Unlocking Hidden Revenues from Current Customers

Carter Hinckley and Corey Torrence

When sales leaders seek growth, many turn first to new avenues – new customers, new geographies, new products and other untapped sources of revenue. However, there often is considerable growth potential in the existing customer base. Current customers have already shown they need your product or service and want to buy from you. Significant growth can come from getting them to buy more of what you sell.

The key to growing existing accounts is increasing your share of “addressable spend” – the total amount a customer spends on the category of products or services you provide. Here are the three steps every organization must take to understand their opportunities, prioritize them and then develop plans for growing share of spend with each customer.

Step 1: Understand the potential of your accounts. To capture more of the dollars customers are spending on your product or service category, you first need a solid fact base. For each customer, seek the answers to five questions:

  1. What is the customer’s total spend on the types of products or services your company sells?
  2. How does the customer’s total spend compare with their peers’ total spend and to the market opportunity in your product/service category?
  3. What does the customer currently spend with your company and on which products or service lines?
  4. What does the customer currently spend with your competitors and why?
  5. In aggregate, is the overall level of spend increasing, decreasing or remaining constant?

Share of Addressable Spend
In building out your fact base, it can be instructive to ask each of your sales reps to estimate your company’s share of addressable spend for each of your top customers (e.g. the top 100 or top 25%). Once they’ve done so, the manager or an independent resource should validate those figures. In most cases, the sales rep will have overestimated the share, usually due to assuming that a strong personal relationship equates to a high share of wallet or to misinformation from customers. This is not unusual. We once worked with a company whose sales reps overestimated share of spend by 20 to 30 percent for three-quarters of their customers. While the mismatch between perception and reality was sobering, it ultimately led to increased sales as those reps were able to pursue opportunities they hadn’t known existed.

Once you have established a solid understanding of your share of customer spend, segment customers by relevant factors in order to prioritize them and develop action plans for each group. Start simple, segmenting by easy-to-identify methods such as account size, current spend, industry vertical and geography to determine whether there are clear opportunities to employ a share-of-spend growth strategy. From that initial basic segmentation, go on to segment along more sophisticated lines such as buyer values or loyalty scores, which will enable further refinement of targeting and messaging. When done well, segmentation will help you identify distinct customer types for whom you may be able to create strategies that work across a whole group.

Step 2: Prioritize the opportunities identified in Step 1. Once you have established your fact base, you can begin to prioritize accounts. This is an important step as not every account with a gap between their addressable spend and the amount they are spending with your company presents a good opportunity for growth.

One of your highest priorities for a share-of-spend effort should be your “splitters” those customers for whom satisfaction is high but share of spend is relatively low. Splitters are those customers who divide their spending dollars between multiple vendors. Do you know who your splitters are and are you monitoring this data point on a regular basis? Just as important, do you know which splitters are (a) highly satisfied with your company, as determined by measurements such as Net Promoter Score (NPS)® (trademark of Sametrix Systems, Inc.) but are (b) giving you a comparatively low share of their spend? These customers are prime targets for the sales organization to understand and address the root causes of the gap.

It can be helpful to plot accounts in a visual manner. We like to use a 2x2 matrix capturing both NPS score and spend share. Customers who fall into the lower right quadrant should be at the top of your share-of-spend priority list.

As you prioritize your accounts for share-of-spend growth, you will find some which would be best served by field sales reps or inside sales reps and others that are better served by skilled account managers. To best serve each account, it is important to formalize distinct roles for field reps, inside reps as well as account managers and then match them to the right accounts.

Step 3: Have a plan and stick to it. Left to their own devices, most sales reps will naturally gravitate toward customers where they have friendly relationships and away from more challenging customers. Yet the more comfortable accounts may be the ones where reps have the highest share of spend and therefore offer the least opportunity for growth. A solid plan for each account, enforced by sales managers, ensures reps devote most of their time and business development dollars to the highest potential accounts.

The best territory plans lay out which accounts to visit, how frequently and with what messaging to ensure high-potential, high-priority accounts get the most – and the right – attention. The best plans also include implementation of a formal program for requesting customer referrals, particularly to other buying units within the same company. Many customers have multiple divisions, geographic locations or departments that could benefit from the same kind of success you have brought to one division of the company. In most cases, all you need to do is ask for the referral.

Increasing your share of addressable spend among current profitable customers is a highly effective growth strategy as it is largely about deepening and expanding relationships with customers you already have. But as with any other growth strategy, it requires a thoughtful, measured approach and cannot be undertaken by gut feel. Successful execution takes time and resources, but by adhering to these three steps, we have seen companies grow their share of spend significantly, thereby igniting stronger revenue growth.

Carter Hinckley is a Managing Director with Blue Ridge Partners, a driver of revenue growth. He has more than 30 years’ experience in sales, senior management and consulting — all focused on helping firms grow sales more effectively. He can be reached at chinckley@blueridgepartners.com.

Corey Torrence also is a Managing Director with Blue Ridge Partners. From strategy through implementation to executive management he has focused on achieving revenue growth and profitable bottom-line results. He can be reached at ctorrence@blueridgepartners.com.