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TSIA’s Land, Adopt, Expand, Renew (LAER) customer engagement model has become the most prominent framework for how to grow and keep revenue in the XaaS world. However, if you’re not careful, each of these functions, and the organizations who perform them, will start to serve their own needs rather than those of the company and the customer.
If your company is going to capture the efficiency promised in the LAER model, you need to stop thinking about each motion separately and start thinking about how the motions flow together to grow revenue throughout the customer life cycle.
The Land motion should set up Adoption and Expansion, and Adoption should lead directly to improved metrics in Expansion and Renewal. These motions cannot function as independent initiatives. Unfortunately, we’ve seen that the old silos of Sales, Account Management and Services have in many ways been replaced by new silos.
Sales is still Sales, but Customer Success has Adoption and sometimes Renewal responsibilities, though dedicated Renewals teams have also been formed under their own silos. If Sales doesn’t have goals on Adoption or Renewal, they are incented to land the biggest upfront deal possible, without any concern about whether it meets the customer’s desired business outcome. If you landed the deal at such a discount that it can’t be renewed without losing (even more) money, then you’ve set yourself up for an expensive short-term customer. That’s a death sentence in a recurring-revenue business model.
The primary charter of most Customer Success teams focuses on the adoption of your subscription technology. However, if your Customer Success teams only have goals around adoption metrics, then adoption may become the goal in-and-of itself. The result of your efforts toward adoption have to be easier and lower-cost renewals. If the customer is using the technology the way it was intended, and reaching the outcome they hoped for when they bought it, then the renewal becomes a no-brainer...or at least a straightforward and uncomplicated sales process.
However, if customer success managers (CSMs) don’t have the right goals in place, then the adoption metrics in and of themselves can be the goal, rather than an understanding of where the customer needs to go and how they need to get there, and your Expansion and Renewal metrics won’t reap the benefits of their efforts.
One of the biggest questions we get in our Expand Selling research and advisory practice is: “Who should handle the upsell?” Sales teams are reluctant to give up this function, and Customer Success is often hesitant to take it on. However, TSIA research has found that most Sales executives don’t pay attention to an upsell unless it’s for more than $250,000 USD, even though the majority of upsells are for around $50,000 USD.
So, there’s a huge gap, and one that can be filled in cost-effectively by Customer Success and even service delivery teams (especially field service engineers, if you have them). But in order to figure out who’s doing the selling, you need to first look at what’s being sold. You need to sort out these responsibilities not by market segment, but by the complexity of the offering and the capability level of the people doing the selling. I go into this process in far more detail in this paper, “A New Approach to Customer Growth: The State of Expand Selling 2020.
TSIA strongly advocates that the Land and Renew functions should be separated, otherwise, as with most renewals, you end up paying for the sale twice. However, you also need to look at what percentage of your Renewals have an Expansion tied to them. If you’re taking the customer through a full purchasing process as part of a renewal, which requires difficult motions like gaining buyer consensus, securing budget approval, negotiating with Procurement, etc., then you have to push for an expansion as part of that renewal wherever you can.
As any salesperson will tell you, driving a sale through the customer buying process is hard, but if you’re taking on expansion outside of the renewal, it’s often twice as hard, because you have to go through the same cycle again. It’s inefficient at best, and borderline irresponsible at worst. In order to make this work, you need tight policies and processes to allow you to call in Sales help when it’s needed and warranted, but keep your salespeople focused on landing new deals as much as possible.
At the upcoming Technology & Services World in San Diego, I’ll be delivering a talk on this topic, where we’ll go into how to break down the silos of LAER and create a customer engagement model that serves both your company and the customer. You’ll also hear fantastic insights on how to drive compensation plans where everyone benefits from ARR. There will also be sessions on how the cross-functional collaboration between Sales and Services is critical for cost-efficient growth. We’re looking forward to seeing you there!
Post Date: March 17, 2020
The State ofExpand Selling 2020
Steve Frost is the vice president and managing director of revenue research and advisory for TSIA. He also serves TSIA’s vice president of expand selling research. Throughout his career, he has held various leadership and business development roles at companies like Google, Netscape, and Loudcloud, helping them define their go-to-market strategy and business development tactics. Steve is dedicated to helping technology organizations grow their services, subscription, and XaaS revenue by optimizing their practices for growth throughout the customer lifecycle.
The Technology Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.