Jeffrey Gitomer – internationally renowned expert on sales and customer loyalty
How many sales executives are given sales targets for new customers rather than nurturing and maintaining current long term customers?
Too often in business today, the focus is on finding new clients – often at the expense of existing clients. Generally, there are two types of salespeople with different personalities. They can be best described as either hunters or farmers. In the business sales process, they have different roles. A hunter’s role is a sales role – find new clients. A farmer’s focus is maintaining accounts and developing long-term relationships with existing customers – an account management role.
Attracting new customers is a challenge and, although it can be rewarding, it involves planning and hard work – and it costs money. International consultants Bain & Company found that the cost of attracting new customers was seven to eight times more expensive than retaining existing customers. They also found that an increase of 5% in retaining current customers could increase profits from 20% to 80%.
While acquiring new customers is important, retaining current profitable customers is a far more cost-effective strategy. Listening to current customers and actively seeking their feedback provides an opportunity to improve service, develop new services and provide a new source of referrals.
Remember: over 65% of customers leave due to indifference.
Do you have a system in place to nurture and manage current profitable customers?
I was providing advisory services to a business who were faced with two of their largest customers threatening to leave. There had been a history of poor service and strained relationships. Both client businesses were headed by difficult and often unreasonable personalities. Careful analysis of each business showed that one was not growing and was unprofitable to service, whereas the other was growing and profitable. To the credit of the business’ general manager, and despite pressure from the owner, he took action. While it forced the unprofitable customer to leave, at the same time he developed a strong working relationship with the other customer – which resulted in the signing of a new contract with increased rates. The customer also recommended the business’s services to another company. This is a good example of successfully managing an existing profitable customer.
Are farmers more important than hunters as salespeople?
It depends on the business’s objectives. Both are needed for a business to grow. It is very important to maintain the current profitable customers, as it is cheaper for the business and offers other opportunities to improve and expand both services and products. The emphasis is on ‘profitable’ customers as, according to the Pareto Principle, not all customers are profitable. Making and maintaining sales need not be a difficult task. It requires an understanding of the business and must be aligned with the business’s plan and goals.
Do you know who are your most profitable customers?
Why are they the most profitable?
Which customers are you not making money from?