder and/or slow down – either because of market or product dynamics, sheer saturation or increased competitive efforts. Once at this point, they belatedly turn attention to the base in the hopes of maintaining traditional growth rates. But that is often too late. The time to be begin the process of maximizing "same store sales" is when the company is still young and the customer base still small.
Companies need to have the same sort of rigorous attention to metrics and pipeline management and sales cycle process with current customers as they do with new customers. And this isn't built overnight. That infrastructure should be developed once the first customers sign. Your customers also need to be "trained" to expect new product enhancements and new service offerings. They need to learn to expect that the relationship will continue to include contract expansions. Having the conversation early on with a customer that there is the expectation that the relationship will grow if the product exceeds expectations will help pave the way for incremental revenue. If you haven't talked to a customer in the last five years about add on business and lob in what would effectively be a "cold" call, you are very likely to be met with a quizzical and potentially hostile response. It is the sarcastic "Well, nice to hear from you!), response.
One of the questions most companies need to consider when tackling this opportunity is whether to use the existing salesforce to pursue both customer add ons and customer extensions as well as new customers. And the answer to that generally lies in the nature of the product or service provided. If there is intensive ongoing support for the service, it would be natural to have those providing the support also look for and incentive to sell ad on opportunities.
Where this effort should reside is also a function of what percentage of new revenue every year can be expected to come from the customer base. That number will shift overtime as a Company penetrates the market and new customers become more scarce and harder to close. In the early days, the sales team is often better focused on new opportunities where contract value and sales cycle is likely to be higher and longer respectively. Sales people are highly efficient economic creatures. They will zero in quickly on where they can generate the most commission in the shortest amount of time. How you set up incentive comp will drive behavior and focus much more effectively than any management dictate. If add on sales are perceived to be incremental and smaller, they are likely to fall by the wayside as the sales team focuses on the new deals that drive their comp higher in chunks.
A Company risks having add on sales become an afterthought if one group is doing both add-ons and new sales and is a mistake many companies make. In my experience, it is best to have an inside sales/support organization that is incented and organized to increase the net annual revenue per client - with product extensions, the addition of new users or better contract terms at renewal.
There should be an explicit revenue goal for expansion of the base. If it is a combined support/add on team, you may want to also have a client satisfaction goal. This may not be necessary as the team will figure out quickly that the only customers who buy more are the happy ones. The "new" sales team's comp can be more heavily weighted towards incentives for chasing the "net" new customers. The base/incentive comp ratio may be different for the two groups as a result.
We took this approach at MDeverywhere giving our Account Management team (which historically was focused on providing service support) a quota for increasing the revenue for their assigned client base. They could bring on additional users or additional groups, they could sell add-on service offerings. Or they can do all of the above. This effectively accomplished two things - it focused the support team on developing relationships at the right levels of an organization and on solving the big problems for clients that were blocking incremental sales - driving home that a growing client is a satisfied client. Growth and retention go hand-in-hand. It is a virtuous circle
The sales team, while initially grousing about losing this potential source of commissions; eventually recognized that they had been spending little to no time on this anyway. Their incentive comp plan was restructured to more clearly incent the closing of net new business. We gave our Account Management team extensive training on sales techniques but, frankly, not all of them made the transition successfully. Some were uncomfortable with asking for new business and were reluctant to consider themselves "sales people." But the more creative and aggressive members of that team were excited about the opportunity and realized significant increases in their annual compensation from driving a great deal of new business - very profitable business - for the Company. Once those commission checks started flowing, it didn't take long for it to become part of the Company culture that "everybody sells."
No comments:
Post a Comment