Whilst some things change, others stay the same. Whilst AI ‘swarms’ are busting out of digital cages; it remains cheaper to retain and up-sell/x-sell to existing customers. You don’t have to drive hundreds of miles, fly around the globe or create elaborate events for existing customers. They trust you to deliver what you are delivering to them and the relationship is already built. So, whilst new business acquisition remains something to aspire for and to grow, looking after the house remains key. So, let’s discuss why new business acquisition still costs more than retention.
New business acquisition
New business acquisition is the process of winning or acquiring new customers that bring new business revenues. These are revenue streams that did not exist before and are not part of your existing customer base. By implication, these accounts need some encouragement to buy from you, assuming that they even know who you are. If they do know who you are and what you do, then at least you are part of their awareness and may form part of their consideration. If they don’t know who you are and what you do, you somehow need to get their attention.
Unfortunately, getting attention and awareness is a bit of a challenge. Many people consider this as free by posting on social media. However, if your buyer doesn’t see what you post, they won’t know anything about you, and that is if they see it. Recent estimates suggest that an organic post on LinkedIn has up to a 5% chance of your contact seeing it. The key word here is ‘contact’, when they may not already be. As a result, B2B businesses exhibit at trade shows (expensive), use paid digital media (expensive) or create vast content factories (expensive) to pummel contacts with.
According to Forbes, it costs 5-7x as much to acquire a new customer as to retain one. Some sources suggest that in niche areas, it could be 20-25x more expensive. This is due to factors such as the industries you target, the difficulty in reaching senior decision makers and experimentation with different tactics.
Customer retention
Customer retention is the process of serving a customer well enough to ensure that they stay with you and maintain or grow revenues. These revenue streams already exist before and come from your existing customer base. In general, these accounts will keep buying from you as long they need what you buy, you deliver it well and they don’t find a cheaper or better alternative. They know who you are and what you do (or at least some of it). If they do not know everything that you do or you believe that you can create solutions to solve their challenges, they may buy more from you.
Encouragingly, you already have awareness and, in some cases, consideration. You already have contacts, you are already a supplier and you already know something about them. With a bit of stakeholder work and some targeted communication, you may unlock further opportunities. This could be up-selling of add-ons and new features or cross-selling of other products or services in your portfolio. Whilst some up/x-sell may occur when you exhibit at and attend trade shows, there is less need to attract their attention. However, you do need to put the work into building broader, deeper and more trusted relationships.
Business case for existing customers
In the current economic climate, bar a few industries that are seeing high growth, taking care of existing customers is crucial. If your owners, shareholders or Board are demanding more profit and cashflow and you fail to take care of existing customers, the impact could be substantial. It is tempting to sacrifice service and quality when the bottom line is challenged. It is also tempting to scale back customer interaction to control discretionary spend and reduce the cost to serve. Such manoeuvres only work when customers are ‘locked in’ or are unlikely to look elsewhere. In the short-term, this strategy may work. Medium-term, it may give pause for thought and sweaty moments when the CEO or MD has to ‘jet in’ to save the customer. Long term, it could cost you a lot more.
When you look back and consider how hard it was to win those customers, and how long it took to scale some accounts to their current size, it makes sense to retain and grow. Since people tend to have short memories, it is worth noting that B2B buying journeys can now be 12-24 months in some industries and in some circumstances. A longer, more complex and wider decision-making group make B2B sales increasingly hard. As buyers become saturated with low-quality content and ‘AI slop’, they are switching off. Key personas are increasingly hidden on ‘dark social’ networks that sales and marketing struggle to access. Decisions are made behind closed doors between peer groups, leading to the term ‘dark funnel’ to describe missed opportunities. New business acquisition remains a costly approach that requires meticulous planning and persistent effort.
Working with B2B sales and marketing teams
Think Beyond predominantly works with B2B clients, typically in the mid-market corporate sector. It is a common occurrence to find opportunities overlooked and leads not followed up, even without significant investment in new business. Competitors win deals with services and products that you didn’t know existed. Customers buy adjacent services from other companies because they didn’t know that you also offer them. Sometimes, the real value is within the data, relationships and customer experience that you already have.
If you would like to review your sales and marketing strategy, why not reach out for a free introduction. Alternatively, you can message us via our LinkedIn page.
Finally, check out articles on building a sales engine and different funnel approaches.