Twice in the last week, this has happened during workshops:
I made the statement that, almost without exception, the most lucrative source of untapped latent profit for most companies exists in their current customer relationships.
In each case, executives said something like, “Wait, I have too much business concentrated in too few customers. I need new customers.”
In one case, the company had 60% of its business with one large customer. Yes, that’s pretty dangerous, and they should find some new customers. But, in a short discussion, we quickly saw that there was a ton of unrealized potential in the company’s other existing customer relationships. It didn’t take long for the people in the room to recognize that their quickest route to reducing the vulnerability to this one large customer was by improving relationships with other customers, while they are out prospecting for new accounts.
In the second case, the company had four extra-large customers, creating a similar vulnerability. Again, it didn’t take long for the executive who made the claim to see that he needed to mine his existing customer base if he really wanted to protect himself. New customers? Of course. Develop existing customer relationships? Don’t waste a minute.
For some reason, people reflexively think they need to make a choice between developing existing customer relationships and creating new customer relationships. I still hold that, in virtually every case, you should prioritize developing existing customer relationships, because it is a quicker road to profit. But that doesn’t mean you have to give up finding new customers. It’s just secondary.
I first encountered this either/or mindset about 15 years ago, when I was vice-president of resort marketing at Hyatt Hotels. I quickly saw, after taking the job, that we were doing a great job of getting customers to love us at our resorts, and a really poor job of translating that love into future visits and strong relationships. I moved money from acquisition-oriented advertising to customer retention efforts. What did the advertising folks say? “We can’t believe that Steve doesn’t believe in finding new customers.” That seemed like a pretty stupid comment to me. But, they said it.
I’ll repeat what I said above: New customers? Of course. Develop existing customer relationships? Don’t waste a minute.