Why Existing Customers Are Your Most Underused Growth Channel

Research & Sources / Sales & Revenue Growth

Imagine driving to the market every week to buy apples, while the apple tree in your own garden is full of ripe fruit that falls to the ground unpicked. It sounds silly. Yet many companies do exactly this: they spend most of their energy chasing new customers while their existing customers, who already trust them, are barely looked after.

The excitement of new

New customers are exciting. A new logo on the website, a new name in the CRM, the thrill of a first signature. Sales teams are often rewarded mainly for new business. So that is where energy goes.

Existing customers, meanwhile, get an invoice, a support line and an annual call if they are lucky. Unless they complain, they are mostly left alone.

What research shows

Frederick Reichheld and W. Earl Sasser studied customer loyalty in service businesses and found that keeping customers longer had a strong effect on profit. Loyal customers tend to buy more over time, cost less to serve and bring others with them.¹ In a later piece for Bain, Reichheld reported that in financial services, a 5 percent increase in customer retention produced more than a 25 percent increase in profit.²

The exact numbers vary by industry. The direction does not: the customers you already have are a powerful, often neglected source of growth.

Three ways existing customers create growth

They stay. Every customer who does not leave is revenue you do not have to replace. Reducing churn is growth that does not show up in the “new business” column.

They buy more. Existing customers often have needs you could meet: a second service, a larger version, another department. They already trust you, so the sale is easier.

They bring others. Happy customers refer friends, colleagues and partners. A referral from a trusted source is one of the warmest leads there is.

Why it gets overlooked

• Nobody owns existing customer growth.
• Contact only happens when something goes wrong.
• Nobody asks customers what else they need.
• Referrals are hoped for, but never asked for.

Picking the fruit in your own garden

Call your best customers regularly, not to sell, but to learn: how is it going, what has changed for you, what is next?

Listen for the next need. Neil Rackham’s research on large sales showed the power of good questions about problems and their consequences.³ Those questions work just as well with existing clients.

Ask for referrals at the moments customers are happiest, for example after a successful project.

Watch for warning signs of leaving: fewer orders, slower replies, a new contact person.

What this means for you this week

• List your top 20 customers and when you last spoke with each one, outside of billing.
• Call five of them just to ask how things are going.
• Ask one happy customer for a referral.
• Name one person responsible for growing existing accounts.

The market will always be there. But first, look at your own tree.

Sources

1. Reichheld, F. F. & Sasser, W. E. (1990). Zero Defections: Quality Comes to Services. Harvard Business Review. hbr.orgKeeping customers longer raises profits sharply, because loyal customers buy more, cost less to serve and refer others.
2. Reichheld, F. Prescription for cutting costs. Bain & Company. media.bain.com (PDF)In financial services, a 5 percent increase in customer retention produced more than a 25 percent increase in profit.
3. Rackham, N. (1988). SPIN Selling. Routledge (originally Gower). routledge.comThe Situation, Problem, Implication and Need-payoff question model for large sales.