Everyone loves a good quiz and the Sandler Research Center has a tricky question for any business leader responsible for customer success or net revenue retention.
Of all the clients who changed suppliers in 2019, 68% did so because:
- They were offered a better, shinier deal
- They were offered a lower price
- They no longer felt valued by the incumbent supplier
If you answered A or B, you’re wrong! 68% of clients changed suppliers because they no longer felt valued by the incumbent supplier. As the leader of a team responsible for sales, think about the implications of that. Every year, businesses lose billions of dollars in sales simply due to poor customer service and inefficient account management.
In the Sandler Research Center’s latest report, we look at how nearly 500 other organizations are managing their customer relationships and present our findings and recommendations to those who understand that the key to survival, especially in today’s environment, is based on the fundamental ability to Land, Expand and RENEW.
Strengthening the Relationship
We start at the top with uncovering key data points about the strength of high-level relationships. In our survey, nearly 30% told us they have very strong executive to executive relationships with their major accounts. This is good news for the top 30% but leaves an enormous crack in the foundation for the remaining 70% who may not benefit from the same level of executive access and sponsorship.
Think about your sales team. Most reps will foster one or two strong contacts at an account. Yet, most major account buying networks consist of multiple individuals across the organization. If we start in sales alone and get pushed down, it is very unlikely that we can get back up again unless we have a relationship with the company. The responsibility lies entirely with the seller to ensure a relationship is continually strengthened. It requires a proactive strategy, which focuses on improving lines of communication and increasing the number of contacts.
Recommended Action: Work with each salesperson on the team to map out the organizational structure for each major account and identify where each role fits. The goal is to increase the influence at every level within the account. Match seniority and roles on the client team accordingly. Identify when senior people need to be involved and wherein the sales process, they need to remain involved.
Understanding the roles, responsibilities, and influences of these buyers sets the stage for communication and strategic interaction that is critical to winning, growing and keeping major accounts.
Relevance is not a constant. It changes as your clients’ needs and trading climate changes. Whether it’s COVID or some other unexpected crisis listed on your “2020 Bingo Card,” what is relevant today may be flipped upside down tomorrow. To remain a strategic competitor who can ride with the tides of change, you need to continually ensure that what your organization has to offer is wholly relevant to the client. Surprisingly, Sander’s survey showed that less than 20% of companies reported that they deliver a variety of products and services very successfully.
Furthermore, only 9.6% indicated that they can very effectively manage a deep and wide approach to penetrating the account ecosystem.
Yet, the good news is that every customer has commercial objectives. At the very least, every company has a well-documented plan that describes what they expect to achieve over a 12-month period.
Herein lies the secret to remaining relevant – you must ensure that you are completely aware of your clients’ commercial objectives. In times when those objectives change – you must then align your solutions to assist them.
Recommended Action: Coach your sales team to make their clients aware of the full range of offerings, without engaging in a “product dump.” Strategically identify which products and services are relevant and adopt the mindset that clients depend on the salesperson to bring them on a journey of discovery.
The ability of your organization to deliver value in as many client areas as possible is critical, as is your ability to provide multiple offerings from your solutions portfolio.
Pursuing a successful account retention strategy requires total commitment to the principles of “win-win,” with both partners gaining real value to lay the foundation for further growth together. However, far too many frontline sales professionals do not have the necessary negotiating skills and are still working to “lose-win” principles. A “lose-win” mindset is toxic and often causes lasting damage to the relationship since one party must inherently lose during the negotiations. It also consciously or subconsciously prompts each side to engage as adversaries. You may “win” the sale today, but the client may never want to buy from you in the future.
In a win-win environment, the healthier mindset is that your company is providing a service that the client needs and finds value in the benefits of that service. In return, the client will pay the organization for the value that has been provided. In this case, each side can work together as partners, rather than adversaries, and the positive experience is more likely to motivate the client to continue to buy again from your company in the future. This environment fosters the potential to expand and renew
Yet, when we asked companies more about their pipeline status and forecasted revenues, the results were a bit disappointing. Only 6.2% felt the pipeline status of current opportunities is very healthy. Likewise, only one third projected a percentage increase in forecasted revenues.
Recommended Action: The pipeline in general is not only a blind spot for many leaders, it’s top of mind for all CROs. Sales leaders need to be continuously coaching on the skills such as negotiation, role playing and actively tracking both the sales process and relevant behavioral plans to maintain in-depth visibility into the pipeline.
Once we establish and sustain the “win-win” – it becomes easier to foster an open and collaborative commitment to working towards mutual success over time. This equates to net revenue retention, a healthier pipeline and an increase in forecasted revenues.
80% of revenue comes from existing clients and customers. Yet many companies are far too focused on winning new business instead of nurturing the existing customers that they have.
What dictates your organization’s right to win, grow and keep major accounts all comes down to perceived value – which is always measured from the buyer’s perspective (note: if you just pulled out your company’s value proposition, you’d be mistakenly measuring by the seller’s perspective).
In Sandler’s survey, we found that just 24.5% of companies reported being very effective at delivering value from their client’s perspective.
Recommended Action: Only 44% of sales people achieved quota in 2019, with many missing a clear opportunity to grow current accounts. Coach salespeople to hold regular review and planning meetings with clients. Build a plan that maintains a realistic balance between new business and existing customers and incentivize for organizational growth.
Real value begins and ends with the client. The only way to know if your organization is consistently delivering true value is to ask them!
Growing the Partnership
Strengthening account partnerships means a strategic focus on increasing satisfaction, building trust and promoting collaboration. The good news from many organizations surveyed is that account satisfaction levels are over 75%, with the trust level even higher at 80%.
Companies that don’t continually strive to improve these levels of satisfaction and trust, risk stagnation, or even regression. A period of stagnation opens the door for a competitor who has identified your negligence and is ready to take advantage.
Trust often leads to loyalty, which ultimately persuades the buyer that the cost of changing the supplier and the risk involved are simply not worth it. It also allows the seller to charge premium prices for solutions because the buyer places a value on the relationship and recognizes the mutual benefit of account growth.
Recommended Action: Aim to become the clients’ trusted advisor. You know as an executive that you need to be recognized as an expert in your particular field so that you can quickly gain clients’ trust and build customer loyalty.
Building strong and enduring relationships with your clients is the best way to foster trust. You do not need to be liked, but your aim is to be respected. A buyer may leave a “vendor” but is less likely to leave a “trusted advisor.”
The Benefits of Implementing Client Retention Programs
Although most companies traditionally spend more money on new client acquisition, client retention is often faster and typically costs up to fifteen times less than finding, qualifying and selling to a new client.
Research suggests that the likelihood of converting an existing customer into a repeat customer is 60-70%, while the probability of converting a new lead is only 5-20%, at best.
That’s why the ability to land, expand and renew with existing clients where you already have a relationship will help you to create a business that can survive these changing times by implementing a strategy backed by sustainable organizational growth.
Don’t let your clients change suppliers because they no longer feel valued by your organization. Set the stage for open communication and strategic interaction so that you can continue to win, grow and keep your major accounts for years to come.
Read Sandler Research Center’s complete report, “The Critical Elements of Proactive Client Retention” to access all the data collected from our survey, additional recommendations, and methodology.