Ensuring your business’ survival, let alone its development, has been no easy feat. It’s likely that many businesses like yours have had to make some tough decisions to stay afloat. As you look to the future, you’ll have many decisions to make regarding your business development. There’s no doubt that some of the major economic changes we’ve seen are here to stay. But there are changes that you can implement that will improve your bottom line and make the going more worthy.
One of the major strategies that have proven records of success in many industries is the land-and-expand sales model which aims to increase conversion rate and boost sales numbers. Keep reading as we dive into what land-and-expand can do for your business and how to adapt your processes to this model.
What Is “Land and Expand”?
And How Can This Business Model Benefit Your Business
The land-and-expand strategy, also known as “seed and grow”, is when you start with a small deal and use the agreement to form a strong relationship with the company through exceptional service. Then, you continue to sell to the business across different projects and expand your services and profit margins over time. This model allows you to maintain a positive return on investment while growing your business.
Over time, you can attract more deals with that client as they require more services and come to rely on your company for its stellar offerings. You leverage your initial sale to highlight your uniqueness, integrity, and proficiency in what you specialize in.
Land-and-expand model for SaaS companies is quite popular, and you can view success stories from companies like Alteryx, DocuSign, Twilio, Veeva Systems. However, the model is not limited to SaaS companies. Other businesses can take advantage of this model and stand out by disrupting their sales strategy and solution offerings. Successful implementations from Michelin tires that tuned to offer services per mile, or a mattresses selling company which adopted a service per night usage, have all seen lower risks and higher returns.
Three Pillars to Re-engineer When Applying This Model
Shifting your business to the land-and-expand strategy takes several vital steps to ensure its success. We’ve outlined the three major pillars of an effective implementation of that model which should be applied in the following order as well.
1. Disrupt Your Solutions
Your business solutions (products and/or services) need to be divided into smaller chunks to be able to apply this new business model. Some businesses might find their new solutions in a relatively easy and fast way, others might be a bit more challenging. Following are a couple of steps to apply that can catalyze your quest and help you develop your new solutions.
- Understand your customer: Apply a customer-oriented study to segment your customers, know their buying behavior, the alternatives they compare you with and what features or value do they see (not what you pitch) in your solutions.
- Categorize your solutions: The first point will make you understand how your customers are using and valuing your solutions. Hence you can create your different smaller solutions (products or services) according to your customers’ tiers, or usage.
When your solutions are broken down into chunks, many other related numbers should be revised such as:
Pricing and Sizing
Pricing for each – or combinations of – solution(s) needs to be revised by taking into consideration: The length of its use, payment frequency, and the dimension you implement, such as Flat Rate, price per Usage, per Tier, per User, or per Feature; in coordination with the packaging and positioning. It is advised in this matter to apply a customer-based pricing (in opposition to cost-based and competitor-based). Sometimes starting with the pricing might be a catalyst for defining the new solutions.
Moreover, the solution size (or scope) needs to be justified by its order in the offering cycle, the target customer, implementation period, benefits to it offers, and its competitive advantage.
Michelin, one of the three largest manufacturers of the tires worldwide, has recently made that leap and disrupted its solutions to provide Tires-as-a-Service that has shown promising results. Another example you can think of is Rolls Royce Power-by-the-hour model of revenue generation.
2. Re-engineer Your Sales Process
Once you’ve restructured your solutions and services, the next thing to do is re-engineer your sales process. A land-and-expand approach often is critical to land deals and building momentum. The process should no longer finish with the Won/Lose step, the new funnel should rather look like a bow tie, centered by a relatively smaller win status and progressing with nurturing and account-growing steps such as onboarding, customer success, building relationships, and expanding.
This new funnel requires a different set of roles, from the traditional one-way funnel, which is reflected in the following restructuring of the sales organization.
3. Re-structure your Sales and Marketing Organization
The logical following step would be to restructure your business development organization to fit the new scenario. First, it no longer depends on a sales department but rather one unified unit of three departments working together in coherence: Sales, Marketing, and the Customer Success departments. Mainly because the land-and-expand strategy is based on the notion that your current customers are your best sources of revenue.
New roles will be in need and old ones would be idle, hence the hierarchy and number of people might get affected in either direction. For most implementations account managers, customer experience, and customer service roles are added, while pre-selling and first contact sales activities are replaced with contactless touchpoints covered by technology and marketing efforts. The sales department is no longer the main reason for success but its activities should be in total coordination with both digital marketing and technology arms which covers the activities to study the customer experience, extract customer insights, apply the right tools, offer customer service and support, in parallel to the ongoing personalized marketing campaigns. Consider replacing activities with tools and technology to shorten your cycle and increase the value of your sales executive time with a sales digital transformation.