Today’s post is by Jeff Seeley, CEO of sales and leadership training company Carew International, as well as a frequent keynote speaker, columnist, and blogger. Find him online or connect with him on LinkedIn.
As sales and marketing leaders, we need to give our time and attention to an emerging conversation: the call for more focus on expanding the customer life cycle, versus acquiring new business, as the means to fill the sales funnel.
Obviously, both sales revenue streams are critical, but there is fresh focus on understanding and expanding the customer life cycle as a means to put more convertible sales opportunities into the sales funnel.
We all know acquiring new business is far costlier than retaining existing customers. According to recent statistics compiled by Invesp, the cost of acquiring a new customer is five times greater than the cost of keeping an existing customer. Perhaps more compelling is the data that speaks to the dramatically higher conversion rate and profitability from existing customers.
- The success rate of selling to an existing customer is 60-70 percent, while the success rate of selling to a prospect is 5-20 percent.
- Increasing customer retention rates by 5 percent increases profits by 25-95 percent.
These numbers suggest shifting your priority – from acquiring new business to expanding and extending the customer life cycle – is not only worthwhile, but also a potential game changer.
For so long, we have viewed “sales success” as getting a prospect to customer status – so we have funnelled our marketing dollars into the pursuit of new customers. But what if we change our paradigm? What if we define sales success in terms of customer loyalty, advocacy, and longevity?
Doing so would hold significant implications for our sales process and sales team, with the greatest potential falling into these three categories.
Category #1: Customer Relationships
The customer relationship belongs at center stage. Customers buy from people they like – when trust, credibility, rapport, and respect have been established. These elements provide the foundation on which to build productive, long-term relationships.
For sales professionals, building this foundation requires abilities far beyond product knowledge. For starters, sales professionals need a strong intellectual curiosity to understand their customers’ business, competition, and marketplace – and they need to work in partnership with their customers to influence the customer’s customer.
Your sales team also needs specific communication, exploratory, and diagnostic skills, as well as a mindset that puts the customer’s business ahead of their own sales objectives. This combination of skills and mindset strengthens the customer relationship, extends the customer life cycle, and drives more sales as the role of the sales professional evolves from vendor to business partner.
Category #2: Networking
Sales professionals usually have a limited scope of customer contacts who advocate for us within an account. Not surprisingly, one of the leading causes of lost business is the exit of a solo champion from the organization.
Effective networking protects against this vulnerability and, more importantly, allows sales professionals access to the people who can educate them as to how they can provide significant additional value for the client’s organization. Networking is the most effective means of extending your value contribution deeper and more broadly throughout the client organization.
Category #3: Sales Team Motivation
Sometimes sales can be a brutal and deflating profession. That’s why sales leaders devote a lot of time and energy to motivating the sales team.
While rejection is a reality for every sales professional, there is no greater motivator than success. When we consider the comparative sales statistics between new and existing customers, as outlined above (success rate of selling to an existing customer is 60-70 percent, while the success rate of selling to a prospect is 5-20 percent), we can clearly see they advocate paying attention to the customer life cycle for sales team success and motivation, as well as bottom-line growth.
Beyond the direct correlation between customer retention and sales growth/profitability, these benefits spill over into new business development, since customer advocacy is a key driver of new customer acquisitions via referrals. And we know that referrals drive the strongest leads for closing new business.
If you want to maximize sales growth and profitability, place proportional focus on extending the customer life cycle. Success on this front depends largely on having selling skills in place to cultivate strong customer relationships, loyalty, and advocacy.