Account growth and retention is not a new focus, but the way we prioritize and achieve it has changed in recent months. According to American Banker, “Two-thirds (68%) of respondents to the latest Arizent survey of 450 executives say their companies experienced moderate to considerable challenges on customer acquisitions due to the impact of COVID-19. This is the most impacted area of the customer lifecycle being affected by the virus.”
In a pre-COVID era, we learned that it is 5 to 25 times more expensive to acquire a new customer than to retain an existing one. Add to that the cost of re-engineering processes and tools to support reimagined acquisition functions, and it becomes clear how imperative it is for organizations to identify and maximize revenue potential within their existing account base.
3 key factors to consider in your approach to account growth and retention
Once your organization has determined that account growth and retention is a priority, there are a few approaches to consider, but ideally you will take a holistic approach to include:
- Avoiding preventable attrition.
- Growing your existing customers’ share of wallet.
- Improving renewal rates and maximizing the value of your contracts.
1. Avoid preventable attrition
At a minimum, organizations need to ensure that they are taking all measures to protect their current account base. According to Bain & Company, the authority on customer retention, improving your customer retention by just 5% can increase profits by 25-95%, depending on your industry and company size.
Month-to-month retention alone does not provide a solid indicator of a customer’s interest in continuing to do business with your company. It simply means that they haven’t actively decided not to cancel their contract or engagement within a current contract period. The real proof that a customer is satisfied is that they actively choose to continue engaging with your company when their contract expires via a contract renewal or extension. Retention and renewals are equally important and addressing retention as a priority will have a positive effect on renewals in cases where attrition is preventable.
Nick Christ, Account Director at Atrium, describes how we should focus on the full lifecycle of a customer from the moment they are onboarded to identify these signals in his blog post: “How AI Can Improve Customer Retention.”
2. Grow your share of wallet
The time and effort to sell a new product or service to an engaged business team or a relevant product or service to a new business team within an active customer is correlated to time to value. It is just easier to sell to a customer or stakeholder team where your company has proven value.
Identifying opportunities where additional revenue can be recognized while avoiding traditional sales cycles can reduce the time required to recognize additional revenue. This can be accomplished by analyzing consumption patterns against existing contracts and identifying opportunities where the customer is already consuming products or services beyond their current contract thresholds or is expected to reach or surpass a limit before their contract expires.
3. Improve renewal rates and maximize the value of contracts
Long-term contracts are valuable because they offer some level of predictability about future cash flow and revenue, but they should not be counted on and these customers should not be passively managed. Many contracts are written on customer paper and favor the position of the customer — tying your organization into difficult-to-negotiate terms while leaving them flexibility to cancel the contract at any time. It is necessary to have a mechanism for measuring the customer’s satisfaction, the value they are achieving from their investment, and the likelihood they will renew so that proactive measures can be taken if there is any risk that they may not.
Additionally, the customer may be getting benefits beyond the agreement within the original contract, so it is important to be prepared to engage in conversations that justify an amendment prior to the renewal date.
Give sales teams the best chance at success with an intelligent solution
In a world that is not enabled by CRM solutions integrated into their daily workflow, account executives are left to their own devices to identify accounts with additional revenue potential. This may come in the form of direct calls to key stakeholders in their current account base, regular reports against a variety of disparate data systems, or internal correspondence with other account team members to identify potential pain points or upsell opportunities. In each scenario, the rep has to:
- Wade through a potentially endless list of accounts.
- Perform independent analysis against the data, which may or may not be complete.
- Determine how to prioritize their time based on which account has the highest revenue potential and likelihood to convert to a sale.
If this sounds like your company’s sales landscape, you should consider prioritizing the implementation of an intelligent solution. Done right, it will eliminate the manual effort and inconsistencies in your sales approach and guide your sales team through best practice activities to identify and pursue the most valuable and monetizable opportunities in their current account base.
Real-world example: How sales reps can leverage AI built within their CRM to unlock account potential
Let’s walk through a real-world example of how this may play out. In the case of SaaS technology companies that have business models built on periodic subscription fees or utilization volumes, the type of information that helps people monitor utilization and identify opportunities can be easier to come by because it is more consistently captured and managed.
Not all cases are as straightforward, so we will take a look at the world of medical device sales. Specifically, we will detail a day in the life of an account representative that is responsible for selling capital equipment used in clinics or hospital operating theaters — to see how they can leverage AI built within their CRM to unlock account potential within their existing customer base.
In the medical device world, account representatives build relationships with doctors and surgeons in clinics and hospitals and typically sell a range of different capital equipment and consumables. Capital equipment is characterized by exceeding a specific cost and being durable and therefore not disposed of within a year. (Examples include radiosurgery systems, operating booms, and surgical robots.) Once the sale is complete, a supplemental support contract is often sold to cover repairs, replacements, and sometimes preventative maintenance for a specified term — usually 1-3 years.
Over the course of the contract, the ROI is monitored to ensure that the customer is consuming against the planned value of the contract and not overconsuming. Over the life of the customer relationship, the rep generally makes regular visits to the clinic or hospital they serve. This gives them a chance to walk the halls and review the surgical schedule boards and evaluate opportunities for new product sales and to assess the need for new or replacement equipment. These new sales, in turn, represent additional opportunity for service coverage.
Challenges and solutions for sales reps following COVID: intelligent recommendations and next best actions
Post-COVID, can you imagine what the experience looks like for a medical device rep? They can’t yet go onsite to nurture their valuable relationships, walk the halls, or attend procedures in the operating theaters, so they can’t depend on their tried-and-true sales motions to drum up new opportunities. They must evaluate information that is readily available to them and do everything possible to retain and grow their existing account base.
Consider, instead of an exhausting and unpredictable manual process, a solution where the sales rep has key insights to help them drive out their daily activities and guidance toward recommended opportunities and actions that will help them improve their likelihood to convert a deal and recognize additional revenue.
Let’s explore how, as a medical device sales rep, I can work intelligently to avoid preventable attrition, to grow the share of wallet at my current customers, and to maximize the value of my renewals:
Logging into my CRM to plan and prioritize my day
I just sat down with my cup of coffee, greeted with a dashboard on my landing page that provides a summary of notifications I have received, events I have scheduled for the day, and tasks that have been assigned to me. There are key analytics in the form of charts and list reports related to the accounts that reveal details around product footprint, contract dates, current ROI, health score, and trend.
Identifying and acting on accounts at risk of attrition
In order to identify accounts that are at risk of attrition, I set a filter to adjust all of the visualizations down to those accounts where ROI is lower than expected at this point in the contract. I know that this pattern can lead to a reduction in contract value or attrition if I am not proactive. From the resulting account list, I can take direct action to open the account record where I discover that our AI model has determined a high likelihood to attrit, and that a recommendation has been made to initiate an ROI analysis.
When I accept this recommendation, the specialty service rep that manages the contract is automatically notified of the concern and we can begin to collaborate directly on the account. Better yet, I know that my sales enablement team is working on a solution that will automatically notify me when any of my accounts reach a specified ROI threshold for likelihood to attrit and will create a task and assign it to me to perform an ROI analysis.
Identifying and acting on opportunities to grow my share of business
Now that I have reviewed all of the accounts at risk of attrition, I have an opportunity to grow my share of business. From the same landing page, I want to determine which customers have consumed services beyond what is expected at this stage in their contract or who have a service spice that merits an amendment to their contract. As an example, midway through their contract, a customer may have exercised more than 50% of the planned repairs against or may have experienced a significant spike in battery replacements in excess of their anticipated ROI. These situations both represent opportunities to recover revenue and protect margins.
In order to isolate these customers, I can simply set my filter for those accounts at >= 100% ROI. Directly from the results list, I can choose to create an amendment opportunity. When I navigate to the opportunity record, an AI model-based prediction provides me with an estimated contract extension value to help me determine how I want to size the opportunity. Accompanying the prediction are the primary contributing factors, as well as opportunities that I have to improve the value. But more importantly, I see that my AI engine is recommending that I schedule a business review. When I accept the recommendation, I am prompted to input the date, time, and attendees — and now I will see the event populated in my upcoming activities pane when I return to my landing page.
Once we get more comfortable with the estimated contract extension values, we can automate the process of opportunity creation once an account reaches a particular ROI threshold and I can prioritize my day based on model-based likelihood to close metrics.
Improving a customer’s likelihood to renew before their contract is up for renewal
Finally, I want to determine which of my customers is approaching a contract renewal that may be at risk of attrition. Our solution automatically creates renewal opportunities for accounts within three months of their renewal date, so I want to identify the customers that have a CSAT below 85 or a CSAT that has decreased since last month. I want to determine whether there is any action I can take to help improve the score and their likelihood to renew before the contract is up for renewal.
I open one of the applicable account records and see that there are a number of embedded metrics such as Tech Survey Average, Number of Late Payments, % Uptime, and % SKUs Covered. I review the Early Warning System tab that indicates my Health Score is a 72 and that an account with this score has a higher likelihood of attritting in the next 12 months. More importantly, I can see what sales, operations, and service factors are contributing to the score.
I elect to take my AI engine’s recommendation to initiate an action plan. When I accept this recommendation, an action plan template is automatically created and attached to the account record and the entire account team is notified and given access to the action plan document. We can collaborate directly on the plan and work toward a solution to improve the customer’s experience. Once we have a good understanding of how to get the customer in better standing, we will also be better positioned to suggest any contract amendments that our AI model recommends.
Ultimately, we will be enhancing the solution to notify me automatically when the likelihood to renew dips below an acceptable value. For now, I am confident that I have prioritized my day well and taken action on all of the accounts and opportunities that have the likelihood of having the most immediate revenue impact.
A bonus benefit… my coffee is still warm!
Visit our services page to learn how we can help your business unlock account potential and recognize revenue with intelligent solutions.