How to measure new vs existing account processes (members only)

Marco, a SPIF! member in Europe, wrote to ask me this question:

Hey Michael,

How would you handle this situation in the context of measurement:

A salesperson acquires a new account but the initial order is low say $500.  At the same time the forecasted annual sales volume for this account is $20,000.

If in the sales production diagram you record this transaction the amount would be $500 for that week or month. But then this account passes to the keeping phase as it is an acquired account where it will start to purchase more in the following months.

So my question is, new business seems to be only $500 but in practice it will be much more than that, how would you record or handle this scenario. Which metrics are the most appropriate?

Marco,

Thanks for your question.

If I understand properly, you are pointing out that in some businesses success is a matter of generating additional revenue from existing accounts, rather than maximizing the number of new transactions from new relationships.

You seem to be wondering how to measure these two cases, as they may seem to be different on the surface.

My answer is that they are the same underneath the surface.

You have a process (input, value add, output) for generating new account relationships (defined as someone who has not purchased anything from you before), and another process for maximizing revenue from existing account relationships (defined as someone who has purchased something from you before).

In either case, you could measure productivity by any method that is suitable to the business, such as revenue per month, transactions per month, Average revenue per transation per month, average revenue per account per month. The specific metric is more dependent on the nature of the business than it is on which stage of the funnel it is in.

Don’t fall into the trap of thinking that revenue only comes from the winning phase of the sales cycle. It can come from ANY stage, finding, winning, or keeping. For example, you could measure finding in terms of number of new accounts opened per month, and winning in terms of percent of available customer wallet per month, and keeping in terms of number of referrals, case examples, or amount of client savings achieved per month (i.e., not a measure of direct revenue, but of client value created).

Does that help?

MW