Generating new leads, closing new business and increasing new revenue is consistently high on many sales executives’ agenda. Many calls I get are focused on one thing: signing on new clients. New clients are the lifeblood of any organisation, so the thinking goes.
Or are they ?
There’s a huge amount of evidence that – in reality – most organisations would be far better of by focusing on serving their existing clients better.
Why ? I’ll give you five reasons why you’ll want to be out there selling to existing customers.
1. They have a far higher chance of actually closing.
According to Marketing Metrics, “businesses have a 60 to 70% chance of selling to an existing customer while the probability of selling to a new prospect is only 5% to 20%.”
Personally, I think that’s a little pessimistic. I’m sure the real closing rate for most firms on new business is a little higher – but the argument still stands.
New clients already know you, and your work (which is top-notch, right ?). They’ll have already benefited from the value you deliver, meaning there’s less uncertainty in working with you. And you probably already identified several new ways in which you might be able to help them meet their business objectives.
Meaning they’re that much more likely to close.
2. They are likely to spend more.
According to data from Laura Lake, existing customers spend roughly 33% more than compared to new customers. Think about it this way: every sale you make to an existing customer could increase revenue by 30% – for the same number of deals actually closed, one third more revenue.
So now we’re two for two: not only are existing customers far more likely to close, but they actually spend more on each transaction as well.
3. They close much faster.
Data from Accenture has shown that close to 50% of all business with existing customers closes within 3 months – the space of a single quarter. With new clients, the number of opportunities that close within that same 3-month timeframe drops down to 20%.
In other words, you could be closing more than double the amount of new business within the next three months by simply shifting your focus from selling to new customers to selling to existing customers.
4. They help increase profits.
Given what I’ve said thus far, it shouldn’t come as much of a surprise that selling to existing clients helps increase profits – but by just how much ?
According to a joint study by Bain and Harvard Business School, “(we) showed that in industry after industry, the high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. The bottom line: Increasing customer retention rates by 5% increases profits by 25% to 95%.”
In other words, given the acquisition costs for new customers, selling to existing customer is a tremendously powerful lever for boosting profits – even with relatively small increases in retention rates.
5. They help reduce costs.
If there’s talk of increasing profits, reducing costs typically isn’t far behind. Salesforce estimates that it is 6–7 times more costly to attract new customers than it is to retain an existing customer.
Many organisations suffer from low retention rates, hampering their ability to gain all of the significant benefits outlined above. By selling to existing customers versus new ones, they could simultaneously reduce costs and increase profits.
Perhaps more importantly for their salesforce, they could increase close rates (dramatically), increase the average spend and more than double the number of sales closing within the space of a quarter.
Yet, all this depends on a key underlying premise: your (organisation’s) ability to keep current clients happy, demonstrate value, build trust and – perhaps most importantly – identify future opportunities where you might be able to help them.