Question

Topic: Strategy

Customer Cross Sell

Posted by Anonymous on 125 Points
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.
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RESPONSES

  • Posted by Peter (henna gaijin) on Member
    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.
  • Posted by Markitek on Accepted
    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
  • Posted by telemoxie on Member
    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.
  • Posted by mgoodman on Accepted
    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.

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