What did Gartner (1), Harvard Business Review (6) and countless other pubs and business researchers learn that their corner grocer could have told them fifty years ago?
A can of corn can only stay on the shelf so long before it loses taste and efficacy. Any cook can tell you it’ll also cost more to make a meal with that “new” can of corn than with ingredients already existing in your pantry and fridge.
The cost of net new sales is exponentially higher than building new business from existing business you already have.
How much more? According to published sources, conservatively, anywhere from five (1) to fifteen (2) times more. Other estimates range to thirty times+ (3). Adding insult to injury, even after you spend money for net new sales, repeat customers still spend, on average, 67% more (3).
Why then, do we place such emphasis on net new sales?
Because the prevailing global business economy puts emphasis on opening more and new markets.
The prevailing entrepreneurial spirit emphasizes creating products and categories no one else has discovered.
Because many of us invest in direct and indirect sales partners, the vast majority of whom have no continuing interest in your relationship with the end customer once they’ve taken their cut.
In reality, we should all keep in mind that when companies identify and respond to loyal customers, companies reduce their customer acquisition cost by 27%. (4)
What about that 67%? That’s more than half of what’s coming down the pipeline.
Like that grocer’s can of corn, all things vegetable, fashion, tech or human have an expected life cycle.
- Development, when a new product’s first brought to market, often in BETA, before the need, let alone its efficacy, has been established. Case in Point: In the early 1980s, before Americans even knew what a Personal Computer was and why anyone needed one, Texas Instruments had a rudimentary form of voice recognition software they insisted upon advertising. Result: Know anyone with a Texas Instrument PC, let alone one that speaks like a smart phone?
- Growth, when the product begins to make waves as a “must have.” Even Pac-Man and the Mario Brothers had to walk (“bite?”) before they took over every nine-year-old on the planet. The product growth cycle is when you want to be pushing those early adopters, especially when they’re often those who get “the worm.”
- Maturity, when a product moves into the mainstream, remains steady and true to its roots, mostly likely growing from updates and upgrades, but more usually trying to feed on entirely new products to come.
- Market Decline (End of Life), when the product loses customer appeal or competitors come knocking, sales fall off in the face of both new customer needs and brighter, shinier, more promoted “net new something.”
We say it’s time to make hay before someone turns “maturity” into a dirty word.
It’s in this third Life Cycle stage, maturity, when your renewal specialists should be introducing your contemporary products, setting up renewal reminders, future updates and upgrades. As well as reminding your install base your company’s served them well before and will do all you can to continue serving them well for the future.
If you’re using a spreadsheet, CPQ or CRM system to manually find, track, correct and remind everyone of renewal dates, if you depend upon your Renewal Specialists to manually spiff original sales people/vendors/distributors and/or make sure existing customers know what new tricks your company has up its sleeves that will most benefit them, I’d say he or she is more than ready for a vacation.
If, however, you implement a smart, relevant automated business process that follows product life cycles as well as customer, contract, sales and distribution data, your Renewal Specialist will have a partner feeding them all the info they need to hit (even exceed) that 67% (1).
Although most companies focus their sales effort into net new, a product’s life cycle proves that except in the case of absolute start-ups, significant effort should be applied to a revised sales and product cycle. A revised cycle for which that 27% lower cost of sale says a lot. Expand with what you’ve got and the profits will increase.
Now about that corn…
Perhaps not as simple as looking for that can’s expiration date, allowing your product life cycle to work through your automated renewals process, channel partners, direct sales, etc. to your Renewal Specialist will still make sure your relevancy to current, and net new, customers stays as fresh as that corn was when picked.
Today’s businesses, especially as we move more into the cloud and annuity sales, need to make sure they have the automated tools they need. And that they’re taking full advantage of those they already have.
An automated Renewals Management Platform can do that and much more. Isn’t it time you made sure you’re taking advantage of your customers’ product life cycles so you can continue to turn them into your own?
- https://www.linkedin.com/pulse/what-cost-customer-acquisition-vs-retention-ian-kingwill (source quoted as Gartner)
- (Winning New Customers…Terry Gillen/Gower Publishing ISBN0566086158)
- https://www.linkedin.com/pulse/what-cost-customer-acquisition-vs-retention-ian-kingwill (Bain & Company)
- Harvard Business Review, “Exploit the Product Life Cycle” by Theodore Levitt