Why companies need to market - and not just sell - to existing customers

For technology and service providers, especially those that target other businesses (B2B), making or missing quarterly sales goals often comes down to whether a few key “new name” prospects sign deals in that period. These deals not only provide future revenue, but also drive the narrative of company momentum as seen through the eyes of financial markets, investors, analyst firms, the media and even employees.

However, renewing customers and growing account revenue are typically far easier and more cost effective than trying to increase revenue by adding new customers. These revenue sources are often more predictable and higher-margin and reduce the need to continually close many new customers every quarter, which is why many providers often measure customer lifetime value (CLV) as a key performance indicator.

Todd Berkowitz, research director at Gartner, estimates that providers can increase revenue by as much as 20 percent by taking a programmatic approach to marketing to existing customers.
Berkowitz said in his blog post, “When study after study shows that it’s easier and cheaper to sell to existing customers than to try to acquire new ones, and loyal, happy customers are key to influencing prospects, provider marketers should be completely engaged in this effort. Account managers or “farmers” do a great job with account maintenance but they are neither marketers nor product experts. And that’s a problem because customers don’t just want access to support or basic account management, they also want frequent contact, tailored offers, white papers and other things that should be coming from product marketing and management rather than sales.”

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In a Gartner survey of 503 buyers of B2B technology and services completed in the first quarter of 2013, a significant number of respondents viewed these activities as extremely significant in terms of expanding the relationship, and therefore the propensity to buy more technology and services (see Figure 1).

[caption id=“attachment_78758” align=“aligncenter” width=“752”]  Source: Gartner (2013)[/caption]

Of course you can’t simply flip a switch and start marketing to your customers without a thoughtful, programmatic approach. Expanding usage, cross-selling and up-selling is very different to making the initial sale.

Gartner recommends a framework based on four steps including:

- Agree on Marketing’s Role and Objectives

- Collect, Consolidate and Correlate Data to Uncover Hidden Opportunities

- Map Content and Activities to the Customer’s Buying Journey

- Enable the Field and Partners for Selling to Existing Customers

Each of these areas, and especially the last three, can require significant time and effort upfront. While so much more data is available than ever before, not of all of it is created equal, and it’s important to figure out what really matters. Analysing the data usually requires tools that work based on resources, skills and IT support. Content geared toward existing customers will need to be developed or modified from existing content. And if the sales force (particularly the account managers) and partners aren’t really adept at cross-selling and up-selling, they will need training and support in order to be successful.

In the end, a customer base should be viewed as an asset, one that needs to be both protected and constantly nurtured to gain maximum value. To capitalise on this asset, provider marketers need to apply the same level of discipline, rigor and effort toward expanding existing account revenue as they do toward acquiring new customers.