Avoid the dreaded “revenue plateau” by getting to know your customers, figuring out how you can help them solve their biggest pain points, and then selling them more products and services.
All businesses know that finding new customers is much more expensive (almost five times) as retaining an existing one, but did you know that increasing customer retention by just 5% can translate into a profit increase of 25%-95%? And, that the success rate of selling to an existing buyer is 60%-70%, versus just 5%-20% for a new one?
These are sobering statistics in a business world where the temptation to run out and find new customers is as compelling as the siren song that customers hear every time they get online and try to find the electrical products that they’re looking for. Let’s face it, you’re both in the same boat—so why not ferret out some new ways to create a win-win relationship with one another?
In this two-part article series, we explore the basics of customer retention, show why it’s important in the current selling environment, and provide some good strategies for expanding market share without having to ramp up your new customer acquisition strategy.
Growing Market Share, Expanding Footprints
The difference between companies that grow and those that stagnate, customer retention is all about keeping buyers engaged, happy, and turning to your distributorship for the goods and/or services they need to be able to run their own businesses. By definition, expanding market share means taking sales away from your customers. Technically, when you sell more into your current customer base, you’re not really expanding market share.
“Market share is really about taking money away from your competitors,” says Alex Alexandrov, business growth and efficiency expert and CEO at ICC, Inc. For example, if 20 electrical distributors are vying for $20 million in sales in a particular market, and if one of them suddenly grows its sales from $2 million to $4 million, then it took market share away from its competitors.
The same electrical distributor could also grow by expanding its footprint by $2 million within its current customer base. Alexandrov says independent distributors that are grappling with margin compression, online competitors, less loyal customers, and other market forces should focus on expanding their product offerings into their current pool of customers.
“Even here at our engineering consultancy, we’d much rather ask our more loyal customers what they’re biggest pain points are,” says Alexandrov, “and then work to help them solve those issues.” He sees that “pain point” conversation as a great starting point for electrical distributors that want to dig a little deeper into their current customer bases.
“Ask them what’s hurting them the most right now and then go back to the office and list those issues out. Analyze the list and figure out where it makes most sense to help those buyers even more than you already are,” says Alexandrov, who is quick to point that this exercise should not be focused on selling, but rather on solving customer problems. “What keeps them up at night? What hurts the most? Then, match your products and/or services to those pain points.”
Getting to Know Them
Focused on bidding on and finishing jobs in record time and with minimal headaches, today’s electrical contractors need all the help they can get when it comes to project management, procurement, and construction. This leaves the door wide open for the electrical distributor that goes beyond product sales and that helps its customers do their own jobs better, faster, and more efficiently.
To make that happen, Alexandrov says distributors must get to know their customers’ businesses inside and out. If, for example, you know that an electrical contractor spends too much money for onsite electricians, consider offering engineering services as a value-added package (to go along with the equipment that you’re selling). You can also offer planning, design, and project management services.
“You don’t have to become a consulting engineer, but you could certainly partner with engineering firms to come up with an overall package that, combined with your electrical equipment, will save your customer money,” Alexandrov advises. “You increase the amount of money you can charge, your customer saves money, and everyone goes home happy.”
Avoiding Revenue Plateaus
Some customers inherently shop on price, others are more interested in the service behind the sale, and still others are perpetually behind the 8-ball and focused on the fastest possible delivery times. A fourth category wants all three of these things…and more. To satisfy these customers while also growing sales, business consultant Stacy Caprio, founder of Growth Marketing, tells distributors to develop more than one offering.
“If, for example, you’re only selling low-end equipment at a certain cost, consider selling both low- and high-end options that give customers a chance to make their own decisions,” says Caprio. “This can help increase sales and profit right off the bat from both new and existing customers that are seeking higher-quality goods.”
Another idea is to develop one more offering that provides “high-touch support,” Caprio says, and then price that offering higher than what you would normally charge for this type of value-added service. Openly publish the offer on your website, landing page, and/or sales collateral, she says, and see what kind of response you get.
“This is a low-risk/high-reward test you can take as the first step to getting on track with selling more into your existing customer base,” says Caprio, who sees these strategies as being “must-haves” for any electrical distributor’s toolbox. “There’s no reason not to test an expansion of your offerings. If you don’t start offering your customers more options and more customized support, they’ll either go elsewhere, or you’ll be stuck in a revenue plateau.”
In the next installment of this article series we’ll delve down into some of the most effective ways that electrical distributors can start increasing revenues by selling more products and services to their existing customers right now.
Tagged with best practices, sales