If you pour water into a jug with a hole in the bottom, it’s only a matter of time until all of the water leaks out. Even if you are able to continuously pour more water into the jug, you will still lose a significant amount of your water through that hole.
This is an important analogy to keep in mind for your sales and marketing strategy. Most of the time sales people and marketing teams are bombarded with demands for “more”; more opportunities in the pipeline, more customers, and more valuable deals. While “more” is definitely good for business, sales leaders and executives must also measure how well they are doing with existing customers to ensure that the customers they’ve already acquired don’t “leak out of the bottom”. There is a lot of value in retaining customers, and it’s much easier to retain your existing customers than it is to gain new ones. Here’s the proof.
1. The Probability of Selling to an Existing Customer is Higher
Your existing customers already understand why they need your product and what sets it apart from competitors. Their entire team is aligned about the need for your product, and they have budget to allocate to it. That’s why the probability of selling to an existing customer is 60% -70%, while the probability of selling a new customer is 5% - 20%. If you’re not focusing on selling to your existing customers, you are making your job (or your team’s job) much more difficult.
2. Small Changes Can Have a Big Impact
One of the mistakes many organizations make is assuming that their churn rate (the rate at which customers leave their product or organization) is set in stone. However, this is not the case. Churn rates can be decreased and retention improved, often with relatively small investment in your product or service offering. Conduct interviews or customer satisfaction surveys to find out what they like and dislike about your product, as well as their level of satisfaction with your organization. Use this information to make improvements to your products and services, and ultimately improve your retention rates.
3. Increasing Retention Increases your Profits
Returning to the water jug analogy, consider how much more water would be in the jug if you were to make the hole smaller. While some water would still escape, you would not need to pour as much into the top to keep the jug full. The same is true for your profits. The more customers you retain, the more profit you keep in your organization. In fact, organizations that increase customer retention by 5% actually increase profits by 25% - 90%.
Your existing customers are your biggest source of revenue and your greatest advocates. Focus on pleasing your existing customers by making product improvements, providing great service, and listening to their requests, and you’ll be successful at retaining them for years to come.
Interested in learning more about retaining your clients? Check out our Strategic Account Management course to learn how to maximize managing multiple accounts and strengthen client retention.