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Disproportionate spending on New business vs Existing Revenue


We hear it time and time again that companies spend more on acquiring new customers than they do on their existing customer base. In fact, Forbes believe it’s normally 5 times more expensive to acquire a new logo than it is to grow similar revenue from your existing customers. So why does it happen? When all hands are to the pump, there’s often genuine excitement about attracting new clients, of course there is. Maybe it is the thrill of the chase or the instant gratification ‘buzz’ a lot of us have become used to in today’s society.


Whatever the answer, logic would suggest it’s a good plan to invest at least equally, if not more, in your existing customers. Revenue and profit will grow quicker and there is the bonus that you build an army of advocates who are treated well, have value delivered to them and are happy to recommend you elsewhere.


The challenge comes with the ‘how’? With the emergence of ‘Customer Success’, predominantly within the Software sector, we’re now constantly being reminded of the new North Star; Net Revenue Retention (NRR). How to grow this relatively new key metric is another question. Balancing both risk at the bottom and preventing customers churning, while also delivering value and upselling requires expertise and planning. It requires strong foundations, built on a true ‘win-win’ relationship with customers, and requires investment in time and resources. Building long term relationships requires continually adding value, sometimes when there is nothing in it for you in the short term. It’s sharing success and understanding real key drivers for your customers and how your product or service can help achieve their goals.


I’ve had many conversations with business owners and company officers who wonder why they never looked at it sooner once they finally do. Often the answer is that they were not sure where to start even though they were fully aware it all makes sense. Other’s often believe they are doing it already, and have ‘maxed out’ the revenue potential. Somebody told me recently they had segmented all their customers into bands and spoke to them with different cadences based on those bands and nothing more could be done. In fairness they have a great business with an exceptional service yet I could not help wondering what more they could be doing to drive even more business. Did every customer take every offering and take it as often as they could? Was every department and location using the company's services to the maximum? Was there really no potential for growth?


Personally my belief is that there is a lot of room for growth. With developing technology in reporting and communications I’ve no doubt relationships are getting stronger yet I still wonder if the right level of investment is going towards the existing customer base versus New Business.


If you have any questions on any of the above then feel free to get in touch with me or have a look at my website for further information.



References - Forbes




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