Customer base or new business?

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2015 and is posted here by their kind permission

How should you deploy limited resources for best returns?

Entrepreneurs know that they do not have unlimited sales and marketing resources. You face the question of how to get the maximum output from what you have. Should your energies be directed at more sales to customers, or more customers? Is it wise to split your resources between these?

A partial answer can be found in the nature of the business. If you sell things that customers buy very seldom like flooring or wedding facilities, your effort should go towards positioning your brand as one to consider and delivering beyond expectations to grow word-of-mouth and referral business. Similarly if your product set is applicable only to a small total market and you are the major supplier you want to ensure that all customers use as much as possible of your product range.

In cases where you offer highly differentiated products or have a unique market focus your priority should be new business before imitators become a problem. Where you have a ‘me too’ product set, very similar to that of your competitors your first priority should be to ensure loyalty of your customers and differentiate by excellent service.

Some new business is essential. Customer attrition will come through closures, relocation and competitive attack. Costs will increase and without new business you will have to cover this increase with price hikes, which make you less competitive.

Follow the opportunities

A good starting place is a reflection on the nature of your business and determining where the best opportunities lie. For instance how easy is it to sell your products; do you win most sales cycles or is there a low strike rate or many postponed decisions. In the first case you want to get more new business sales cycles with great marketing promotions and more salespeople, in the latter case you may want to improve the products, review the pricing, upgrade your sales force skills or put major effort into making existing customers into enthusiasts so you get the referrals.

Try reviewing all existing marketing promotions and sales effort asking the question “is this the best way we could spend this scare resource?” Does the company golf day, the newsletter, the participation in a customer’s pet project or the exhibition stand produce revenue directly or in the end result? In my view there are four measurements you can apply; immediate sales leads, measurably increasing customer loyalty, measurably increasing the brand repute so that future customers will favour you when it is time to buy and building networking relationships which lead to traceable sales and referrals. Those are hard measures but applying them will stop you believing that the advert in the school magazine is going to increase your turnover. If you are subject to arm twisting to advertise or sponsor set aside a fund to be spent exclusively on these. Then when the fund is exhausted you have a reasonable response to similar requests.

Moving forward

Start with a clear set of objectives for new business, additional sales to customers or both. Then deploy and train the right people and develop appropriate campaigns and initiatives. A highly targeted efficient campaign followed up by knowledgeable and customer centric salespeople is likely to give much better return for a given spend than a shotgun approach followed by careless and ignorant salespeople trying to pressure prospects. If you are in a market which is well serviced by competitors, you should either find and exploit an under-serviced niche or target the customers of the weakest competitors. If your focus is on growing sales to your customers institute a dynamic cross selling campaign, upskill your salespeople in account management and increase customer service from all staff. Ensure you have performance measures in place for people and campaigns. Get rid of the people and projects which do not support the objectives or transfer them to CSI or entertainment.

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