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The Leaking Bucket Effect
If you look at your customer base you will see leaks. These leaks are due to customer activities such as switching to alternate vendors or merely ceasing to use that asset because it has reached its end of useful service life. If we look at the standard sales model we see that while these leaks are occurring sales reps are busily utilising their CRM systems to attain new customers.
The diagram below shows that your installed base “bucket” represents say 100 units. There is customer leakage of 7 units out the bottom of this bucket over a certain period of time, say a year. Meanwhile the sales reps are filling up the top of the bucket with 5 units of “new” customers. Therefore with the standard sales model there is a net loss of 2 units.
Standard Sales Model
With the CALM sales model we also have a situation where your installed base represents 100 units with sales reps adding 5 units of “new” business in the top with 7 units of installed base leaking from the bottom. The difference is however there is additional activity call Installed Base Business, or IBB for short, which converts existing customers to new business effectively adding 8 units of new business in the top of the bucket. The net gain over unit time is 6 units.
CALM Sales Model
The CALM sales model promotes multiple revenue streams from both new and existing customers adding to the profitability of the company. The sales force is no longer lost or in pain but now has vastly improved visibility into the existing customer base but also opportunities that flow from that installed base.
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