(& Why Customer Acquisition Cost & Customer Lifetime Value Metrics change everything)
In my last blog, we looked at the seven reasons why expand sales strategies fail. In this blog I want to look at three strategies for success – and also discuss the issue of sales team structures and their role in ensuring that land and expand strategies work.
Land and Expand – two teams or one?
There is no doubt that the ability expand deals calls for a different set of skills than those needed to land that first order. So, does this mean that a successful land and expand strategy needs two separate sales teams? While larger vendors can afford to have a new business team separate from the expand team, and it does afford the opportunity to hire against different skill sets, I would argue that this is a flawed strategy.
When the land team hands over to the expand team, this is the “hidden” single point of failure. What makes this even more damaging is that the threat to the expand business, at the time of handover, is almost impossible to detect – especially by the sales leader.
In fact in all my years of sales leadership, I have rarely seen an effective handover. Even with the most accurate CRM records it is virtually impossible to capture every interaction and nuance of discussion between the land team and the customer during the initial land campaign. So here’s the 3 slippery steps that destroy the expand potential:
- The land team wants to move on as it gets no compensation for the follow on business, so it’s in a hurry to “throw it over the wall” to the expand team
- The expand team will always by nature down-play the size of the follow on business following the old adage of “under promise and over-deliver”
- The customer has some nervous “did I make the right decision” feeling about the first order and now the land team has gone has an ideal excuse to deny, de-commit or delay placing any follow up orders when meeting the new expand team.
The hybrid sales professional
The alternative, and in my view better approach, is a single team or sales person with responsibility for both land and expand and in fact this is the reality in start ups which have pressures on headcount. However, the sales people obviously need to be capable, trained and coached in order to execute both elements of the strategy and know the different skills and techniques to use in each case. While hiring and developing these hybrid sales people is more complex, the payback is high. Clearly this also requires sales leaders to spend more time accompanying their team members when meeting customers so that they have first hand data on which to base feedback and coaching. While this view may be controversial and fly in the face of the traditional division of “hunters” to “farmers”, unless your business is lucky enough to win all the business possible from a new customer in one order, then I believe it has to be the only way forward in the successful selling of enterprise tech solutions.
Expand – getting it right – the three key actions
I believe there are three key actions required for a successful expand campaign:
- The sales leader needs to coach and mentor the sales team at the right amount of elapsed time after the first order has been implemented on the skills and tactics required for expand strategies
- A short “before and after” impact report should be prepared which documents the positive results delivered by the first order for the solution compared to the system or process it replaced. This is the basis of the business case for the expand campaign. There are three important benefits which result from this technique:
- The decision maker can see evidence that the first order was a good decision, the business benefits and is therefore far more likely to support an expand campaign
- It avoids the decision maker only hearing about minor operational issues from the team having to learn a better (but different) way of working
- If the first order was placed by a decision who is no longer responsible for any follow on business, the report is the best collateral with which to open up contact with the new decision maker
- Constant data should be gathered to record the elapsed time between the first order and when customers are placing the second orders in order to accurately forecast the flows of future expand revenues.
As we discussed in part 1 of this blog, the emergence of the CLTV (Customer Lifetime Value) metric compared to CAC (Cost of Customer Acquisition) used by investors and analysts to value tech vendors makes an Expand strategy one of the most important objectives for a sales leader to achieve.
In our search work we look for the character traits and skills that combine to make sales leaders and individual sales professionals capable of both land and expand.
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