Shifting Focus in 2023 from New Business to Customer Growth & Retention

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For the past 10+ years we’ve been obsessed with outbound and focusing most of our “growth” efforts on new business.

I’ve been guilty at times as well.

Somewhere, we lost sight of the fact that it’s not about just signing contracts but retaining customers to create power users and fans.?

Focusing only on net new business can lead to higher churn, slower growth, a loose strategy, and a negative brand image.

The success rate of selling to a current customer is 60-70% and the success rate of selling to a new customer is 5-20%. But we’ve ignored this.

Out of these 3 groups: current customers, inbound, and outbound, current customers convert the fastest (with inbound second and outbound third). So why have we been spending so much of our mental energy on outbound? Why is it that just now we deem keeping current customers and growing existing relationships as most important?

The economy. Often, tough times force us to accelerate trends. We saw this with COVID and the need to create better digital selling experiences.

Now, as organizations struggle with generating new business, customer retention has to be a focus not only to sustain but grow revenue.?

If you’re tired of spinning wheels and not seeing a change, it’s time to flip the script and focus on account retention & expansion this year. This will lead to repeat customers that spend more money over time (vs new customers), a decrease in CAC, an increase in profits from 25-95%, and happy customers which increases referrals and trustworthiness.

So let’s talk about it. Where we’re at today, the benefits of switching to a retention strategy, and then how we get to this new state of selling.

“Which customers convert the most? It’s current customers, inbound, and then outbound – in that order. So why have we been spending so much of our mental energy on outbound?”?

We have been obsessed with outbound.

For the last 10 years, and a lot of you have probably seen this in your own organization, we’ve been of the mindset that the only way to grow the business is outbound, outbound, outbound.

Around 2015-2016, we saw the development of a bunch of tools that made our lives easier; we started sending a bunch of emails, and it was working, so everyone started to do it… then it stopped working as well.

Now here we are. We have the next big thing in sales:?account expansion – including growth and retention.?Net new business is taking the backstage.

And here’s the irony. With a focus on account expansion, we’re now saying is…?Instead of cold outbound, what’s most important is keeping our current customers and growing those relationships.

I laugh at this because it sounds like common sense when we say it, but at some point, we lost sight of the goal of a customer, which is not to sign a contract but keep and retain them.

So I’m happy that we’re seeing this trend. I’m happy that we’re focusing on customer retention now.?

My mantra has always been out of these three groups, what do you think converts the fastest? Current customers? Inbound? Or outbound??

It’s current customers, inbound, and then outbound – that is the order. Why have we been spending so much of our mental energy on outbound??

Let’s talk about it. Where we’re at today, the benefits of switching to a retention strategy, and then how we get to this new state.

• Today: New Business Focused: High churn and attrition
• Bad comp plans
• The three-year hype curve
• Implementations
• Tomorrow: Account Expansion Focused: Faster growth
• SDRs in Account Management
• CS has value-based conversations
• Comp plans tied to renewal

Recap: Shifting Focus in 2023 from New Business to Customer Growth & Retention

The important bits

• :40 – For the last 10 years, we’ve been obsessed with outbound.
• 2:40 – What’s most important, instead of cold outbound, is keeping our current customers and growing those relationships.
• 3:25 – What converts the fastest? Current customers, inbound, and outbound – in that order.
• 5:20 – The number one reason we see high churn and high attrition is bad comp plans.
• 6:00 – The goal of every revenue organization is to create power users.
• 7:25 –?What we’re suggesting to our clients is that 10-15% of sales comp is tied to renewals. It incentivizes the tenure of reps and what’s right for the customer.
• 8:08 – If your implementation team has a main KPI of time, you will consistently jam people through who aren’t ready.?
• 9:50 – We’re seeing a “lukewarm” brand impact.?
• 12:30 – Reposition one SDR and do two things for faster account growth and retention.
• 14:04 –?LinkedIn Sales Insights?is amazing for territory and account prioritization.
• 14:45 – This is how you ask for a warm referral. Not, “Hey, who do you know anyone in…?” Do the homework, know specifics, and offer to tee up the email.?
• 19:52 – I don’t want my enterprise rep calling every State Farm location. What a waste of time. Think of those contacts as decentralized decision-makers.?
• 21:12 – CS organizations must be trained how to have business and value-based conversations.
• 22:20 – If you’re struggling with what to talk to your customer about… ChatGPT.
• 26:20 – If you’re thinking about doing this, you have to have the right strategy: how should we think about going to market with this organization, what are the right things that we’re going to need to have in place across teams, how can we train our people how to have business conversations, and do we have the right people?

New Business Focused: High Churn and Attrition

Let’s talk about how we got here. There are three reasons why overfocusing on outbound and new business has caused high churn and attrition.?

And don’t worry, as you follow along, I’ll give you solutions for this as well. No one wants to hear a bunch of problems.

#1 BAD COMP PLANS

The number one reason for high churn and attrition is bad comp plans.?

If you’re a business rep, your leader is telling you to sell more contracts. Sell more. And there’s no incentive if they renew or not. It doesn’t matter if they’re a massive time-suck on your CS org. What are you going to do? You’re just going to sell the deal.

But the goal of every revenue organization is to create power users, and without tying retention to compensation, sellers don’t have the room to care.

Solution:

I know a lot of you are thinking,?Sacrilege! You can’t adjust the sales comp plan to somebody who renews.

But why can’t that be a portion of the comp plan? I’m not suggesting all sales comp should be based on renewals, but what we recommend to our clients is that 10-15% of their comp be tied to renewals.?

This incentivizes two things: (1) it incentivizes tenure for people to stick around, and (2) it incentivizes what’s right for the customer.?

#2 THE THREE-YEAR HYPE CURVE

The second reason for churn and attrition is what I like to call the “three-year hype curve.”

We especially saw this happen in late 2020. Everybody bought every sales tech that existed and loved it.

Year 1:?By 2021, we kind of used – “all my friends bought it, so I bought it.”

Year 2:?By 2022, we weren’t really using it at all.

Year 3:?Now, we’re in the last year of the hype cycle. People are asking themselves, “Do I really need this thing?”?

Many technologies right now are going through this process. What happened is they got high on their own supply. They thought, “Everyone’s buying this, so we must have product market fit.” They didn’t realize that what they really had was people had a lot of money that they didn’t deploy in 2020, so then they just kind of went crazy.

Unfortunately, there isn’t a solution for this one at this point, but there is for this next one.

#3 IMPLEMENTATIONS

Then the third big culprit behind churn and attrition is implementation.

We’re seeing churn not just because sales is being forced to close deals with no consequences but also because of lack of proper product implementation.

How many of you have an implementation team with success metrics tied to time-to-implementation???

If your implementation team has a main KPI of time, they will consistently jam people through the process who aren’t ready to go off on their own.

Hypothetically, time to implement is a good thing, but it actually incentivizes an implementation team that says, “Just get them through.”?

They only care about checking the boxes.?

• We did this training, check.?
• We got it synced with Salesforce, check.?
• We did this governance meeting, check.?
• We did this strategy meeting, check.?

Done, moved ’em down the conveyor belt. Implementation says the boxes are checked, so we must be crushing it.?

But in reality, the customer is like,?Woah, and they don’t end up using the product.?

Forcing people too quickly through implementations has another impact besides churn. It creates, not necessarily a negative brand image, but let’s call it a lukewarm brand image.?

Take, for example, Gong. If I asked two years ago, “What do you think about Gong?” Everyone was saying, “Oh my God, I love it. It’s so great. Everybody’s using Gong.” Last year, it was, “Yeah, we definitely use Gong.” This year, “Yeah… we’re getting value out of it…” It’s that three-year hype curve.

Solution:

This one’s easy. Stop checking the boxes. Time-to-implementation can be?a?metric, but not the goal. Too long of an implementation is also bad because people want to start seeing value. But the goal of a successful implementation should be adoption. I’ll get more into this later.

Account Expansion Focused: Faster Growth

Some of my favorite engagements are account growth and retention engagements. We’ve worked with thousands of companies, and I’m going to talk you through why you should care about account growth and how to start making the switch.

SDRS IN ACCOUNT MANAGEMENT

I’ll give you a real example.?

We recently worked with a client whose, by nature of their business, had a small client pool of large enterprise companies like Barclays. They were in the finance sector.?

So we came up with this novelish?concept and did two things.

The first was the warm referral talk track.

The reason referrals aren’t working for many is that they just ask for an intro and expect people to get back to them. They ask, “Hey, who do you know over at XYZ?” The usual answer is, “Let me check and get back to you.” And that person often never does.

Instead, the strategy/talk track should go like this:

Use?LinkedIn Sales Insights?to know what companies are growing in the departments you care about and the industries you care about. It is an impressive territory and account prioritization tool and isn’t hit-or-miss third-party data.?

So, step one to finding warm referrals is to go on?LinkedIn Sales Navigator?and type in the job title and office name. Then you can go to your main point of contact and say, “Hey, Susan. I hope you’re doing great. I’m not sure if you know one of these three people in the Hong Kong office? I want to make sure we can support them where needed. Let me know, and I’m happy to tee up an email for you to make an easy intro.”

That is how you ask for a warm referral. You don’t just say, “Hey, who do you know?” You do the homework and then offer to tee up the email.?

The second was to reposition an SDR to do this for Account Management.?

For this test pilot, our client only has about 120 customers. But we probably booked meetings with 20% of those contacts. Maybe even closer to 40% because we set up multiple meetings with some of the larger companies.

If you want to grow faster, build a growth engine with your current customers. If a company has 50 or 75 locations, a sales rep could reach out to them, but they probably have six other enterprise accounts. Why not pair them with an SDR??

We’ve seen the stats on this all over. By just?increasing 5% in customer retention, you can potentially increase profits by 25-95%. That’s a lot.?

So think about retention in terms of possible expansion and what that might actually look like if you were able to build out this growth engine.

CS HAS VALUE-BASED CONVERSATIONS

Pairing SDRs with Account Management is just one way to expand. Imagine if we took all of our net new business principles and applied them to current customer growth. I’ll give you another example.

Customer success organizations must be trained on how to have value-based conversations. Not just checking in and asking, “How’s it going?”

I can promise you this. There are things that will never happen when we train CS teams at Skaled.

1. Your team will never send an email or a touchpoint that says checking in, touching base, or catching up.?
2. Instead, we’ll train them to have value-based reasons for reaching out and engaging so people will want to meet with them.

How many of your customer service teams get people that cancel on them all the time? First, they’re running late. “No, everything’s good. We’re great. We’ll catch up later.” And then it just becomes a habit to cancel or delay. And then they stop showing up for meetings.?

So you have to train your teams how to add value. And for many CS teams, it’s not that they don’t want to have value-based conversations; they just don’t know how to do it and don’t know what to talk about.

Here’s a hack for this.?

If you’re struggling with what you should talk to customers about, use ChatGPT.?

COMP PLANS TIED TO RENEWAL & ADOPTION

As applied to new business, I mentioned these earlier as what’s increasing churn today.

So as I wrap up, I want to flip this around and reiterate what it means for account expansion if we incentivize the right actions.

Your sales team needs to have a small percentage of their compensation tied to the first renewal. Salespeople might hate me for saying that, but it incentivizes the right behavior. It’s the right thing to do for the customer.?

When it comes to adoption, it is shocking to me how few teams have clear adoption metrics.

What does getting started look like? What is the initial usage, and how do we define power usage? What percentage of people do we need to get for the highest likelihood of converting? (Conversion being renewal.)

These are important metrics past how you track and measure implementations.

You need to have different adoption metrics for each step of the journey with the goal of creating power users.

That’s it.

Many of you will be focused on account expansion on top of outbound this year. So use this information as a catalyst to have smart conversations internally.

1. How should you think about going to market with this organization?
2. What are the right things you will need to have in place across teams?
3. How can you train your people how to have business conversations??
4. Do we have the right people?

P.S. - If you want to get tactical, here are my?13 must haves to truly implement an account retention and growth engine.