Recurring Revenue within Existing Accounts vs. Acquiring New Customers
Wednesday, January 20, 2010 at 8:00AM What Happens When Sales Organizations Focus Exclusively On Recurring Revenue within Existing Accounts vs. Acquiring New Customers?
We have all heard of – and many of us follow - the supposition that selling to existing customers is easier and a more cost effective way to generate revenue and thus a great way to grow business. Based on a recent observation I would like to offer a contradictory theory to this widely held perspective.
At SPI we have recently started working with a client that is a venture capitalist. The principals of this firm worked as executives in some of the top software companies in the world so they focus on their comfort zone; acquiring and turning around failing software companies. Among all of these failing companies that get acquired I have observed a consistent theme:
Apart from having no repeatable sales process, misalignment of their marketing efforts, and ineffective pipeline management they had little to no focus on selling to new customers and spent all their time servicing the existing by pushing renewals and upgrades. In fact, the only new logo business would come via unsolicited RFP’s (Tenders). And we all know the low win rates associated with sellers who live their lives as “Column Fodder”. Of course, based on the “compensation drives behavior” theory the sellers were compensated on this approach. To drive renewals sellers would do things like discount high profit items, namely services, to get the additional licensing revenues. In my humble opinion their poor performance was preordained by their approach.
I cannot and will not advocate a complete reversal of their approach but I will make the obvious recommendation that balance is the key to their salvation. Not backing the truck up to their loading dock and dumping your products and then running like hell for the next logo, but a “healthy pipeline” of net new and existing customer opportunities supported by effective and attentive customer service is the best practice.







Do You Really Understand Your Customer's Problems?
I have the opportunity to speak with the sales leaders for a lot of small and medium-sized businesses. One common sales challenge I have been hearing a lot lately is that sales people are not having consultative dialogues with the customer. As a result, sales cycles become longer or win rates drop. Let me paint the picture.
While the customer may give the seller several reasons on why they decided not to go forward, chances are that the seller never truly understood the factors that were impacting their buying decision in the first place!
Think about the last purchase you made where you felt you had a positive experience with the salesperson. Did the sales person introduce themselves and immediately tell you what they thought you needed? Did they ask you questions to better understand your situation and accurately diagnose your needs?
Here is a good way to test yourself to see if you understand your customer’s real problems. Think of a specific opportunity you are working on and name two or three challenges that your prospect wants your capabilities to help them resolve. In most cases, this is the easy part.
Now comes the hard part. Ask yourself, “What bad thing will continue to happen if they don’t do business with us?” It could be that their revenue won’t grow, they will lose market share, miss a goal, etc. Obviously, it varies based on product or service.
But if you can’t answer the question, chances are your prospect can’t either.
The basic principle here is to diagnose before you prescribe. When you can answer the question, “what bad thing will continue to happen if they don’t do business with us?” you are ready to provide your prospect with a recommended solution. Challenge yourself to answer that question for your clients. They will reward you with their business.
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