Do you spend more energy getting new clients than servicing the ones you already have? Praise and heavily reward new business wins? Would you rather start a new job with a new customer than fix a problem with an existing one?
Our prevailing business development culture tends to measure and reward new business success over everything else.
But this could be costing more than you think.
A study by Bain and Company (cited by Harvard Business School) found that the high cost of acquiring customers means that many customer relationships are initially unprofitable. However, this changes when the cost of serving loyal customers falls and the volume of their purchases rises.
The same study found that increasing customer retention rates by just 5% can increase profits by 25% to 95%.
Add to this the Gartner Group’s assertion that 80% of a company’s future profits will come from just 20% of its existing customers, and it’s clear that investing in the business we already have makes logical commercial sense. And yet, in many cases, this investment just doesn’t happen.
Here are five business development beliefs and behaviours that sabotage our long-term success.
- Focusing too much on revenue. Most BD metrics focus heavily on the revenue line. New customers push that line up much faster than incremental growth in existing accounts ever could, and what gets measured gets rewarded.
- Believing customer satisfaction will result in customer loyalty. Most organisations run annual customer satisfaction surveys. Unfortunately, satisfaction measures are not a good predictor of loyalty OR of future behavior. I hold customer interviews as part of my pre-work for the retention programs I facilitate for clients. On more than one occasion, a customer who at one point reported themselves “highly satisfied” has turned out to be angry, disengaged and/or preparing to walk.
- Performing well, but becoming complacent. When we’re hitting all our KPIs, it’s easy to forget that good work is what we get paid for, and not a selling point.
- Shying away from the hard work. Let’s face it, some large customers are demanding and hard to deal with, and the relationship can become strained and tense over time. It can be easier to get excited about a new customer than to dig in and turn around a difficult one.
- Being seduced by bright, shiny objects. It’s fun and exciting to pursue new business, with all its promise and possibility. In contrast, re-competing for customers you already have feels like applying for your own job. It’s hard, and confronting, and there is much, much more at stake.
Customer retention pays enormous dividends when we get it right. While the probability of converting a prospect can be less than 25%, we should be odds-on favourite with an existing customer.
But incumbency is only an advantage if you choose to use it. Request the white paper and learn more about Getting Ready to Recompete For Your Most Important Contracts and Customers.
Robyn Haydon is a business development consultant specialising in competitive bids and tenders. Are you part-way through a contract term with a big customer? Have an important piece of business coming up for renewal or re-tender in the next 12 months? Join Robyn’s one-day workshop “How to Retain Your Most Important Contracts and Customers” and develop a Ready to Re-compete plan for the business you can’t afford to lose - http://www.robynhaydon.com/workshops/
|Robyn Haydon is a business development consultant who helps helps service-based businesses that compete through bids and tenders to articulate the value in what they do, command a price premium, and build an offer that buyers can’t refuse. Don’t let others dictate how far and how fast your business can grow – take your power back! Email email@example.com to request the white paper for the Beyond Ticking Boxes program.|