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Over the last few months, many of our members have asked me whether the COVID-19 pandemic has accelerated the need to transform sales or if it’s slowed things down.


My answer is always the same: “It depends where you were on the journey before the start of 2020.

Let me quickly touch on what we’ve observed from our research and member engagement since the beginning of March:

  1. Subscription revenues have been impacted far less than traditional transactional revenues.
  2. Companies are reporting that pipeline values are holding firm, but there are serious questions being asked about the quality of the deals in the pipeline.
  3. The majority of companies have revised down their revenue forecasts for the coming quarters, over a third have revised down by more than 10%.
  4. 80% of technology companies say that deal cycle times have either slowed or stopped completely.
  5. Very few (around 12% on average) are planning to reduce sales headcount, but there are very definite plans to allocate headcount differently.
  6. The virtual sales operating model is here to stay for a while; many companies are now reporting that they are not planning a return to the office until July / August 2021.

So, it’s within this context that all technology companies (hardware, software, and services) are on a journey of sales transformation and significant change.

All these companies are on a mission to effectively and efficiently sell either XaaS or Subscription offers. Each of them will follow a different path to the same objective and the path will differ based on their starting point.

And, the one thing I can tell you for sure is that it’s not plain-sailing for anyone – there are pitfalls, challenges, and issues that will impact everyone. Generally, software companies have the smoothest path – and I’m talking in general terms here. Services companies are second, and it is the hardware companies that have the rockiest and most treacherous journey to navigate.

One of the biggest mistakes we see companies make as they are considering the journey of sales transformation is they don’t spend enough time aligning before they start out. It’s the same as if you were planning a road trip; you’ve got to be aligned on some basic principles:

  1. You’ve got to know where you’re going – otherwise I wouldn’t call it a journey or a road trip.
  2. You’ve got to have an idea of when you want to arrive – it doesn’t have to be precise but directionally you need to have a target (which may be adjusted if you get distracted along the way).
  3. And finally, you’ve got to have a reasonable idea of the route that you’re going to follow. You can, of course, amend this to do some sight-seeing or to stop for a snack along the way.

Taking the time to agree on these three points is the number one priority for any sales leader. Time spent here will save time, conflict, and wasted money down the road.

When people ask me for guidance on what the destination looks like, I always refer them to this picture. It describes the optimal customer engagement model for a sales organization that is selling subscription offers designed to impact customer outcomes.
Subscription Sales
You can use this engagement model to figure out what you need to do within your organization to be able to deliver this experience for your customers. The stages outlined in this diagram summarize the capabilities that you will need to sell, implement, and deliver solutions that create customer value. This is the most important cultural shift that any sales organization needs to tackle on this journey.

The Three Strategic Imperatives of Sales Transformation

“Shift Right” – the move to outcome and value selling

This is fundamental to the success of organizations looking to sell subscription or XaaS offers, yet many companies fail to make the connection between subscription offers and outcome, or value selling. There are two factors that make this a non-negotiable imperative:

  1. Business buyers, who are increasingly responsible for technology spend, don’t want to talk about features and functions. They want to understand how a solution is going to improve the efficiency and effectiveness of their business operations. In other words, what is the outcome value that you are going to deliver. 
  2. The economic success of subscription-based offers is tied to whether the customer buys more and renews their subscription. If you’re not delivering value, then the customer won’t buy more and won’t renew.

Enabling all your sellers, not just the ones that handle your high-end accounts, to be able to engage with customers and prospects in this way is not easy. If you look back to the diagram above, you’ll see that this is best described as enabling your sellers to “position proven offers with known outcomes.” 

This exact topic will be covered in a lot more detail at the upcoming TSIA Interact event in October.

Digitization – the automation and intelligent enablement of sales

There are a number of consequences of the “Shift Right” as described in the previous paragraph. The image below describes the ideal future state operating model for sales organizations:
Subscription Sales

In the historic, all revenue activity in the sales operating model (Land, Expand, and Renew) is handled by Sales. In this new model, the activities are appropriately allocated to the function with the necessary capabilities and the appropriate cost.

In order to have your highest paid resources (typically your front-line sellers) make the shift to landing subscription offers that impact business outcomes, it is not enough to simply provide new PowerPoint slides and some virtual training. You will need to implement new processes and tools that facilitate an outcome dialogue with the customer. You will also need to be able to effectively monitor and report the actual value that you’ve delivered to customers and you will need a system to baseline the current KPI performance and then track the achievement (or not) of the improvements that you “agreed” to during the sales process.

This will subsequently give the customer success and renewal specialists the evidence they need to be able to easily upsell and renew contracts at a much lower cost of sale.

And finally, you will need to make e-commerce, self-service, and automation a priority so that customers can easily complete basic transactions themselves without having to engage in an unnecessary and costly engagement with a seller.

Bridge the Divide – creating alignment between pre-sales and post-sales

Many of you are familiar with the LAER framework. It has become the prototype customer lifecycle model for businesses who have a recurring revenue business model. The steps describe the four critical stages that you have to develop competencies around if you want to have a growing profitable subscription business.

You have to land new customers, you have to make sure they are adopting (or using) what they bought, then you’re able to drive expansion through cross-sell and up-sell activities. Finally, you’ve got to make sure that when their agreement expires that they renew.

LAND is the pre-sale activity to get someone up and running and AER are post-sale activities. As you implement LAER, you quite rapidly realize that the way you LAND a new Customer and the way they’re onboarded has a significant impact on how easily you can grow and retain the relationship.
Subscription Sales

Now, each stage of the LAER journey is made up of a series of activities that occur along the timeline. So, if you think about LANDING a new customer there are standard activities that you will go through.

These activities start all the way back in marketing, when you are prospecting for new customers, and flow through the Discovery, RFP, and Deals process. If you are able to push them along, then finally / hopefully you negotiate and close the deal.

And this set of activities is typically owned by Sales and Solution Engineering, which is called lots of different things in different companies. Basically, it’s the pre-sales functions, which are increasingly calling on post-sales resources to help with the sales effort.

Once you’ve landed the deal, you then run your post-sales plays: onboarding, adoption plays, etc. These are all generally run by a combination of Services, Customer Success, and Renewal Specialists. With Sales resources occasionally being brought back in if there is a big opportunity for growth or help is needed with the renewal.

What that means is, during the sales cycle there are various topics that need to be discussed and agreed to with the customer. You need to:

  • Know what the customer is looking to achieve, both at an outcome and a financial level. 
  • Agree on how to collectively measure success. 
  • Baseline the critical KPIs. 
  • Ensure there is no ambiguity or uncertainty around scope and timing of what you’re looking to achieve.
  • Everyone involved in the value realization journey needs to be on board with the plan and, more importantly, everyone needs to understand their role. 
Subscription Sales
Creating alignment between the pre-sales and post-sales teams around these topics, and making sure there is a formal process in place to do this will go a long way to making sure that customers are set up for success and future revenues are optimized.

Learn More About Sales Transformation at TSIA Interact

At our upcoming TSIA Interact virtual conference, taking place October 20-22, TSIA members and attendees will be covering this topic and more in detail, sharing additional data, real-world best practices, and pitfalls to avoid. Be sure to register today to take advantage of the valuable insights you can look forward to in our Subscription Sales track.
 

Martin Dove

About Author Martin Dove

Martin Dove is the vice president of subscription sales research for TSIA and brings a unique set of experiences and insights on outcome-based selling and subscription sales methodologies. In this role, he works with TSIA members to help them navigate the journey to being more outcome-based in the way they sell and to optimize their organization’s sales of subscription, or “as a service” offers, to both new and existing customers.

 
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