You may have heard of the Boston Box. The Boston Group of Management Consultants created a grid with four boxes where the two axes are Products and Customers as below:
They make the point that it is low risk / high rate of success to sell Existing Products to Existing Customers; and that it is high risk / low rate of success to sell New Products to New Customers. For this they probably got paid a lot of money, and people think salespeople are tricky!
From my personal experience, I can tell you that most of the very large deals that I have sold were Account Development deals, selling Repeat business ie selling existing products to existing customers. Why?
Whether the first sale into a major account is consciously defined as a trial or not; it very often serves as a trial of both the product and the company as a vendor. Most products have a wider opportunity for use than the initial sale. There will be direct competitor products being used, or alternative solutions that have overlapping utilization. The best example of this is any enterprise infrastructure such as computer software, I will use database as an example. Unless the numbers have changed since I was involved in the database market, a major customer account would have on average seven databases deployed within the enterprise. After your initial sale you should look at how much market share you can take of the total account market. You can be sure that as soon as you win the first deal, your competitors will be focused on winning back the market share they have lost to you.
From the customers perspective as soon as you have sold to them they begin to learn about your product as a solution and your company as a vendor. At some point the customer will look at consolidation and standardization on as few products and vendors as possible. If we consider the questions that a customer asks himself after a sale and implementation:
“Does it do the job?” – after a few months he knows exactly what the capabilities of your product are.
“Are they a good company to do business with?” – no more pre-sales dating; they are aware of what it is like to be married to your company, they understand your service ethic and capabilities.
“Does this make economic sense in the long term?” – New question – it is in this area that the customer will find the motivation to standardize. As long as at least one product has the capability and one vendor provides acceptable service (and both attributes of their experience of your company appear to scale to enterprise use) in time the customer will start thinking about the costs involved in having more than one vendor for similar capabilities. The costs that are not always apparent to vendors are in the area of maintaining more than one skill set and in the operational costs related to complexity. Further you can encourage this “economic” thinking by indicating that discounts are related to volume of purchase.
You have to look at the competitor installed base as your best opportunity for new business (albeit in an existing account) and give the opportunity the attention it deserves. Call on executives in the divisions that use your competitor products; spread the news (if it is good) about the success of your products deployment within the company; uncover the costs of having diverse solutions, take senior executives to lunch; make a “straw man” proposal to show the benefits of standardized infrastructure. The truth is that most companies sell once and then the salesman moves on and the only “relationship” the customer has is with the customer hotline.
I have worked with tools that help you quantify the “market size” and “market share” within an overall Account Planning process, but I do not intend to share those in this book for two reasons, these tools more properly belong to a Major Account Process that is company driven rather than salesperson driven, and really a lot of this is common sense application of the same techniques in the business development and opportunity management stages above. The beating the competitor tools are of particular use in account development.
The motivation will be that the size of the deals and their hit rate (probability that you will close them) are significantly better than in new business deals. In one of the companies I worked for the average new business deal was approximately US$100k and the hit rate across all the salepeople’s new business opportunity funnel was between 3:1 and 4:1.
The account development deals in the same company averaged US$2 million for enterprise deployment and the hit rate was consistently between 2:1 and 1:1.
So from a salesperson’s perspective you had twice as much chance of getting a twenty times larger deal; a compelling reason to look after your accounts, yes?