In understanding the difference between your company’s new sales and account expansion, it is first essential to recognize that the two do not always function independently. Making a sale is a critical component to expanding an account. And to be aware of opportunities, sales teams often rely on the knowledge and relationship customer success managers or account managers have with the customers. Despite overlapping responsibilities and functions, it is productive for your business’s operation to understand how these two departments are distinct from one another.
The primary difference between new sales and account expansion is relative to the customer lifecycle. Sales teams are typically focused on acquiring new customers. In contrast, account managers and customer success managers are tasked with retaining and expanding existing customers.
In other words: Sales focus on acquisition, while account expansion emphasizes revenue growth through existing accounts.
What are Sales?
Sales are a large field of study and practice. But for the sake of this discussion, we are focusing on sales as the acquisition of a new customer. This definition is too simple, of course. Still, it serves an essential function in distinguishing it from the activities of expanding an account. Sales teams are responsible for sourcing your leads or qualifying and closing your inbound leads—all intending to bring the customer into the business. Once you conclude this process, the sales team member can brief your account managers or success managers on the new customer and their goals. This collaboration helps transition the customer’s journey from the sale to onboarding and beyond. Eventually, resulting in opportunities for account expansion.
What is Account Expansion?
The effort to expand accounts is a direct-to-customer and post-sale role. As an account manager or customer success manager, you can grow accounts through upsells, cross-sells, and add-ons. Expanding your accounts is relative to generating revenue through your existing customers rather than new customers. Customers are nurtured through consistent dialogue and check-ins, understanding the nuances and evolving goals specific to them individually.
Many statistics point to the argument that growing revenue is easier and more productive through the existing customer base than acquiring new customers. This is also to say that it can be cheaper to increase revenue from account expansion than to grow the number of new accounts.
The importance of the distinction?
Comprehending the difference between sales and account expansion is vital to your company’s success. Different strategies are associated with acquiring new customers versus expanding relationships with existing customers. It can be difficult for one team member to focus on new prospects and closing them while also managing the nuances supporting the maintenance and retention of your existing customers. Much less expand their relationship with the company.
An understanding of the distinction can also impact your company’s bottom line. Perhaps your company is a start-up with very few existing customers. Focusing your business efforts on expanding that customer base through new acquisitions could result in more investment in the sales team. Yet, as growth in your company flourishes, it can become more viable to switch strategies. A more significant customer base presents more extensive needs for those customers to be understood, supported, and retained. With this new and broader base of resources, a customer success team and account management team can help lower acquisition costs and maximize revenue growth through expanding existing accounts.
A thorough and accurate vision of your business’s current status further emphasizes how imperative an understanding of sales efforts and expansion efforts can be for growing from your current position.
Differences in Approach
A defining difference in the approach between account expansion and sales is how long your engagement with the customer has existed for. For your sales team, the method is more short term. Whereas expanding accounts requires a long-term effort with the customer. A sales team specializes in the early stage of the customer lifecycle, identifying and executing the initial point of contact. However, efforts to expand accounts rely on considerably more depth of relationship and knowledge of the customer.
Another way of understanding the difference is that your sales teams tend to focus on information useful for their own needs. In contrast, an approach to expanding accounts focuses on what the customer needs. Now, of course, a sales team cannot discard the needs of the customer. Sales approaches must identify whether a customer is a fit for the product or service for the transaction to be successful. Similarly, any approach to expanding an account must first understand what the company has to offer for upgrades or add-ons. But for the latter, the plan is considerably more tailored to where the customer is at with their goals. Expanding accounts also considers whether it is the proper time for each customer to increase their engagement with products or services.
Distinguishing the KPIs
As other sections have discussed, there are clear overlaps in the usage of KPIs between sales efforts and account expansion efforts. Your account and success managers will be as interested in particular KPI’s as your sales teams. But there are some KPIs more commonly associated with one approach over the other.
For instance, sales teams commonly rely on Monthly Sales Growth, measuring the increase or decrease in your sales revenue every month. Assessing this KPI monthly allows your sales team to remain nimble, adjusting strategy depending on results. Sales Closing Ratio is another useful KPI for your sales teams. This KPI tracks the ratio between how many quotes your sales team delivered to customers and how many deals they were able to complete. Because this KPI helps illuminate how long it takes a salesperson to pursue an opportunity, it can help your sales managers determine how many leads might not be qualified. Or it may assist in determining where your sales team is spending too much time attempting to finalize each deal.
There are numerous KPIs utilized to increase or refine account expansions. A few of the popular customer success KPIs that can assist in growing your account values are Net Dollar Retention, Retention Rate, Customer Churn Rate, and Customer Satisfaction Score. Net Dollar Retention is the KPI increasing used by board members and investors to understand the overall success of subscription businesses. It measures the revenue from a given cohort of customers to understand if overall revenue is increasing or decreasing, even in the face of inevitable churn of some customers within the cohort. The Retention Rate is particularly useful for SaaS companies because it highlights the percentage of expiring contract renewals against canceled contracts. Knowing this KPI is relative to also following your Customer Churn Rate. This KPI tracks explicitly the percentage of existing customers who cancel their contracts or fail to renew them. Finally, a KPI that can assist in improving retention and churn rates is the Customer Satisfaction Score. Using surveys delivered to the client, a Customer Satisfaction Score gathers and assesses the level of satisfaction your customer has with your product or service.
Should there be different teams for sales and account expansion?
In a word: Yes. In more than one word: It depends.
It can be difficult for a start-up or smaller-scale company to isolate responsibilities to one team or another. You may not have the revenue to afford different sales teams that can focus exclusively on sourcing leads and closing the inbound sale versus retaining and expanding existing customers. But even if your company has ample resources, the efforts and knowledge of sales and expansion efforts commonly overlap. A success manager may have been able to identify a customer that would benefit from an add-on or an upgrade, so they bring in a sales team member to discuss the details of the matter.
Aside from not having the resources to make clear distinctions and the existing overlaps, it is mainly to the benefit of your company to separate acquisition efforts from expansion efforts. A sales team should be able to focus most of their efforts on generating new opportunities and bringing new customers into the company. Expanding accounts requires longer-term strategies and a more in-depth relationship with the customer, relying on different skill sets and approaches to achieving their goals.
Since acquiring new customers and expanding accounts with existing customers have such a critical impact on revenue and growth, it can be of great benefit to your company to have distinct and specialized teams.
For further reading on this subject from Uptick: How to Build a Successful Subscription Sales Team