As connected devices become a standard offering for manufacturers, many organizations are concerned with how to grow and scale beyond the standard “one and done” sales model to a recurring revenue model.
In the following video, Tim Meuschke and John Stamos, directors for Alexander Group, discuss the sales motions needed to expand sales of new and current offerings to new and existing customers, and the new and specialized roles, including those for post-sales activities, to support new sales models.
At 2:50, Tim discusses the six key expansion motions including adoption upsell, usage upsell, multi-product cross-sell to same buyer, new buyer cross-sell, platform selling and enterprise license agreement or bundled solution selling.
Tim Meuschke: Hello, my name is Tim Meuschke, director with Alexander Group’s Industrials practice, and I also have with me my partner in crime, John Stamos, also a director in Industrials with Alexander Group. So a hot topic of interest that John and I keep getting questions about from our community is how do we grow and scale our XaaS or digital business?
I’m going to start with the ILAER sales process. I’m sure many of you are familiar with it. But I’d like to talk through this because it really sets the stage for the ongoing customer engagement to match the buyer journey and a recurring revenue model. In many cases, you’re used to the CAPEX selling model of access, persuade, fulfill. But now what we’re doing is we’re trying to de-emphasize, to whatever degree we can, on the actual device purchase and focus on the ongoing service. So there are obviously pricing strategies tied to that too. But getting back to ILAER here. First, we have Identify and Land – targeting and finding the right prospects to sell the initial deal. In this world, we sell the device, if there is one. You start the service contract typically a year or two-year, three-year contract. And you have the Adoption, which is really being that post-integration. You’re ensuring the product is being used to the fullest extent. The customer is getting the most value out of the product. If you have a licensing agreement, who are the users, that’s what you’re interested in. Are they actually integrating all the capabilities of what you sold? This is ultimately what’s going to make that product sticky. Then we moved to Expansion. This is what we’re going to focus a lot of time on today. This is during Adoption. You actually find these Expansion opportunities. This is where you’re digging around in the account. And we’ll get on that in the next slide. Talk about the six strategies there. But lastly, you have the Renewal piece. So this is where you’re renewing the contract. And the idea is if you did a great job through Adoption, this is really a foregone conclusion, already a non-event.
But let’s talk about the different types of Expansion opportunities on the next slide. So here we have six different Expansion motions. And like any good consultant, we have our two by two here. So showing our existing customers on the bottom left with our existing buyers, our existing customers with new buyers and then the two across the top selling our current offering or selling a new offering to those buyers. So I’ll briefly highlight a few of the six here, but usually, companies pick one or two and get really good at it. Not all six. But there are six different types here. So the first one, an adoption upsell. This is ensuring your customers are maximizing the adoption of the technology against all those different kinds of users. Another one I’ll hit here, so the multiproduct cross-sell, the third one. This is where you’re not necessarily selling the features of the product, but you’re identifying complementary solutions to support the base product. And then the last one I’ll hit is really the kitchen sink here. Number six, this is where you sell everything upfront, and all you’re really doing is ensuring everyone’s adapting and using the entire bundle technology upfront. So the key here is there are lots of different ways to do Expansion and annual recurring revenue model or ARR and how you can win there. So I’ll hand it over to John, who can tell us about the different roles and coverage to support these types of sales.
John Stamos: Thanks, Tim. So what are some of the roles and coverage considerations for Land and Expand model? Well, it’s changing where we invest in our resources. It’s leading to more time spent on that continuous engagement. So you’ll notice on this slide at the top, you can see the traditional model where we’re focusing on investing on resources primarily to close deals. Spent a little bit upfront to engage prospects, generate leads and a little bit on the back end in the post-sales. But whether it’s new roles or existing roles, spending more time on Adoption/Expansion opportunities, it really is fundamentally changing the roles the way that the roles are being used. To fund growth, companies are investing in specialized roles: field marketing, lead gen. You’ve got oftentimes overlay roles to help land deals, particularly if you’re layering a software as a service. You may have some specialized reps to support the traditional seller to articulate the differentiated value and the capabilities that your services offer. And then, of course, post-sale. What are we doing to ensure that the product is sticky? The value is maximized, and we’re proactively leveraging what it means to Expand and ultimately minimize churn. And you’ve got specialized resources there.
Let’s drill down into some of those specialized resources. So on the next slide, you’ll notice on the left, we’ve got our traditional model. You see the two by two. On the y-axis, we have our buyers, existing customers and prospects. And on the x-axis, we have our products, current and new. And so you might say the traditional model where you make a sale walk away until there’s a new device to sell, we have a traditional rep. We’re expecting them to do a series of activities: sell new products where it makes sense in the existing customer base, doing some account management to ensure we’re staying in good standing and they’re likely hunting for new customers. In the Land and Expand model it helps to think about well, for retention, who do we have ensuring we’re minimizing churn for the recurring revenue coming in the door? And then two, how do we think about the hunting in the wild versus hunting in the zoo? What sort of focus areas do we want our core seller to support and where can they be flanked through some of the support resources? Who’s focusing on that Adoption and satisfaction among the user base? Oftentimes, that’s a customer success manager. So you’ll see there are some common expansion strategies with that customer success manager focusing on ensuring that the product is getting full use, integrating into the process, et cetera. And you’ve got the account manager hunter/hybrid model where you’re focusing on aggressive account expansion.
This is just intended to give a brief overview on how we’re seeing the dynamic change towards that Land and Expand model. For more information on this topic or other areas of interest, please reach out to an Alexander Group practice lead or send us an inquiry through our website www.alexandergroup.com. Thank you.