October 17, 2017
The act of selling technology has undergone a radical change. Purchases are no longer the large up-front investments they once were, but are instead made up of lower cost subscriptions and value-add services. As a result, the features and function of the technology are now less important when compared to the business outcome achieved by using the technology. In this new era of technology-as-a-service (XaaS), the ability to successfully deliver customer outcomes, keep customers on your platform, and get them to spend more money over time will be what determines your company’s profitability and success.
In order to thrive in this changing marketplace, TSIA believes that today’s technology providers need to shift their focus from selling more assets to growing customers successfully. To aid in this transition, TSIA has developed the supplier view of a customer engagement model called LAER (pronounced “layer”). While we have discussed this in blogs, TSW conferences, and the new Technology-as-a-Service Playbook, here are the basics of LAER explained and its impact to the customer-supplier relationship.
Today’s customers are less focused on product features and more on how the technology will lead them to improved business outcomes.
In the days when technology was purely sold as an asset, the critical milestone in the customer-supplier interaction occurred when the customer was convinced to buy that asset in a large up-front payment, with the option to purchase additional implementation and support services. After that point, the technology, and what was accomplished with it, became the customer’s responsibility. The revenue and margin on the transaction was guaranteed for the supplier regardless of whether the customer received value from their purchase or not.
Today’s customers are less focused on product features and more on how the technology will lead them to improved business outcomes. However, this means that if at any point along the customer journey the customer decides your product or service isn’t meeting their needs, the revenue will stop flowing. As a result, the traditional make/sell/ship business model with the key milestone of “landing” the customer has given way to one that includes additional critical milestones designed to prevent customer churn. These new milestones are what make up the LAER model.
TSIA's LAER model is the supplier's internal perspective of the customer journey and consists of four distinct customer life cycle objectives.
While the LAER model will continue to evolve as more businesses begin to embrace it as part of their day-to-day operations, here is an example of an established LAER-based customer coverage model that breaks down the traditional roles and responsibilities between sales and services. Please note that we’ve reversed the Expand and Renew phases in these examples to make it easier to map roles to them.
Adopt: Once a customer is using your offer, there should be a role focused on helping that customer successfully adopt the technology, such as a customer success manager. Your Customer Success, Education Services, and Support Services teams are all able to help ensure your customers successfully adopt the technology. They are also well-positioned to aid in the renewal process, because highly adopted customers that are happy with their purchase are more likely to renew their contract. However, it's important to keep in mind that not all levels of adoption are created equal, and the key here is to make sure individuals in these roles are promoting “effective” adoption of the technology.
[...] you don’t have to completely reorganize your current operation today in order to begin reaping the benefits of LAER.
The above is an example of how current sales and service roles blur into new coverage models that are optimized to drive a customer through the LAER life cycle. In looking at this model and the various roles that need to be in place in order to make it work, would you say that your current customer coverage model looks anything like this? Based on conversations we’ve had with various technology and services organizations across the industry, likely not.
However, it’s worth noting that while this type of organizational structure is TSIA’s prescribed best practice, you don’t have to completely reorganize your current operation today in order to begin reaping the benefits of LAER. As stated in Chapter 4 of Technology-as-a-Service Playbook, we actually recommend delaying the larger organizational structure conversation until you’ve established a clear plan for the operational model you want to build, how your customer will experience that model, and the capabilities you’ll need to invest in to execute it well. For now, identifying the key players within your current organization as they relate to the core mission of LAER–to keep customers happy and on your platform so they spend more money with you–can help you get started down the right path to a successful (and profitable!) subscription business.
At TSIA, our mission is to help technology businesses like yours better leverage their services to rise above the challenges presented by our growing and changing industry and thrive for years to come. The LAER customer engagement model is just one of many frameworks our members are using to achieve business success that are the direct result of our in-depth industry research and the collective years of experience of our team of research experts. Reach out to us today to learn more about how TSIA can lead you down the proven path to overcoming your top business challenges and achieving the business outcomes you want.
Organizational capabilities that technology services businesses must master
Thomas Lah is executive director of TSIA. Since 1996, he has used his incisive analysis, strategic thinking, and creative solutions to help some of the world’s largest technology companies improve the efficiency of their daily operations. He has authored several books, including, Bridging the Services Chasm (2009), Consumption Economics (2011), B4B (2013), and Technology-as-a-Service Playbook: How to Grow a Profitable Subscription Business (2016).
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