Print Solutions December 2006
FEATURE ARTICLE
Acquisition, Retention and Add-On Selling
Customer relationships are your
most important asset.
By Andy Brown
The historical gap between companies that relied on price to compete, and those
that promoted quality, has virtually disappeared. Buyers assume quality is a
given, and they know they can find low prices anywhere. Considering this
business environment, how do buyers decide between two companies? According to
Dave Rothfeld, founder of Creative Sales + Management, Orlando, the company
with the stronger buyer-seller relationship will close the sale. As a result,
more companies are investing in
“relationship asset management.” The practice involves measuring and maximizing the financial value of customer
relationships. Specifically, companies have started to perform the following:
• Compute the asset value of customers
• Adjust their marketing investments according to trends
• Organize processes and structures around acquisition, retention and add-on
selling
• Address the whole customer and not just individuals or isolated departments
• Utilize customer interactions to reinforce relationships
| Relationship Asset Management |
| With this fictitious table, Creative Sales + Management Founder Dave Rothfeld
illustrates how companies measure and manage customer relationships as assets. |
| Buford Electronics |
Low-Volume |
High-Volume
Customer Customer |
| First year margin per customer |
$360 |
$8,500 |
| Cost per sales call |
$20 |
$100 |
| First year sales per customer |
$1,200 |
$44,000 |
| No. of calls per prospect |
2 |
9 |
| No. of customers acquired |
6,000 |
400 |
| No. of customers targeted |
40,000 |
8,000 |
| Customers retained |
1,154 |
4 |
| Close rate per prospect |
15% |
5% |
| Gross margin |
40% |
27% |
| Retention rate (over 10 years) |
85% |
65% |
Rothfeld notes the reversal of a management trend: “In the past two decades, managerial trends have focused on either cost
management or revenue growth,” he says. “Companies that cared about growth looked at ways to get rid of ‘toxic accounts.’” These included smaller accounts that demand a high degree of maintenance. These
accounts suddenly are attractive since companies have determined they cost less
to acquire, and are more loyal and profitable since they receive fewer or no
volume discounts.
Relationship Management In Practice
Rothfeld stresses two key factors that make relationship asset management
succeed. The first is that companies must address the entire customer. In other
words, everyone in the customer
’s company is an asset to be nurtured. The second is the importance of personal
interaction.
“If you’re going to build relationships, someone has to be out there face-to-face with
the customers,” he says. Software such as ACT!, Goldmine, Selsys and Seltys should support
relationship management but isn
’t a substitute.
"Add-on selling is when you create campaigns
for your customers that require them
to buy more from you."
Dave Rothfeld, Founder
Creative Sales + Management, Orlando
Treating relationships as assets means managing what Rothfeld calls ‘customer equity.’ The four cornerstones of customer equity include managing the customer life
cycle, exploiting the power of databases, precisely quantifying customer value
and optimizing a mix of customer acquisition, retention and add-on selling. To
aid your efforts, Rothfeld recommends asking your clients what percentage of
their print business that you have. Knowing the amount of business you don
’t have is the first step to capturing more of it. “Add-on selling is when you create campaigns for your customers that require them
to buy more from you,” Rothfeld says.
Andy Brown is managing editor at Print Solutions magazine. Email comments to
abrown@PSDA.org.
