Existing clients drive profitable growth

After spending much time in B2B manufacturing, I have had the privilege to learn some important lessons with regards to generating consistent and profitable growth. In manufacturing, I have identified two vectors of growth that work particularly well. One consists in bringing existing products to new industries and geographical marketplaces; the other is about growing sales to one’s current clientele. Both approaches require planning, effort and forethought. They consume much time, attention and energy. However, the easiest vector is by far the one that focuses on clients in hand.

Acquiring new customers is always expensive, especially if the clients are far away. It takes time, effort and commitment as well as a good understanding of their particular marketplaces. There are many traps and pitfalls along the way, making the cost of customer acquisition a risky burden to bear. There are also many false routes associated with different cultural contexts and much time may be lost while finding one’s way. In times of Covid-19, this is especially true as either travel outside your geographic region or even trying to make new client connections within, are now a much more complicated than before.

Growing profitable sales to existing clients is therefore, by far, the easier route. Because of the advantages that your current relations present, you already know how to close business with them and are cognisant of what making profitable business entails. You are beyond getting your foot in the door; you are actually welcomed to wait in the lobby. Your past history acts in your favour as it affords you a basis for trust, with the intrinsic obstacles of new business development being already successfully overcome. More importantly is the insight you already have into your client’s particular culture.  As you and your client already know each other and you both know what it takes to successfully do business together. You know your client’s ethos and have the opportunity to discover their future aspirations. You already know most of their key players and understand the idiosyncrasies of their decision-making process.  You know where the real power lies and who can act in your favour to facilitate sales. You have the opportunity to do due diligence on the particularities their industry, product, market and sales. You also have champions within their organisation who can give real insights and some highly beneficial information.  Further, your existing relationship and deep penetration makes you much harder to displace as a vendor. As Covid-19 complexifies new business development, it also serves as a barrier to your competition, which helps further incubate your current relationship. There are so many factors already in your favour that increasing sales with them if often only a question of paying some real attention. 

To increase sales within your existing clientele, you must take the time to deeply analyse them and focus only on those who have the desire and potential to grow. You must make the effort and time to look into their marketplace, business model, and product offering in order to logically identify their potential avenues for growth in terms of both sales and profit margin. In essence you are studying to become one of their team. This preparation will allow you to position your company as a trusted advisor and create the opportunity for your offer to help.  To earn this trusted position, it is important to focus on understanding not only their business model but also the industry in which they operate. You must understand their position in their marketplace context. In any industry, there are vendors who garner a premium for reasons of either branding, quality or innovation. With regards to your particular client, you must see where they can earn such premiums and figure out how your company can help them do so. In other words, you must be able to offer your clients valuable insight that will help make them more money. This approach is called the Challenger Sale and I highly recommend the book by Dixon and Adamson on the matter.

Most frequently, as a B2B vendor, we are most useful in helping our clients grow sales by supporting them in the field of innovation. It is my favourite growth strategy when it comes to expanding profitable sales. R&D (Research & Development) and Innovation are costly, time consuming and risky. They take away focus from current business realities, they draw scarce resources from daily operations, they require speculation on the state of the future and the results are frequently uncertain. There are many impediments to success in innovation and risk averse managers are often reticent to gamble their own status on such uncertain endeavours. However, sustainable growth is hard to achieve without it, leaving many companies in a state of paralysis. On one hand, they desire growth, while on the other, they prefer shunning the risk.

You will notice that companies that are stagnating have generally limited investment in both innovation and R&D, feeding an unvirtuous circle. Because of the costs and risks involved, there is always a fear as to whether the investment will lead to profitable growth. It is at this crossroad that the opportunity lies. Because of all the risk and uncertainty involved, most clients are generally quite receptive to offers of help in shouldering the burden. With a proposal to aid, you create an opportunity increase you client penetration and to make yourself a more valuable to them as a supplier. This deeper penetration is not only key to increasing profitable sales but also in making competition from third parties less effective, as well. By being involved in your client’s development effort and sharing some of the costs of their new product design, you place your company in a unique position of trust and become part of their team.

When making available your product knowledge, technical expertise, and marketplace insights, you are offering you clients real help. Forearmed with your deep business analysis and good understanding on what will drive premiums in their marketplace, you can influence the design direction to more certain outcomes, which helps reduce the risks associated with new product launches. This serves not only to increase your position of trust, but also leads to the integration of your products into their final design.  When you work on figuring out what will help change the game for your client’s business, you can tailor your offering to that game changing solution. Being involved in your client’s innovative design process is all about having the opportunity to share market insights that lead to your own unique product solutions.

Traditional client entertainment expenses will not, generally, help increase your margins or protect you from unwanted competition, but the time and money spent helping you client with their innovative design process will, thereby also serving as an effective marketing expense. The time spent with your client will not only deepen your understanding of their inner workings, but also will promote all of your products to their buyers. By being involved in your client’s R&D you are now more than just a mere vendor, you are a trusted partner. Being a trusted partner will afford you all due courtesy. Clients will more comfortably share their thoughts in the field of supply and frequently may offer a last look to you before finalizing a purchase with one of your competitors. Apart from increasing profitable sales, becoming so deeply entrenched makes you much harder to dislodge by the competition and helps pull your company away from the traditional price/commodity paradigm. This is why it is critical to be an active participant in your client’s innovation and design process. New product offering leads to new pricing and new pricing is an opportunity to increase margins. In my experience, when you help your clients make more money, your company make more money as well.