in July 2005
By David McNutt
A simple approach to healthy, organic sales growth.
is the focal point where the disciplines of marketing, sales,
product or service development, and customer service are
brought together to form a company’s new-account strategy.
However, in a great many businesses, the matter of new customer
or client acquisition is approached haphazardly. Often the
core responsibility for new accounts is left to the owner
or, in some cases, to the salespeople. When left to the
owner, often the process is undocumented and not integrated
into the company. When left to the salespeople, it often
leads to poor account acquisition that hurts margins. The
results are less than satisfying, more expensive than expected
and generally inadequate from the standpoint of contribution
to profit. In either case, improvements come not from strategy,
but by accident.
To work best, new-account acquisition
must incorporate marketing messages, sales processes and
product or service capabilities that converge to achieve
specified business performance. The goal is to create new
accounts with targeted margins, often without having to
increase fixed costs. This process involves four simple
but essential procedures that are formalized as part of
the overall account acquisition strategy: Plan, Specify,
Identify and Justify.
A Sample New
• Must be within 100 miles
• Must potentially represent repeat
• Must have potential for service
• Must appreciate value versus
being a price buyer
• Must have a good pay history
• Should be a recognized company
that can be leveraged to acquire other customers
• Minimum purchase volume of $25,000
Most new customer/client acquisition
efforts involve sporadic, unmeasured and usually unplanned
investments. The cash spent on this type of effort consists
of salaries, phones, free consulting, demos, administrative
time, marketing communications and, sometimes, promotional
or entertainment activities. In this situation, the “do
what it takes to bring in the business” philosophy
becomes the driver of the sales-force efforts. What is needed
is a coordinated plan to measure results against expenditures.
A strategic new-accounts plan describes
sales goals in terms of target margins, expense structures
and company capabilities, allowing the entire organization
to understand and buy-in to the process. In fact, acquiring
new accounts/clients should be a “core competency”
of any company. It should be just as important as the manufacturing
or customer-service core competency, but it can’t
happen without a clear plan and specific goals.
The second procedure is to decide what
kind of account/client is desired. In the same way that
a systems consultant writes a specification, a company must
specify the type of customer it wants. This is perhaps novel
to some companies that will take any customer or client
who has a pulse and a checkbook. But is your business so
undefined that you just want any account/client? What makes
a good or optimal account/client for your company? Is the
quality of revenue dollars the same across all of your customers?
Or are there differences that represent potential volume
growth with some while others are a one-time sale?
As a general rule, no customer is just
buying a product or a service. There is an underlying need,
another specification, if you will, that optimally meets
that customer’s objectives. The company must understand
what the prospective account/client requires and must be
prepared to invest in the expertise to meet that need. Understanding
the account/client type and its objectives is a basic skill
of asking, listening and translating this information into
a profile of the account.
After the initial profile, the next step
is to quantify what type of business must be generated.
Not all business or new accounts are equal. Without describing
the customer in terms of revenue type and size, a company
might find that its new-account efforts are focused on big
projects. As we all know, big sales generally are more competitive,
often result in lower margins and are harder to find because
they are fewer in number. Smaller new accounts with lower
volume potential may yield higher margins and a better return
on invested resources. With the cost of an in-person sales
call ranging from $100 to $300, the time and expense devoted
to even modest account/client research can be justified
Once the new-account targets have been
profiled, the third procedure is to identify specific businesses
and screen the most likely prospects. Rich sources of information
for identifying targets include press releases, trade articles,
associations, marketing references and websites. Much can
also be learned by talking to suppliers, competitors and
other business leaders. Sometimes, talking to current customers
can be a rich source of information as well. A few days
devoted to secondary research can prove rewarding and result
in a good list of candidates to consider.
Narrowing the candidate list to a manageable
number of qualified potential new accounts is an important
part of the identification procedure. The list of qualified
prospects should be ranked based on the depth of information
you have of the prospect. Using good judgment and probability
can help narrow the list. The top manageable number of candidates
should become the initial target list. This number will,
of course, vary based on the time allocated to the new business
These qualifying activities should be
performed on an ongoing basis, with the target list re-evaluated
based on results and new information. Not every target prospect
will become a new customer, and some will take longer to
convert than others. Sticking to the planned list requires
perseverance and commitment by management and salespeople
to support the extra efforts that go into the process. Without
upper management support, sales representatives will tend
to revert back to old methods of prospecting and prospect
Lastly, you must justify these efforts
by measuring results. Companies that do not have a formal
strategic new-account acquisition plan often will simply
look at the top-line sales increase and, as long as the
company is still experiencing a positive trend in profit
growth, the results will be viewed as successful. However,
a true justification of the new-account efforts is required
to prove real success. The goals that were set should be
evaluated on a three- to six-month basis, which is the most
common sales cycle in our industry. Measures such as the
number of new accounts, average sale size, gross margins,
type and mix of costs, length of the project and payment
history must all be analyzed against the targeted metrics.
For example, if your overall objective was a contribution
margin of $100,000 with no increase in fixed costs, was
To avoid incorrect focus by the business
development and sales team, these results must be made public.
Charting and publishing results will provide the team with
an understanding of the cost of sales to secure a new account
and its contribution to the company’s well-being.
After all, it is quality new business that the new account
process ultimately provides.
A new account/client acquisition process
requires a planned approach involving multiple departments
and coordination. It is intended to take a company beyond
simply increasing revenue volume any way it can. Using these
simple procedures takes deliberate and thorough planning,
with input from senior management and cooperation from everyone.
David McNutt, a member of Sound & Communications’
Technical Council, is based in Chicago and has been involved
in many business sectors of the systems integration industry.
Send comments to him at email@example.com.