“Land & expand” is the modern VP of Sales favourite phrase to bandy about that marketing has brought into their net. It’s all about signing up huge volumes of net new customers, then pushing the expansion of revenue, cross-sell and up-sell to these customers. It’s crude, tacky, over-simplified and jargon. If it really were that simple, every business would be booming, and every sales director and their team would be driving convertible sports cars due to the commission they are earning! So let’s rewind a little, and in this week’s post, focus on the two words that are missing from this over-simplification about how the world of SaaS really works!
The phrase “land and expand” has been around almost as long as businesses switched from selling software on disks to software online. The concept is stunningly simple, and when executed well, ruthlessly effective. Most modern management teams know that it’s not as easy as launching their product to the world and waiting for the revenue to come in (in fact, that myth was well and truly busted, time after time, in the murky world of pyramid selling schemes.) But what do we actually mean by the phrase? Let me tell you a story about Bob, and his online product, Widget.
Bob creates a really cool online product called “Widget”. Widget is a great solution to peoples’ problems, so Bob assumes that as soon as he makes it live, people will discover it, and he will get rich quickly. After some time, Bob finds that although people who love his product generally really do love it, not enough people seem to find it. So Bob employers a marketeer, Jean. Jean furiously works to create a funnel, raise awareness, leverage social media and SEP (search engine optimisation) to bring a bucketloads of leads in for Bob.
Lots of those leads convert into new customers for Bob, but Bob finds that some prospects need nurture to help them to convert. Bob hires a head of sales, Brad. Brad works furiously to further expand the funnel, incentivising a team of sales “hunters” to convert prospects to sales. Bob is happy with his growing business.
Bob adds a few new products and services to Widget, and makes various changes to the original product. Bob sets Jean and Brad the task of growing not just the new customer base, but increasing the revenue (and thus profitability) of the existing customer base. Jean and Brad push hard, and sure enough, there is a decent amount of growth within existing customers, but when Bob looks at overall profitability, he sees a not-so-positive picture. The customers come in, and some even buy more, but many just flow back out the door. This is pretty costly, because Bob is paying Jean and Brad for every converted lead, but with so many leaving before they become profitable, this is becoming serious.
“Not my job“, cry Jean and Brad. Bob realises something is missing in his “land and expand” world. Bob brings onboard Janet to head up service and customer success. Janet is responsible for helping to get the customers adopt the products they have just purchased, then removing all the barriers to them forming a healthy new habit favouring Widget, rather than their old habit. This is adopt and engage. Without helping the customers to see the value of their Widget purchase, and then easily become a regular user, Bob’s customers made no connection with Widget, and started to look for another solution (or lapsed back to their old solution.)
At first glance, some might assume that Janet’s function is just fixing broken stuff in the product or process, but in fact, Janet knows that human beings are creatures of habit. Even if there is a quicker way to work, we will still often stick to the route we have always taken. Janet has to unpick the old habit, and ensure that the product supports this. Then Janet and her team help the customer to form the new habit, becoming fully engaged with the Widget product. Only then, when a customer is successful, seeing tangible value from the Widget product can Janet set her team to help the customer discover more value, through additional purchase of the same Widget product, or by discovering new Widget products and services that will deliver value, the expand element.
All too often, an ambitious CEO will listen to his product team, and believe that the product IS what customers need. They may or may not be right, but unless you can validate that customers are achieving value, then they are unlikely to stay with you in the short, medium or long term, buy more or recommend you to others. Bob has learned this, and sees the importance of a sales funnel that goes BEYOND closing the deal, through adopt and engage, before expand can happen. Even more importantly, Bob now knows that in order to deliver his revenue growth number, there are actually 4 headline metrics he needs to track to drive his “land and expand” model:
Land – Adopt – Engage – Expand