The Six Dimensions for Expanding Customer Engagement and TCV
June 10, 2019
Picture the following customer success story. In parallel, note the various dimensions in which the relationship between vendor and customer expands.
Further down, I summarize the six possible dimensions in which you may be able to expand each of your major customer relationships and, accordingly, the annual contract value of each relationship.
This specific story is about adoption of e-signature services by a prominent global organization, adapted from the vendor’s customer success page on its web site. From earlier field research, I have seen how proactive this vendor has been in deploying customer success resources in service to their major corporate customers. If only most Saas vendors were half as proactive in this pursuit!
Land & Expand – Customer Success Story
“The major business problem that Salesforce (the customer in this story) needed to address was the problem of scaling their business efficiently by closing more deals faster without increasing administrative or sales resources. Because many of its customer onboarding processes were manual, sales reps complained that up to 40% of their time was taken up by admin tasks including chasing document signatures by customers as well as Salesforce managers. The company eventually determined that this area was ripe for a technology solution.
Initially Salesforce.com needed to simply let customers sign documents electronically to streamline their approvals (use case #1). However, the company found that by integrating with existing systems, they could quickly and easily automate the customer account setup process (saving up 322 man-days of work per year) while adding even more value by automatically kicking off internal processes that launch new customers’ accounts, with little or no manual intervention needed (use cases #2 and #3).
Salesforce achieved further economies by integrating the e-signature system with salesforce.com in customer implementations (use case #4).
When the quoting process for a customer is complete, Salesforce account executives send eligible contracts for signature with just a single click from Salesforce. After the order form is e-signed and completed by the customer, the system automatically determines if it meets the criteria for automatic launch, or if additional information is needed.
Continuing the story, the vendor’s account team managed to reduce the time spent per quote per account executive by 10 minutes. In addition, they helped Salesforce move from an average of two days to close a deal, to 90% of deals closing in one day and 71% of deals closing in one hour.
In essence, Salesforce’s use of the e-signature system to replace manual processes goes beyond signatures. Signing authority is now verified using the vendor’s integrated authentication. For payments with check or wire transfers, customers can create and complete add-on orders completely via self-service. The overall ease of these interconnected applications further increases customer satisfaction at Salesforce and also accelerates the customer’s speed to revenue while reducing costs.
The vendor’s customer success team has improved productivity throughout the revenue operations organization (more users in new department) because it facilitates no-touch orders for the back office. Account executives value the electronic document trail with the associated status updates through automated integration of Salesforce’s Chatter messaging system. They see in real time when contracts are viewed and completed – giving them greater visibility and control throughout the sale (additional contribution of e-signatures for real-time visibility and control).”
Account Expansion Potential – What We Can Learn from the Salesforce Case
This case, adapted from the success story published on Docusign’s web site, describes the kind of intensifying customer engagement that can take an initial deal from, say, $100k or so in set-up fees and annual subscription fees for a small number of users and one use case, to $2.5m. or even $5m. a year within a couple of years, by which time the needs of the entire global organization are being addressed by variants of the same e-signature service.
I don’t know the financial particulars of Salesforce’s relationship with Docusign but, using a degree of poetic license, I have labeled this expansion metric “Zero to 50x”. Interestingly, I’ve frequently seen this kind of TCV multiplication to be achievable within eight quarters or less. Some customer organizations might experience accelerated adoption organically, without the vendor being especially proactive in cultivating the various opportunities, but it can be more predictable when a vendor is willing to resource their customer engagement teams with bona-fide Customer Success Advisors (note: preferably not commercial CSMs, but rather business consultants).
In this example “Zero” represents the revenue number before signature of the first contract; “X” is the value of the initial deal; and “50X” represents the potential multiplication factor that can result from a well thought-out and executed account expansion strategy within the foreseeable timespan of, say, six to eight quarters. Even if it takes longer to reach this multiple, or if the maximum multiple is no more than 5x or 20x, the payback for resourcing Expansion (or Customer Success) teams appropriately is usually an extremely healthy one, with a far better ROI than you get in the costly process of trying to land new logos. More importantly, this investment makes for sticky customer relationships that are unlikely to experience much if any churn. Once a new SaaS application becomes integrated into a customer’s business processes it is very difficult to dislodge.
Whatever your favorite expansion metric is, my advice to enterprise SaaS companies is to favor an offense-based metric such as Zero to 50X over the more habitual, defensive metric of churn or defections.
The Six Dimensions for Account Expansion
Without getting too creative, I know of six different dimensions for expansion, which essentially turn a one-time customer into a market with various different segments for consideration over time.
These Six Dimensions fit into three pairings, as follows:
Usage: Get your initial users to engage with the new solution to achieve results with it. The first use case in the Salesforce example is electronic sales contract approvals. The more your solution gets plugged into your customer’s business processes, the deeper and stickier and persistent their engagement will be with it.
Use cases: Keep on the lookout for new problems to solve, so that you can line them up in a series of use cases to address as you solve the early business problems and gain familiarity with the customer’s organization, giving you tacit or explicit permission to “walk the halls” inside the company.
Users: Simply, get more users in the organization to adopt your product or service. So, in addition to persistent engagement (or usage) and proliferating applications (or use cases), increase the sheer number of users who leverage your offering.
Functionality: Find ways to help your customer to use functionality in your product that they aren’t using today, or use functionality contained in a new version of your offering, or even use new offerings that they have yet to find out about or to evaluate for their use.
Divisions: Cultivate relationships with other departments and divisions that haven’t yet engaged with your product or service.
Geographies: Figure out which different geographical regions of the customer’s global, international, or national organization might be the likeliest to adopt your solution next and map out a timeline; develop your political network within the organization in order to facilitate new evaluations and implementation projects.
How Many Dimensions Should We Expect to Leverage?
In different customer situations you may only (need to) expand in two, three or four dimensions, but having six possible dimensions in mind should help you to examine which ones apply, rather than leaving this to chance.
As you build a picture of your customer’s organization and their business requirements, it’s worth assessing whether it will be more productive to target a number of new use cases or engage with new departments or divisions, or even introduce a new offering to the same target customer.