Sales strategy defines how a business will profitably grow the top-line. Given the dynamics in many industries, sales strategy tends to have a shorter cycle time and is refined at least annually (i.e., how will we retire next year’s quota). From a practical perspective, sales strategy begins by articulating the amount of revenue that will come from acquiring new customers (or Acquisition), retaining revenue with existing clients (Retention), and expanding revenues with current customer accounts (Expansion).
Graphically, the Acquisition, Retention, and Expansion (or ARE) framework is shown below.
Retention revenue is often the most profitable - core products/solutions (ones that we presumably deliver with great efficiency) are being sold to existing clients (no longer subject to high acquisition costs). Additionally retention or repeat/recurring sales can account for 90% or more of a business’s total revenue. As such, articulating how we will maximize retention revenue is often the first step in defining an overall sales strategy.
Expansion revenue may also provide strong margins – selling new products/solutions (ones that presumably have a unique & compelling value proposition and thus command a premium price) or simply selling more core products/solutions to new or existing buying centers within an account. Expansion selling often accounts for 20% or more of a business’s total revenue. As such, articulating how we will maximize expansion revenue is often the second step in defining an overall sales strategy.
Acquisition revenue may not always be the most profitable – due to higher selling costs and aggressive pricing required to knock out an incumbent and land a new client. However, the long-term health of any business is typically predicated upon new client acquisition. For most businesses, less than 10% of revenue will come from acquisition.