For just about every company, some revenue leakage is inevitable. It most often happens unintentionally and without anyone noticing.
Revenue leakage can result from errors in billing or when warranty and service costs outweigh the value of the product sold, but all too often, revenue leakage is due to individuals throughout the organisation not having the right kinds of information at their fingertips so they can effectively manage customer relationships. In other cases, lost revenue stems from lack of total understanding of what customers really want.
“Revenue leakage means different things to different people. In my line of work that would mean you need to think about your corporate strategy, methodologies, and technology to optimise the revenue opportunities in a customer relationship. This means addressing all sides of the customer relationship, whether it is sales, pre-sales, customer service, or other company functions that are customer-facing.”
Better maximisation of revenue from customers begins with asking the right questions.
“The question shouldn’t be; ‘What’s my strategy with my customer?’ It should be ‘What’s my customer strategy, and how can I help them’?’’
That requires a real understanding of the customer’s point of view, something that is vague for many companies because other pressures get in the way.
The sales representative
For sales reps, targets often leave them feeling that they need to keep on selling regardless of whether they’re broadening the revenue opportunity footprint of the account. A salesperson can often look at the low-hanging fruit and the most lucrative sales opportunities first, which is normal human nature. The salesperson locates the gold mine accounts that already exist and makes the sales. This might be a single division in a large company, but he doesn’t take the time to contact other divisions to see if inroads can be made. Or he might focus on a single company product line that he is already successfully selling instead of expanding his efforts to other product lines that he hasn’t attempted to sell to before. Simply stated, it’s easier to sell to an existing customer.
The customer service representative
For customer service reps, the pressure comes from being evaluated on how many calls you take and on how many calls you can resolve within a very short period of time. This usually doesn’t result in learning more about the customer and passing additional information on to sales and others within the organisation.
To downgrade the trends and actually reduce lost revenue opportunities, companies will need to review how to sell to and service their customers. This includes evaluating their account management strategies and how they reward sales and service personnel, as well as collecting data that is customer-centric and actionable from your systems and processes.
Recent research found that 52 percent of initial sales meetings don’t lead to second meetings. Much of this goes back to the customer assessment and sales qualification processes that sales organisations employ. The concept that strong skills in customer account management can make all the difference when it comes to capturing revenue opportunities with customers is then a must-have tool.
You might have a salesperson in healthcare who is good at selling surgical supplies but not at selling lab tests, but the customer he deals with buys both.
“If you don’t look at the entire account potential, you’re only getting a fraction of the revenue that you could realise with that customer. Sales managers could improve their organisations’ performance if they began asking questions like ‘Who’s good at selling this kind of product to the account?’ If you don’t have someone internally who can sell a product, the next question becomes how you get the right talent.”
Sales reps can also widen their parameters a bit when they’re selling. Perhaps they’re only selling one product line or only selling to one division in a company, or there might be other companies that need the same kind of products.
“In these cases, you want to be asking for references. When the customers you’re selling to know others who might have interest, it’s prudent to ask them to introduce you to these individuals.”
Take a holistic approach
In the area of customer account management, it’s critical for sales leaders to not separate the pursuit of sales opportunities from the end-to-end management of customer accounts which requires a strong account planning discipline in order to be achieved.
Unfortunately for many organisations, account planning is exactly what’s not happening in any kind of regular or systematic way. “Account planning in many companies is not a core competency”.
The wallet model: One major problem to meeting targets is how salespersons are incentivised. The sales leadership of any organisation should be taking a look at the message that the compensation plan is sending the salesperson.
“Speak to the person’s wallet instead of the person, you will get a better results.”
While a tiered approach is critical, lower commissions for sales to existing accounts and higher commissions for closing deals with new accounts or selling new products to existing accounts is a winner. Salespeople can also be evaluated based on their ability to reach the most senior-level decision makers at their accounts. The wallet model helps sales reps shift their behaviours and become more effective at revenue optimisation.
If a salesperson receive less commission for making a sale of an established product to an established customer, and a higher commission for breaking ground with new product sales to existing customers or with new sales to new customers, they’ll start prioritising the latter.
Rating systems like this require your organisation to look critically at your customer relationships. You cannot just send out the basic marketing emails and hope for hits.
The views given herein are solely for information purposes; they are guidelines and suggestions and are not guaranteed to work in any particular way.
Robert Gonye is a Business Growth Expert and Influencer. He writes in his personal capacity. Comments and views: [email protected]