Land and Expand, the Business Model Worth Billions
“Look around. If you don’t see any salespeople, you’re the salesperson.”
“Look around. If you don’t see any salespeople, you’re the salesperson.”
— Peter Thiel
We often assume (don’t you just love this word…) that all successful companies have a skilled salesforce behind them.
If this were true how should we classify the extreme success of Palantir or SpaceX that have emerged with super expensive products and only one salesperson: their CEO? Careful, they are no exception, Basecamp, Slack, Evernote, Dropbox and Atlassian all operate in a market segment with no sales team to account for their rapid growth. All vastly more successful than most of us despite doing something different. What? They have built a business model around the Land and Expand framework, also known as Seed and Grow.
Atlassian with upwards of 100,000 customers worldwide and no sales team. Slack has a valuation of $5B and no sales team. Basecamp currently has more than 2.5M users and… again… no sales team. So what are they doing that the rest of us are missing?
Land & expand, the alternative to sales for B2B businesses
Broken down to its simplest terms Land and Expand means starting small with your customers, gaining their trust then expanding into other areas of their business to become a trusted partner.
The key to any successful land and expand strategy is to deliver exceptional (not good or great, but exceptional) customer experience and customer service.
Your aim is to build customer retention and long-term customer value. In essence, Land and Expand is a customer-centric philosophy. Why? We want to build trust.
‘Trust’ will help you generate expansion revenue with cross-selling and upselling opportunities as your customers will trust you with increasingly significant projects.
Free trials, freemiums and SaaS (Software as a Service) accounts with a limited set of functions in exchange for just creating an account are of increasing popularity. If we like the product, take Slack, Trello, Thinkific, Basecamp, Evernote, Instapage, and Dropbox by way of example, we may choose to pay a small user-based subscription fee upgrading us to more features and extend our stay. We call this “landing” a customer.
From there, these companies will provide value, nurture, help and educate us until they have built a trusted relationship.
Like any great courtship ritual, this courtship dance is accompanied by additional programs and promotions aimed to solve our day to day operations or reveal new features for us to ‘unlock’.
Once we are educated in any one area it then makes sense to “expand” the relationship with a commitment turning this service provider into a trusted partner.
The land and expand strategy works on the notion that your current customers are your best sources of revenue, and that upselling and cross-selling engagements will exist once your customers know, like and trust you enough.
The market requirements for land & expand to work
For Land and Expand to work you need to figure out three things:
- Product-Market fit (PMF): the moment you build something a significant amount of people love. Good indicators are high growth rates, net promoter score (NPS), and high user-retention.
- Market: Understand your target users, know your competitors well, understand what your competitors are doing and why and understand the psychology behind your pricing strategy.
- Sales team: Can you afford one? If your customer lifetime value is below $1,000 you can’t. If it’s between $1,000 — $5,000 perhaps, as long as your product is easy to sell. Above $5,000 Yes.
- Product: To avoid any friction in a Land and Expand strategy your product MUST have a great onboarding strategy in order to optimize conversion rates. Your product also needs to be scalable, otherwise, there is nothing to ‘expand’ into…
- Inbound marketing: This includes all pull-channels and a good marketing strategy: SEO, E-Mail, Organic Social, Video marketing, podcasts and influencer marketing.
“Every customer interaction is a marketing opportunity. If you go above and beyond on the customer service side, people are much more likely to recommend you.”
— Stewart Butterfield
I would also suggest building an SEO strategy addressing all three stages of your content funnel:
- TOFU (top of the funnel)
- MOFU (middle of the funnel)
- BOFU (bottom of the funnel)
At the top of your content funnel, provide purely informational material. Avoid all sales pitches. The idea is to create ‘made for you content’. You want to position yourself as a partner, educator, and source of information.
In the middle of the funnel, talk about the problem your product solves. You want to stand out as a leading product or service provider. Think podcasts and webinars.
Only at the bottom of the funnel through live demos and consultations does it make sense for you to sell your product to the max.
Slack, is a great example of how a company can use social media to gain early traction. They created a Wall of Love on Twitter where users tweets were pinned praising their product. This creative way of showing just how much their product was loved by customers acted as social proof for prospects.
“We bet heavily on Twitter. Even if someone is incredibly enthusiastic about a product, literal word of mouth will only get to a handful of people — but if someone tweets about us, it can be seen by hundreds, even thousands.”
— Stewart Butterfield
However, I do feel the need to point out that all great things don’t start out so great. That fan mail on the Wall of Love didn’t all start out so positive; in fact, many of those messages started out as problems to be solved.
What does this teach us? We need to be customer-centric and concentrate all our efforts on building a great customer relationship providing ways for our customers to interact with us. The best techniques to employ are the lessons learnt in the Marketing Flywheel.
What the Marketing Flywheel teaches us is that by finding ways to closely connect our channels with each other we can create a loop for users. This reduces friction facilitating a transition to occur between channels.
A couple of examples would be:
- adding sharing buttons to your content
- encouraging users to engage with your content
- encourage user-generated content
- adding sharing buttons to your e-mail newsletter to make it easier to share and remind users to do so.
- allowing people to comment on blog posts with their Facebook account.
- retargeting recurring blog visitors with a special offer.
It’s okay to sell small
Food for thought: an average loyal customer is worth up to 10x as much as their initial purchase. The average repeat customer spends 67% more in the 31st-36th month of their relationship with a business than in the first 6 months. As the old adage goes, we buy from people we know, like and trust. The more we know and like you, the more we trust and buy from you.
Selling small is a great hook and something that we are coming across more and more thanks to tech stack usage-based pricing pioneered by AWS in their infrastructure model back in 2004. This model, increasingly popular for infrastructure, middleware and applications, allows customers to decide for themselves the value any given product provides them, completely scalability and with no shelf-ware.
This is not a game of tricks or gimmicks
Don’t fall into the temptation of treating Land and Expand as a self-serving strategy. I speak from experience: if you are unable to create mutual value for the customer and yourself, one of you is going to leave. You need to have a vision and add value. One sale is the beginning of many more years of earning and growing your trust and business, rather than the end of a funnel and a high five.
This is where we separate the sheep from the goat. The old lessons of traditional SaaS, big deals upfront, locking in customers, closing accounts before moving onto the next just don’t work anymore. Rather, look to find ways to drive growth.
This year, Alteryx increased existing customers spent YoY by 28% simply by encouraging companies to add users to their accounts and Twilio by reducing frictions and simplifying user interaction. Sounds easy, and it is, but it takes work and energy redefining your whole business strategy.
Overcome friction for land and expand to work
Onboarding is key to growth
So you may call it customer success, or professional services, even consulting, doesn’t matter. It’s how you take the promise you’ve promised and deliver it. How do you get your users adopting your solution?
Look no further than Trello’s onboarding. It’s gone from being a pool of friction in its early days to a driver of conversion rates. So what have they done?
To begin with, it takes you only two clicks to get in the product. The goal is to make the sign-up process as easy as possible and they do this by removing most of their menu links — except signup and login. This is the first step of a land-and-expand strategy, ensure you ‘land’ the deal. This simple technique may increase conversion rates by 28%.
The biggest reason onboarding strategies fail is lack of follow-through and commitment, caused by unrealistic expectations.
Building a long term customer relationship isn’t a stop/start initiative. It requires sustained ongoing effort with dedicated resources. Otherwise, you will be losing customers just as fast as you’re gaining them.
Trello discovered that they were able to increase “sign up” to “first action” rate by 100% simply by asking users to confirm their email once users had personalised their account and seen the value of their product and understood how to migrate to their new concept.
Over the years, some of the challenges Trello have faced and overcome is learning how not to ‘drown’ users in too many options with wordy copy whilst customizing their onboarding experience. This has given them a huge competitive advantage.
Many companies fail simply because they will put together a sales team, get very excited about selling deals, and then don’t focus on onboarding or on customer success. They are failing to provide the value they promised and losing a potential champion for your product.
Build exceptional customer relationships
A 5% increase in customer retention can increase a company’s profitability by 75%.
Churn management is a journey. It’s not a one-stop-shop. The key is to provide a shared vision and value so that the average life of your customer continues to increase.
The more the value your customer gets from your solution, the less the risk of churn. This is ultimately what everybody wants: value.
If you are able to do an excellent job with your first assignment, your client will trust you as a service provider for future projects, they will feel comfortable tapping you for references for new accounts in new areas. Allowing you to expand into their network providing you will positive reviews and references.
It is important to note that executives in niche demographics likely swim in the same waters, especially if within the same vertical. They are trusted colleagues, have spent time together in conferences and events, and go to each other for advice.
Use this webbing network effect to your advantage.
Map out an opportunity chart
In order to ‘expand’ you need to always be thinking ahead to your next project with a customer. Look for ways to provide value to your clients so that you can become a trusted partner. Ask yourself: what is the outcome that people really care about?
An ‘Opportunity Chart’ is going to be your tool that outlines all potential buyers within an account and their areas of interest. Putting this map together helps you identify the areas you can expand to.
When putting this strategy in place, it is important that you get as much information from your clients as possible:
- what are their direct needs?
- are you acquainted with the other divisions of their organization?
- are there parallel teams in other departments that might benefit from your solution? If it is working well for one team, it will likely work for other functional teams as well.
- what markets do they handle and how can you help with their purpose?
You need to know all the answers and mix and match a category with a point of contact before plotting out a plan of action enabling you to interact with each area.
Product-scalability is a must for growth
Product scalability is a minimum requirement to expand. For growth to occur you need to find ways to be able to solve small problems for single customers and big problems for large teams. A necessary milestone for providing vision and value.
Remember that nothing runs smoothly but your ultimate goal is to define a process that is repeatable and scalable and works. If you can define one and you are able to make that land successful, your customer will proactively start looking for ways to give you more business.
Hubspot is an excellent example of a scalable product:
- you start freemium yet they allow you to see locked features you ‘may’ need.
- they help you explore additional features and upgrades that you have not yet adopted.
- they educate you on how such features will enable you to better achieve your goals.
- they have a bottoms-up sales playbook that seizes every opportunity for cross-selling to book short-term wins.
Develop customer relationships to build Champions
Champions are internal references. Of course, they could be external references as well. What are the key ingredients of going from land, expand, and delivering that value contract? It’s the product experience being superior.
Our buyer journey has changed. We are smart, we know what we want and there are many options and reviews out there. Our product or service experience has to be solid. Otherwise, you’re off to a huge disadvantage.
The key is to measure adoption. Measure adoption three, six and nine months from sale. Your customers should be consuming 85% of the product or services purchased, otherwise, alarm bells should be going off as this is when a churn is going to happen.
Go back a reassess the onboarding experience you are providing as well as the customer relationship you are building. Perhaps you are sending out too many emails or perhaps, not enough of the right type.
Build a referral strategy
Customers are 77 % more likely to buy a new product when learning about it from family and friends.
A core area of growth marketing and vital for Land and Expand to work is helping users to share what they like and enjoy. Make it stupid easy for users to invite other users in. Slack is a great example.
If you are a service provider, make it easy for clients to sharing your content with their friends. Then, when their friends get the invite to view the content, invite them to sign-up too.
Canva and Airbnb have designed referral strategies where both you and your friend benefit from ‘perks’ by sending out and receiving referral links.
Alternatively, if you are looking for a quick way to ‘land’ your first customer in the hope that they get hooked, the “first user free” model can help with quick adoption. This means that single users don’t pay for your product. If you can’t land, you can’t expand. “First user free” ensures broad and quick adoption.
It is just as important to nurture customer relationships through loyalty programs. Loyalty programs keep your customers engaged with your brand and motivated to work with you. These can be as simple as limited-time free upgrades (Slack and Trello offer these to show freemium users what they are missing out on) to exclusive customer discounts.
Vision + value = Network ripple effect
We have all heard that 80% of our company’s future revenue will probably come from just 20% of our current customers. How do we put this to our advantage?
Network effects are key to product-scalability and building champions. The more people use a product the better it becomes, the better it becomes the more people talk about it, the more people talk about it the more people use it and the cycle begins.
Think of WhatsApp: if you were the only user it wouldn’t make sense to use it. However, when your whole family and friends are on it, it wouldn’t make sense to be on Telegram.
Products with good network effects have a huge competitive advantage, Slack and Zapier being a case in point. Users are connected either through networks, marketplaces or other apps. Depending on the number of connections each user can have their network cluster will be larger or smaller. Finding ways to cross-pollinate these groups will help you ‘land and expand’ into new networks.
Deliver your value contract and explode
You have a successful land and a successful product and onboarding experience. You are now expanding, which is exciting, but the ‘explode’ is when you are able to fulfil your vision and the maximum achievement of value.
A successful explode is possible when your product/service and customer experience is delivering your value contract whilst your customer accrues value. This may be because you have successfully added more use cases, more users, more services. It is a decision your customer will make.
You will be shifting from manual to automatic and scalable processes where the customer decides that they want to add more products and services onto their current stack themselves.
Key to this, and every stage, is continued education. You need to be able to show your audience and customers that you are able to grow their business in unique ways. If you are able to do this, you go from being a provider to a partner. From courtship to marriage.
Here industry alignment matters. What thought leadership can you provide your audience that will help them stay ahead of their competitors? Do you have insights into what their peers are doing? Would it make sense to create courses, white papers, industry groups or forums to bring like-minded thought leaders together? Would this give your buyers a sense of confidence, that investing together in you is their best business strategy?
Key Land and Expand KPIs To Track
We aren’t all Elon Musk, Basecamp or Atlassian neither can we afford to get rid of our current sales teams — assuming that we have one. At its best, a Land and Expand framework will only apply to a subset of our customers. So it is important we are able to identify and grow those accounts that present genuine opportunities. The easiest way to do this is by tracking 5 account management KPIs:
- Average Revenue Per User (ARPU): Increase in the ARPU, especially of key accounts, from the time of landing.
- Adoption levels: Following the adoption curve and revenue yield of high-value features for every account.
- Penetration levels: Determining broader penetration levels across the organization due to new departments or seats being added.
- Engagement metrics: Level, frequency, and quality of engagement with higher-level executives and key decision-makers of the organization.
- Net retention: If a customer spends a dollar today, how much are they spending with you after a certain period of time? If you’re under 100% you’re bleeding customers, and that’s not a good sign.
Take-away’s
For a successful Land and Expand strategy to work you need to focus on fostering trust between you and your clients.
Be there for your customers in every way you can. If they have questions, be quick and comprehensive in answering them. Create an efficient onboarding process that focuses on reducing frictions, experience segmentation and mental migration. If problems arise with your product or service, drop what you’re doing to ensure these are addressed.
Quick Steps to implementing a Land and Expand strategy
Make your customers feel important. Make them feel like a priority. Make them feel understood. Give them a product and or service they won’t be able to find elsewhere.
- Land a relatively small deal with a client, this can be freemium based or a minimum set of services, enough for them to understand your vision and value.
- Provide excellent services, education and insight to help you deepen relationships and trust. customers respond exceedingly well to companies that can educate and teach them new ways of doing things.
- Expand by mapping opportunities within the same organization and network.
Remember, Land and Expand is a business strategy and not a sales tactic. You are doing this to grow trust as a brand and as a business, in turn, reducing churn and increasing customer lifetime value. This will lead to more long-term success as a business.
When you combine education, vision, value, great onboarding and customer relationship with being able to solve the customer’s problem, your customer starts to look at you as a trusted partner. I know it sounds very cliched, but I can tell you from having lived it, it’s very true.
If you want to learn more or discuss anything else in this blog schedule a quick call. I’d be happy to chat!
Originally published at https://mentomics.com on February 16, 2021.
