Part 1 of this series introduced the top five technology industry challenges for 2018. Part 2 below addresses implications a few of these challenges will have on your tech business and how AGI can help.
XaaS revenue leaders face numerous, relentless challenges, including lowering the cost of customer acquisition, building a growth engine and leveraging channel partners. Getting these issues right is the key to revenue growth success.
Challenge 1: Lowering Cost-of-Customer Acquisition
Tech vendors must allocate additional resources to early sales cycle activities in an effort to:
These actions will obviously substantially increase customer acquisition costs (CAC), often creating an expense-to-bookings (E/B) ratio of well over 100 percent. Vendors must improve the yield and capability of early sales-cycle resources in order to generate more sustainable CAC levels long-term. Tech companies increasingly utilize digital capabilities in this space to drive more cost-effective interactions with an expanding prospect universe.
AGI has helped companies improve segmentation and targeting of prospects to get in front of more likely buyers more frequently. As part of this work, you must structure new sales roles to better enable early sales-cycle selling including next generation digital reps, try-and-buy program managers, social marketing managers and other identify-land-adopt focused resources. AGI has also helped with resource reallocation and staffing modeling to support customer acquisition efforts.
Challenge 2: Building an Enhanced Revenue Growth Engine
Tech vendors must reallocate resources to support post-sales adoption, renewal and expansion sales motions:
As AGI research bears out compellingly, a XaaS subscription booking provides an ideal platform for revenue expansion. Not only is expansion revenue between eight and 10 times less costly (sales and marketing costs) than net new acquisition, it is also considerably easier to identify, source and target. However, capturing all of this potential is dependent upon building a scalable, efficient subscription revenue engine to ignite growth.
Companies need to identify, build and articulate post-sales revenue plays and rules of engagement. AGI can help define post-sales roles (e.g., account managers, customer success reps, cross-sell specialists, etc.) to execute expansion plays. Our research provides us with industry benchmarking to calibrate post-sales roles.
Challenge 3: Leveraging Channel Partners
Tech vendors must examine their current channel partners, partner programs and internal partner support resources to align their indirect channel capabilities with their overall go-to-customer growth plans to:
A robust set of channel capabilities can provide vendors with a competitive advantage in the marketplace, but tech companies must be more deliberate and selective to focus on channel relationships that are ultimately accretive to revenue and customer value development.
To overcome this challenge, evaluate current partner relationships and identify opportunities to supplement programs with higher capability partners while curbing or eliminating support for partners with less or unneeded capability. Companies must also define indirect channel sales motions, rules of engagement, and roles and responsibilities for both vendors and partners. AGI can build effective internal channel-facing roles and sales compensation models (e.g., partner account managers, channel account managers, partner advocates and alliance managers) to properly support and enable channel partners.
Successful technology leaders who make the most of lowering cost-of-customer acquisition, building an enhanced revenue growth engine and leveraging channel partners will set a course for improved revenue growth this year.
The experts at the Alexander Group can help tech organizations of any size grow market share and top-line revenues by harnessing the power of effective go-to-customer coverage and sales compensation.
The final part of this series will address how to get acquisitions right and how to navigate ASC 606.
Read Part 1 of this series.