Why Client Retention Isn’t Enough (A Note to the Sales Leader)

There is no doubt that client retention is a key component of a good growth strategy. You must do everything in your power to retain your key accounts. But too many sales organizations count too heavily on retention, and by doing do so leave themselves one catastrophe from a bad year.

Retention Is Up To You . . . Except When It Isn’t

I have personally experienced the great misfortune of losing a number of multi-million dollar clients at the same time. I lost two accounts at exactly the same time, and for reasons that were beyond my control. My largest client at the time decided to move their operations to another location so they could reduce their costs and so they would no longer have to use a service like the one I provided. The other was lost to a local political decision.

Both losses were completely out of my control. In each case, my company was doing a wonderful job for the client and receiving high praise. Had the strategic or political decisions not been taken, my retention efforts would have ensured I retained my clients.

Retention wasn’t up to me. And it isn’t always up to you.

You are going to lose clients because they move their operations overseas.

You are going to lose clients because they make a strategic decision that eliminates the need for your product or service.

You are going to lose clients because they decide to vertically integrate and buy a company that provides what you provide.

You are going to lose clients because your contacts leave and their replacements have their own relationships.

You are going to lose a client because another company purchases your dream client. That company has their own preferences about your product or services.

You must do everything in your power to retain your clients. Losing key accounts can mean a loss of revenue and profit that is difficult to replace, and it can make for a difficult year (or in some cases, difficult “years”).

The Growth Code

Growing your top line number means following the code. That code is (Client Retention) + (Wallet Share) + (New Client Acquisition) = Growth.

Growing sales means keeping your existing clients. You will churn some clients even in the best of cases, which means you cannot allow your clients to churn for reasons that you control. A high churn rate means that you have to grow sales faster just to remain even. But remaining even often means that you are shrinking as your marketplace grows.

Wallet share gets nowhere near the attention it deserves. Last year at this time I reminded you to focus on wallet share in 2010 (I hope you did!). Some of your clients spend more in your category that the number that shows up on your reports. The rest of their spending shows up on your competitor’s reports. Doing what is necessary to increase your wallet share should be a high priority for any sales organization. Here’s why:

You already have the relationships. You already have access to the decision-makers, the decision-influencers and stakeholders, and the information that you need to grow your wallet share. You have already been through purchasing. You have already been through legal. It is always easier to sell to an existing client than it is to a dream client where all of the items above still must be completed—after you get in.

In a lot of cases, increasing wallet share can make a big dent in your revenue goals, and by doing the great work that growing your wallet share requires, helps to ensure that you retain the client in the bargain.

While retention and wallet share growth will help, to outrun even the most benign of churn rates, you still need good, old-fashioned, new client acquisition. New client acquisition replaces what has been churned and provides the opportunities to sell your new products and services in the future (that’s cross-selling opportunities, up-selling opportunities, new required service opportunities, and wallet share opportunities).

Questions

How much revenue can you afford to churn and still meet your revenue goals?

For what reasons do you lose clients that are no fault of your own?

When planning your sales goals, do you build in the possibility of an unexpected churning some percentage of revenue?

How much of your goal is built on or around an increase in wallet share? How much could your sales results be improved by wallet share alone?

For more on increasing your sales effectiveness, subscribe to the RSS Feed for The Sales Blog and my Email Newsletter. Follow me on Twitter, connect to me on LinkedIn, or friend me on Facebook. If I can help you or your sales organization, check out my coaching and consulting firm, B2B Sales Coach & Consultancy, email me, or call me at (614) 212-4729.

Read my interview with Tom Peters (Part One and Part Two).

Read my monthly post on Sales Bloggers Union.