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Customer Growth and Renewal

How to Grow Your Business in a Turbulent Economy

Three Tactics to Ensure You’re Built to Last

4 min read
By Jack Johnson
It’s easy to see that our economic environment is in disruption and approaching turbulence. Every technology and business sector has been thrown into uncertainty, and how the next few quarters will play out is truly unknown. However, one thing is for sure: we are departing from a decade of cheap money, low interest rates, low inflation, and high growth, and moving towards higher interest rates and higher inflation.

This can present real challenges to creating and maintaining a high growth environment, challenges you need to be ready to face head on. But which best practices should you be implementing to prepare?

At TSIA, we conduct research that indicates which business capabilities “winning” companies are deploying to achieve their desired outcomes. In this blog, I’ll explore a few of the big concepts as well as tactical actions that will make a difference in growing revenue in a turbulent economy.

Embrace Outcome Selling and Value Articulation

A central capability in today's economy is having a clear understanding of why your customers buy your technology and being able to articulate that value from your customer’s point of view.   Do all your employees understand why your solution is valuable to your customers? What outcomes are your customers able to achieve by using your product or service? Why do they stay with you?

Being able to answer these questions and articulate your value will help you to embrace outcome-based selling, another key component of success in our current economy. Outcome-based selling pivots your focus to the outcome your solution can give to customers and not your product or service features. This shift is especially important in everything-as-a-service (XaaS) sales, and is already being thought of as an industry standard and best practice.

These two approaches dovetail together: articulating your value highlights the perceived benefits of your solution, and selling outcomes promises measurable “things” that can happen for your customers if they use your product or service.  
  • We offer our customers the ability to do VALUE.
  • As a result of using our product/service, customers are able to achieve OUTCOME.
  • Without it, they fail to be competitive in THIS ASPECT OF THEIR INDUSTRY.

Example

Let’s look at a scenario of a network infrastructure provider articulating their value to a university and focus on selling outcomes. Traditionally, we may think that low cost of ownership, lower security risk, or perhaps five 9’s uptime are top selling points and a great way of showing our solution’s value. However,these are key performance indicators (KPIs) and features–not why your solution will be valuable in helping them achieve desired outcomes.

First, you need to understand the outcome the university is looking for and how your solution can help them achieve it. In this example, you learn that the university is hoping to attract top faculty members and students to their programs. In order to do this, the school needs to provide quality, innovative content and content delivery so they can gain a competitive advantage in their market.

Understanding how your service is valuable to the university and what they hope to accomplish by using it allows you to effectively position the sale or contract renewal. 

The opportunity to highlight your value and promised outcomes can present itself at several points in the sales and renewal cycle. Perhaps the conversation comes up  during a customer success health check, when your customer lets you know that they wish to discontinue with your product or service. What do you do? How do you respond?   

If your representative knows the value of your solution and how it can/has contributed to the customer’s desired outcomes, they can reframe the conversation:
 
“You’ve told us that you absolutely love the learning collaboration experience when using our product. It extends the quality of time for faculty while giving students a choice in how they consume content. Are you ready to go back to the old way of providing instruction? How will that impact faculty and students?”

This is only possible if your representative has an understanding of how the solution is valuable to the customer and has a practiced (keyword: practiced) dialogue prepared about the outcomes they can achieve. Companies that fail to enable their customer-facing employees with skills to discuss outcomes and values find themselves struggling with renewal performance. This can lead to unnecessary discounting to save the renewal, but ultimately leads to a loss in potential revenue. When there is a lack of awareness of value, the conversation devolves very quickly to the cost of the transaction.  

1st Rule for Growing Revenue In A Tough Economy:
DEFEND YOUR BASE BY UNDERSTANDING THEIR DESIRED OUTCOMES

Segment Customers by Growth Potential

A second capability for successful companies is the ability to define and prescribe which parts of the business to support and which parts to divest.

Over the past years, you may have experienced high growth in sales and bookings. However, not all deals/relationships are profitable. When growth is high, unprofitable business may be masked by growth and enthusiasm for future growth. In short, we accept a certain level of unprofitable business because we can overcome it with volume of new sales.  

But as business slows, choices must be made. Can you afford the cost of supporting and renewing all of your business? Resources may become more scarce and time short. The question which must be asked is this: Am I willing to spend a dollar to continue an unprofitable relationship? Will it ever be profitable? If I had to choose where to spend my dollar to promote growth, where would I place my bet?

One way to promote growth is to focus energy and resources where growth exists. Study after study indicates that it is much cheaper and easier to expand and grow from existing customers than it is to add net new customers. Segmenting customers by profitability and propensity to renew is an alternative to segmenting by geography or size. It offers a segmentation strategy that allows you to focus on growth areas while prescriptively reducing capabilities that are unproductive.

If a customer success manager or renewals specialist has 100 opportunities to close next month and eight of them are unprofitable, segment out the eight for a special conversation.
 
“We would love to have you as a customer under profitable conditions, but if you are not interested in the 30% price increase we can discontinue at the end of this term.”  

Become prescriptive in which businesses you are willing to invest and cut the rest.

2nd Rule for Growing Revenue In A Tough Economy:
DUMP THE JUNK AND FOCUS ON PROFITABLE CUSTOMER SEGMENTS.

Share the Work

Once you know the value proposition and have segmented out the accounts with growth potential from the accounts that detract from growth, there’s still the task of actually garnering growth.    

So, where does the growth potential reside and who is going to do the work to grow revenue? Is it generalist sales account managers selling net new products into net new “greenfield” Accounts?  Potentially,  but when money is tight companies are resistant to take on additional risk.

At TSIA, we see the answer as being: established customer base utilizing the complete revenue growth team.
Customer Success Team Growth Org Chart
Customer Growth Team Org Chart

The most effective and cost-efficient way to grow revenue is to defend your existing customer base and grow that base using the total growth team capabilities. This means deploying a unified revenue plan in order to share the work amongst the team. It also ensures that the roles are utilized in a strategic, prescribed manner.

This does not mean simply deploying sales to do net new, plus upsells, plus cross sells, and plus renewals. While sales and renewals are traditionally accustomed to playing in these types of  roles, customer success and services are also fueling growth.  

Our benchmark data indicates that when customer success has adoption, expansion, and/or renewal charters and deploys formal prescribed plans and playbooks, revenue grows. When they establish Net Revenue Retention (NRR) or Annual Recurring Revenue (ARR) growth metrics, revenue grows. When they recognize performance through incentive programs, revenue grows. And when renewals move from a “defend charter” to a “grow charter” approach, revenue grows.

What this means, however, is that new lines of responsibility must be drawn with sales and between customer success and renewals. You can mobilize each to a responsibility that best maps to their capabilities and capacities: sales leads complex new/ upsell/ cross sell efforts while customer success and renewals lead lower complex upsells and renewals. Marketing, analytics, and offer management provide services that help with installed base growth, rather than an emphasis on breaking new ground with new products.  

This strategy may feel awkward to some companies, as they have relied on the sales teams for offense while support, customer success, and renewals provided defense. Building offensive capabilities into the balance of the customer growth team will take thoughtful consideration and some time. However, the data shows the payoff is significant.

3rd Rule for Growing Revenue In A Tough Economy:
DEPLOY YOUR ENTIRE  CUSTOMER GROWTH TEAM–NOT JUST SALES.

Putting Revenue Growth Rules into Action

Each of these strategies will affect your results and provide long term sustainable results. But perhaps you find yourself short on time and in the middle of the battle already. If so, here are a couple practices that you can deploy immediately in a “scrappy” manner:
  1. Review pending renewals greater than 90 days past due. Conduct one review and then purge. If the account is 90 days past due, the chances of renewing now are low. You do not have time to think about unproductive renewals when next month is fast approaching and that effort could be spent elsewhere.
  2. Document every request for a discount and build a short list of reasons. Develop prescribed responses based on value and outcomes, and/or pre-approved discount actions. Practice these conversations weekly with your team. Remember–role playing is a best practice. 
  3. Build a list of “top accounts” and “at-risk accounts.” Review these lists with your reps weekly and push to remove all ambiguity. (Excel spreadsheets may be your friend here.)
  4. Repeat item 3 with key channel partners.
  5. Place equal emphasis on getting quotes out 90 days in advance. This goes beyond a high intensity, high energy focus on closing subscription/contracts. You shouldn’t regard this as a casual activity, but an absolutely critical step for next quarter’s success.
The key to all of this is simple: be prepared. I’m sure you’ve heard the phrase, “how you prepare today will determine how you perform tomorrow.” Well, tomorrow is now and the big question is: are you ready?  
 

 July 14, 2022

Jack Johnson

About Author Jack Johnson

Jack Johnson is the vice president of customer growth and renewal research for TSIA. In this role, he works closely with member companies to deliver research and advisory programs focused on helping them grow and renew services revenue effectively. Throughout his career, he has held Renewals, Customer Success, and Operations leadership positions at technology companies providing enterprise software or hardware, or in business services companies helping technology companies growing recurring revenue.

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