Research Suggests IT Services Firms Too Reliant On Customer Loyalty

Compiled ByJill Jusko Yes, you can have too much of a good thing -- if the good thing is repeat business, says global IT advisory firm ITSMA, Lexington, Mass. While existing customers are "often more profitable" and "a critical measure of customer satisfaction and loyalty," it is new clients that "are a vital source of growth and innovation," says Julie Schwartz, vice president of research for ITSMA and author of "Sales Performance Study: Benchmarks and Best Practices from IT Services Leaders, 2002." The IT advisory firm found that for three-quarters of leading technology firms, repeat business accounts for 80% or more of their services revenue. This figure compares with between 50% and 60% in 2000. "Customers today are highly risk averse and are sticking closer to existing suppliers," Schwartz says. "In today's economy, however, companies need to balance sales efforts between existing and new customers. Focusing mainly on existing clients is fine for now, but what happens when the economy changes? Sales and marketing managers need to make sure they are looking closely at their sales strategy to determine whether changes in the services revenue mix are due to calculated efforts or to poor new business selling skills." Other study findings indicate that win rates -- the percentage of all proposals submitted that are won -- average 40%; and services sales representatives spend less than half of their time in actual customer-facing activities. Study participants included Microsoft Corp., PeopleSoft Inc., PwC Consulting and EMC Corp.