Moving from Account Renewals to Account Expansion
In this blog series, we have been reviewing the four strategies that sales leaders are using to make their 2020 goals. Here we explore strategy #3, expanding business in existing accounts.
It won’t surprise you that existing accounts are the lifeblood of a sales organization. In fact, the shows that, on average, 70% of revenues come from existing customers.
And where new account acquisition is very inefficient, sales to existing customers can be very beneficial to the bottom line. Sales cycles with current customers are half that of cycles with new accounts (7.2 months vs. 3.8 in our study). In addition, we know that the ability to provide insights and perspective is linked to better win rates. It’s easier to find ways to provide more relevant thought leadership and insights when you already know the customer. Shorter cycles and higher win rates are major contributors to productivity.
All that adds up to plenty of reasons why sales leaders worry so much about customer retention and expansion.
Expansion abilities lag renewal abilities.
So far, the results of those strategies are mixed. On the whole, over two-thirds (69.4%) of the nearly 900 sales leaders who participated in our study were confident in their ability to renew business with existing customers. However, less than half (44.4%) had the same level of confidence in their ability to expand customer relationships.
That is a huge drop-off and represents a significant opportunity for sales organizations.
Of the 44.4% who noted satisfactory expansion practices, the vast majority said they ‘met’ expectations. Less than 10% of the full study population claimed expansion as a strength for their organization, ‘exceeding’ expectations.
What do these top performers do to expand their accounts, versus simply renew them?
- Knowledge. Sellers in these organizations were perceived to have stronger knowledge of customers and their industries than did those in organizations with less effective expansion activities. This enabled them to provide more relevant perspective and achieve deeper levels of customer relationship (as measured on our Sales Relationship Process matrix). Such knowledge isn’t just limited to how the customer makes decisions or other sales process milestones. Here we are talking about being expert in the way that the customer runs their business.
- Skills. Sales organizations in the strong expansion group stood out for their strong ability to deliver effective and consistent communications with customers. This was linked to success at creating customer loyalty. The path that a customer takes from awareness to buying and ultimately implementation, is made up of many touchpoints. While the tone or content of post-sales interactions may change, the best ensure that the intent does not…to help the customer solve for a business issue.
- Methods. Sales leaders in this top tier also said that their teams excelled at value driven elements of selling such as configuring solutions relevant to customers’ needs, presenting solutions in context of value and negotiating and resolving concerns.
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All of these competencies are brought to bear within the context of creating and executing account plans. Similar to our discussion on opportunity planning, account planning showed marked increases in win rates as compared to organizations with account planning processes which needed improvement or major redesign.
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It’s not the time, it’s how you spend it.
Ultimately, this may be a lot of activity. But, if well planned, it does not necessarily translate into a huge time commitment. In fact, the study uncovered that sellers who spend more time on post-sales activity do not have better expansion, nor lower customer churn than those spending less time. Consider which post-sale actions end up creating the most impact. And, look to support organizations outside sales to support long-term relationship growth. While not all business models include customer success within their structure, most include service of some kind. Yet, as a siloed function, there is often little partnering between selling and service resulting in a missed opportunity for the sales organization (and the customer).
