Especially service providers invest a lot of money in customer loyalty programs, assuming that long-term customers are good for the company. Because of that myth, customer churn and customer retention have become key performance indicators with service providers; budgets and resources are allocated based on those figures and most marketing campaigns are set with the goal to keep customers as long as possible with the company’s services. This paradigm is so strong and unchallenged, it seems worthwhile to have a look at how well all this loyalty money is really spent. While it is certainly important to keep paying customers that contribute revenues to your company, this post focuses on the profitability that long-term customers generate compared to not so loyal customers. We also look at this mainly for settings where a service provider has … Read more
Everyone in Sales (and probably everyone in business) has heard the truism that customer acquisition is three times more expensive than customer retention. That is such a high-level statement, it is hard to say what it relates to and what to take out of it (by the way, if any of you readers knows the origin of this myth, please let us know and comment on this article). Costs for customer-related expenses in such a comparison can only be accounted in total, meaning for the entire customer lifecycle, or per customer transaction or purchase. 1. Total Customer Lifecycle Let’s first look at this from the high-tech sales perspective: Presales time in high-tech sales is usually 3 to 24 months. However, the average customer lifecycle is usually 2-3 years, often even 5 years and more. Therefore, … Read more
We all heard it many times, “sales people should mainly be out there, on the road, with the customer”. Well, this might be true if you sell insurances for consumers or ice-cream in a little kiosk or so. If you are in large ticket, project-based high-tech Sales, it is a little different. Face-to-face meetings are only one way of communicating with the customer, besides telephone and email. Meeting the customer face-to-face is only required if: You need to add a social or emotional component. That is usually required in the beginning of the sales cycle in order to build trust and a personal relationship with the prospect. It can also be necessary later in convincing buying influences or in price negotiations. You need to explain or resolve a complex matter. That can include a detailed, … Read more
The stupidest question I ever got in a job interview came from a CEO (who is not CEO anymore but that might be for other reasons) asking me: “So, who do you know, who can you call tomorrow and sell my product to?” Yeah, right… all what Sales is about, is knowing people, the rest is easy. Well, everyone in high-tech Sales knows that this not true. It’s a myth for anyone with no sales experience and especially in start-ups that one of the key challenges in Sales is to know the right people in the targeted customer organization. To understand the meaning of contacts, let’s again have a look at the sales process, for which I introduced an example in one of my previous blog posts. If you look at the individual process stages, … Read more
