03.03.05-1 BEST PRACTICES: CUSTOMER ACQUISITION VS. CUSTOMER RETENTION

I began hearing customer retention rationalizations back in the late 70's. We sales folks were being told that it was cheaper and easier to maintain an existing account as opposed to prospecting and closing a new account. This rationalization was driven primarily by the costs incurred in pursuing new customers that were theoretically not needed to service existing accounts. Costs like advertising, travel and entertainment. The accountants loved this rationalization.

I was first presented with the customer retention rationale during a Xerox Professional Selling Course which were quite popular back in the day. I remember our instructor going to great pains to make sure we understood the risks of focusing on maintaining old customers over finding new customers. His point was that it was easy to maintain an existing account- the tough part was winning new accounts. Tough because it took a special breed to deal with cold-calling and rejection. He explained that you needed organizational skills to manage existing accounts and aggressive, competitive instincts to fight for new accounts. And that these skills tended to be mutually exclusive. Contemporary hunting and gathering.

The 80's saw the emergence of a new sales role called key account managers. Key account managers were charged with maintaining and expanding the business of a current account. Organizational and nurturing skills were highly-valued in this role. Key account managers were trained to be advocates for the customer - in essence an employee of the customer. In fact many key account managers actually had offices or a desk at their account. IBM in the early 80's advanced this practice to an art form. An important element of key account management was to work with the customer as a partner in collaboration.

During the 80's there seemed to be a well-balanced portfolio of competencies in the sales and marketing suite. An effective combination of nurturing and aggression. But as the nineties unfolded, and new economy notions took hold, the kinder gentler crowd began to monopolize the conversation. And like any system that becomes unbalanced, the sales and marketing suite began exhibiting decidedly dysfunctional behavior. Customer acquisition skills are different from customer retention competencies. A healthy, vibrant sales and marketing organization needs both sets of skills in order to thrive.