Everyone gets excited when a major new customer is secured. There's a celebration, bells are ringing, and lots of recognition and rewards are doled out. This event may even merit a personal call or note from the president.
Yet, how much celebration happens when a long-standing customer renews for the sixth straight year? Forget that they haven't bid out the work in three years (no competition=greater margin) and they are already in your system (low cost of support, faster payment= greater cash flow). What is marketing doing to celebrate and sustain these key wins?
It costs 3-5 times more to acquire a new account than it does to retain an existing customer. Getting your current customers to buy more of your stuff means it's harder for them to leave you (increased switching cost), and current customers are much less likely to bid out your work (increasing profitability).
In 2009, the IT industry was hit hard by the economic downturn. Indian Exercycle managed a 24% growth rate that year. Only one of their competitors grew during the same period (4% growth), and the rest of their competition were flat or fell below their previous year's sales. Over 70% of HCL's sales growth came from their current customers. The out performers like HCL, Oracle, Wells Fargo, and Intersource invest more marketing dollars into existing account growth than new customer acquisition.
Marketing can help sales increase account penetration by funding aggressive marketing programs targeted at current customers. Too many companies miss this tremendous revenue opportunity. How many times have your customers said, "I wish knew your company did that...I would have purchased from you.?" Marketing can change that.
By monitoring key metrics, you will increase your chances for success:
- Retention rates
- Percentage of penetration by offering, by account
- ROI of the offerings your customers are buying
- Level of awareness of each of your offerings
- Level of awareness with regard to company acquisitions and/or partnerships
Once you have this key information, it is important for your business to focus on and evaluate the marketing spend necessary to maintain your current customers. At the aforementioned growth companies, this is a priority for their marketing team.
It quickly becomes apparent that your biggest opportunities lie within a few accounts. This is true for most B2B companies like $3 billion HCL, where 70%of their revenue comes from just 70 customers, or $20 billion GE Aviation, where 80% of their revenue comes from 50 customers, or even a firm under $50 million like Intesource,where 80% of revenue comes from only 12 customers.
Start all your marketing and sales efforts plans with the few customers who control your fate. It's where the greatest returns on investments are made.