Winning new accounts is satisfying, retaining them is profitable

Securing new customers takes five to 25 times more effort and cost than driving sales from existing customers.

Securing new customers takes five to 25 times more effort and cost than driving sales from existing customers. Salesforce estimates that it is six to seven times more expensive to gain a new customer than it is to keep an existing one. Sales productivity is much better, too, with close rates substantially higher for existing customers versus new customers — 60 to 80 per cent close rate for existing customers compared with 10 to 30 per cent for new accounts.

According to research by Bain, existing customers are more profitable, showing an increase in customer retention by 5 per cent can affect profitability by 25 per cent to 95 per cent. Having a growing and satisfied ­account base helps you build the profitability to be aggressive on the account acquisition side. You will need deep pockets to sustain acquisition efforts and unseat ­entrenched competitors.

We all love the feeling of winning new accounts. It’s a great rush, there’s great peer and management recognition, celebrations aplenty, the ultimate satisfaction of unseating an incumbent competitor and no doubt anticipating the compelling financial rewards.

Rightly so. Winning new accounts is hard work, and getting harder. Customers are putting up more barriers to entry, doing their research online and avoiding salespeople more effectively as each year goes by. The compet­ition is also investing heavily in customer experience, as we no doubt are, to ring-fence customers more effectively. All this adds up to account acquisition getting harder and more expensive. Many sales leaders are still banking heavily on new account business to achieve growth goals; for many, winning new business has become the shiny object of the sales world.

There is little doubt that businesses should have a priority on new customer acquisition but it should be part of an overall strategy that puts customer retention and growth directly at the centre. There’s an increasing recognition and body of thought that the path to profitability and sustainable growth is through maximising your existing accounts first and foremost.

Growing with our existing customers is mandatory for survival. If nurturing and growing relationships with existing customers is less costly, more profitable and great for sales productivity, then the inverse is also true. Lose good, valuable and profitable customers on a regular basis and the company will suffer, and you can’t ­replace this lost profit with new customers. Companies that focus heavily on winning new ­customers without a big effort on retention and growth of existing customers create instability and unpredictable profitability. It is like pouring water into a leaky bucket.

Prioritising existing customers can be a powerful differentiator. Many organisations do not get this right and take existing customers for granted. Doing this right creates customer advocates and builds a powerful referral and reference engine. Satisfied and growing existing customers are the best source of referrals and reference sites. This is the most powerful lead generation engine for winning new accounts.

Even if you’re in start-up mode and acquiring new accounts, you already need to be thinking about how to manage and retain them, as the accounts you sign now should be the backbone of future revenues.

You work hard to gain new ­accounts, so don’t let that effort go down the drain.

Steven Norman is the founder of Growth Acumen and author of Future Proof Sales Strategy.