Essentials to Generating Add on Revenue

April 27, 2012 by  Filed under: Sales 

Overland Park, KS, October 11, 2011 – The art of prospecting for ancillary sales channels or revenue sources can be discouraging. These channels hold revenue opportunities generated by products that are related or derived from your core product or service. The road to gaining this revenue can be replete with unforeseen challenges and pitfalls.

Looking at this challenge from the perspective of an Account Manager, you need to review the basic premise for having an Account Manager on your team: 1) to cultivate a relationship with the customer, commonly referred to as the “farmer” role, and 2) to prospect new customers, known as the “hunter” role.

Most sales executives and or managers continue to use this classic model when considering how they grow revenue for their company. However, upon further examination, it becomes evident that the classic model is not the panacea that many sales executives and managers thought.

Frankly, it is outdated, and in this economic environment does not adequately address the idea of trying to capture additional sales and revenue from an existing business model. There are Account Managers that excel in bringing and capturing new customers, and there are those that excel at nurturing and retaining existing customers. But sales techniques have evolved to a point that necessitates a third role, essentially the “Gather” role, or the ability to add value to an existing product or service.

Any decision on revenue growth has to be built on the following fundamental concepts:

1) Add value. As long as the add-on product you are considering can add value to the customer and to your core product, it will mean additional revenue at a substantially lower cost that recreating or developing a new product. Any decision of ancillary revenue should also include a realization of how the core revenue is being positioned or sold.

In a Business-to-Business Account Management leadership role, I realized that my employer’s newly launched product could be utilized as more than just a coverage play. Therefore, I directed my team to initiate the process of bundling our product with a complementary product on the retail level, and marketed it as a solution to a need that had previously been untapped in an electronics big box store.

The result – more than $10.2M in additional sales from a product that had originally sold $49M.

Note, this ancillary revenue idea was realized only after consistent dialogues were held with the customer to understand where the needs were and how we might address those needs.

2) Know your customer needs. This can be accomplished by doing more active listening than active talking. At routine face-to-face meetings or on customer phone calls, listen with intense interest and passion to customer complaints. In many instances, you will be able to identify issues and problems that were not formally conveyed.

In one instance, I observed an Engineer for a major technology firm identify a major issue the customer had with power supply equipment, which he noted on a phone call with the customer. Due to his interest in the customer issue, he was able to help write the customer’s RFP, resulting in a subsequent contract award of $15M with his company.

3) Identify and tailor small, easily attainable milestones. In order to credibility with any customer, show them your word is your bond, and make sure the customer will see that you are able to do what you say you can do.

A quick illustration of how to implement this principle is setting realistic and easily attainable goals is in the initial stages of the customer or vendor relationship. By doing this, the vendor is able to complete these milestones on schedule, thereby establishing a high degree of confidence and credibility with the customer.

This will benefit you greatly as you begin to layout the framework of a project plan where you will need the cooperation of your customer in identifying more strategic and complex milestones and dates as the relationship matures.

Years ago in the initial stages of the performance of a contract with a major customer, I implemented minimal revenue data milestones as part of the project plan. These milestones were data that we could provide with very little effort, but it set the precedent with the customer that I could deliver on schedule. This contributed to a subsequent award of $4.3M worth of additional software upgrades. It is paramount that you avoid at all cost losing trust and credibility in the initial stages of the relationship, recognizing the long term impact could result in lost revenue and sales of substantial proportion.

Generating and realizing ancillary revenue requires more than the classic twentieth century approach. It requires the three essential elements. Any decision on how to proceed with positioning ancillary products need to be aligned with your core strengths, know your customer, their needs and their dissatisfactions, and obtain credibility by setting small realistic milestones that are easily attainable. Using these simple but important principles can be the key to millions of dollars of add-on revenue and long-term, satisfied customers.

Rick Madsen

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