The true cost of ignoring clients
Solidify Your Client Base
I have worked with dozens of companies over the past several years and have been surprised at how many concentrate more on client acquisition than they do on client retention. Sales managers often make the mistake of focusing their team on acquiring new accounts (cold calling) rather than nurturing their existing accounts.
While cold calling (new business development, client acquisition, prospecting) certainly has its place, giving it paramount importance over growing your current client base may not be prudent over the long haul.
Your client base represents your most valuable asset. It’s a veritable gold mine with abundant, untapped sales revenue potential. Most salespeople simply scratch the surface when it comes to mining their client base for additional business.
Most of your clients are looking for ways to reduce expenses, drive sales revenue, increase productivity, and improve efficiency. You may have the very solution they need to help them achieve their goals.
Perhaps it’s time to approach your clients with something new. Consider calling them to let them know you have something new you’d like to introduce. Let them know you think it will improve their business. Save the details until the appointment. You want to keep them intrigued and curious.
The Cost of Replacing a Lost Client
Back in 1988, I worked for MeadWestvaco. The mantra at MeadWestvaco was, “It costs five times as much to acquire a new client as it does to retain an existing one.” This nifty quote, extracted from the Harvard Business Review, suggests that businesses would be wiser to keep their customers.
If often, in fact, understates, the value of client retention. In my business, for example, it costs one hundred times more to acquire a new client than it does to retain an existing one. The only expense we incur in retaining our clients involves staying in touch and continuing to be a resource at a minimal cost. The investment we make in marketing our services to acquire a new client is much higher.
Perhaps you’re thinking, “I am a salesperson. Why should I concern myself with the cost of acquiring a new client? That really isn’t my concern is it?” Well, yes and no. You may not have direct costs for client acquisition, but you do pay indirectly—on two fronts.
First, there is the cost in terms of your time. It takes considerable time to identify, qualify, target, and contact new, prospective clients. This entails a variety of expenses:
- Phone calls
- Drive time
- Meeting time
- Proposal preparation
- Strategizing with management
Remember: These items will ultimately cost you. Your sales time is a valuable asset. You have to invest considerable time, sweat equity, energy, and resources to develop new business. Therefore, the cost of client acquisition should concern you because it affects your income.
Second, the more your company spends on marketing to acquire new clients, the less they can offer you in the form of salary, benefits, commissions, and bonuses. If your marketing department can invest less in advertising, there is more money available for other important expenses.
So, the cost of client acquisition does impact you. Here’s the great news: you can save yourself and your firm considerable money if you maximize your efforts in acquiring new clients and retain the ones you have. The end result can be a stronger job package for you.
Open Your Current Files
Take a few moments and think of all the inactive customer files in your filing cabinet or database. Sales organizations often make the costly mistake of selling a client once and then assuming he or she will stay on as a client forever. They make no effort to maintain or foster the relationship and then, a year later, wonder what happened to the client. ‘Why haven’t they heard from him? Did he leave?’
There are many reasons clients leave you, but here are the ones you’ll hear most often:
- They felt your pricing was too high or unfair.
- They had unresolved complaints.
- They took a competitor’s offer.
- They left because they felt you didn’t care.
Of these, the last two items on that list are the reasons most frequently cited by clients. This can be a hard pill to swallow. Your client is inactive because he or she felt neglected, and your competitor was able to exploit this. Ouch!
This makes sense when you consider that clients often purchase your product because they have developed a relationship with you, because they owned another product of yours, or they were referred to you by a friend or associate.
So why do businesses still spend 80% of their marketing dollars going after new clients rather than nurturing, retaining, and maintaining the customer relationships they already have? Before you decide how to invest your time, consider the following statistics:
- Repeat customers spend 33% more than new customers.
- Referrals among repeat customers are 107% greater than among new customers.
The Friendship Factor in Selling
Strengthening your relationships with your clients is paramount. Rest assured your competitors are trying to snatch business from you by offering discounts and more value. You’re less likely to lose business to a competitor if your relationship is rock solid.
The best way to improve your relationship with your clients is by spending time with them. Get to know them on a personal level. I know that some buyers don’t like to personalize their business relationships. They can be tough nuts to crack. Many buyers, though, value personal relationships and are open to gestures of friendship.
Never discount the value of friendship. Having a great relationship with your clients will accomplish a number of things:
- You’ll have more latitude when you make a mistake.
- Your competition will have a tougher time getting in the door.
- If your competition does get in the door, you’ll know where you stand.
- You can propose a higher price or fees.
- Your clients will think of you first when new projects arise.
- You’ll have good references to share with prospective clients. Take care of your client
In the past, salespeople focused on one thing – closing sales. Once a sale was closed and the contract was executed, a salesperson’s work was, for the most part, finished. However, these days, salespeople often handle many of the post-sale, service-related matters previously handled by a customer service team.
To solidify your client base, you have to distinguish yourself from the competition. The best way to accomplish this is by providing exceptional service to your clients. The service you provide should be so incredible your clients will want to stick with you through good and bad times.
Exceptional client service begins with the proper mindset. First and foremost, you have to want to provide your clients with the great service that stems from an excellent attitude and quality decision-making. This calls for a client first mentality; you readily take on your client’s needs, wants, concerns, and problems. In essence, they become your problems – you own them!
This post was contributed by the Encore Consulting Group. Learn more about the work they do at www.encorecorporatetraining.