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Focus! The dilemma of Prospecting or Growing Customers

Balancing act: Prospecting or Growing Customers

 

Finding the balance between prospecting for new customers and growing your existing customer base can be difficult. On one hand, you need to bring in new business to keep your company moving forward. On the other hand, you don’t want to sacrifice the customers you already have in order to do so. So how do you find the balance?

 

 

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Photo by Pixabay on Pexels

 

In this blog post, we’ll take a look at the benefits of prospecting and how it can help you grow your business. We’ll also explore some ways to find the balance between prospecting and growing your customer base without sacrificing one for the other.

 

Prospecting is about survival.

Prospecting is an essential part of any sales process, and there are many benefits to doing it effectively. Perhaps the most obvious benefit is that prospecting is needed to find you new customers and grow your business.

Even in a perfect world, we know that a small part of your customers will move away from you every year. Of course, this could be because of problems on your side, (then you are wise to fix those), but more often it is due to circumstances completely out of your reach, factories moving to other continents, rotation of contacts in the account, customers mergers or some even go out of business. 

Over time, we must always be at least replacing the churn, the customer that leaves. For every account that leaves you must acquire at least one new one. If you want to replace the revenue from the lost account, you need more new accounts to compensate.  

 

Prospecting keeps your ears to the ground

There are other benefits as well, such as:

  1. It helps you understand your target market better. By talking to potential customers and getting their feedback, you can learn a lot about who your target market is, what they want, and how best to reach them.
  2. It helps you improve your sales skills. The more you practice your sales pitch and learn to handle objections, the better you’ll get at selling.
  3. It keeps you motivated. The act of prospecting itself can be motivating since it’s a way of taking action towards your goal of growing your business. And when you do make a sale, it’s even more motivating!
  4. It builds relationships. Even if a particular prospect doesn’t become a customer, the relationship you build with them during the process can be valuable in its own right. Who knows, they may refer someone else to you down the line!

 

The cost of prospecting vs growing customers

How much effort does it take to sell for a million to prospects, compared to selling the same million to large repeat customers that have been with us for years? 

Let’s compare 3 scenarios, prospecting, growing an existing account, and maintaining sales in a fully penetrated account

  • Prospecting is by far the most time-consuming process among the sales processes. First, for the successful prospects that become customers, the sales cycle is longer than for well-known accounts. Secondly, for every successful prospect sale, you will have spent time on 10 -20 suspect calls with other companies, 5- 10 initial meetings, 3-4 second meetings, and a few proposals – all with those prospects that didn’t end up buying. 
  • Growing an account means that they buy something new, that the didn’t buy yesterday, either cross-selling new solutions or upselling advanced features or more seats. It can also be expanding to new departments, projects and sites, so that is also something new to somebody (to us) new. 
  • Maintaining your sales with your best customers is often considered by salespeople to be the top priority. After all, that is where the money is at! This is, however, the easiest bit, since all the hard work was already done previously so to say. And this is where salespeople add the least value. 

So how should I balance time between these? Is it even possible? A simple rule of thumb can be helpful here. Prospecting is 5-15 times more time-consuming than selling the same to the “maintain” or keep customers in the example above. 

 

The problem with the “maintain” customer is that there is no more room for growth. We can not grow, or compensate for churn, by hoping that these super-good customers will buy more from us. 

 

Growing customers require more work, but we have a working business relationship, so the cycle to introduce new things here is shorter. The hitrates are also higher than what we expect in Prospecting sales projects. This means that we can expect 2-4 times more time needed to 

 

Qualification is key 

The first thing to keep in mind is that not every prospect is a good fit for your business. It’s important to qualify prospects upfront so that you’re not wasting time pursuing leads that aren’t going to convert. There are a few key questions you can ask to help you qualify a prospect:

  • What need does this product or service address?
  • Is this need urgent?
  • Does the prospect have a budget allocated for this purchase?
  • What is the decision-making process for this type of purchase?
  • Who else is involved in the decision?

Asking these questions will help you determine whether or not a lead is worth pursuing. If they don’t meet all of the criteria, it may be best to move on.

 

How to Grow Existing Customers Without sacrificing Prospecting.

There are a few key ways to grow your existing customer base without sacrificing prospecting:

  1. Offer additional products or services to existing customers – upselling and cross-selling are great ways to do this.
  2. Get involved in referral programs – word-of-mouth marketing is still one of the most powerful forms of marketing there is.
  3. Run targeted campaigns – create targeted content and campaigns specifically for your existing customers to get them to refer friends or family members.

 

Time to balance

When you’re trying to balance prospecting with growing your customer base, time management is key. You need to make sure that you’re spending enough time on each activity, without letting one suffer at the expense of the other.

 

Tips for Time Management for Prospecting

 

Here are a few tips for managing your time when prospecting:

  • Set aside a specific amount of time each day or week for prospecting. This will help you stay focused and ensure that you’re making progress. As a rule of thumb, think 8-10 times the time for each new customer you acquire. 
  • It’s hard work to get 10 no’s for each yes, only for a meeting. Make it fun through competitions and group calling exercises. 
  • Use a CRM system to track your prospects and customers. This will help you keep organized and prioritize your time accordingly.
  • Take advantage of automation where possible. There are many tools available that can automate repetitive tasks, freeing up your time for more important activities.

 

 

Tips for Time Management for Growing Existing Customers

Similarly, when you’re trying to grow your customer base, effective time management is essential. You need to make sure that you’re spending enough time on activities that will directly impact your bottom line, without neglecting other important areas of your business.

 

Here are a few tips for managing your time when growing your customer base:

  • Invest in customer relationship management (CRM) software. This will help you keep track of your customers’ data and interactions, so you can better understand their needs and how best to serve them.
  • Segment your customers according to buying behaviour or other criteria. This will allow you to focus your attention on those who are most likely to grow your business or have the highest lifetime value.
  • Give attention to customer surveys to detect attitudes among your growth-accounts, focus on selling to those with good feedback from stakeholders, and work to improve the perception of the others 
  • Give less priority to accounts that already buy all they can from you. This may sound contradictory to many –  where most of your current money comes from, is where your sales team adds the least value. Go for an excellent customer experience here instead, and let other teams create this. 
  • Create targeted marketing campaigns based on smart customer segmentation. This will ensure that you’re using your resources efficiently and reaching those who are most likely to respond positively to your message.
  • Use data from past campaigns to inform your future marketing efforts. This will help you fine-tune your strategies and better allocate your time and resources.

 

Conclusion

 

If you’re like most business owners, you understand the importance of both prospecting and growing your customer base. However, finding the balance between the two can be difficult. Too much focus on prospecting can result in losing customers, while too much focus on existing customers can prevent you from acquiring new ones.

 

The key is to strike a balance between the two. Prospect without losing customers, and grow existing customers without sacrificing prospecting. By doing so, you’ll ensure that your business continues to thrive.

Leadership will get you really far, but only management knows where to…

A couple of weeks ago, I was asked the question about Leaders and Managers, and what you should be. The answer is both. In management models, they live side by side and must work together. Our 6 pillars of Sales Management is no exception, the 3 cornerstones of Sales Management are Management – Leadership – Development in our model.

 

 

 

 

Leader or Manager? Both!

Management and Leadership are necessary and complementary. In his 1990 Harvard Business Review article “What Leaders Really Do,” John P. Potter argues that management and leadership are both crucial for the success of executives as they advance in their careers.

 

 

The myth of the born leader

One of the most prevalent misconceptions in the business world today is that there is a competition between leadership and management, and that only leadership will take you where you want to go. Often leadership is thought to be all about charisma and vision – and that it is something you are born with and into. Leadership is different from management, but it’s not about having a certain personality or being chosen by a higher power.

 

Leadership skills are not there from birth, some personality traits may make it easier for you to develop them, but they can certainly be acquired, developed and fine-tuned by anyone!

 

It is true that many larger companies today have too much management and structures and often lack the space and energy to develop the right leadership. They need to develop their leadership skills by identifying people with potential and giving them opportunities to grow. However, it’s important to remember that strong leadership alone is not enough and needs to be balanced with strong management. Both leadership and management are necessary for success in business. A successful company needs both strong leadership and strong management to thrive.

 

Leadership is about dealing with change and being able to inspire and guide others to work towards a vision. Management, on the other hand, is about dealing with complexity and keeping the day-to-day operations running smoothly.

 

 

 

 

In essence:

 

 

 

Management skills, such as planning, organizing, and controlling, are essential for maintaining the day-to-day operations of a company. However, leadership skills, such as visioning, inspiring, and guiding, are necessary for creating and implementing a strategy that will take the company to the next level.

 

 

 

The leader vs Manager roles

The role of the leader is to provide direction and set the course for the organization, while the role of the manager is to ensure that the organization is running smoothly and efficiently.

The best leaders are those who can balance these two roles effectively, by being able to both lead and manage. Potter writes that “good leaders are good managers, but good managers are not necessarily good leaders.”

Daniel Coleman’s 2004 article “What Makes a Leader” also emphasizes the importance of both leadership and management skills for success in the business world.

 

 

 

Leadership is more needed than ever

Coleman notes that the role of the leader has become increasingly important in recent years as the business environment has become more competitive and more volatile. He states that leaders must be able to create a vision for the future and inspire others to work towards that vision. At the same time he emphasizes the importance of management skills, stating that managers must be able to plan, organize, and control the day-to-day operations of the organization, in order to ensure that it is running smoothly and efficiently.

 

What makes a leader?

The article identifies the traits and characteristics of successful leaders. He argues that effective leaders have a combination of:

  • emotional intelligence, EQ- self-awareness, self-control, motivation, empathy, and social skills, which allow leaders to connect with and inspire their employees.
  • cognitive intelligence, IQ – strategic thinking and problem-solving, which allow leaders to make effective decisions.
  • technical or subject expertise in their field – allows leaders to understand the industry and the challenges their company faces.

 

Learn from mistakes

Coleman also emphasizes the importance of adaptability and the ability to learn from failure in leadership. He states that leaders who are able to adapt to changing circumstances and learn from their mistakes are more likely to be successful.

 

 

Conclusion

Companies should actively seek out people with leadership potential, give them opportunities to grow and use both strong leadership and strong management to balance each other. As a matter of fact, there are multiple facets of management that needs continuous evaluation, development and perfection. Below you will find an image collection that points to the function of our 6 Pillars of Sales Management. Enjoy!

 

Tradeshows and conferences – 5 simple steps to double the effect

At certain times of the year, we find ourselves in a  “Trade fair season” in full bloom. After a few years of pandemic downturn to the event market, we are now back into meeting up at events again. Millions and again millions are invested in creating links between people and companies. 

 

The fact that trade fairs are still around when in theory you could do the same thing in virtual meetings and social media networking, proves that real live face to face meeting is still important and needed.   

 

5 steps to boost the return on invested time & money

 

If your company has decided to invest in your team going to a major trade fair, what should you do? As with any investment, your job is to maximise returns, go there and totally smash the audience and get the hottest prospects with you home as ever possible. Right? 

 

Events are very expensive, your company pays a lot to have you at the fair. But most of all, teh opportunity cost of having you away from your normal job and customers must pay off!

 

Here are 5 simple steps that can help you maximise your return: 

 

Set Objectives for yourselves 

Set some very concrete goals, think about what are your primary targets with the event. Are you there to canvas for new prospects? Are you there to meet up with existing prospects or are you there to deepen existing relationships? Maybe you are there to develop channel?

Write down your goals and communicate in your team. Use your sales meeting to align the team around the purpose and goal of the event

Rehearse effective responses

Go through and rehearse responses to some of the most common blockages. Make sure to write down a line that you can practice. Roleplaying is great to rehearse a standard answer that otherwise would feel awkward. 

Typical situations could be: 

  • The first opening line when someone gets close to the stand
  • The “elevator pitch” – answer to “what do you people do?“
  • Objection – figure out the most common objections and write down answers
  • Rehearse a short demo many times, make it look really smooth

Also rehearse how you interact and pass prospects between yourselves, sales to sales, sales to product specialist and back. 

Prepare contacts and meetings ahead

Prepare before the event. Ask your team to set off some time to go through the participants lists, see which potential customers are there, which of your existing customers are there, competitors, partners. Try to leverage the event to set meetings with people that otherwise would be difficult to meet. Don’t fill your calendar with meetings that are easy to get any time you like. Set targets and follow up with your team before the event. Who has the most high value meetings planned? 

Lead and support the team during the event

At the event, be present, coach and help, help your team do the right thing, and to get all encounters captured in short reports and notes to help you remember who was who after the event. Tactical tips:

  • Keep mobile phones away. Make it a rule. People who stand with their phones are not likely to make any targets, at least not at the fair. Potential prospects will not approach a booth while the reps are speaking on the phone or texting.  
  • Have prepared some tool or template that are easy to fill in and staple a business card to. Register everything!
  • Make little fun competitions out of the whole experience, on number of business cards or the number of letters of the titles of contacts or whatever. Have fun in the team. 

Follow up fast – turn into Opportunity

It cannot be stressed enough, take care of the leads within few days after the event. We are all exhausted after the event, but your leads and all those thrilling conversations start fading away from peoples memory very fast. You only have a few days before the probability to close something has fallen by at least half. Because you will be tired after the event, you may want to plan the following already before the event:

  • solid plan with assigned responsibilities for who should follow up which leads and how soon after. 
  • meeting the day after getting home to “kick off” the sales campaign on the new leads. If you do, plan this meeting already ahead of the event.

 

Conclusion

 

This is a very simple process, but as the manager of the team, your role and active leadership and coaching during the event is very important for the success of the team. There are many distractions, and leaders who leave it up to the team members to manage time and contacts by themselves are often surprised by how different people act, and many times come back home disappointed.

 

Athletes train activities and fine-tune behaviours, you should too!

 

Clear and challenging goals boost performance 

Studies show that by setting clear, challenging, meaningful, and agreed objectives for ourselves, our productivity increase 10-15 percent. When the goals are followed up with structured feedback methods, the positive effects are approximately doubled (!!)  (A little book on Goals, Christopher Svensson & Stefan Söderfjäll 2020).

 

Performance (Activity) and Learning objectives are not micro management

 

Setting and working with objectives on all levels is enormously effective and will almost certainly guarantee you a new boost to your growth. As the team’s manager, you need to become very good at using different types of objectives in combinations, often adapted to the capacities and experience of each individual.

 

Most companies we work with have sales targets for sales personnel in the form of quota letters, with or without financial rewards attached to them (bonuses). These are pure result goals, and the problem is that we cannot coach or improve results – they already happened! (See our article on “Leading and Lagging Indicators.”)

 

Our focus must move to performance/activity and learning. The activity, how well we perform it, and which customer we prioritiseexplains a good part of the productivity increase; the rest is explained by the increased motivation through the intrinsic sensation of empowerment and control of your own situation. 

  • The first part, how well we do customer work, depends on competence and skills, and improvement happens through learning.
  • The second part – prioritising the right customers and contacts in the right moment – improves through pro-active calendar planning and careful selection of where we invest out time. 

 

Define tactical 1-2 month objectives, plan the month together, and move focus to almost exclusively discuss the activity, not the result. Set goals for the activity: who to visit, where to present, contacts to prioritise. While the overall result objectives may stay the same for a year, your road there – the choices you make, the visits you plan, the trade fairs you attend, the calls you make – will be constantly adapted, revised, and changed! 

 

Every success story is a tale of constant adaption, revision and change.

Richard Branson 

 

As the manager, your principal goal is to make your sales rep become successful, to sell more with less effort, to spend more time with prio customers, and eventually to have a better life and more time with family.  This is important to understand: the wish to excel must be present and rooted inside our rep. As with all change management, the desire to perform must be there before you can introduce new ways of setting goals. Otherwise, you risk being perceived as a “micro manager.” (See ADKAR model, prosci.com on Desire in change management.)

 

 

The swim coach and you

 

You can compare the methodology to coaching athletes. The athlete and their coach set up a common goal: “I shall win the World Championship in 200-meter Medley.” None of us would expect a coach to just give the athlete the result objective of winning the championship and then walk away wishing them luck. Right? Yet this is what we often do as sales managers/directors.

 

What does the coach do? The coach follows the athlete through training, identifies weaknesses, uses strengths for tactics, builds individual training programs, and coaches and helps the athlete to push them to the limit and across it.

 

In Medley, the three strokes are carefully studied, and optimal individual training programs are planned and executed. Just like we need to balance our platform in sales, the swimmer needs to balance training in Butterfly, Backstroke, and Breaststroke. And it is the coach ́s job to cut the total time of the 200m distance down to a minimum (as it is our job to maximise revenue).

 

The training and exercise program that the coach builds is everything to the success of the athlete. And it is activity based – the result objective of winning championships is there at the horizon, but the daily challenge revolves around movement and behaviour – activity. The coach looks at every movement in the water. Should the left hand be a little more angled during the stroke? Is the position good in the water?

 

In the same way, we can only help our salesrep if we know where in the process they tend to get stuck, where they spend too much time, and if they are talking to the right people, saying the right things, and asking the right questions. Our job as sales director is to build these individual training programs, and by joint activities and follow-up, to coach our sales rep to excellence! 

 

Select the right sales model for profitability

 

Today, a common challenge for companies is to find the right sales model for their products and services. Where previously a deal could be signed, delivered, and invoiced upfront, companies today face subscription models and pay-as-you-go schemes. The selling company faces all the cost of sales up front, through development cost and sales salaries, while the income is deferred over time. This creates challenges to financing and cashflow, especially in growth companies. 

As sales managers, we may not need to be CFOs, but we certainly need to understand the concept of cost of sales and be vigilant that our company doesn’t run out of money before getting paid by customers. It is up to us to do what is possible to lower complexity and cost, and to maximize the size of each transaction and charge well for our solutions. 

 

Complex sales needs large deals

 

Look at the complexity involved in your sales cycle. How much work does it cost you to sign a deal? What guidance does your prospect require in the process? Too many companies are struggling with a too-expensive sales model for the sales their team actually produces. Customers and partners all would like to get your product at a good price (or for free if they could). At the same time, they demand guidance and help from our salesforce to understand the product and its benefits.

What is the real price they would need to pay, given the extensive hand-holding and human interaction during the process?

 

Sales can be very different depending on what you sell, and range from giant projects and systems sales where tens or even hundreds of people are involved in one single sale, and where the sales team closes a deal a year, to high volume sales, where the seller needs to close tens of deals every day. We normally talk about high-touch and low-touch sales, and sometimes even no-touch sales if self-service, to distinguish these models. Most of us are somewhere in between these extremes.

 

The trick is to find your model and align it to your business to make it profitable.

In more technical terms, this is all about aligning the ratio between your cost of sales, or customer acquisition cost (commonly known as CAC) with the money you can expect to earn from that customer, your deal-size, or in businesses with high recurrence, your lifetime value (LTV) on that relationship.

 

 

Do not get stuck with high-touch sales in a volume business.

 

Especially in B2B technology sales, with sellers claiming high differentiation, your customers are likely to require handholding through the sales process.

 

This costs you money. Customers in this type of business are also used to receiving lots of attention from the sellers, as low-cost SaaS models and pay-as-you-go schemes are recent, and customers have not yet gotten used to taking a technology decision without guidance and human interaction.

 

 

Find out where you are on the scale between low and high touch

 

The first step you need to take is to get to know your real current sales cycle complexity. If you don’t know where you are, you will not know how to improve. Put some simple measurements and metrics on your process. What’s the real effort you put in for every sale? Find out the following:

  • The effort—calls, e-mails, other interactions = “touches” that you on average need to convert a lead into a deal?
  • The average time spent on these “touches.”
  • Perhaps you have accurate activity registers in your CRM, but if not, do a manual “post mortem” on your last 10-15 successful deals. (This can be turned into a great team building exercise for a sales meeting.)

 

It is also relevant to look at the total time your team spends on sales to determine how efficient your sales team is. The longer the process is in the successful cases, where you actually end up selling, the more important it will be that your team is doing a good job qualifying opportunities early in the cycle.

 

 

Improving profitability per transaction

 

So, let us assume you have discovered that you have a complex sales cycle, with a too low average deal-size for you to feel happy about it.

 

What can you do about it? Logically, you have two options:

    • Lower the sales cost/effort (your customer acquisition cost – CAC).
    • Increase your deal-size, which increases the value of that customer for your life time value, or LTV.

Often the latter is more difficult to achieve in the short run, but in a longer perspective, it is where we want to head towards. On the short term, quicker fixes help the cost of a sale. There are a number of things you can try to see immediate results.

 

 

Short-term fix – work Cost of Sales

 

Shorten the cycle – Identify the stages in the sales cycle/process. Are there any steps that could be improved or eliminated? Could demos be automated? Can you create some materials that help to accelerate the process and limit the number of “touches”?

  • Spend some time on this. Why not invite a few of your trusted partners or even customers to get their feedback?
  • What would have been the minimum help they really would have needed when they decided for you?

 

Improve pipeline efficiency. – Disqualify early. Learn how to maximize the proportion of time spent on opportunities that convert into sales, and minimize the efforts spent on opportunities that will not. The earlier in the process you can narrow down your pipe, and choose where to spend your time, the lower customer acquisition cost you will have. (read our article on sales efficiency here)

 

Automate, automate, automate – Try to eliminate any human interaction from the process except for where it is absolutely necessary.

  • If you are receiving your leads from webforms on your pages, get yourself some marketing help. Inbound marketing can be very powerful. Consider marketing automation tools, providing “hotter” leads instead of a mix of cold, lukewarm, warm, and hot ones. A rep that is behind quota tends to let many bad leads through.
  • Minimise the sales admin work a salesperson needs to do on proposals and order management. If your proposals are customised every time, try improving your qualification process so that only opportunities that will convert receive proposals.
  • Can the purchase process be automated with credit card payments or buying via a web interface?

These tips may or may not be right for you, but what you should do is to work on identifying what will work for you. Work through your sales cycle, adjust, and improve wherever possible.

 

In the medium to long term, increase your deal size

 

The other side of the coin, to improve your sales figures for every customer you make, you have some options:

 

  • Cross-sell more products in every transaction, and to existing customers. Invent yourself your own cross-selling opportunities and build a strategy to create your own catalogue. Initially, if you are a single product company, expand through services and trainings. Can you sell add-ons separately? Look at your ecosystem. Are there any products that your end customer uses together with your product that you could resell with your own product?
  • New product editions that allow a higher price. If your current product has an entry level and a premium level, add more levels for a higher priced platform, such as an enterprise edition or super-premium.
  • Increase your footprint in existing customers. Add more seats, sites, or whatever your pricing model is based on. Penetrate deeper into your customer and sell into more departments. The best reference to use when you sell to one division in a corporation will be other divisions in the same company.

 

 

To cross-sell, upsell, and discount less, you need to provide value to your customer in every interaction and contact surface. Visit our value sales sections to learn more about value-based sales technique, and how you as the sales manager can work this with your team.