That’s all I needed to hear because I’ve thought a lot about this (I refer you to figure 1.1, the New/Existing Customer/Product grid). Quickly, along the X axis, products (or services) range from your existing products on the left to new products on the right. On the Y axis are customers, ranging from new on the top to existing on the bottom.
I use this grid to talk about growth opportunities and rank them on a scale from 1 to 4 on ease of implementation, speed, and profitability. For example, No. 1 on the lower left is selling more of your existing products to your existing customers. It’s easiest because your people know the customers, it’s fast because customers know you/your products, and it’s profitable because you’re good at what you do.
Think of Starbucks adding a premium coffee line to their menu. The customers know Starbucks, they know coffee, and an innovative new coffee line ramps up quickly and profitably. For comparison, No. 4 is the most difficult because it’s all new to your people, making adoption slow—the customers don’t know you/your offering, and it’s hard to be profitable because delivery isn’t optimized. Think of a startup company with no customers, no brand name and no profit. That company may end up relying on investors to survive.
Convergence is in growth area No. 3. It’s not as easy as No. 1, but it’s not as hard as No. 4. You’re adding a new product or service to your existing customer base. Your people know the customers but your customers don’t associate you with the product and your operational history is lacking. It won’t be easy, but there are steps you can take to maximize growth in this area. I’ll give you three.
1. You never asked.
A large CPA firm approached me, concerned one of their service lines wasn’t growing as expected. It was a new service introduced to existing customers without success. When we dug into the sales process, we found a lot of very smart people applying deep insights and critical thinking to the market, creating a product and jumping in. I ask, “Where is the customer in this?” and get met with blank stares.
My first piece of advice will make it easier on your people to enter a new market, it will increase the speed of customer adoption, and it will impact profitability. Start with the customer. Call it market research or client surveying, but think of it as “getting the what from the who.”
Ask your customers to help you understand how they would make a purchasing decision for this new product or service. Investing your time and money up front by involving the customer from the beginning will save you ten times your investment on the back end. The reason is because it allows you to pivot early.
No matter how smart you are and how well you know your customers, if you’re bringing a new product to them, you need to approach them as humble servants and get insight into how they think about this new product. If done well, your customers will teach you how to make your offering stand out and give insights on the fastest path to their adoption. Without their input, a new product can languish and cost a fortune in wasted time and energy. To prevent waste, all you have to do is ask.
2. What if it we give it away?
To speed up sales cycles, one tactic salespeople use is a discounted price. My second bit of advice is to give your product away instead of discounting. It sounds dramatic but bear with me. In the near future, you’re counting on this new product to be a profitable addition to your company’s offerings. Those projections are based on providing either a unique enough product that you get a better than average price, or having the ability to deliver the product efficiently because, “We already have the people/facility/knowledge.” All your sales team has to do is go sell it.
As Mike Tyson said, “Everyone has a plan until they get punched in the mouth.” Next thing you know, close rates are lower, and the selling prices aren’t as high as expected because your people are discounting in order to meet quota. When offering a new product, you’re better off getting interested customers to use the product for free than you’ll be with discounting.
The reason is because while your customers know you well, they only know you for your current offerings. When you add a product or service, they think “good, that will save me money from my other vendor.” They will see no differentiation. Like the market research suggestion, I want you to forget about immediate profits, and focus on holding value in the future. To speed up growth, do the work for free, but couple it with research. After your first free customers use the product, you want to learn:
- Their state before making the decision to use your product
- What they wish they knew at the start that they know after using the product
- Where you fell short of expectations
- How they’d describe your new product to peers
It’s expensive, but you’re investing in future profits. Their answers to the questions will give your marketing people insights on how to market the product, they will tell you how to improve operations, and they’ll provide you with testimonials. Don’t discount; give it away.
3. Optimization can wait.
You’re a strong and efficient company. This works in your favor when selling existing products to existing or new customers, but it’s a problem when selling new products. My last piece of advice is to focus on incremental improvements versus optimizing operations. Draw distinctions between your best right now and your next best, versus third party comparisons.
I worked with a fast-growing financial startup excellent at providing streamlined service to their primary market. They brought me in because a new division was struggling to meet projections. Although they were technically a startup, I pointed out that their old offering was something they had done for almost a decade. They knew the market, the market knew them, and everyone was happy.
The new offering was something related but different and the metrics used to measure progress weren’t made for a startup. They were offering it to the same companies, but had new buyers, procedures, and underwriting. Once we stopped trying to optimize delivery, we got closer to projections.
Once we started measuring our internal best effort and improving on that instead of comparing it to the old service, they were back on track. The big data and math models didn’t apply in this new world because we were after new outcomes. That mental shift made all the difference and thinking “optimization can wait” will help you, too.
The idea behind selling new products to existing customers is straightforward on the surface, but to be successful you need to change your frame of reference. Three ideas make it easier for your people to implement, speeds up top line growth and adds more profit over time.
First, spend as much time learning about your target customer as possible; second, hold onto your future margin by using free samples; and third, put off optimizing your operations. Growth is a challenge and when you try to grow under stress, it’s even more challenging. Use my growth grid to frame your discussions and approach convergence in its own best way.