Increasing revenue is an important part of every business. But although attracting new clients is often the primary goal for many businesses, it is still incredibly important to retain existing ones.
Many businesses struggle with determining where to prioritize their energies, bouncing back and forth between client acquisition and retention. However, without a clear strategy, this can result in scattered efforts and wasted resources.
Why Do Businesses Often Focus on Client Acquisition?
It doesn’t matter what type of business you operate – without customers, it won’t succeed. So it’s no wonder why so many organizations invest a significant size of their budget toward client acquisition strategies.
Getting new clients looks different for every type of business. If your business is focused on public safety solutions, then typically, you will have different challenges than an e-commerce business trying to sell to end users.
The underlying reasons and methods for client acquisition are usually different from one company to the next, but the goal is the same. Companies want to increase their clientele and ensure they have enough funds to improve their operations.
With the growth of a client base, businesses gain the versatility to introduce new offerings. This growth also allows them to venture into fresh markets or regions, solidifying their foothold.
Beyond market expansion, however, getting more clients often opens up opportunities for diversifying revenue streams. Sticking to the same client list year after year or only focusing on one market segment can be a critical mistake. Markets change regularly, and what once was a steady stream of revenue may dry up unexpectedly.
Continuously bringing on new clients can be a protection for companies if and when bigger clients decide to take their business elsewhere. When you have a large enough client portfolio, losing one customer won’t be as disruptive to the business.
How Important is Client Retention?
Client retention focuses on continuously building up and “protecting” the client relationships you already have in place. It avoids the “set it and forget it” approach that can be all too familiar in businesses, where you close the initial deal and then expect the client to stick around indefinitely without any effort.
Businesses that focus attention on client retention truly value the importance of great account management. They hire qualified “farmers” who know how to cultivate great relationships with clients over time. These relationships often pay huge dividends and can be a continual source of revenue that companies can count on year after year.
Prioritizing and nurturing existing client relationships also plays an important part in helping a business innovate. When you’ve built trust with your clients, they’re usually more receptive to exploring new products or services you introduce. This bypasses the challenge of long sales cycles for new clients and offers a chance to try out new ideas with a group that provides valuable feedback on what’s effective and what isn’t.
How to Find the Right Balance Between Acquisition and Retention
Establishing a sustainable growth plan for the business doesn’t have to come to choosing between client acquisition and retention. If you apply some proven strategies, you can successfully balance both critical initiatives without sacrificing one for the other.
Here are some tips to help you find the right balance between acquisition and retention:
Spend Enough Time Forecasting
Many businesses fall into the trap of relying too heavily on instinct when determining whether to chase new clients or build up existing ones. This approach can lead to challenges, especially when deciding how to distribute resources efficiently. Sales forecasting is an important component of business planning because it offers real data to drive decisions.
Forecasting doesn’t always need to be complicated. In many cases, simple and direct forecasts can be more beneficial than highly detailed ones that take too much time to produce and may not even provide completely accurate insights.
Instead, focus on breaking down your forecast into opportunities and risks. Each opportunity should be given a value, and an overall risk level should be assigned to it. This will allow you to identify the highest priority for the business.
Recognize the Importance of CLV (Customer Lifetime Value)
Understanding the CLV (Customer Lifetime Value) of a client, which is a calculation of how much revenue a client will generate for your business when they’re with you, can help you make smarter decisions about whether or not to invest in acquiring them.
Since it costs more to bring in a new customer than to keep an existing one, ensuring your efforts have positive returns is crucial. It’s also essential to weigh the calculated CLV against the overall cost of customer acquisition. Sometimes, businesses might overvalue a customer without realizing that the long-term Return on Investment (ROI) isn’t as profitable as anticipated.
Balance Your Team’s Sales Objectives
It’s fairly common for businesses to put a significant value on new client acquisition. This is also represented in how most sales teams are structured and incentivized. Because of this, “hunters,” or sales professionals tasked with finding and closing new businesses, often have higher commission or bonus structures than account management teams.
While there is nothing wrong with incentivizing your team to bring in new clients, it does paint a picture that new clients are always worth more than existing ones. This thought process often bleeds into the overall company culture and can create a bias toward new client acquisition as the most important goal.
However, it’s also important to recognize the long-term and proven benefits that building stronger relationships with existing clients brings to a business. By recognizing the distinct approaches necessary in your sales team and even adjusting their goals and incentives accordingly, you can create a more balanced approach to both new client acquisition and existing client retention.
This is a much safer strategy that can lead to an equal focus on both objectives, helping you both grow and sustain your business.
Build the Right Growth Strategy for Your Business
Each business has its own distinct approach. While some might thrive on a constant influx of new clients, especially in industries that sell public safety software, cloud-based solutions, or other subscription-based services, others may find more value in forging closer ties with a chosen few.
Regardless, it’s critical to understand that there will be phases where gaining new clients may prove difficult. In these situations, a dependable base of loyal customers can act as a safety net, ensuring your business remains steady in the long run.
By ensuring your sales team maintains a balanced focus, you’re laying the groundwork for a resilient business model that can navigate market fluctuations successfully.
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