My new book, Account Planning in Salesforce, is due to be published at the end of March 2013. I am excited about it. As you would expect from anyone book on account planning it dives into the benefits of generating more sales from existing customers. Selling to an existing customer is easier than acquiring a new customer, and there is much research to support that. But as I researched the cross-selling and up-selling activities of the ‘average’ B2B salesperson, I noticed some behavior that I think merits comment.
We are all familiar with the Amazon style “Customers who liked this also liked that“, or “Because you bought that, we thought you’d like this.” This works pretty well in high-volume low value transactions. But even though we all receive these personalized, relevant, and sometimes interesting email offers from Amazon and others, it is very rare that we actually take any action. And in the high volume world that Amazon occupies, that is ok. Low hit rates and microscopic sales conversions are acceptable when you are dealing with millions of customers. ‘Big data analytics’ and predictive modelling can help to increase the return, but in the end it is a numbers game – albeit a numbers game that is getting smarter all of the time.
It is very different in B2B high value sales of sophisticated complex solutions – though what I have seen from some sellers, particularly those who sell for large brand name companies, is that just because the customer purchased Product A, they assume that the customer should automatically buy Product B from them. The arrogance is telling, and of course is ineffective. Buyers are a lot more discerning.
Let’s look at the purpose of cross-selling and up-selling in a large account.
If I sold Product A to a business Division A in a large account, then maybe I can sell that same product to business Division B of the same company. For the purpose of this post this example will suffice as a definition of cross-selling. But because I have multiple products, I would like to up – sell Product B and Product C to Division A, and then if I was successful in cross-selling Product A to Division B, then I’d like to up-sell Products B and C as well. It all sounds pretty simple, but of course it doesn’t work like that, and the reason is that is fails what I call the Mutual Value test. For a transaction to be successful there has to be value for both parties – mutual value, with a focus on the word mutual.
The scenario I outlined above is a somewhat misguided attempt to identify ‘white space’ in an account, because it ignores the role of the customer. Pursing ‘white space’ is very value but only when you use the twin axes of Value to You and Value to Customer. The ideal scenario you are aiming for is to have all of the divisions or business units in an account use all of your solutions, but just because one business unit purchased one solution from you, it is not a given that they should buy anything else, nor is it pre-ordained that any other department, division or business units in that company should buy anything else either. Amazon has so many customers it is neither possible nor necessary to understand in depth the goals or aspirations each one of its customers. Amazon’s cost of sales pursuit is very low and it can afford a low win-rate. That is not the case in the world of B2B sales.
Having an existing customer to sell to brings lots of advantages over selling to a brand new customer. But it does not bring any entitlements.
The advantages are:
- The customer knows who you are. That’s a good first step.
- You know some people in the account.
- You possibly have a Master Agreement in place as an Approved Vendor.
- You have an in-house reference (hopefully). This is very very powerful.
- You have developed relationships with some people who can help you navigate the organization.
- You have somewhat of an insider’s view of how the company works.
- You have some understanding of their technical and regulatory environment in which they operate.
But there are some other things to consider:
If you are trying to up-sell …
- Are you known just for Product A, or will they consider you for other solutions?
- What business problems do they have that requires Product B or C?
- What alternative solutions do they have that solve the same problems as you do with B and C?
- It is quite likely that the same decision makers aren’t involved in this decision as in the previous one
- The competitors are unlikely to be the same as before
- What impact will this additional sale have on your current ‘Product A‘ business?
- How will the customer view the increase in total spend with you?
It seems that in some cases when trying to sell more to the same customer, sellers tend to abandon some of the good selling behaviors that got them the original business. Often they have developed a strong relationship with the customer and are reticent to hold out for a good price for the up-sell product. On occasion they will blindly accept guidance from the people who they have made friends with, forgetting to ‘go wide’ in the account to validate and verify information. Then they lose the advantage they had and the cross- or up-sell activity is sometimes just marginally profitable.
That is a great waste. Selling to existing customers is easier than selling to new customers – but it is still selling.
By the way, if you are interested in being notified when the book (Account Planning in Salesforce) is available, please email me at ddaly (at) thetasgroup (dot) com.