Average Revenue Per Account AKA ARPA is a measure of single accounts total annual billing/revenue.
Sales Potential defined
What does Sales Potential stand for and how do you define and leverage it?
Sales potential stands for evidence based calculation on what would be an achievable level of sales/billing for an individual business customer per offering. Evidence based approach means, that there are customers that already behave in a way that they set the level of "good" billing level in a peer group of companies. Potential is a figure about prospects, which is about the future possibilities.
Potential is not a fixed figure. When performance in sales improves, also the evidences change and the potential can grow higher due to this change.
"Similar companies or peer companies" is an important factor in this modeling. By modeling the markets according to customer segmenting and grouping, we can create scalable outcomes. The more specific the segmentation is, e.g. in case we would directly use Standard Industry classification level 3 segmenting, we need thousands of customers to analyze, especially if the customer base and target group is very heterogenous. By clustering and segmenting customers we can get to actionable and relevant insights with much smaller customer base.
Potential has a different meaning in different business types
In early stages new customers represent greenfield projects and the business is about adopting new solutions, but in later stages all new customers are won from competitors. Naturally the actual means to turn potential into sales are very different and require different approach to demand generation, lead generation, selling and retention. In matured markets, risk management and retention become very important factors.
Variation:
- Segment A: a lot of users and volumes of hunting customers = Potential for upselling, cross-selling and new customer acquisition
- Segment B: No customers = No evidence = No potential
USE CASES - VALUE AND BENEFITS
- ACCOUNT PLANNING: When an account manager does account planning, they have a clear view on which offerings the money is coming now and is there up-sales potential in those offerings. In order to grow offering penetration, improve retention and uplift annual revenue there is also potential for cross-selling offerings. The combination of current value and potential gives answers and priority for account management for growth.
- GROWTH PLANNING: By using views with macro market level data, the current value and potential can be analyzed by company size, Industry Classification, Geo location, Sales team, internal division/business unit/subsidiary or any other attributes. When we look at the history and change, we are capable of delivering "IDEAL OFFERING PROFILE" for different segments and supporting organic growth with upsales, cross-sales and new customer acquisition priorities.
- OFFERING MANAGEMENT: On the offering side the important question to answer is about "IDEAL CUSTOMER PROFILE". Offering side needs to prioritize customer types and define priorities on who are they actually serving and where are the biggest growth prospects.
LEARN MORE ABOUT PRACTICAL USE CASES FOR POTENTIAL
Value and Potential Based segmenting for management
ARPA (Average Revenue Per Account) Defined
