16 Jul Why are cross-selling and upselling crucial for your business?
Sales or sales efficiency is commonly associated with the ability to close deals with new customers. As a result, marketing & sales resources are usually allocated to selling products and services to new accounts and therefore increase the customer base and revenue. Bringing new customers is vital for a company but it is as vital to look at how to maximize the value brought by your existing customer base. One company may be proud of having a 20% increase of new business while in the meantime they have a 20% churn rate (usually not measured), which in short means 0% growth!
Let’s see how Salesforce CPQ can support companies in selling more effectively to their existing customer base.
The cost of new business
Let’s get straight to the point – getting new business is expensive both from a cost and time perspective. When it comes to cost, there is one important metric to consider: CAC (the Cost to Acquire a Customer), the sum of sales & marketing expenses divided by the number of customers. The CAC can be associated with another metric, LTV (Customer Lifetime Value) the total revenue generated for a given customer, to measure the health of recurring business. According to standard, a viable business shall have an LTV three times bigger than CAC and the CAC shall be recovered in less than 12 months.
If a company neglects the potential revenue from upselling and renewal, it means that 3 times CAC has to be covered by the new business. So instead of putting all your revenue in one basket, why don’t you consider upsell & renewal to diversify your income!
The perceived complexity of upselling/cross-selling
Companies are usually aware that upsell/renewals represent another way to increase income. In most cases, they fail to build an efficient sales flow that answers basic questions such as:
- What is the current setup of my customer?
- What is the current ARR/MRR?
- Which amount shall I invoice if we upgrade the price plan in the middle of the contract?
- What shall be renewed?
Sales representatives struggle to provide meaningful answers. In general, this results in endless digging through official documents and discussions with sales and finance teams. Kind of making a puzzle from scattered elements!
Let’s imagine that your contract is always up to date. Upgrading or turning on add-ons is as easy as ABC – your finance team gets notified on what and how much shall be invoiced automatically. It sounds like a dream, doesn’t it? Let’s see how CPQ makes dreams come true!
Digitize your contract
Digitization is the keyword.
Salesforce CPQ, out of the box, creates a Contract with assets (materials) & subscriptions (recurring products) from the quote that has been signed by your customer. All dimensions such as quantity, start/end date, billing frequency, list price, discounts are available at your fingertips
It covers not only the main product purchased by your customer (e.g. price plan or license) but also all add-on or features that are part of your product catalog (warranties, Service level support, etc.).
At any time, one can look and report on what the current offering to the customer is, quickly generate a co-term quote that includes additional licenses and turn on some add-ons. All the complexity takes place behind the scenes so your sales rep can focus on what matters – selling suitable products to your customers!
What else can CPQ do for you?
- Automatic renewal: renewal quote automatically generated and ready to be issued to your customer;
- Contracted Prices: record prices and discount agreed with customers so they are automatically applied during the quotation
- Renewal Pricing, steer your pricing & discount policy and minimize the churn rate;
- Evergreen Contract: your contract remains active until your customer resigns.
One more thing
Let’s assume that your contract management flow is working like a charm. Renewing, upselling, and cross-selling is working seamlessly and your revenue on existing customers has grown significantly. It’s the right time to take a step forward and convert your customers into your own sales representatives!
As your customers log in to your community or mobile app, right at a glance they see how many licenses they’ve purchased or which add-ons are turned on/off. In a few clicks, they can increase the number of licenses and turn on 2 add-ons. The contract pdf pops up with amendment details and related costs, ready to be e-signed. Once the deal is signed, the additional licenses and add-ons are automatically provisioned and your customer receives an email with the invoice attached. Sounds like a dream, but Salesforce CPQ really does it!
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Article by Xavier Marette.