If you’re like most companies, you focus the lion’s share of your growth budget on demand generation and customer acquisition, leaving customer expansion as merely an afterthought.
But the sale isn’t over just because your prospect becomes a customer. There’s still ample opportunity to grow revenue from customer expansion—nurturing your existing customer relationships, helping them see the value of growing with your solution, and continuing to build loyalty over time.
Consider these stats:
- Analysts estimate that 70-80 percent of the average company’s annual revenue comes from existing customers in the form of renewals and upsells.
- Yet, the majority of companies allot only 10-20 percent of their sales and marketing budgets toward customer expansion.
In other words, the majority of sales and marketing spend goes to customer acquisition, which only amounts to 20-30 percent of your customer lifecycle. Clearly, there’s a significant, yet overlooked opportunity for businesses to tap into customer expansion as a growth engine.
Here are three ways to capitalize on the opportunity and effectively keep and grow revenue with your existing customers.
1. Train Customer Success for Sales Opportunities
It’s easy for Customer Success to become so focused on the idea of helping and supporting that they overlook everyday selling opportunities. We recently had one such experience while canceling a SaaS product.
We reached out to the account executive who helped us with onboarding last year. Here’s how the conversation went:
Not sure who to contact but we will not be renewing [product]. It’s a great tool in theory but just doesn’t fit our needs at this time.
Please let me know who to contact on your side if it’s set up as an auto-renew.
Sorry to hear. No auto-renew in the contract, so no action needed on your end. Hope you’re doing well!
What happened? The rep made no attempt to ask why the product didn’t fit our needs. Nor did they make any effort to help us see more value in their solution. Instead, they let a $24,000 annual contract walk out the door. They practically held the door open for us in the process!
How often does this happen in your organization? How do your Customer Success reps identify and manage situations like this?
Whether it’s to win a renewal, upsell a customer, convince them to pay more, or apologize after a service failure, your Customer Success team is on the front lines of conversations that directly impact your revenue. And they need to learn how to identify sales opportunities, engage your customers, and skillfully win them over.
2. Know When (Not) to Challenge the Status Quo
The biggest threat to your competitive success isn’t the other players in your industry—it’s your prospect’s Status Quo Bias—their preference for not doing something different from what they’re doing today.
To create the urgency to change and overcome Status Quo Bias, you need to introduce your prospects to Unconsidered Needs—problems or missed opportunities they’ve underappreciated or don’t yet know about.
When you’re talking to a new prospect, it makes sense to challenge their status quo and persuade them to switch to your solution. In fact, research conducted by Corporate Visions found that a provocative messaging approach that begins by introducing an Unconsidered Need enhances your persuasive impact by 10 percent.
But to your existing customers, you are the status quo. And research shows that using a provocative, challenging message when you’re trying to renew or expand business with them will increase the likelihood that they’ll shop around by at least 10-16 percent.
Bottom line? Whether you’re talking to a prospect or an existing customer, you’ll win more business if you tailor your messaging to match the psychological drivers behind each unique buying conversation.
3. Tailor Your Sales and Marketing Messaging for Customer Expansion
The majority of companies (58 percent, according to a Corporate Visions survey) see no need to differentiate their messaging between customer acquisition and customer retention/expansion.
Why? It’s mostly due to a lack of budget or resources. In an effort to save costs, these companies recycle the same messages and content, regardless of where the customer is in their lifecycle. However, our research has proven that the psychology of an existing customer is 180 degrees different than a potential prospect. And messaging approaches used to acquire a new customer will backfire when used to renew or expand an existing relationship.
To be effective, you need to take a tailored approach to your message for customer expansion.
Tailoring your sales and marketing messages for existing customers is a two-step process. First, you identify what questions your customers are asking in key buying moments. Then, you create messages that are most likely to boost their loyalty and persuade them to take action in each of those moments.
Corporate Visions research has identified four critical decisions your existing customers need to answer to renew or expand business with you:
- Why Stay? Why should I renew with you?
- Why Pay More? Why should I pay more for your solutions?
- Why Evolve? Why should I buy even more from you?
- Why Forgive? Why should I trust you after a service failure?
So, how do you build the messages and skills needed to effectively respond to each of these questions?
We’ve built several resources to help.
Customer Expansion Resources
The Expansion Sale, a new book by Erik Peterson and Tim Riesterer, authors of The Three Value Conversations and Conversations That Win the Complex Sale.
Backed by years of research into what motivates your existing customers to buy, this book reveals a tested and proven approach to messaging that will fundamentally change how your organization approaches customer conversations. Learn more at expansionsale.com.
E-books for Marketing and Sales Enablement
Check out our Customer Expansion e-books to learn specific, scientifically-proven messaging frameworks for renewing your customers, communicating price increases, convincing your customers to expand, and regaining trust after a service failure.
Don’t let your renewal and upsell opportunities walk out the door. Armed with these resources from Corporate Visions, you’ll learn the messaging techniques and skills you need to keep and grow more revenue with existing customers.