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Increase Value, Increase Sales

Recurring Value, Recurring Revenue

Creating the right culture is essential to any company’s success. The key pillars of a successful sales culture include a clearly articulated mission and revenue goals, the use of science-based methods, organizational trust, and ongoing sales coaching. The sales culture of a company will be a key factor in determining whether a business is successful or not. In order to build a winning company strategy from day one, begin by putting customer-centric principles and team success at the core of your sales culture. 

To do this, you must clearly define the company-wide goals, vision, and values that everyone will be accountable for upholding. Being part of a bigger purpose will motivate employees to strive for excellence, and it also aligns the company on shared beliefs. This type of cultural accountability will prove its value during a company’s most challenging quarters as it brings everyone together to work harder in order to meet (or exceed) company goals. In this article, we share concrete methods to translate recurring value into recurring revenue.

1. Deliver Impact 

The typical buyer’s journey that a customer goes through is often thought of as the general phases of awareness, education, and then selection of the right solution for their business. Similarly, the typical sales process that revenue teams use to work with their customers often focuses on those three phases. But once the customer makes their selection, that is not the end of the customer journey; it’s actually the very beginning. In this way, recurring revenue teams typically make the mistake of focusing primarily on their own sales process to get to the commitment from the customer, ignoring the rest of the customer journey where the customer is focused on achieving their desired impact. The sales process for certain recurring revenue products may take just a few months, while the length of a successful relationship with that customer may last many years. Therefore, rather than a narrowing ‘funnel’ that ends with the customer commitment, the proper process and model for recurring revenue is far better represented by a bowtie, with the customer commitment in the middle.

One of the challenges of increasing perceived value in subscription businesses versus other industries is the need to maintain that perception month after month, year after year, to keep subscribers on board. You can increase the perception of value, but at the end of the day, you need to deliver continually in order to keep those customers around. There is a fundamental rule that drives sustainable growth for successful recurring revenue businesses: recurring revenue is the result of recurring impact. Many companies think in terms of prospects, MQLs, and qualified opportunities. Instead, the sales process should be thought of in terms of the customer: expressing interest, engaged with us, committed to a solution, ready to activate, achieving recurring impact, and growing further to achieving maximum impact. When we start to use this customer-centric mindset and terminology, we start to act in the best interest of our customers, helping them achieve recurring impact, in turn yielding recurring revenue over time.

2. Go-To-Market

Every company needs a documented sales process and sales playbook that will evolve as the business grows. There are several basic steps to consider as well as pitfalls to avoid when designing and implementing a process. Not every Go-To-Market model will require the same sales process. Depending on your company’s market segment or customer type, there will be slight differences and adjustments that need to be made. Documenting your company’s sales method has three major benefits: First, it provides consistent guidance to sales reps about how to progress through each deal. Second, it conforms company sales activities to a process that you can easily measure. Third, it allows you to understand what is working well and what needs to be adjusted.

The GTM Model shows how the specific motions of Marketing, Sales, and Customer Success can be matched and aligned, based on two key factors: 1) the number of deals sold per year, and 2) the annual contract value (in the first year of the customer’s contract). The GTMs must be matched in order to achieve maximum efficiency and growth. When we map the GTMs of Marketing, Sales, and Customer Success to the axes of number of deals sold per year and annual contract value, we can then understand that the customer acquisition cost and the service the company delivers to them are being matched together. As an example, in product-led growth, the customer wants a low-priced product delivered to them very quickly; with named accounts, they are buying products at a high price point and typically want high-touch service and customized support along the way. By applying GTMs in this way, companies can deliver the best possible customer experience during the buying process, while spending an appropriate amount of effort to acquire that customer.

3. Cultivate Relationships

There are a few specific moments in sales that require special attention. If you and your team perform well during these moments, they will work in concert to generate success. We’ve identified seven key moments that are crucial during the recurring revenue sales cycle.

Business results, not fit. The concept of fit is reframed as impact. For example, the sales team at a car dealership must understand that they are not just selling a car — they are selling the ability for their customers to get to work and to provide for their family. Uber realized that impact could be unbundled from the car itself. Now Uber now sells pure impact (the ability to get around) to its customers, eliminating the need to actually own or even rent a car.

Conversation, not qualification. Instead of determining whether a prospect is “qualified” for your solution, focus on the fundamental skill of conversation. Conversation is a more natural, human activity. It helps you connect with the prospect on an emotional level and uncover real, pressing pain points. Have a clear idea of whether, when, and how your solution can have an impact on the customer’s business.

Diagnosing, not pitching. Keep this in mind: “Prescription before diagnosis is malpractice.” A salesperson must first understand the customer’s pain and what they want to achieve, before recommending a solution that will benefit the customer’s business.

Trading, not negotiating. This single change in wording and emphasis can have one of the greatest effects on your cumulative sales. When two parties negotiate, typically both parties come away with having given up things that they want; both parties walk away with something they were hoping to get, but compromising on other things so that a deal could be struck. That’s not a win-win scenario. Instead of negotiating, think about what you’re doing as trading. For instance, if you’re asking for something of value from the other party, what are you going to offer to them that is of equal value. This mentality forces the seller to think from the customer’s point of view, not just their own.

Orchestrating, not onboarding. Rather than just onboarding the customer to get them to start using the product, consider this to be an opportunity to orchestrate the entire business relationship going forward. Guide how the relationship will develop, set milestones for success, and ensure the relationship is set up to provide real impact to their business.

Results, not usage. Product usage isn’t a proxy for success. You should be looking at the success of the product itself. A more impact-focused approach would be to explore whether the customer is getting the results they need from the product.

Growing, not upselling. “Land and expand” implies that the customer is like a territory that should be mapped, flanked, and conquered. Instead, expansion teams should be thinking about growing the customer relationship. It’s the impact that matters most to the customer.

  1. Be Transparent
    Trust plays a major role in recurring revenue. Customers who trust your business are more likely to be “sticky” — loyal even when the competition lowers their prices. Another way to prove your value to customers is to gain their trust through process transparency. How do you achieve the results you’re sharing? How are you measuring the results? By being honest, customers gain an understanding of not just how good your business is, but also why it’s so good. Transparency builds trust, and trust attracts sticky customers who are sure to be subscribers for the long-haul. Reaffirm that trust with a strong product that delivers, and your recurring revenue is assured. By standardizing on customer impact, companies can overcome these challenges and align their teams to become customer-centric.

SPICED (Situation, Pain, Impact, Critical Event, Decision) is a diagnostic framework that provides the guidance for keeping the customer’s desired impact as the ultimate goal, at the forefront of all conversations that occur during the sales cycle. It allows for both a consultative and provocative conversation, where the seller asks questions to understand what the customer wants (consultative), and encourages the customer to think differently or see a different perspective (provocative).

  • Situation. Facts or circumstances relevant to the customer that determine whether the customer falls within your ideal customer profile and what is happening in their world. Such as size of company, number of employees, software they use, hiring needs, security needs, or revenue goals.
  • Pain. The problems the customer has purchased your product or solution to help solve. This could include the need to conduct training or recruit, support a global team, pass a security audit or stop errors from happening in a process.
  • Impact. The results produced by solving pain. These are the outcomes the customer is trying to achieve by purchasing your solution. Impact can be both emotional, for individuals, and rational, for companies.
  • Critical Event. Any particular deadline by which the customer must achieve the desired impact or suffer negative consequences. Critical Events drive the customer’s timeline for a purchase. This is distinctly different from a compelling event, which does not have a specific deadline associated with it.
  • Decision. The people involved in the decision, the process they will follow to reach that decision, and the criteria they will use to evaluate the right solution.

5. Scale Growth 

As growing companies move along the journey from starting up to scaling their growth, they go through a few key stages:

  • Product-Market Fit: In this stage, the company is finding its fit with the market (e.g., determining the right price for the product they have built, for the market they are serving). The company has a high customer acquisition cost, as they learn more about their customers – what they are willing to pay, what impacts they are looking for – and adjust the product based on those learnings. 
  • Pitfall #1: No sales process. These early-stage companies are usually in Founder Sales mode, so every deal closes differently. While it may be clear to the founder how the process works, others on the team may be uncertain. 
  • Solution: Search company emails and calendars for the customer’s name so that you can review a history of the relationship, how it started, and the meetings you had. Try to glean common themes and language from each deal that the company closes so you can document it.

  • Go to Market Fit: In this stage, the company is now learning to sell its product in an efficient and effective way. Toward the end of this stage is typically when venture-backed companies raise a series B round of funding, in order to facilitate scaling going forward.
  • Pitfall #1: Failure to analyze deals against a process. Your company keeps winning deals, but the sales reps do not review the deal to learn why the customer purchased your solution and how to improve the customer experience. 
  • Solution: After a sales rep closes a deal, ensure that they look back over the process at each step to understand what happened, why, how to replicate it, and where there is room for improvement.
  • Scale Up: In this stage, the company is learning how to grow and scale the business, applying what has been learned in the previous stage in order to accelerate growth.
  • Pitfall #1: Retaining the same sales process. Your company has expanded into different markets, segments, or verticals, but it has kept the same sales process for all of its customers. 
  • Solution: New segments of the market behave differently. If your company used one sales method (such as Consultative) to sell to SMBs, you will likely need to change your process. For example, selling to mid-market customers is different because your sales will now require more people to approve the process, a longer sales cycle, and a more structured purchasing process. To remain customer-centric and continue bringing value, your company must create a sales process that fits each segment of the market that it targets.

6. Evoke Emotions 

If your sales team is still talking about needs and benefits, then they aren’t giving customers what they want. The focus in today’s world should be Impact. What exactly do we mean by Impact? Human beings experience impact in two ways: rational and emotional. 

  • Rational impact is measurable using facts and figures. Does it help save on costs? Does it increase revenue? Rational impacts usually refer to benefits or impacts that affect the company overall. 
  • Emotional impact is based on feelings and experiences. This kind of impact centers on ideas that aren’t as easily quantifiable, such as user experience or employee experience. Emotional impacts usually refer to benefits or impacts that affect the individual employee; for instance, your prospect might express that they need your platform in order to “save four hours of processing time each week” or “give me peace of mind that my department’s crucial data is protected.” 

Research shows that people tend to make emotional decisions first, then validate them later on with facts and figures. Thus, emotional impact supersedes rational impact.

In traditional sales methodologies, sales teams identify a customer’s needs and talk about the benefits their product or service has over those of the competition. This can be a mistake, because it focuses completely on rational impact and ignores the emotional impact that the prospect is looking to achieve. Your customer’s needs are more like an onion, with overlapping layers that can be peeled back by asking the right questions. By diagnosing a customer’s needs, your sales team can uncover the underlying impact they are looking to achieve. And impact is what differentiates the nice-to-have from the must-have solutions. 

Demonstrating rational and emotional impact isn’t a one-time proposition. If you’re using the conventional sales and marketing funnel, your team should be thinking about impact every step along the way toward the sale. When we focus on expansion sales specifically, we have to look backwards. What were the customer’s pain points before you started working together? How were you able to solve them together? Has that customer actually achieved the full impact that they were seeking when they first sought out your solution? A common trap of companies is to focus entirely on adoption and usage data: those are focused on your own needs rather than the customer’s needs, and they are all about rational impact. To tap into the emotional impact, point to real customer problems that you helped to solve, and measure the results in a way that your customer can connect to. Once you’ve accomplished that, you can start looking forward toward your future relationship with the customer. Demonstrating emotional impact is a powerful way to plant the seeds of expansion.

7. Consumer Experience

The availability of Information and technological innovation has created a power shift away from sellers, placing control firmly in the hands of the customers. There are no more ‘rainmakers’ selling ice to eskimos, famous high pressure sales tactics won’t survive and accelerating old sales techniques with technology is just going to accelerate failure. Sales is now a customer centric pursuit and we need to evolve how we sell or find a new profession! 

The proliferation of subscription based business models is changing how customers purchase. Instead of buying a product or service with a high initial upfront investment with ongoing maintenance costs they can now purchase in monthly or annual installments. This is transformative as the lower cost democratizes the buying process, enabling anyone in the business with a credit card to make a purchase decision. fueling a transactional sale.

67% of the buyer’s journey is now done digitally and B2B buyers are demanding a similar buying experience. The explosion of content enables business customers to better understand the problems they face, how others have solved them and stack rank potential solutions, Comparing pricing, features and your credibility before they even speak to anyone in sales. Traditional sales methodologies have failed to keep pace with this customer change, developing a sales innovation gap.

If you aren’t engaging your customers online you are missing an opportunity to influence during the formative process of researching problem solutions. Waiting for the customers to contact you means that you are late to the game, opinions and solutions have been formed making your job of influencing the journey a losing battle. We need to embrace the customer’s digital problem solving process!

In recent years we have seen a proliferation of SaaS solutions to help the B2B seller  close the innovation gap and support the customers problem solving process. From helping you identify potential customers on LinkedIn to getting the contract signed with digital signature apps like DocuSign and PandaDoc and managing your customers’ success with Intercom.io or Zendesk.

When deployed with traditional techniques and tactics these efficiency tools are accelerating bad sales behavior and training buyers to ignore sales messages. Think about that generic email you recently received or the unwanted cold call that sounded scripted. They are accelerating failure! On the flip side, when deployed with a customer centric methodology they are transformative, accelerating the problem solving process and increasing sales effectiveness exponentially.

8. Mitigate Risk 

Another way to increase perceived value is to, in fact, decrease perceived risk: Real Value – Perceived Risk = Perceived Value. The good thing is you can change the variables in the equation as you wish. You should be focusing on reducing the perceived risk to a minimum and then increase the real value of the offer. Because no matter how valuable your offer is, your customers won’t commit until they feel assured. When it comes to financial matters, your customers are very skeptical. You have to address this skepticism head-on. Not in a rude way of course. This will indirectly assure them you understand their concerns. Assurance provides certainty. And certainty in their decision-making process will always lead to sales. This is the blueprint of all online businesses. 

Your customers make decisions once they are convinced it’s the best decision for them. It’s the marketer’s job to assist them so they can commit with confidence. Any products or services have some kind of features that bring a functional benefit to your customers. These benefits will solve the problems of your customers. However, it’s the positioning of your offer that’ll enhance your offer’s real value. But marketers always tend to overemphasize the real value of their offer. This doesn’t contribute to your customers buying from you as much as the perceived risk. Remember, marketing has transitioned into a customer-centric approach. That means your customers’ assurance is the real value in this context. You’ll be more likely to see improvements in your marketing once you adopt this approach.

9. Price Strategically

Intelligently managing price structures and levels is the most important topic to secure business success. Get it right and you will thrive. Get it wrong and risk permanent damage to your business. Excellence in pricing goes far beyond the price of an individual product. It involves strategy, goals, positioning, but also governance, tools and finally all of a company’s processes and culture that ultimately result in the price tag. Optimal pricing plays a pivotal role in achieving profitable growth. It requires experts with an in-depth understanding of customer segments, the products’ value-to-customer, and experience in handling the relevant business data to come to the right conclusions. A 5% improvement in pricing without volume loss and average margins can boost profits easily by 30% to 50%. You may already have a cost-cutting strategy in place to boost profits. But no matter how heavily you invest in increasing volumes and cutting costs, this can only take you so far, and intensive efforts have often already exhausted all potential.

The length of the sales cycle tends to shorten as we move from a value-based proposal with an upfront payment, to impact-based performance with payment at the time of consumption. Indeed, with the term ‘recurring revenue’, most people typically think of services sold on monthly, quarterly, or annual contracts, yet recurring revenue models actually exist across a much wider continuum. There are three types of models along this continuum:

  • Ownership: The most extreme example in this category is where a company is selling on-premise hardware, where the buyer pays upfront (e.g., perpetual software license).
  • Subscription: Most typical as-a-service businesses fall in this category, often with monthly, quarterly, or annual contracts paid upfront.
  • Consumption: This includes various forms of usage-based pricing; an example of this is pay-as-you-go cloud computing resources. 

Businesses can move from left to right, as well as from right to left, along this arc; doing so changes how the business should price their product, as well as how they sell it. It is crucial to be aware of these necessary changes, and the impact they have on the company’s revenue operation. The principles of recurring revenue apply to any business where they do not make a profit on the customer’s first purchase, and therefore need to continue to sell and provide recurring impact to the customer over time. ​​In a pay upfront model, the buyer bears the majority of the risk, as it’s much harder for them to return the product and realign their organization around a new solution. As we move further toward subscription and consumption models, the seller instead carries the majority of the risk: their company has made a large investment in developing the service, while there is very little risk to the customer for changing their mind.

Overall, for the past several decades, most companies have used a traditional model typically referred to as the “sales and marketing funnel.” But there is a fundamental problem with this model: Recurring Revenue takes place outside the purview of this conventional funnel. Why? Because as we have shown, the funnel ends at the point when the deal converts to a paying customer…which means that the funnel does not show the recurring revenue that takes place in the months and years during which that customer uses the product they purchased, when they renew their contract, and when they expand their usage. 

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