Businesses constantly strive to expand their reach, tap into new markets, and cultivate lasting relationships with customers. However, despite the recognition of this importance, many companies find themselves grappling with stagnant growth rates.
In this article, we discuss how internal obstacles within your sales strategy might be impeding your growth. We explore eight common barriers hindering customer base expansion and provide actionable insights on overcoming these challenges.
By addressing these obstacles head-on and implementing targeted solutions, you can revitalize your sales strategies, foster sustainable growth, and unlock the full potential of your customer base.
Is your sales strategy standing in your way?
As a consultancy focused on unlocking better growth, we at Simon-Kucher conduct many commercial excellence programs to boost sales performance every year.
When we ask companies about uncovering new markets and customer segments, we often hear the reply, “We know everyone in our market.” This is especially the case in mature sectors. But while sometimes true, it can often be an example of overconfidence from within sales teams.
We regularly surprise companies by highlighting the amount of untapped sales potential available. Though we all like to think that we are rational, studies of behavioral economics show that we are heavily influenced by biases like this, which can cause poor decisions and actions.
Does this example of overconfidence sound familiar? Then you might be interested in these further eight barriers that stand in the way of growth.
8 barriers to customer base growth
1. Lack of clarity around your sales goals
To have a clear sales strategy, you need to understand what you are aiming for. You need to set clear objectives. Pretty straightforward stuff so far. Probe a little deeper though and the story is not always so clear-cut. This is especially problematic if you haven't discussed trade-offs related to a particular course of action.
For example, in one of our projects we asked the sales leadership team the following trade-off question. If in two years the overall number of customers was lower, but revenue was higher, would this be a success? The sales managers were pretty much split down the middle. Four people said it would be a success and five said it would be a failure.
Now, if we had asked this during an open meeting, we suspect we would not have had such differing opinions. Once one or two strong characters voice their opinion it becomes harder for others to take a differing position.
Instead, to avoid this “groupthink” bias, we asked the question blind. Each respondent was unaware of, and therefore not influenced by, their colleagues’ answers. Highlighting the two differing opinions made the discussion much less political. This allowed us to get a clear decision on the agreed direction.
2. Lack of segmentation
Segmentation helps in understanding the diverse needs and preferences of various customer segments. This allows you to create personalized marketing campaigns that resonate with each group. Without proper segmentation, you may not be effectively targeting and reaching different customer groups. You risk delivering generic messages that may not appeal to specific customer segments, leading to missed opportunities for growth.
As a fun example, in our value selling training we ask participants to guess who this description refers to:
“He is male, 69 years-old and was raised in UK. He is married and has two children (who are now both adults themselves). He lives in a castle. He is both wealthy and famous.”
Who are we talking about? A couple of bright sparks usually guess Prince Charles. When we reveal Ozzy Osborne as the mystery man, it usually gets a few laughs.
That same demographic segmentation fits both though – and no doubt others – and therein lies the danger of demographic segmentation. It makes it very hard to target customers effectively.
3. Gaps in your CRM
For a well-established firm that has been using a customer relationship management (CRM) system for years, it can come as a major surprise when we highlight the number of potential customers missing from the database.
In a recent project, we did a quick cross-check on two divisions within the same client (which did not talk to each other) to see the overlap between their CRM databases. Two clear opportunities emerged from this exercise.
The first was that there was very little overlap between their existing customer bases, despite both targeting similar segments (with different types of products or services). Clearly, this showed there was quite considerable cross-sell potential (as well as a need for some CRM system improvements).
The second opportunity was that their prospect lists also had very little overlap, making us suspect that the market potential was considerably bigger than first thought. By segmenting the market and buying in third-party data, we were able to map, size and prioritize their market. This gave their reps a richer and much more targeted hunt list.
4. Misconceptions about customer perception
In one customer segmentation project, we captured a list of 10 truths that described our client’s customer base.
We started with internal surveys to get the insider perspective. What did bigger versus smaller customers want from their relationship? How did customers perceive the company? Which customers would say they weren’t good value for money?
When we tested the internal results with an extensive customer survey, we could only validate about half of the points.
For example, we found that size was not a great proxy for identifying their needs. Moreover, despite being the most expensive, the survey showed that customers believed they were good value for money. The anecdotal evidence from interviews was only half right.
While quite a surprise to them, the management team also saw the opportunities it offered. First, the findings were presented back by the management team to the wider organization to ensure that some of the myths were displaced. Then, we worked together to create a distinct offering for each of the needs-based segments.
Finally, the insights that we had gathered were turned into a value-selling story back out to the customer base to promote the new offers. In effect, the needs-based segmentation was deployed consistently across sales, customer service, marketing, and product development.
5. Suboptimal territory coverage
Think about the joy children get from sticker books. There is something satisfying about seeing each area of a page covered by a sticker.
In the case of sales territories, however, this nice balanced pattern of geographical coverage is usually far from optimal. It means you leave money on the table in high potential territories. At the same time, it demotivates sales reps in lower potential regions, who complain that their quotas are unfair.
Defining effective sales territories and setting more objective targets/quotas based on better data is a start. You also must manage changes carefully to ensure sales reps understand and accept the reasons behind sales territory planning.
For some it may require relocation to a different geographical area. Others could perceive it as restricting their earning potential. In other words, you may need to overcome some loss-aversion biases. The last thing you want is for your best salespeople to become disgruntled and start to think the grass is greener elsewhere.
6. Too much focus on price
“Our customers tell us we are expensive.” Of course, they do. During the course of our client interviews, we often hear such things. If the salesperson hears this often enough from customers, it can easily become a self-fulfilling prophecy.
When we analyze “reason codes” within lost deals, price is usually the most frequent cause. Conversely though, customers seldom quote price as the reason when the deals do come in.
In one interview with an executive we heard, “Our market is almost completely commoditized. We have lost power relative to our customers, and we are seen as expensive”. To test this explanation, we conducted a series of “voice of the customer” interviews. Here is an extract of one such conversation.
Simon-Kucher: “Since you give [Client X] an 8 or 9 out of 10 for service, do you feel like you have to pay a premium for that service?”
Customer interviewee: “No, I don’t.”
Simon-Kucher: “How easy is it to negotiate the price down with [Client X]?”
Customer interviewee: “Pretty easy. In fact [Client X] is a ‘cheap date’ compared to its competitors.”
So do you know and record which are your truly price-sensitive customers as part of your customer segmentation? Even in highly competitive markets it is rare to find price alone as the sole determining factor across all customers within the portfolio.
7. "Strategic" accounts that are loss-making accounts
When looking for outliers within a client’s customer portfolio, a few blue-chip names often show up with both low revenues and margins. The usual explanation given for this is that it is a “strategic account.” This is often a firm that had the potential to be a key account but for some reason is not.
The assumption is that, if we keep trying, the bad luck will eventually reverse. To try to encourage growth, you put increasingly better offers on the table. If such a client ever were to grow to the size of a key account though, it would then expect even bigger discounts. Eventually, the account would end up underwater if it is not already.
The reality is usually that the service level from a competitor is superior, switching costs are prohibitively high, and/or that the client is happy to dual source to keep their primary supplier on its toes. At some point it will be worth directing your energies elsewhere.
8. Reluctance to target new segments
“They don’t understand what we do.” This is as much a lament as a quote. With the rise of professional procurement, many salespeople, particularly those in highly technical/engineering companies, are having to visit a wider range of people within the buying center. Sales reps are much more comfortable with like-minded technical buyers, with similar backgrounds and interests to their own.
However, top performing salespeople know they must try to identify, adjust their selling style to, and develop relationships with a wider range of influencers (finance directors etc.) within the customer organization.
In some cases, the biggest influence lies outside the firm paying the bills. For example, within the building technology sector we have seen smart companies targeting architects rather than contractors. They hope that such an influential specifier and stakeholder will help ensure that the contractor will not, or cannot, switch them for an inferior but cheaper alternative.
When it comes to growth, data is your friend
To provide antidotes to the above barriers and biases, you need data. This can and should take many forms: internal interviews, days with sales, customer surveys, voice of the customer research, transactional/invoice data, and CRM reports.
A multi-source approach is usually the most rigorous as it allows you to compare the answers to questions from different methods. It also helps when you know where to look.
Improving your sales using data can help you grow your customer base by:
- Empowering sales reps and addressing pain points
- Optimizing sales pipelines and streamlining sales processes
- Understanding existing customers better and creating accurate buyer personas
- Identifying the type of customers that bring the most value
- Aligning sales goals with customer needs, leveraging customer feedback to improve products and services, and enhancing the overall customer experience.
- Retaining loyal customers, enhancing customer retention strategies, and ensuring long-term customer relationships
- Developing a successful sales strategy tailored to your target markets
By utilizing data-driven insights, you can make informed decisions, personalize interactions, and drive growth effectively.
At Simon-Kucher, we know how to get the most out of your data. Reach out to us today!
