Observation #44
Growing sales volume with existing accounts is sometimes referred to as “increasing your share of wallet,” but it’s actually not a very good description — or even objective. We’ve found that companies are generally most successful increasing sales volume with existing accounts when those accounts are themselves growing, and they manage to maintain a share of that wallet.
Many companies are not great at increasing the “share of wallet” for three main reasons. The first reason is that this means taking business directly away from competitors. The harsh truth is that companies tend to think that their products’ (or service’s) advantages are more distinct than their customers do. The unfortunate result is that stealing business away from competitors often leads to lowering prices, which in turn damages profitability. The second reason is that customers often intentionally divide their purchases between alternate sources to optimize their leverage and reduce risk. The third reason is that sometimes companies try to increase their “share of wallet” by broadening their offerings, but this can confuse their customer. Unless your business is lucky enough to be some type of monopoly or oligopoly, where customers have little choice (e.g., a telecommunications company), it’s difficult to get customers to believe you can be a leading provider in different, distinct categories. In the management consulting industry, for example, if you are known for operational performance improvement work, it’s hard to sell strategy or IT consulting, even if you are capable of delivering it.
Despite the hurdles, the concept of growing sales volumes with existing customers is appealing because it’s “friendly terrain.” Your customers already know you and presumably like you. Salespeople usually prefer calling and visiting existing customers for the same reasons. To gain share from existing customers, you need very good intelligence about their requirements (e.g., a specific “inventory” of their purchases that you don’t — but could — get), and a clear rationale for why your product or service adds value to their business.
It’s possible to gain share of your customers’ wallets without just lowering your prices to “buy” the volume, but often it’s a better bet to figure out which of your customers are growing — and make sure you look after them well.
