It costs seven times the blood, sweat, tears and dollars to win a brand new client than it does to maintain an existing client. Heard that one before? A million times, I bet.
This old adage has become so oft trotted out that most of us no longer even know where or who started it. Or if there is any empirical supporting evidence. And even if there was, so what? We all also know that sales effort is all about RoI and so the relevant ratio is revenue (or profit) for cost invested – not just cost of acquisition or retention alone. And, in any event, most businesses simply need to acquire new customers to replace lost ones and to grow beyond organic growth from existing customers. The emerging question is how many new customers, and what do they need to look like ($ delivered).
In mature markets (which covers the vast majority of us), sales budgeting should prioritise the contribution from the existing customer base. This leaves the balance of revenue/profit to come from hunting. The age-old truisms of pipeline theory tell us that hunting becomes a “number into the pipeline to get the number we need out of the pipeline” pursuit. Opportunity management tracker tools/spreadsheets where Sales Execs load up their prospectives and assign gut feel % probability conversion to each are no longer good enough. A unique pipeline needs to be tailored and specified for every sales organisation.
The starting point is to profile and quantify the target audience…not just the target market. In other words, the subset of the target market that you have decided to hunt, given the number you have calculated that you need to put into the pipeline to get the number you need out of the pipeline. The PV (potential value) calculated to separate your star and cultivate customers from the rest is the first criteria.
Determine the critical pipeline gateways that represent the progress the typical prospective and your Sales Exec make together. By all means use the age-old terms, such as “suspect”, “prospect”, “target”, “hot”, “presign”, “new client” – and others we may not even be aware of, but ensure that the whole sales organisation attaches and understands the specific definitions of each gateway. And that such definitions are auditable, objective, black & white and can be measured.
Then and, only then, can you think effectively about specifying your CRM to support – and your scoreboard to measure – progression rates, not just top-to-bottom conversion rate.
Glenn Guilfoyle is the Founder & Principal of The Next Level, and an accredited align.me Funnel Coach. For more insights like this, go to The Next Level’s proven sales process.