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This question has been answered, and points have been awarded.
Customer Cross Sell
Posted by Anonymous on
2/9/2005 at 7:45 PM ET
I am trying to find research or information on the value and return of selling to an existing customer versus trying to acquire new customers. My sales team is not doing a very good job of cross selling. I'd like to share information, statistics and more to convince them that it's a shorter sales cycle and a better return to target an existing customer than a new customer.
2/9/2005 at 8:06 PM
The rule of thumb I have always heard is that it costs five times as much to get new customers than to retain existing ones. I would assume this number reflects the cost in sales staff time, collateral material, advertising, etc.
Peter (henna gaijin)
2/9/2005 at 8:09 PM
Everything I have heard also supports that new customers cost much more than reselling/additional selling to current customers.
But, the actual numbers will vary greatly by industry/market. Resale of a car is vastly different than reselling to a consumer of toothpaste, which are both very different than getting a buyer of enterprise data storage systems to buy again.
2/9/2005 at 8:18 PM
All research points to the fact that the cost of selling to an existing customer is about 1/10 to 1/5 the cost of selling to a new customer. All the acquisition costs occur with new customers . . . existing customers need only to be given proper customer service so that they are informed of your greater whole product offering, or complementary products and so on.
Here are a few samples of the stats that you can find everywhere
According to the Customer Service Institute, 65% of a company's business comes from existing customers, and it costs five times as much to attract a new customer than to keep an existing one satisfied.
A study at Harvard University by researchers Fredereich F. Reichheld and W. Earl Sasser calculated that a mere 5% reduction in customer defections increases company profits by 25% to 85%.
According to Gartner CRM analyst Adam Sarner, obtaining a new customer is 10 times more expensive than retaining an existing one.
A 2003 McKinsey report put the cost of acquiring customers at 10 times the cost of keeping them. Rescuing defected customers costs 100 times more than keeping existing customers.
This ought to get you going
2/10/2005 at 8:10 AM
Three ideas you might consider:
1) How good is your project management and support? If you are doing a fantastic job of servicing customers, and your customers are estatic about your company, then it's typically easier for a sales person to make more sales to existing accounts. On the other hand, if you have poor or non-existant project managment, if you are late on deliveries, if sales folk who call on current customers end up wasting their time on resolving service related issues, they may perceive it to be easier to sell new accounts.
2) What incentives are you offering? Most sales teams are motivated by commissions, bonuses, contests, etc. How much is is worth to you? I'm no expert on sales force compensation - but I know for sure that if you showed up at the next sales meeting and handed a large cash bonus to the sales person who closed the most repeat business - and if you promised to do the same next month - you will see an increase in the type of activities you are looking for.
3) How are you handling "inside sales" ? Do you have folks who are primary office / phone based who follow up with current customers? If not, have you considered this approach? You need to be careful about how you calculate commissions - but an inside support team (or an outsourced one like me) can alert your sales team to opportunities at existing accounts, increase the level of customer satisfaction, and free your outside folk to focus on new business.
2/10/2005 at 11:25 AM
Try this link
2/10/2005 at 12:13 PM
I'm skeptical that the sales team will respond to the kind of argument you're making. It's all based on statistics and "generic" situations in unidentified industries (which they will assume are different than yours).
What they understand are BIG FAT COMMISSIONS (or bonuses, depending on how you operate). Why not give them double or triple their usual commission on business they bring in by cross-selling for a fixed period of time (like 4 weeks). You'll lose money on a few sales, but (a) you'll make believers out of them, (b) you'll get the secondary product into the hands of a lot of new users, and (c) you'll make it up on repeat purchases, because current customers are 10 times easier to sell than new customers.
You need to remove the risk from the sales team's perspective and make the reward high enough to tell them you mean it.
2/11/2005 at 8:39 PM
Mgoodman gives a great response! Excellent input Mgoodman. That one just might be enough to make me buy your book "Rasputin for Hire".
NOTHING BEATS AN INCENTIVE LIKE BONUS...
Having been groomed by sales managers I have never found really great sales managers who inspired me as much as an increase in incentives. Real sales people need to be coached and then inspired by a BONUS. The sales manager has a motive and should support their sales teams beliefs by backing it up with real benefits.
JAY ABRAHAM'S BOOK "GETTING EVERYTHING YOU CAN FROM ALL YOU'VE GOT"
Is the best resource I have found in print to support the explanation and review of how the "REPEAT PURCHASE" out benefits a company more than they will ever know.
GREAT SALES MASTERS DO THIS...
Great sales masters of sales save more energy, time and money by selling a lot less harder than they need to by getting existing clients and customers to "REPEAT PURCHASE". I can't tell you how much money I turned over and over and over again almost effortlessly by getting my existing clients to buy again.
TELL YOUR SALES TEAM TO READ THIS...
CREATE A SALES EARTHQUAKE...AND SHAKE YOUR BANK...
Become the "Repeat Masters & Add-ON" experts of their industries and they will far out sell the competition and simultaneously create an internal sales earthquake in your organization.
WHEN YOU FAIL TO MOTIVATE A SALES TEAM YOU FAIL...THEN THEY LEAVE MORE MONEY ON THE TABLE FOR THE COMPETITION TO COME ALONG AND GLEAN...
to get eveything you can out of your sales team you need to find a way to motivate them. Don't let them ever leave money on the table. When they fail to get an existing client to buy more from your organization they are leaving money on the table. When they fail to follow-up with EXCELLENT CUSTOMER SERVICE they leave money on the table.
START RAKING MONEY UP OFF THE FLOOR OF EXISTING CLIENTS TODAY...
Is there anything else I can do for you Lisas?, maybe send a free motivational email to your sales team, how about exchanging emails with you to inspire you to a new level with them and if my ideas work let's keep doing it, or maybe they can send me emails and I'll answer their questions for free? I'd love to inspire you to the next level. You deserve to have your sales team raking up money off of the floor of your existing customers.
Your Servant, Deremiah, *CPE (Customer Passion Evangelist)
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