Your Existing Customers Are Your Growth Engine. So Why Are You Ignoring Them?

 

Here's a number that should keep every CEO up at night: 73% of revenue comes from existing customers. Not new logos. Not the deals your sales team is chasing right now. The customers who already trust you enough to write you a check.

And it gets worse. According to Ebsta's 2024 analysis, 52% of net new revenue also comes from existing customers. When you do the profit math, nearly 100% of profit — sometimes more than 100% — is generated post-sale. Companies routinely need to generate 130% of their profit from existing customers just to cover the cost of acquiring new ones.

So where does the investment go? Into new business sales. Every time.

I had a conversation with Alex Raymond on the Thoughts on Selling podcast recently that crystallized something I've been feeling for years. Alex is the founder of AMplify, host of the Account Manager Secrets podcast, and he just published a book called The Growth Department. He's spent the last decade studying how companies grow through their existing customers — and his conclusion is blunt: most companies are blowing it.

The Varsity Team and the JV Squad

Alex uses an analogy I can't stop thinking about. We treat the sales team like the varsity team. They get the best coaches, the best playbooks, fancier uniforms, a nicer bus, nicer changing rooms. The account management and customer success teams? They're the JV squad. An inexperienced coach. Ratty hand-me-down uniforms. A smelly locker room. And then leadership says, "How come they're not performing at the same level?"

It's a structural problem, not a talent problem. The people in post-sales roles are often the hardest workers and most customer-centric people in the entire company. They drive more revenue than the salespeople in many cases — they just don't talk about it. But without the playbooks, training, tools, and leadership investment that sales gets, they're left twisting themselves into pretzels to get renewals across the line and keep customers happy.

And here's the cruel irony: when they succeed through sheer heroics, leadership doesn't see valor. They see a bunch of people running around putting out fires. The respect for the team goes down, not up.

The Recurring Revenue Myth

One of the most dangerous ideas in business today is that recurring revenue is automatic. Alex calls it a myth, and he's right. Just because revenue is structured as a subscription doesn't mean it shows up without effort. But executives hear "recurring" and assume it's on autopilot — which gives them permission to hire less experienced people, invest less in their development, and treat the entire function as an afterthought.

In the early days of SaaS, we knew better. Even on a 24-month contract, we'd say we have to earn the customer's usage every month. That mindset has been replaced by complacency, and the results are showing up in churn rates everywhere.

Keep, Grow, No Surprises

Alex offers a framework that's simple enough to fit on a napkin and powerful enough to reorient an entire post-sales organization. The job of account management is to help your company win. You do that three ways: keep the customers that sales brought in the door, grow the ones with the most potential, and make sure there are no surprises.

That's it. Not NPS scores. Not CSAT dashboards. Not being a liaison with the product team. Those are trailing indicators. The real job is keeping, growing, and eliminating surprises — and delivering profit back to the business.

The $1 That Changes Everything

One of the most surprising data points Alex shared comes from Greg Daines, who has analyzed massive datasets on why customers stay or leave. The minimum threshold to get a customer excited about renewing isn't some blockbuster ROI number. It's basically $1 of measurable improvement.

Why? Because once a customer sees a dollar of progress, they can imagine the path to ten, a thousand, a million. They feel justified in their decision. They want to keep going. And here's the kicker: even customers who see negative results stay twice as long as customers where you don't report value at all. Showing up with the truth — even when it's ugly — beats silence every time.

The Path Forward

This conversation reminded me of Jane Scott, one of the best CSMs I've ever worked with. Jane was the glue that held the Xerox account together at Oracle. She knew the metrics, she knew the people, she knew what mattered. She's what happens when you invest in post-sales talent and let them do their job.

Every company deserves a Jane Scott. But you don't get one by treating post-sales like the JV team.

Alex's book The Growth Department lays out the blueprint for changing that — for building the scaffolding that account management and customer success teams have never had. If you're a CRO, a VP of sales, a founder trying to scale, or a CSM wondering why nobody seems to care about the work you're doing, go read it.

The path to long-term, durable, profitable growth doesn't run through your next cold outreach campaign. It runs through the customers who are already here.

Listen to the full conversation on the Thoughts on Selling podcast.

Abandoning the Hero Sale

When companies first get started, the founders may do most or all of the selling. They have the vision, the passion, the depth of knowledge of the service or product and connect well with early adopters.

At some point the Hero Sale risks becoming the Hero Fail. The challenge is that as the business expands, the founders (the heros) need to focus on running the business, managing the growth, courting investors, hiring managers, etc., and they have less time for selling.

So...they hire sales people. 

And they expect sales people to act and perform in their image, with the same depth of knowledge, passion, and ability to connect with mainstream customers.

I've seen and experienced it first-hand.

When I sold predictive analytics to some of the largest tech companies in the industry, the company president and founder expected the sales team to leverage his 100 page slide deck...to go deep into the technical details of the what and how of the platform. Much of our sales training focused on this technical deep dive, and only lightly touched on personas and messaging.

Conversely, my mainstream customers were only interested in the benefits of leveraging the platform - could they increase pipeline velocity, improve pipeline size and shape,  bolster their customer acquisition rates, meet their quota and revenue targets. The decision makers didn't care what was under the hood, only whether it would bolster their marketing results and how difficult it would be to integrate the predictive analytics platform and workflow into their existing marketing processes.

IBM wasn't even interested in the platform...they had their own...they were interested in our curated third party data. And we discovered this not through a detailed review of the CEO's slide deck, but in an extended white boarding session focusing on work flows. (White boards are my favorite selling tools.)

In talking with clients I hear many facing this same challenge...as the company grows, expected sales productivity fails to increase as experienced sales people are hired. And the founders question the new hires, the selection process, the target markets, everything but their own outsize influence in setting sales strategy.

Moving from a hero-driven revenue model to one that is sustainable and scalable requires a fundamental shift to a traditional selling model -- a formal selling methodology, selling processes, SFA and CRM platforms, formal onboarding activities. Dedicated sales managers will provide strong leverage for additional growth, particularly if a coaching methodology and mindset is part of the structure.

When I joined BAO, the outsourced inside sales organization, as its first sales leader, I implemented a formal selling methodology and spent a lot of time coaching my sales team on value selling techniques. Many had come from the delivery side of the organization and had been accustomed to a highly transactional sales approach...making up to 250 calls each day. The investment in time and effort paid off...we signed a number of key accounts that had been chased for fifteen years.

We also drove an increase in revenue of 75% over that first 18 month period.

Moving to this scalable selling model requires both support and patience from all of the key stakeholders. It won't happen all at once, and it does require a substantive shift in approach. The founders must step back and give the hired managers the space and time to do their job.

A formal approach to change management...and specifically...setting expectations with the key stakeholders will prove useful.

And maybe, just maybe, that hero can take their first vacation in four years.

Thanks!

Lee

Marketing Plans and Sales Executes

Marketing plans and sales executes.

Okay, so it’s not quite that cut-and-dry, but in considering the roles of the two organizations, we find some key distinctions.

Marketing - Step 1

Marketing sets the “tone” in the market before sales engages with individual prospects. Marketing identifies the “best prospects” based on market size, competitive environment, and product or service capabilities. Marketing establishes the overall value proposition – “our products solve this problem”, the positioning, pricing, etc. Marketing creates the sales assets used in developing individual opportunities.

Selling - Step 2

Sales follows through to establish the relevancy of the offering for individual prospects and converts prospects into customers.

I’m simplifying a bit…

In this model, step 1 naturally precedes step 2. You sand before you paint. You scramble the eggs before you cook. You date before you marry. Step 1 is necessary for the success of step 2.

A change in step 2 requires changes in step 1. Cooking paella requires different preparation than that for cooking an omelet.  To transform sales, you must create a new set of preparations in step 1 (marketing).

Results are what matter

We don’t actually care about sales transformation; instead we care about the results of sales transformation. In this conversation, we don’t even care much about the short term results of sales, what we’re focusing on is building a more robust, healthy business, a qualitatively better set of results.

Selling is a means to this end -- the creation of profitable, long-lasting relationships between buyers and sellers. These profitable, long-lasting relationships generate the highest shareholder value.  And what shareholders really care about is shareholder value (not this quarter’s sales).

Unfortunately, our current set of preparations (in marketing) doesn’t usually lead to that end. If measured using the Six Sigma scale, selling is at best a one sigma activity. Buyers complain that less than a third of their sales people show up “very prepared” for sales calls. Buyers cite a poor relationship with their vendor as a primary reason for switching vendors. More than 50% of all reps failed to make quota last year. (Source IDC 2010)

Vendors are failing miserably to meet the relatively low expectations of their buyers. In talking with senior executives at Global Fortune 500 companies, I repeatedly hear stories of sales people driving to a deal rather than building relationships. One executive at a global financial services firm described a storage rep who, despite being invited to coordinate a brainstorming session, essentially showed up with an order pad and an expectation of booking something that day. The damage to the relationship by his actions can be measured in the millions of dollars of lost revenue.

Most vendors mean well. They want their sales people to do the right thing. They hope that their sales people are doing the right thing. They need their sales people to be doing the right thing. But wanting and hoping and needing don’t constitute a strategy.

To create more productive, profitable relationships between buyers and sellers that actually drive shareholder value for both sides, both parties must commit to change. Both parties must invest in the relationship. If vendors do not make this investment, buyers will treat them as commoditized suppliers rather than value-adding partners.

Where to start?

A good place to start is to evaluate the needs of your best customers. What value do you provide these customers? What other organizations have similar needs? How should your engagement process change to enable more value creation and transfer? What else must change within your organization to ensure consistency?

If you undertake sales transformation with the goal of improving relationships with your customers and actually make the changes necessary to ensure this transformation, you will be rewarded with higher share of wallet, longer, more profitable relationships with your customers, higher revenues and profits, and increased employee satisfaction.

Seems like a no-brainer to me!

Thanks,

Lee

Winning in 2010

While 2009 was a difficult year, 2010 represents tremendous opportunity. Early indicators suggest that the economy is on the mend. While I don't expect budgets and activities to return to 2007 levels, executives have stopped behaving like ostriches and are increasingly considering how to build and improve business operations.We're seeing this in both our own client base and in our daily conversations with hundreds of IT decision makers.

I've called the fourth quarter of 2009 the most important quarter of the decade. Hopefully, you ended the quarter strongly and are well positioned for success in 2010 and beyond. This new quarter will also be critical -- market share is still up for grabs and as you solidify your position within accounts and markets, you will be ensuring future profitability for many years to come.

Weaker competitors are still sitting on the sidelines, wondering what has happened and whether their fortunes will ever change. Agile competitors have already launched new tactics to gain market share in well defined target segments.

To help you move forward strongly, I'll provide some context and the sales productivity framework Tom Barrieau and I developed at IDC. The framework includes the following five major levers of sales productivity:

• Talent Management
• Sales Management
• Sales Methodology
• Sales Enablement
• Customer Intelligence

Each of these five levers incorporates a number of elements. In the interest of time, we won't go into those today. Additionally, we're going to leave off the discussion of the heart of the framework itself -- the issue of sales productivity.

Sales productivity is a meaty issue. Most B2B organizations have some definition of sales productivity and in our experience most of those definitions lead to one rathole or another. (Hint -- it's not the number of calls a rep makes or the amount of revenue delivered in a given time period).

For an initial discussion of sales productivity measures, please see the IDC best practices report we published in 2008 on sales metrics and KPIs. This report will help you to start thinking about how you can collect the sales metrics and KPIs that allow you to measure true sales productivity and leverage that knowledge into action that improves your productivity.

That's an important big picture discussion, but not one that will help you to improve your performance next month. You need to balance the important and urgent tasks (See the Covey matrix to the right). If you ignore the important tasks, they will eventually become urgent...and how most sales organizations manage sales productivity is becoming urgent.

Today, however, the urgent tasks are becoming even more urgent. The steps to ensure improved revenue performance over the next two quarters boil down to the following:

• Sales people must have the right conversations with the right prospects at the right time!

It seems so simple. Yet most larger B2B sales organizations are still working on organizational realignment, tactics to extract more revenue with their existing customers or what to do about a competitive threat. While these are useful discussions, they must not form the basis of your market development strategy.

If you can get past those discussions, here are the steps to take. They map to the three levers listed above in italics:

#1. Target the Right Prospects and Customers at the Right Time (Customer Intelligence)

This is simple. You have useful data in your customer and prospect databases. Ask a couple of your best and brightest business analysts to answer the questions:

• Which of our prospects said "no" to us six to nine months ago?
• Which of our prospects has contracts coming up for renewal in the next three months?
• Which of our competitors is having a tough time in the market?
• What is the buying profile of our customers? After they've bought something from us, what is the next most likely purchase, and when does that purchase typically happen?
• What triggers signal buying intent?
  
• Which of our prospects is growing fastest?
• Which of our clients is growing fastest?

Once you've completed this analysis (and you should be conducting it at least quarterly), you'll have a series of lists of sales targets and a good set of "stories" as to when and why a particular target will buy. Work with field marketing to deliver targeted messages. Work with sales operations to parse out the targets on a controlled, measured basis. Monitor the results carefully -- some of these segments will respond better than others, and you will want to shift your marketing and sales resources to the most productive segments.

#2. Deliver the Right Conversations (Sales Enablement)

As part of this initiative, you will need to rearchitect the sales conversations. What are the key "care-abouts" of a given client or prospect? Why should a given prospect buy now? Why should a client upgrade now? (Hint, it's not because you need the revenue!). Deliver these new sales conversations as scripts for territory reps and channel partners. Deliver them as podcasts for enterprise reps and channel partners. Validate those conversations by asking for feedback. Congratulations, you've now just improved your sales enablement capabilities.

#3. Ensure the Right Behaviors (Sales Management)

You've got a secret weapon in your sales organization. This secret weapon can be used to significantly improve sales performance and results, yet in most organizations this resource is spending most of its time filling out reports to deliver to management. Oops.

This secret weapon is your first line sales manager. When the manager spends most of his or her time coaching reps, rep performance soars. In the short term, lighten up on the managers' reporting responsibilities. In the longer term, rearchitect this role so that it is a coaching role rather than a data management role. For a deep discussion of the first line sales manager role and related best practices, take a look at this recent IDC report.

Effective sales management also ensures the application of the appropriate resources to specific pipeline development activities. While few organizations expect their highly paid enterprise reps to be conducting marketing activities, these same reps may be expected to both cold call new opportunities and to manage existing relationships. Savvy organizations disaggregate the sales function, applying specialized resources to specific tasks. (I'll cover this issue in detail in an upcoming newsletter).

Good luck out there. And please, take these issues on with the sense of urgency that they require.


Thanks,

Lee

This Fourth Quarter

This fourth quarter is the most important of the decade.

Two weeks ago Ben Bernanke stated that the recession is probably over. Housing starts are up. The leaves are turning (at least in New England) and business people are starting to believe that the light at the end of the tunnel may be something other than an oncoming train.

We are all breathing a collective sigh of relief. It has been a difficult year...and for many, with the official unemployment rate scraping 10%, challenges remain.

Yet a sense of optimism is evident. And just as I predicted early in the year, budgets are now starting to open up. Mostly marketing and sales budgets, by the way. There hasn't been a general unleashing of capital investments or discretionary spending. That will come later, in mid-2010 and beyond. For now, the increased spending is coming from organizations that want to position themselves for success in 2010.

And that's why this quarter is the most important of the decade. The results of this quarter will drive discretionary investment decisions in 2010. If you want to have a good 2010, you must deliver the goods this quarter. Success in this quarter will help to ensure access to funding for the next quarter and the quarters beyond that. Mediocre or poor results this quarter will cause a significant rethink of sales and marketing strategy.

Many C-level executives and corporate boards are thinking: "Okay, you've had a year to figure out the current environment and to make the necessary mid-course corrections to ensure a reasonable result by the end of the year." Prove them wrong and your successor will be working on a very different action plan, one that involves wholesale shedding of divisions or organizations, cuts that go far deeper than the 5-20% layoffs we've seen already.

There hasn't been a single more important three month stretch this decade than perhaps the fourth quarter of 2001 for the travel industry. At the time I managed a business that built and sold technology services to road warriers. Road warriers were grounded on September 11th and my business went poof. The entire travel business was reshaped in that quarter and the airline industry is very different today as a result.

Your opportunity is to prove, in the next three months, that your business is both viable and thriving. With a focus on "co-creating" value with customers, you may have a chance. Customers today don't want to be sold to...they demand consultative sales people who work with them to boost profitability, reduce costs, increase shareholder value, make a difference in their world.

The critical success factors are simple and straightforward:

• Focus exclusively on the prospects and customers who value and need your specific value proposition, your differentiator.
• Narrow this focus to those who are committed to short term improvements in their business.
• Ensure that your sales people fully understand the business processes and challenges of the individual prospect, not the group in general.
• Commit to value-adding rather than transactional behaviors. You may think that hard selling will work in this market. It hasn't for years and it certainly won't now. You might "win" a few deals but you're destroying the relationships that bring long term profitability.

Focus on making a difference in your customer's world.

Thanks,

Lee