What is Expand Selling Anyway? A Brief Guide to This New Concept

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Expand_Selling_Rocket_ShipAs the newest member of the TSIA Research Team, I will be focusing on the emerging concept of Expand Selling. Given that it is not yet a household term, it raises the question, “What is Expand Selling anyway?” 

Broadly defining it is straightforward enough: Expand Selling is “the generation of new product and services revenues beyond the initial sale to a customer.” (Tweet this!) However, TSIA has a more extensive view of what it is, including how technology companies can embrace Expand Selling to improve revenue and profit performance. Before delving into what Expand Selling is, let’s explore what is driving the need for it.

The Current State of the Technology Industry

Our industry is experiencing an overall decline in product revenues and a lack of profitability for emerging Cloud subscription revenues.

Expand_Selling_Cloud_20_Service_50_2


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In TSIA’s recent book, “B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship,” we discuss that the primary reason behind this decline is because customers are less willing to pay for expensive, high-risk products and services up front. Instead, they want to pay for what they consume and for services that help them achieve specific business outcomes, (Tweet this!) as shown by the move to Level 3 and Level 4 operating models.

Supplier_Operating_Model

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Despite the move to these models, many companies have not yet figured out how to make them profitable. One major reason is the high cost of Sales and Marketing many suppliers are incurring, which negates what otherwise are respectable gross margins. Clearly, these new operating models require selling approaches that are more cost effective and scalable.

Expand Selling – Beyond the Surface

TSIA views Expand Selling as a formal, structured set of capabilities that tech companies need to build and deploy in order to accelerate revenue growth at scale. Just as we have seen with the rapid rise of Customer Success this past year, we see Expand Selling following suit related to its importance as part of our industry’s cultural fabric.

Optimizing Expand Selling will require transformation in several key areas, namely:

  • Customer Engagement Models that maximize revenue growth with existing customers.
  • Sales Roles to provide more cost effective selling capabilities.
  • Selling Skills and Functional Interaction capabilities across Sales, Services, Customer Success, and Account Management to better identify and close sales opportunities.
  • Customer Analytics capabilities to create scalability in identifying Expand Selling opportunities.

Customer Engagement Models

The TSIA Customer Engagement Model, also known as the LAER Model, provides a framework for how our industry interacts with customers from the initial sale to expanding our footprint with these customers.LAER Expand SellingEach stage presents suppliers with unique opportunities for profitable revenue growth with existing customers. Through our research, TSIA is seeing significant changes within the Adopt and Renew stages of this life cycle as companies dedicate different resources beyond Sales to optimize revenue performance.

However, we are also now seeing changes in how companies are approaching Expand Selling, with ownership of this important activity being shared with other functions beyond Sales.

LAER Model Explained

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Customer Success is the first to show up on the radar (as shown in the lower right box), which is only natural given this function interacts with existing customers every day, and can likely generate new revenue opportunities at a lower cost. We anticipate that such changes are just beginning, and will lead to more significant changes in how selling roles are defined.

Sales Roles

Different roles will result in different compensation structures and areas of focus. Furthermore, roles that are not traditionally held accountable for sales targets will start to gain accountability. These roles will see a portion of their compensation tied to achieving sales revenue and profit targets. Although traditional Technology Sales roles will certainly not go away, their efforts will be augmented with new, lower cost selling channels.

Selling Skills and Functional Interaction

Tied to these new roles will come the need for new selling skills, whether for technology sales resources who need to learn how to sell services and Cloud subscriptions, or Services resources who need to learn basic selling skills. As murkiness in these roles and “who does what” proliferates, the need to avoid organizational dysfunction increases. Sales, Service, Marketing and Product will need to come together in radical new ways to be successful. 

Customer Analytics

Lastly, we believe that leveraging Customer Analytics, at scale, will enable companies to optimize product and service revenues at a lower cost versus Level 2 product-centric models. We are seeing companies start to invest heavily in customer analytics resources, but more so for Retention and Adoption versus Expand Selling. We believe this is a tremendous opportunity area for all three sets of activities.

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Our Definition of Expand Selling

TSIA believes a proper definition of Expand Selling needs to take into account all of these aforementioned elements. Specifically, Expand Selling is:

  • The generation of new product and services revenues beyond the initial sale to a customer.
  • A core component of the Customer Engagement Model with its own unique set of capabilities and requirements.
  • More of a process than a rigid organizational structure that requires Sales, Service, Customer Success, Marketing and Product to come together in radical new ways.
  • The leveraging of Customer Analytics to cost-effectively identify revenue opportunities at scale.

I hope you will join TSIA on this journey, and encourage you to begin looking at Expand Selling through this broader lens. I also would like to invite you to participate in our upcoming Expand Selling Survey in January 2015, which will be used to baseline where our industry is on these key elements. All technology companies are eligible to participate, and can do so by contacting me directly via email or by contacting your TSIA Member Success Representative. I look forward to hearing from you.

About the Author

mark-middlekamp

Mark Middlekamp is vice president of research, Expand Selling, for TSIA. He has nearly 30 years of experience in sales, marketing, and software product management. Mark is dedicated to helping sales, services, and marketing organizations generate more profitable product and services revenues leveraging Cloud and outcome-based operating models. He can be contacted via email at mark.middlekamp@tsia.com.

Mark frequently writes about these topics:
Expand Selling | Collaboration | TSIA’s LAER Model

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