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As the downturn of 2020 rages on, technology companies have to find a way to maintain and grow revenue without additional sales and marketing budgets. The only way to accomplish this cost-effectively is by growing your existing customers, while keeping the revenue you already have on the books.
No one will argue against the idea that protecting the revenue base is critical during a downturn. Most companies, (TSIA members, anyway), have even come around to the idea that a new approach is needed for Expand and Renew, with Services, Customer Success, and even Renewal Specialists playing a larger role. It’s no longer a question of “should we?” but rather “HOW should we go about doing this?" Luckily, TSIA has some key frameworks and practical guidance to help you get there.
TSIA has created a number of key frameworks to help guide our members through their business model transformation. The first, and most prominent of these, is TSIA’s LAER (Land, Adopt, Expand, Renew) customer engagement model. The four motions of LAER are more than just four things your company has to do. You must build organizational capabilities to make sure you do each one of those motions effectively and cost-efficiently. All four parts of the LAER model must work together for the benefit of both the vendor and the customer.
For example, how you Land the deal in the first place will determine how effectively you can drive adoption of your offering. After all, if there’s a disconnect between what you’ve sold and what the customer needs, then it’s unlikely that they’ll use it...and HIGHLY unlikely that they’ll buy more. And what’s a leading predictor of renewal rate? Whether or not the customer has expanded. LAER is a powerful framework, but it has to be used correctly.
The temptation for all sales leaders who want to shift sales behaviors is to turn to the twin pillars of training and compensation to help make the necessary changes. However, if you don’t know what you’re training them to do and don’t know what success looks like, there’s just no way these old-fashioned tactics can drive the necessary change.
The key takeaway here is that training and compensation, while important, come LAST, not FIRST. Only after you've figured out what to measure (KPIs), what to do (critical practices) and who will do it (roles & responsibilities), can you figure out what to train them to do and how to compensate them if they succeed.
The first thing to note is that you have to gain ALIGNMENT before you start the journey. You need to know how aggressively you want to change your model and what you’re willing to do to get there. You don’t have to be “all-in” right away but you need to have a plan to get there.
Alignment: Do we have agreement on our strategic posture around XaaS and how aggressively to promote our XaaS offerings?
KPIs: What are the key performance indicators the company measures during each phase, at both the corporate and individual/team levels?
Critical Practices: What are the key practices (including processes) a company establishes and masters during each phase of the transformation?
Roles and Responsibilities: What are the distinct attributes of the roles and responsibilities in each phase and for each aspect of LAER?
Organizational Structure: What changes does the company make to the structure of sales and service roles in each phase?
Skills: Do the people in each role have the competencies they need to execute their roles, based on the complexity of the tasks they must execute?
Compensation: How are key account roles compensated in each phase, and are we incentivized to the correct actions and priorities?
At TSIA Interact, I’ll be talking about How to Get Started with LAER and Make it Work. We’ve had the privilege of helping dozens of companies through their transition to profitable subscription businesses, and the process described here is the HOW to change your engagement model. From there, we’ll run virtual workshops where industry leaders will collaborate with TSIA researchers on critical problems like Transforming your Revenue Model for Existing Customers and Migrating Existing Customers to XaaS offerings.
Other TSIA researchers will lead sessions that dig deeper into other parts of the LAER model, such as landing the deal in the right way, so that the customer can meet their desired outcomes, best practices around renewals, and how to work with channel partners to sell and succeed with your XaaS offerings. We look forward to seeing you there!
Post Date: October 15, 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.