This is the first in a 5 part series introduced here. The series is focused on how to increase revenue retention and expansion through your customer acquisition (Sales) strategy.
Put another way, this series will explain how to align your Customer Success strategy with your Sales strategy.
So let’s begin with how to Prescribe Value-Based Outcomes To Your Prospects:
‘Outcomes’: just another buzzword?
‘Outcomes’ is without a doubt one of the biggest buzzwords right now in both the Sales and Customer Success domains surrounding B2B SaaS. The promotion of concepts like ‘outcome selling‘ are driving the popularity of the term.
Being a buzzword, ‘outcomes’ can easily be found as another over-used word in a SaaS company’s leadership team’s vocabulary and slide decks.
This cascades down to their Sales teams talking about achieving ‘outcomes’ with all their prospects. Here’s how that conversation often goes, in this case a SaaS company with a sales/marketing product:
Salesperson: “So what you are looking to achieve with a product like ours?”
Prospect: “We’re looking to double our business in 3 years.” or “We want to digitally transform our marketing strategy.” or “We want better relationships with our customers.”
Salesperson: “Great, that’s exactly the type of outcome our customers achieve. Let me tell you about some of our best product features…”
The Sales team goes on to nail the demo and lands the customer. Customer Success hears there’s been a new win and prays that the customer journey mapped out in their playbook is:
A) A set of actions the customer’s users are willing to follow
B) A plan that will achieve the ‘outcome’ captured by Sales that is, in reality, more of a strategic vision or goal dependent on a number of variables outside even the customer’s control.
Yet this ‘outcome’ serves as the only stated milestone against which the value of the subscription will be assessed by the customer when it comes to deciding whether to renew or expand usage.
Should the prayers of Customer Success not be answered, Sales have just acquired another customer that is highly unlikely to expand or renew.
So how do you move beyond relying on the power of prayer and, instead, create an outcome-focused strategy that aligns your Sales and Customer Success teams and drives revenue retention and expansion?
By prescribing ‘outcomes’ to your prospects that:
- Deliver measurable value to your ideal customer
- Link together to deliver measurable achievement of your ideal customer’s strategic goal or vision
- Your Adoption strategy is designed to scalably and efficiently deliver with your ideal customer
I refer to ‘outcomes’ that meet the above criteria as:
…what exactly is a Value-based Outcome?
Value-based Outcomes are prescriptive and measurable adoption milestones representing the achievement and/or sustainment of value realization for customers.
For the customer, Value-based Outcomes are the measurable results they must achieve with your product to progress towards the accomplishment of their overall strategic goals. (There’s an example later in the article)
As a B2B SaaS company, Value-based Outcomes are what your customer must achieve for you to optimize the retention and expansion of the MRR/ARR for that customer.
If we agree that Value-based Outcomes are an important cog in your revenue retention and expansion engine, then we can agree that your sales strategy should only acquire customers that fit with this cog.
You can assess whether your prospects are a fit by prescribing your predefined Value-based Outcomes to them during the sales cycle.
Prospects that do not want to achieve or follow the plan to achieve the Value-based Outcomes you prescribe to them should be disqualified from your SaaS sales pipeline. Plain and simple.
This will save them from becoming a customer that fails to achieve their strategic goals with your product and a customer that will worsen your revenue retention and expansion metrics.
For you Sales leaders who are thinking this all sounds like a good way to lengthen and over-complicate your new customer sales cycles, the reality is the opposite.
The prescription of Value-based Outcomes will serve as a sales differentiator for acquiring new customers as much as a mechanism to help ensure the customer being acquired will be retained and predictably expand.
Providing prospects with immediate clarity on WHAT measurable value they will realize from your SaaS product, HOW they will achieve this and WHY these outcomes will enable the achievement of their overall strategic goal, all serves to de-risk the investment for the prospect.
Designing Value-based Outcomes
All sounds good? Makes sense?
So how do we execute?
Value-based Outcomes are designed by identifying the intersections between your ideal customers’ strategic desires/goals, your SaaS product’s value enablers, your ideal customers’ jobs and your product’s functionality.
Please note the term ‘Ideal Customer’. In a subscription revenue model, you should not be designing Value-based Outcomes on a per customer-basis unless you are selling a premium enterprise product designed to be bespoke and that commands an ARR that affords you the capability to have a very high CAC and long sales cycle.
Check out my upcoming article on Ideal Customer Profiles for more on this.
So let’s step through an example of a prescriptive Value-based Outcome being used in a sales cycle:
SaaStastic is a B2B SaaS company based in the U.S. that helps software engineering teams reduce costs by 20-30%.
For an ideal SaaStastic customer to accomplish a 20-30 % reduction in the cost of their engineering program (Ideal Customer Goal), SaaStastic knows what sequence of Value-based Outcomes must be achieved by the customer with SaaStastic’s product.
SaaStastic knows that the first and essential Value-based Outcome their ideal customer must achieve is a 30-50% reduction in time taken to complete their QA process.
SaaStastic knows that this Value-based Outcome can be achieved through automation (Value Enabler). Specifically, automation of a specific task often performed manually by their ideal customer in their QA process (Ideal Customer Job).
SaaStastic knows the task can be automated through their ideal customer’s QA team adopting a specific function in the SaaStastic product (Product Feature).
Enter SoftWhip, an exciting new prospect for SaaStastic. SoftWhip is a 20 year old software development company based in the U.S. with an engineering team over 50 people strong.
SoftWhip desire a 25% reduction in the cost of their software engineering and are wanting to invest in a SaaS solution to achieve this.
SaaStastic prescribe to SoftWhip’s decision makers and influencers that achieving a 50% time reduction for SoftWhip’s QA process will be a key milestone in accomplishing their desired 25% overall engineering cost reduction.
SaaStastic then present the adoption plan that SoftWhip would follow to achieve that milestone.
In response, SoftWhip share that they are not willing to make the changes to their QA process required to adopt the automation functionality SaaStastic provides. SoftWhip expect their desire for a 20-30% cost reduction to be achieved without any changes to their QA process.
Despite SaaStastic’s best efforts to explain the value of the change and how the change can be effectively managed, SoftWhip refuse.
What should SaaStastic do?
Tell SoftWhip: “We hear you and don’t worry. You won’t have to change your QA process. We’ll come up with a workaround or ask Product to make some changes. Sign here please.”
Sure. If SaaStastic are happy to:
- Take the upfront payment for the annual subscription
- Celebrate it’s addition to their top line
- Invest an inordinate amount of time and resources to then, 6 months later, explain to SoftWhip why the SaaStastic product can’t be changed and there is no workaround
- Watch SoftWhip fail to adopt and then churn at the end of year
SaaStastic cannot sustain growth or achieve profitability doing that as a SaaS company. As a customer, SoftWhip does not fit into their revenue retention and expansion engine. SaaStastic should disqualify them as a prospect and not acquire them.
By prescribing Value-based Outcomes during the sales cycle, SaaStastic will:
- Decrease Customer Acquisition Cost (CAC) spent on customers that are likely to churn (possibly before the CAC can even be paid back)
- Decrease Customer Retention Cost (CRC) spent on customers that still at high risk of churn despite the best efforts of Customer Success, Professional Services et al
- Reduce ARR and Customer Churn %s for each customer cohort receiving prescriptions
- Accelerate the journey to achieving and maximizing Positive Net Revenue Retention (negative churn) for each customer cohort receiving prescriptions
How many customers did your SaaS business acquire last month that don’t fit into your revenue retention and expansion engine?
Learn more at www.valuizeconsulting.com