The Fourth Fundamental of Sales Know-How - Knowing Where To Do It
In previous blogs I introduced The 6 Fundamentals of Sales Know-How, the evolution of my sales method, built through 30 years’ experience in sales - that works. So far I have introduced my first three fundamentals. That’s foundational to your role as a problem solver. Also foundational and equally as important, is understanding where to focus your efforts
The fourth Fundamental, Knowing Where to Do It, is essentially understanding where to find growth opportunities within your existing customer base.
You might think that we covered this in the third Fundamental, where we discussed identifying your target market and customers. The reality is that in my experience the first place you should be solving as many problems as possible is for your EXISTING customers.
So often when looking to grow sales, the temptation is to look for shiny objects to chase. However, I encourage salespeople to look at their existing customer base - to Polish What They’ve Got. The fourth Fundamental is all about that.
The following approach to growing sales with existing customers will serve you well:
Categorising customers
Identifying and converting white spaces
Growing mould
Categorising Customers
Are you following the money or chasing unicorns?
It is easy to become distracted by bright shiny objects, or potential customers, we can see in the distance. You may have heard of the term Labrador focus, where an adorable Labrador is easily distracted: “Ooh, there’s a stick”, then “Ooh, there’s a ball”, then “Ooh, there’s a human that loves me” and so on. Salespeople can be the same, lurching from one poorly thought-out opportunity to the next without discipline or a plan.
Instead of seeking those shiny objects, it is much better to “Polish What You’ve Got.” Work that existing customer base to make it shine.
In an evolving world where new technologies, theories, frameworks and trends tend to pass by old-school ways, there are some time-tested and proven techniques that remain as valuable as ever. One exercise that I see providing many lightbulb moments with clients I work with is that of categorising their customers.
When I work with new clients to help them grow their business, it is surprising how many of them don’t necessarily understand where their business comes from. One of the first exercises I run through with them is an analysis of the last three years of sales results by customer. Three is ideal. If you only have two years or are just starting, then work with what you have - the approach is the same regardless. This exercise will typically highlight three key understandings:
Where the bulk of their revenue comes from (often the 80:20 law applies)
Significant new customers, significant lost customers
The length of their customer tail
A simple year-on-year comparison will highlight customer gains and losses. Through such analysis, you are looking to highlight previously good customers whose spend is reducing. In such cases, a level of investigation is required to understand why. Are the customers losing business themselves? Are you losing business to a competitor, and if so, why? Conversely, customers whose spend has increased over time need to be understood also. Many businesses will experience the short-term gain of a one-off significant project or customer spend. Those anomalies are easy explained.
An analysis based purely on revenue is quite crude however, but it is a good starting point. An improved approach is to add weighting for considerations such as:
Current business potential, past business value
Type of customer and or your desire to work with them
Margin levels and financial considerations
To name just a few. However you choose to categorise your customers, the main thing is to do so.
The following is a practical guideline for you to either follow or adapt to your situation.
Platinum
These customers are critical. There may only be 1 or 2 in your business, but they are your best customers. They are not critical in the sense that your business would fail without them, as that would indicate a lack of wider planning. However, in terms of determining priorities for attending to customer matters, they take precedent.
Gold
These customers are strategic; they will be the top echelon of customers and a significant portion of your revenue. Your team will have layered relationships with each customer’s team.
Silver
These customers are tactical. With some work, they could grow to become gold customers.
Bronze
These are operational customers. They are generally the “tail” of your customer list with low requirements for your services, but when they need a service, they use you.
Once you’ve categorised your customers, you can determine the frequency of proactive customer interaction and customer activities. All of this should be aligned with territory plans and integrated into your CRM. Whatever cadence you choose needs to add value for both you and your customer, and to be manageable.
Understanding your customer base in this way is powerful and can ensure your sales focus and internal customer service strategies are aligned. While maintaining high customer service standards for all customers is important, the worst thing we can do is drop the ball with a gold customer because we are overservicing a bronze customer. There will also be some strategic accounts that you know are currently silver but are on the rise to gold, so they need to be serviced as such.
As one of my clients once said: “Looks like I’ve been spending too much time chasing unicorns instead of focusing on where the money is coming from!”
This exercise will highlight customers you should spend more time on and others you should spend less on. That doesn’t mean dropping your standards or ghosting customers; it simply means working smarter as a team and maximising your resources and relationship-management processes.
Identifying and Converting White Spaces
A podcast interviewer asked me for two tactical actions businesses could take pretty easily to grow sales. My first response was for businesses to categorise and analyse their existing customer base to see whether they are “following the money or chasing unicorns”, as we have just discussed.
My second response was for businesses to further analyse their existing customers to identify white spaces, then formulate plans to convert those opportunities.
A white space is essentially a product gap - the gap between your complete product portfolio and the items in your portfolio that you are currently supplying to your existing customer. The idea is that the white spaces highlight products that you are not currently selling to your existing customer, but you could be.
Repeat business from an existing customer is gold, and the importance of that retention is well known and understood. As Alan Webber and Forrester Research found, it is accepted that it can cost five times more to acquire new customers than to keep current ones, and that on average, loyal customers are worth up to ten times as much as their first purchase. Hubspot states that you are 60-70% more likely to sell to an existing customer, compared to the 5-20% likelihood of selling to a new prospect.
This is a basic sales concept, but it is as relevant today as it has ever been. It is a tactic for increasing sales revenue with a relatively short sales-cycle time, as compared to generating new business from a new customer. Traditionally, it has been referred to as cross-selling or upselling; the “Do you want fries with that?” approach.
However, for many new to sales, particularly in the B2B world, the terms cross-selling and upselling can be confronting. Furthermore, how do you approach it? The concept of white spaces provides a more simplistic, visual approach.
Identifying white spaces for potential conversion is a simple three-step process:
Run a ruler over your list of top customers.
Identify what products they currently buy from you. Everything else is a white space.
Determine whether or not there is potential for you to convert the identified white spaces.
Once you have identified the white spaces, these new opportunities will be managed through your sales process and CRM in the same way as any new opportunity from a potential new customer. The advantage is that you are working with an existing customer with whom you already have an existing relationship.
If your initial research shows that your customer is using a similar product from a competitor, this makes the initial conversation easier:
“[Insert customer name], we really appreciate the business we do with you for [insert product names], but we notice we have yet to supply you with [insert product name].” After an acknowledgement, you can continue along the lines of “It would be great to understand why that is. Can I ask you a couple of questions?”
From here, you can apply your consultative selling skills to explore what would be required to become their supplier, or at least the accepted alternative, and fill that white space. Download the white space template here.
Growing Mould
Having, or at least identifying, ways to increase your share of your existing customers’ wallets, the next obvious targets for sales growth are those closest to your existing customers. By closest, I mean consider potential customers that are similar to your existing ones, with similar needs and (ideally) in similar locations. It is much easier to sell to customers that you can easily relate to because of what you are already doing. Mould grows in spores, with each spore starting right next to the previous one. So, grow mould!
Working with similar customers means you should be able to create relatable and relevant case studies, speak your potential customer’s language more easily and capitalise on the good work you have already done.
This approach is far more desirable than coming up with a random target customer for which you have no relevant success stories or experience to draw on as you attempt to understand them. Prospective customers want to see themselves reflected in your website and marketing material. This gives them confidence in your product and your company’s ability to understand and help them. Some will not want to be first movers or early adopters.
Let’s recap
So much opportunity for sales growth is already at your doorstep - your existing customers.
Get a deep understanding of your existing customer base and follow the money.
Analyse where you have been successful and look to sensibly replicate what works. (Grow mould).
Next up it’s the Fifth Fundamentals of Sales Know-How - Knowing How To Do It.
But if you can’t wait until then you can purchase my book now here.
If you want to evolve your sales approach to be more consultative and effective, I’m here to help. Check out my services or contact me directly for a bespoke programme of sales coaching at hello@iancartwright.co.nz