But Wait ... There's More! How to make three sales in one.
Closing new customers is cause for celebration. As long as you keep closing new deals and new logos keep increasing your company is winning, right? Not necessarily. In the world of SaaS and subscriptions the reality is that with every new customer you bring on board, there’s an opportunity for both expansion and referrals sales every time you make a new sale. That equals three sales in one when you keep new customers around long enough.
The Customer Success Bowtie
I learned about the three sales in one concept from consulting guru, Alan Weiss. Since customer relationships are the key to your success. Alan recommends that you immediately aim for additional sales the moment you start new relationships. My Customer Success Bow Tie, shown below, illustrates why it’s important to connect the buyer journey on the left, with the customer journey on the right. The left side of the bowtie is the familiar sales funnel which starts with attracting multitudes of potential buyers, narrows to nurturing qualified leads, and closes with a handful of buyers.
There’s an expansion on the right of the bowtie because when customers are effectively onboarded, when new customers don’t just “go live” but also actually your product to be heroes at your company, then they are more likely to renew and buy more. But wait . . . there’s more! That funnel keeps expanding when loyal customers become your champions and your revenue keeps compounding and expanding. Rather than just closing new deals and staying stuck on the left side of the bowtie, it’s time you open new relationships and grow alongside your customers.
The initial sale
Of course, making that initial sale is key. Without it, you don’t have any customers to renew in the first place. However, the transactional or “hunting” sales approach that’s so familiar may no longer be your company’s best friend. When you keep obtaining new customers without engaging them, it leaves your business at risk. All that selling without keeping customers around eats into your profits because the costs to acquire customers is more expensive than retaining the customers you already have.
The Second Sale: Expansion
When you have a strong installed base of customers, there’s an opportunity to introduce new products and services to them. Since the cost to renew and expand existing customers is a fraction of the cost for acquiring new business, this is a lucrative approach. McKinsey finds existing customers account for between a third to half of total revenue growth, even at start-ups. Some companies even find their installed base brings in up to 80 percent of their revenue. I like to say that the longer you’re around as a subscription business, the more of your revenues shift to recurring revenues from your current customers—if you’re doing it correctly.
The figure below highlights how the bulk of the revenue “cake” comes from existing customers while new revenue is the “icing” on the top of the cake. Of course, it takes time to build to this state, which is why you need to nurture existing customers right from the start. Otherwise, you will never keep all those customers paying you year after year. The investment pays off, though, because as little as a five percent increase in customer retention produces more than a twenty-five percent increase in profits.
Despite the opportunity to grow through existing customers, companies struggle when it comes to investing in relationships with the customers they already have. Is your company fixated on getting new customers at the detriment of keeping the customers you already have? Or do you and your teams strategize on ways to keep new customers around for the long term? If you want your company to succeed, it’s not enough to hope your customers renew. You need to create a journey that drives customer behavior, ensure new customers are onboarded and go live quickly, and then obtain initial and ongoing value in your product, that you guide them along the right side of the Customer Success Bowtie. Customers will naturally want to use more of your solution when you guide them beyond the initial sale, through a prescriptive and proactive onboarding process that swiftly delivers value.
The Third Sale: Referrals
Supposing you engage existing customers and deliver value along every stage of their customer journey then you reach the third sale: referrals. That’s when customers become an extension of your sales team. They champion your solution and your company, and they refer you to their colleagues and friends.
Referrals are gold. Getting a referral from a happy client is stronger than any sales pitch you could make. Why are referrals so important these days? It’s because along with the consumer revolution that’s been taking place over the last decade or so, the business-to-business (B2B) buyer journey has changed as well. IDC finds that 73% of executives prefer to work with sales professionals referred by someone they know, and business to business (B2B) buyers are 57%-70% through buying research before contacting sales. Your buyers want information at their fingertips when researching new solutions and that includes referrals. You can no longer rely on your sales and marketing approaches to fill your funnel. It’s time to leverage your customers.
Your current customers unlock your success
Rather than hoping customers reach their success outcomes, rather than crossing your fingers and wishing your customers would buy more and champion your products, drive customer loyalty and behavior from day one with prescriptive and proactive onboarding. Onboarding is so much more than going live with your product. It's about building trusting and enduring relationships that lead to expansion and referrals. When you focus on three sales at the beginning of the customer relationship then you unlock exponential growth at your company. It’s time to engage new customers, open trusting partnerships, and keep delivering value. The three sales in one all start with customer onboarding.
DONNA WEBER is the world’s leading expert in customer onboarding. For more than two decades, she has helped high-growth startups and established enterprises create customers for life. Her award-winning book is Onboarding Matters: How Successful Companies Transform New Customers Into Loyal Champions. Learn more at donnaweber.com.