At TSIA, we create frameworks to help technology companies better understand the business problems that they’re facing so they can take the right steps toward fixing them. One such framework is LAER (Land, Adopt, Expand, and Renew), which we created to aid technology providers in making the transition from traditional business models focused on simply selling more assets toward one that promotes retaining and growing customers successfully by way of facilitating customer outcomes.
At its core, the LAER framework is the answer to the technology industry’s growing need for Sales and Service models that don’t just land new customers, but also use data to systematically drive customer adoption so they can realize the value of the technology they’ve purchased, paving the way for account renewal and increased spend. This is absolutely essential for “as a service” or subscription offers, where the ability to prevent customer churn can mean the difference between success and failure.
Successfully Applying the LAER Framework to Your Business
In a previous blog post, I summarized 4 phases that companies experience as they transition from a traditional technology customer engagement model that is very transactional-oriented to a customer engagement model that is successfully following the LAER framework: Traditional Transactional, LAER Experiment, LAER Effective, LAER Efficient.
But while reaching the fourth and final stage of this journey, LAER Efficient, is the goal, TSIA has found that very few companies have yet to make it to the third stage, LAER Effective. That’s why at our upcoming fall Technology & Services World conference, we’re going to help you walk before you can run, showing you how to better optimize your Sales and Service models so that you’re not only able to land new customers, but systematically, and cost-effectively, drive adoption, renewal, and expansion. But first, I want to explain exactly what it means to be LAER Effective.
LAER-Effective Company Traits
To briefly recap the stage before LAER Effective, known as LAER Experiment, your company should now have at least some of your revenue coming from “as a service” offers, are actively tracking your customer churn and customer health scores, and have some sort of formal customer adoption framework in place. If you’re not there yet, don’t worry, you’re in good company. 80% of technology companies TSIA has surveyed, both in our research and at our conferences, do not currently possess these capabilities, thus keeping them at only the second phase of this journey towards becoming LAER Efficient.
LAER Effective companies, on the other hand, are good at tracking, good at revenue retention, and are good at expansion. Here are 4 markers of what all LAER Effective companies have in common so that you can get inspired about getting to where you need to be to reach this third stage and beyond:
1. Renewal Practices
These are the practices related to renewing “as a service” subscription contracts, which includes everything from when to send the customer the renewal paperwork, to managing the discounting process. Often, companies have mature practices related to renewing support contracts that can be retrofitted for renewing subscriptions.
Based on data from our Service Revenue Generation research practice, we’re seeing incredible variants in contract renewal rates across the industry. This means that they’re able to keep customers on the platform, thereby keeping money on the table. LAER Effective companies are at industry average or better on dollar renewal rates.
2. Monetized Customer Success
TSIA has published articles and papers on frameworks for funding Customer Success, which in turn brings in money to scale this function. One effective way to fund Customer Success is to monetize it. There’s a misconception that all born-in-the-cloud companies are surely already LAER Efficient, but that’s not necessarily true. In fact, the majority of born-in-the-cloud companies actually struggle to monetize their Customer Success function and make it profitable. In a recent organizational structure survey conducted by TSIA, out of the 133 companies we asked (including hardware, software, and cloud), only 26% have monetized their Customer Success function. We do know that more are trying, and while they might not be profitable yet, they’re well on their way. Monetizing some of the Customer Success activities that customers have come to value is an important step toward becoming LAER Efficient.
3. Customer Success Plans
First, I should preface this by saying that there is a difference between an account plan and a customer success plan. An account plan is what you as a technology supplier have planned for your customer, such as onboarding, having Sales and Service leaders talk with them about upgrading them to premium support, etc. But what is the customer’s plan? A customer success plan is what you are doing for the customer to help them achieve their business objectives, which you do by becoming outcome engineers. This involves sitting down with the customer to better understand what their goals are, what the KPIs that you should be tracking to make sure they’re hitting critical milestones on their way to achieving those goals, and which skills they already have in place versus which they need in order to be set up for success. Only 23% of companies TSIA benchmarks are actively creating playbooks to align the customer journey for what they want to achieve.
4. Expansion Practices
The “E” in TSIA’s LAER model stands for “Expand”, which refers to all of the activities required to cost-effectively help current customers expand their spending as their usage of your product or service increases, including both cross-selling and upselling.
We know that Services touches customer accounts 5-15x more than Sales. In fact, TSIA’s vice president of expand selling research, Steve Frost, has written extensively on this topic through blog posts and research papers. I encourage you to watch this video of his 30-minute keynote from our last TSW conference, "The 'E' in LAER: Driving Expand Revenue with Services," or read his blog post, “What is Expand Selling?”, both of which explain this concept in detail and goes over the 4 stages of getting better at cost-effectively driving expansion with existing customers by involving Services in the Sales process. To be LAER Effective, you’ll need to have a process in place to grow the customers you already have, and leveraging customer analytics and Service touchpoints are two key practices within this category.