Why It’s Not All About Winning New Customers

Through work I’ve done marketing companies directly, and research/market analysis I’ve conducted on behalf of investors looking to make product and/or company acquisitions, one of the things I come across (especially with the later) is “we like this brand and we want to know how viable it is to grow its base by x%”. It’s the ‘grow factor’ and of course it makes sense — what business doesn’t want to grow? 

And when I talk to peers in other companies about what marketing and growth hacking strategies they’re working on, the common goal is often obtaining more customers. In fact, most of the companies I speak to are hell bent on signing up new customers. That’s great if you’re selling reusable coffee cups (single item purchase, fixed price, nothing ongoing to have to think about providing, supporting, etc.) But it’s a different world for service based businesses. I’m not about to say seeking out new customers is a bad thing, especially in subscription based models; it spread bets your risk.

"In a service based business, more customers equals more complexity".

So what’s my problem with this? My main concerns with the ‘new customer only’ mentality are as follows:

• In a service based business, more customers equals more complexity, more operational hurdles, systems bottlenecks and, ultimately, cost. So if your product margin is 20% for 1,000 customers, it won’t still be 20% when you get to 10,000 customers. This shouldn’t put you off, but you need to be aware of it and scale accordingly.
• Those who focus solely on new business acquisitions will often do so at the cost of ignoring the easier opportunity to grow their existing customers through up-sell/cross-sell. This is perhaps the biggest error to make.
• The legwork involved in finding new customers is far more than selling to existing ones. We all know it’s easier to sell to someone who already knows you.

"Those who focus solely on new business do so at the cost of ignoring their existing customers".

Every good business should seek to blend its activities (and marketing budgets) toward both new business and growing the existing base through up-sell and cross-sell. The benefits to this approach are:

• Selling more services to existing customers will make them more ‘sticky’ to your brand.
• The cost to manage ten products across five customers will be less then ten products across ten customers.
• You won’t have to put as much effort into convincing an existing customer that you’re right to provide that extra product or service — though don’t expect to make no effort.
• Your engagement levels with existing clients will remain strong and, if the process is rolled out correctly, your account managers will keep product/service dialogue running nicely with your customers.
• Your overall client retention will be stronger.

By blending your new business and your cross-sell/up-sell activities to your existing base, you’ll hit a sweet spot that keeps your sales and marketing efforts on point.