4 ways to fix NRR

It's no longer land and expand - it's land and maintain. But what can you realistically do to fix your NRR?

In this episode, we share 4 practical tips that'll help

• (00:00) - Introduction
• (04:27) - Expansion ladder
• (11:32) - What have you done for them lately?
• (16:38) - Involve the customer
• (20:35) - Take a hit on newbiz MRR
• (27:05) - Tripple down on succesful customers
• (31:17) - Wrapup

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This episode is brought to you by Growblocks. Finding and fixing problems in your GTM shouldn't take weeks. It should happen instantly.

That's why Growblocks built the first RevOps platform that shows you your entire funnel, split by motions, segments and more - so you can find problems, the root-cause and identify solutions fast, all in the same platform.

***

Connect with us

🔔 LinkedIn: Toni / Mikkel

✉️ Email: [e-mail]

📺 Watch: https://www.youtube.com/@growblocks 

Creators & Guests

Host

Mikkel Plaehn

Head of Demand at Growblocks

Host

Toni Hohlbein

CEO & Co-founder at Growblocks

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Mikkel Plaehn, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

[00:00:00] Toni: Hey everyone. This is Toni Hohlbein from Growblocks. You are listening to the revenue formula in today's episode. Mikkel and I are discussing four different ways to increase your expansion or increase your net retention rate. Enjoy
[00:00:17] Mikkel: So, my bike is out of commission,
[00:00:21] Toni: Mine too.
[00:00:21] Mikkel: and uh, you're having a hell of a week. So my wife, she called me on my way to work, and it's never a good thing when the partner calls while you're on the way to work. You're just like, okay, who's sick, or what broke, or what happened? And she, on the first question, the first thing out of her mouth, I knew that I was an idiot, basically.
[00:00:44] She said,
[00:00:45] Do you still have the keys to my bike? And I put my hand down in my pocket and I was like, yes. Yes, I do. I'm sorry. Forgive me. So, uh, I literally have the pedal in my backpack and my wife's key in my pocket, so she needed to walk. That's, that's how it is. It happens. It
[00:01:05] Toni: So this works in my family. My wife is looking for something.
[00:01:09] It doesn't matter. Keys, her phone, a pen. I feel after five seconds of scanning, she's like, Toni, where did you put this? And I was like, I don't know. I didn't touch it. And I was like, oh, okay. It's actually, it's actually in my pocket. It's fine.
[00:01:31] Mikkel: man. Yeah, yeah. Very sweet, though.
[00:01:36] Toni: She's very sweet though.
[00:01:37] Mikkel: same.
[00:01:38] So, um, then after, uh, as I talked with her, I saw this kind of thing that kind of triggered me for the Segway today. Which is, um, you know, you can, uh, you can close a custom at a multi year deal. And it's It's a good thing. It's a good thing to have multi year deal. Then you have, you know, good NR in that period of time.
[00:01:59] But at some point, at some point, there's the first renewal. And that's when you figure out whether it's recurring revenue or not, right?
[00:02:07] Toni: this about your marriage? Are we still talking about
[00:02:09] Mikkel: no, I just, it was a very Educational segway today. I couldn't stitch the other one together. I was like, how do, how do we go from, you know, me forgetting the key? Anyway, um, anyway, so we're
[00:02:22] Toni: great introduction.
[00:02:24] Mikkel: yeah, yeah, yeah. That's it. But we're going to talk a bit about the recurring side of the business today, specifically expansion, because if you notice a pattern in any of the unicorns, any of the ones going public, which isn't really happening at the moment, it's that they deliver. a lot of expansion which propels their, you know, NR to 150 percent or something crazy, right?
[00:02:48] Toni: But also we know that that's not true anymore.
[00:02:50] Mikkel: Yeah, it's land and maintain. It's
[00:02:53] Toni: not, it's not learn and expand anymore, it's learn and maintain. So I think the The last benchmarks I saw on net retention rate, um, was 102, 103 percent or something like that.
[00:03:05] Mikkel: just about, just below inflation.
[00:03:07] Toni: And, and this is, you know, we're talking, this is important, we're talking about the top percentile here.
[00:03:12] Mikkel: Yeah.
[00:03:13] Toni: Um, those guys are currently seeing basically a flat 100, uh, plus minus a little bit, right? Um, so some of those days of 150%, you know, net retention. at least for most of us, kind of over right now, right? , and yes, everything will come back and so forth. And I think you and I have been talking sometimes about some of those hacks, which we clearly label as such, and it's not.
[00:03:39] Good business practice. It's bad business practice, but it does might help you to close the next funding round, which obviously is an important piece eventually. Right. but today we wanted to talk about more of the, actual real things of how you can improve your net retention rate. Um, right.
[00:03:56] Mikkel: just, I'll just stabilize it to be honest, right? I think that's really the premise and, and, I think most of the eyeballs, if you're sub 20, it goes to the, let's say the left hand side of the funnel acquisition, right? But at some point that newbiz MRR, ARR you bring in, it's going to sit in your books and it's going to outweigh the left hand side.
[00:04:17] So it matters quite a bit. And we wanted to get into some very practical, tangible elements that you can consider implementing if you haven't already, uh, to start impacting this number.
[00:04:27] Toni: Absolutely. So I think we have like four, maybe five ish different kind of examples here. Let's kind of see where we go from there. And I think the first one. It's really kind of thinking about how does the expansion ladder actually
[00:04:40] Actually
[00:04:41] look like, right? What is it that you could be doing?
[00:04:44] How can you create a path to go from whatever, 1k to 2k to 10k, whatever that might be. Did I just talk ARR, MRR? I don't know. It might be whatever, right? How can you go from A to B? What is a reasonable path to actually get there? What are things you can Give to your customers that they're willing to pay more for.
[00:05:09] What are things where you can, you know, really kind of expand, you know, how can you plan this thing out?
[00:05:14] Mikkel: Yeah.
[00:05:14] Toni: This is, this is even also the best companies. They're not just, oh, oh, wow, we just woke up and we have 120 percent net retention. They were thinking heavily about this, you know, how can we achieve that?
[00:05:25] And the problem with it is, it's kind of a long term game. It's like a year or so out where you're going to, you know, actually you start seeing the fruits of all the labor that you're putting in, um, but it needs to start there kind of, you need to kind of figure out, and if you want to, you can call it. A funnel, or I can call it a flywheel, or I can call it just a process.
[00:05:45] Um, but what is step A leading to step B? Not all of the A's will become B's and then how can it go from B to C and not all of the B's will become C's, right? How, you know, what, what do you need to do?
[00:05:59] Mikkel: And I thought of it almost as the inverse of a discount hierarchy. That you obviously have in place for your sales team, right?
[00:06:06] So there's different mechanisms in place. So yeah, you can offer 10%, but then you're going to take this cut on your commission. Yeah, you can offer 20%, but then it's going to be this cut. And then I'm not sure you want to do 30 percent because that cut, it's going to hurt big time, right? And when I say the inverse, then obviously it's, hey, what can you give?
[00:06:23] Whether it's functionality or services or support, you have to think about your pricing and packaging in those structures. And potentially also because they're a customer. They bought the software for a reason. They, they needed something specifically whether it was cost saving or increasing performance in some area.
[00:06:40] The question is whether there's another tier that can give them even more of that.
[00:06:44] Toni: Yep. And, and again, right, you have a relationship with that customer already. So that's great. You're already in, you have, you can talk to someone, you need to make sure that. They're using the tool that they've bought and the
[00:06:57] the, the
[00:06:58] problem that they had is getting solved. Some of these pieces need to be done, right?
[00:07:02] But then really the next step is, okay, is there another pane with our current buyer? In that use case, is there something where we can add on top, for example? That, that's an easy one, but then, and this is getting more complicated than, okay, is there like an adjacent buy in or department that we can do something for?
[00:07:21] These, these expansions are much more difficult, like a lot, a lot more difficult because it's not going to be something that you can tease in the tool. So they're in there, they say, Oh, this is a new button, you know, let's click it. Oh, it doesn't work. I need to upsell. That doesn't work because, um, the person that you want to talk to doesn't even know you exist in the account, right?
[00:07:41] So that's kind of already kind of difficult there. And that usually comes from trying to sell different use cases that are kind of connected, but maybe not to what you're currently doing, you know, selling, selling maybe full on different products into this, right? I recently heard of, I think. What's it RAMP, kind of really successful US startup.
[00:08:00] and they, they have several different products, each of them having gotten to product market fit, basically. Um, and they're selling them separately, but then once one is in that have figured out a playbook to add these others to it. And then each of these five products is itself like a way into the company.
[00:08:19] And then the upset comes later. Right. So there's basically. These guys have figured out how to expand. They've, they've figured out the land and expand, process in this case. And I think this is extremely important for people to, you know, try and realize how that could work out. Right. Another way is, and especially early on, you have, um, a big product maybe, or you have like a, you know, one, one size fits most kind of product.
[00:08:46] Try and break it up and, separate into different modules. or different, whatever, whatever you're going to call it. Number one, that's going to help you to maybe sell more stuff, lower ACV, that's a problem, but at the same time, it then enables you after the fact, after you sold them to, you know, also direct their attention to maybe
[00:09:06] Mikkel: Yeah, so ultimately what you want to end up with is a structure for expansion. And whether it's horizontal, so going for a new department, new whatever, or vertical, going for, you know, added value or a new pain or whatever, you need to have a plan for it.
[00:09:19] Just like with the discounting structure, you need to have a plan, otherwise it's not going to happen by
[00:09:23] Toni: Yes, and I think, pricing and packaging is part of it but it's actually more than that, it's, it starts a litlte bit further and higher up in the organization
[00:09:34] Mikkel: which
[00:09:34] Toni: products are you gonna build next, and depending on how mature your organization is it might be which companies to acquire next so forth by right? They might be, those will be the.
[00:09:44] The things you need to figure out. So that's why I would, I would even call it a strategy.
[00:09:48] Mikkel: Yeah.
[00:09:49] Toni: You know, I wouldn't call it a plan. I'll probably call it a strategy. And that needs to find its way then to fruition by, you know, executing this, um, and, and working against
[00:09:58] Mikkel: And I, and I think there is a big challenge potentially a lot of folks is going to face if they're 10, 20 million, whatever they are. There's going to be a conversation on, well, okay, now we want to change what's available. That means for some customers, all of a sudden you're going to take things away. And then someone's going to say, I think we should grandfather.
[00:10:17] These accounts. While that's, you know, might make logical sense because you put some accounts on risk It also kneecaps this whole idea of then expanding in the first place. Right? So I think you, you really have to watch out and try and navigate that conversation very carefully. And there might be some criteria you can agree on where then yeah, it's a no brainer.
[00:10:37] We have to grandfather because they're already about to churn and there's gonna be a kick to the teeth that like final nail in the coffin. Yeah. Um, so it's just, I think, a thing to really watch out for.
[00:10:47] Toni: Yes. And again, right, if you're doing mid market enterprise kind of deals, you can be super tactical around it. I think if you have the problem of having thousands of customers, it just becomes a bit more of a data heavy play, which still can work out for you.
[00:11:01] Right? So I think we had Kyle Poyer on the show basically saying that. We only hear about all the negative, uh, examples of pricing, uh, changes, you know, Zendesk was one 10, 15 years ago, Netflix was one, you know, five years ago or something like this. We never hear about the good ones where yes, some churn, but that churn was more than, um, than bought back by the upsell itself, right?
[00:11:22] So there's, there's some tactics here to go about this.
[00:11:25] Mikkel: And I think that kind of also comes into the other, other dimension of this stuff is really what have you done for the customer lately?
[00:11:32] Yeah. So we, we had a conversation a while back around, running QBRs. I saw someone, it was basically a rant. She entered a QBR with the vendor and the vendor had just not done their homework. They had no clue about what, what challenges were they hoping to solve? Uh, what was the use case for the tool?
[00:11:51] And it was purely a, I can see you have this many licenses. You're using that, you know, here's new features we've released. Do you want to buy this extra thing? Right. It was purely informational. This could have been an email. Could have been an email. So there was not a conversation on, hey, the impact, I know you want to have this impact and I have a fear that you're not fully getting it.
[00:12:09] Let's talk about how we get you to that point, right? And I think our conversation basically revolves around why wait for QBR to do that.
[00:12:18] Toni: Yeah. So just to kind of be clear, we're sometimes using QBR in an internal sense. Yeah. So you do like a quarterly business review on your revenue engine and you have a deck and so forth and discuss it internally. Here we're talking QBR in, in an external sense, so really doing a quarterly business review with your.
[00:12:34] Customer. Yeah. Um, and I feel this has been like very much the, the fashion for the last 20 years, but it's also falling very much out of fashion,
[00:12:43] Mikkel: Yeah.
[00:12:44] Toni: And, and I'm not sure if it's, if it's poor delivery by the CSM or the AE or AM, whoever's kind of doing it. Um, or if people are just tired of that hour, you know, what, what is, what is that hour for?
[00:12:57] What does that hour bring for your customer? Um, really because you're doing it for yourself. That's why you're doing it. Um, and what you usually see is, um, the people that you really want to show off for the QBR, they just don't, they cancel five minutes before,
[00:13:12] Mikkel: Yeah.
[00:13:13] Toni: right? You do all the, all the work, all the planning, everything.
[00:13:17] It's like everyone's, you know, pumped, like, you know, on this account this week, the COO is going to be there and then, you know, canceled, and then you sit there with, um, I don't know, some manager and like,
[00:13:28] Mikkel: like, uh. Um,
[00:13:30] Toni: so this, there's a thing, right? Kind of what, what is. What is in it for the customer, even attending this QBR?
[00:13:36] That almost is the question you need to ask yourself. And, um, if you, if you're able to beef this up, you know, make this actually a valuable session, um, then I think the chances of the, the real people that you want to have attend, you know, attending, and that then opens up a lot of other conversations, right?
[00:13:55] Because that then gives you the, the chance to do a bit of discovery into maybe other pains that that person might be having. Um, And again, right, let's just say you're selling into, uh, the sales and marketing organization. And let's just say kind of, you've been solving one particular problem for the VP of sales.
[00:14:13] Um, and now the CRO attends while you can ask a whole bunch of different questions to the CRO that might be touching pain points that he or she has that the VP of sales doesn't, right. And that gives you a bit of a map of what else you could be. Uh, trying to push into the account, right? And, um, but in order to get there, you need to give them value.
[00:14:32] If you don't give them value, you won't be able to have these folks attend, right? So I think this is where you as an organization almost need to be like, okay, can we provide that kind of value at scale, um, and therefore get the right people into the call. Um, then let's try and do that. Can we not? Well, then should we still be doing these things?
[00:14:53] Yes, it's in the playbook. Yes, it's been in the playbook for the last five to 10 years, but does it still make sense, right? It's a little bit like how everyone is thinking and rethinking outbound. It's one of those things where you're like, I'm not sure if this is still the right thing anymore.
[00:15:07] Mikkel: No, but I think it's also like, again, you need to kind of almost justify being able to have an expansion conversation.
[00:15:14] And if you've gone the extra mile and done extra things for some of those, let's just say the happy customers, it's going to be a whole lot easier to have some of those conversations, especially if, if a CRO joins or have the champion invite him or her, right? So I think it's just to say, I think in some cases there's an outsized or disproportionate focus on the accounts that might churn or is at risk versus the ones that are actually good.
[00:15:37] Toni: good, right?
[00:15:37] Yeah. I also think, and this is, this is a bit maybe controversial, but, everyone always is, and I said it even earlier today, um, it's like, oh, you know, before you can upsell this customer, you need to get them into the green. And I'm actually not sure that's always necessary. And the reason is that the thing that you maybe want to upsell, maybe that is going to get them into the green.
[00:15:58] Um, maybe, maybe there's something that's that, that would actually be unlocking for them. So you should maybe totally go for that. maybe there, other circumstances that put them into the yellow and ultimately you're basically kind of also decreasing your pool of accounts you can try and do this play with a lot, but only talking to the ones that are in green, right?
[00:16:17] And I totally understand. It's a little bit like, um, the, the, the heat of that pool. Will probably be lower and they will be less welcoming for a conversation like this for sure. Um, but it doesn't mean it's going to be completely useless, right? So consider expanding, you know, whom you're going to have a conversation with beyond just your green accounts.
[00:16:38] Right. And then I think, and this way, this can also work for, for your, your middle of the pack kind of accounts and customers, you know, ask them, ask them what they want to see. Um, and yes, ask them what they would be paying extra for. And again, this can be a conversation that you have in the QBR and can be a conversation you have on just another check in call.
[00:16:59] Ask them about what are other pains that they're experiencing within your realm. And then, you know what, go out and, and, and, and fix it them. Actually do it, not only ask them and have that conversation, but actually follow through and do it. And then also ask them for the check, right? So really kind of.
[00:17:14] Uh, not only thinking about, okay, what, what could we build, but have a conversation, uh, have them verbalize it, uh, you know, dig into, well, what's the root cause of that problem? Okay. What, you know, this is connected to this year. What if we were to take this away? And, and this requires a bit of a sales mindset.
[00:17:34] And, and this is, I think where it's really difficult for CSM sometimes to navigate this because it's, it's just a, such a sales skill. such a hardcore sales skill that, uh, sometimes it's difficult to pull off. Right.
[00:17:45] Mikkel: And it will also involve, quite frankly, some product manager folks who understands what they're saying, the problem they're describing, is it relevant to us? And how could we go about solving it? Could we even solve it? Right? But I think it's like the premise, you hear this, uh, advice to folks who wanna start a business.
[00:18:01] Like well go out and pitch. Ask people if they would pay, and if they say yes, then ask for an upfront payment. See how much you can actually get to validate the thing. And it's kind of the same piece almost here. Um, not that you have to do it, but it's the same kind of approach to, to figure out what are the commercial elements that folks are willing to pay for.
[00:18:19] So there, there's a company I've followed, they, they sell to SMB. So it's obviously a different game, but they would raise their prices every year. And the way they would do it is they would write out, hey, you know, We've spent a lot of money developing this solution, this solution, this solution, this solution.
[00:18:33] They all came out this year. And next year we want to build these things. So we need to raise, raise the prices. So it's very justified in a way. And it's the same that can happen here. You know, a lot of customers that are not going to care about most of the features that arrive because they're just, they're not for them.
[00:18:49] And that's, that's really the point here.
[00:18:50] Toni: So, and this is, this is a simple, I'm not sure it's a hack.
[00:18:54] It's, it's a, it's a low hanging fruit that, you know, hangs around here, which is sometimes they might say like, Oh, you know what? I would really love it if your support could be faster. Yeah. Um, and.
[00:19:06] 24 7 support is a thing you can pull off fairly easily. Yes, you might need to hire someone and so forth, but you can pull up.
[00:19:14] You can do it tomorrow. Let's just say it like that. You could do it really overnight. Um, and I bet there will be a bunch of people in your customer base that might be Um, not only happy about this happening, but would even pay, you know, to get into this tier, right? So if you have many of those conversations and the people tell you that, you know, support is, and it's a different thing if it's dysfunctional, right?
[00:19:37] Then just a hygiene thing you need to fix. But if you then say like, well, you know, we're actually hitting all the SLAs that we put out, um, but you want to have more, would you be willing to pay for that?
[00:19:46] Mikkel: because we now need to hire Greg he sit there Sundays.
[00:19:50] Toni: Um, and that's going to be more expensive because Greg, you know, um, and, um, this, this is for, this is one example,
[00:19:58] right?
[00:19:58] right.
[00:19:59] Um, and then there might be so many product pieces that you could do,
[00:20:02] Mikkel: I think it's also just hilarious sometimes you can, you can almost sense it on Slack when you're a fairly sizable org. There's all these requests coming from customers to develop something and it's a negotiation. But imagine the argument saying, yeah, they would actually pay for this.
[00:20:15] Then all of a sudden, you know, float, float this to the
[00:20:18] Toni: it sounds like a dreamy marketing world for
[00:20:22] Mikkel: Yeah, yeah. Obviously I have zip experience in sales, product and CS. So you can trust my words.
[00:20:28] Toni: You're a really
[00:20:28] Mikkel: good.
[00:20:30] Toni: father,
[00:20:31] Mikkel: Yeah, Okay. Next one. Next one.
[00:20:35] Toni: So, and then this one, and this is, this is, Controversial. Uh, Hey, why don't you just ask for less money in your original sale?
[00:20:44] Mikkel: Yeah.
[00:20:45] Toni: Why don't you just do that? Just take a hit. Easy, right? You know, this target that you had this quarter screwed. Let's yeah. Hey, we're optimizing for net retention rate. Let's just kind of not hit that.
[00:20:56] Um, so. Obviously, this requires you to be able to maneuver this in the way that makes sense for you. We're not saying it's easy, but the trick is actually that you try and not sell everything in the get go. Um, and that goes counter to how salespeople work. Obviously, and how they incentivize and so forth, so again, there's some, uh, real practical challenges to be overcome in order to make this happen.
[00:21:20] Um, but number one, it sets you up to expand the account in a couple of months from now, right? I think that's, that's really interesting. Number two, You could argue that it will be easier to sell the initial ticket because it's a slimmer use case. Maybe fewer people need to decide. Maybe it's below some approval threshold.
[00:21:43] A couple of those things kind of that might help you both in the Sales cycle length, but also in their conversion rate. And we've previously been talking about this as one of those NRR hacks, right? And, um, and it is to a degree, but there's also another thing that dawned on me lately, not to justify this thing by the way, but just to kind of balance it out, that it's not just something to pump up your metrics, but actually could be overall beneficial for you as a, as a, as a business, which is.
[00:22:12] Think about it as expectation management with your customer use. And I think Carl Poyer talked about this in a similar way, which is really about, well, you, you sell them a simple use case, um, and you're able to fully nail it, you make them happy. Um, and then from that position, you then expand the use case afterwards, right?
[00:22:34] So that means actually for you, not only will the sales cycle be faster, but actually also the time to impact will be faster because, uh, simpler onboarding, simpler adoption. All of that stuff suddenly is faster and on the flip side, you don't have this, you know, Oh, yeah, but you know, since I bought A and B and yes, we're done with A, but in my mind, we're not done implementing,
[00:22:59] Mikkel: Yeah.
[00:23:01] Toni: you know, we're still not done.
[00:23:02] Vendor. Hey, time is fucking ticking. You told us it's going to be two weeks and now we're three months in and we still haven't finished B. Oh yeah, we're done with A for like two months now, but that doesn't matter. In my head, we're still in onboarding. In my head, we still haven't. Actually gotten the value from this thing that you promised to us.
[00:23:20] So in my head, while I'm really happy with A, I'm kind of pissed in general. Right. And, um, and that is, that is something that you maybe don't want to have. Maybe this is not good for you as a business, as a PLG company, that's easy as a sales organization is harder because you will have the sale kind of being pushed in, but think about it not only as a faster sales cycle thing.
[00:23:42] Think about it as a faster time to value thing as Right. So it's really, you know, it's, it's a time component on both sides of the bow tie, which I know is difficult sometimes to comprehend, but that's actually what that is achieving
[00:23:52] Mikkel: achieving. Yeah, I also thought about this when, uh, so I saw Mark Roberge present at SaaStr and one of the things he talked about is well, the problem here is a salesperson will sell, let's just say, a hundred licenses but how many are actually being utilized?
[00:24:04] And I think what you're talking about here is the you want to probably sell what they realistically can utilize and then expand to the next. Whether it's more product functionality or licenses, I mean, it's kind of the same when you think about it, right?
[00:24:17] Toni: I mean, it's a little bit rigging the game to what I said earlier, right? It's like, Hey, you know, don't only focus on the green ones, also expanding the, uh, Amber, Amber accounts. Um, and here I'm actually saying like, Hey, this could be a strategy to increase the pool of your green accounts. Think about it like that.
[00:24:34] Right. and, uh, and obviously kind of the, the conversion rate from green to upsell. Will be a better one than from yellow to right? So and this is basically a way to get more greens and faster and then show the expansion coming out
[00:24:46] Mikkel: Yeah. I think it's also a good con better conversation to have with a prospect to say, Hey, I could sell you this full thing, but I think it's smarter that you start here and then once we are successful in that area, we expand it.
[00:24:57] Right? I can already now tell you it's gonna be this prize and I'm gonna honor it. Right. There's some, some pressure you can take off. And I think it's, it's almost like building a business case and implementation plan you agree on, uh, at the end of the
[00:25:09] Toni: your billing against it. Basically. I know that's, that's almost what it is because you can also have a conversation where, and you know, this happened with us a couple of times with our customers. Like, Hey, you know, first step, we're going to establish visibility across the whole funnel period.
[00:25:23] That's the first step. You know, we're going to look at this, uh, in some cases, hey, let's only look at new business because you're such a big organization. We're only looking at new business. Right. And then over time, once we fix that, let's do existing business. Let's do the planning forecasting piece.
[00:25:36] Let's do whatever things on top, which basically kind of gives them an easier way in an easier time to, you know, hit value. But then over time, expand as they need the, as, as the, as the organization sees fit. Right. So, and I think this is, um, if you can do that with your tool, I think that's a great way to think about it.
[00:25:56] And really the internal, um, the internal, uh, argument should actually be, listen, this is not only going to increase our conversion, it's going to tank our ACV period. Yes. We put this on the, on the, on the bad column.
[00:26:10] Mikkel: Yeah,
[00:26:11] Toni: Now let's list out what we have in the good column and the good column, we have higher conversion rates.
[00:26:15] We're going to convert in more deals than we kind of did previously. Uh, that means on the bad column we might have more churn. Maybe. You know, questionable. Uh, then on the good column, we have, uh, faster sales cycles. That's pretty great. Um, and then we also have, which everyone is forgetting, we have faster time to value, you know, slimmer use case, easier time.
[00:26:35] So faster time to value, faster time to maybe upsell them, more people going to be in the green bucket. Um, and who knows, maybe we're actually not going to churn more. Maybe the people that we bring in for a smaller ACV. Fit that use case totally, they're going to be happy, you know, you know, different from our customers.
[00:26:52] We push the higher ACV for that use case, and then they turn out. And then, uh, also on top of that, we will be able to probably see more upside coming out of this, right? So it's, I think it's a balance. It's not easy to, not easy to strike for everyone. And then
[00:27:05] Mikkel: then we have the last, we can call it bonus, or just the last, doesn't really matter.
[00:27:10] Toni: Let's call it a bonus. Let's be positive so on this is really, you know, two degrees. Oh, you know, you need to figure out the ICP, Mikkel. pretty easy. Um, so, and, and this is, um, I think I heard this the first time from a gentleman that used to work at Algolia. and they basically kind of focused.
[00:27:28] triple down on their most successful customers. That's what they did. like, okay, we have those five customers. They already have been upselling like crazy. Let's dive deep with all of them and understand what do they need to upsell more, of what is missing? How can we. What can we do here? Um, and, uh, that number one created a really nice trajectory for those extremely great fit customers, right on this one hand side, but on the other side, and then also created a clarity on like, okay, whom, whom do we really need to go after?
[00:28:05] And this is, for me, this is stopping to be all, it's just. You know, turn our, our, the margin canons around and only focus on those accounts. actually not what this is about. You're going to keep doing all the other things you're doing and, and as you kind of dial up and down on, on your different tactics, but what are you going to be doing instead on top is you're going to do specific stuff for accounts like that.
[00:28:28] You know, things where that you wouldn't usually do. Things where, you know what, I would never go to the trade show because it's fucking ridiculously expensive. But because you know your core, core ICP is there. Suddenly, you know, that CAC Payback actually turns green. And suddenly you can go there, right?
[00:28:45] Because you know that they will maybe behave differently, you know, once you close them. So really, uh, not thinking about it, it's like, now we're only gonna go for these guys. And if someone inbounds that not their shape, you're gonna say no. Because no one does that. Everyone says yes, but basically you can then, you know, use this to deploy, uh, marketing tactics that you think are ridiculous for your overall pool.
[00:29:08] Mikkel: Um.
[00:29:09] Toni: Suddenly they make sense for this isolated pool on the side, right? Um, and that way you acquire some more of the great ones. They will kind of come in and they will upsell a lot. And that's how you can also, again, connect the left and the right side of the bowtie nicely.
[00:29:24] Mikkel: So really what this is, it's like a split funnel analysis just on the existing customer side to figure out who are the ones.
[00:29:30] Toni: it sound really boring. And on note Yeah, it's just a split funnel thing, you know,
[00:29:37] Mikkel: Yeah, yeah, yeah, yeah, yeah.
[00:29:39] Toni: no, but again, I think what, um, the combination here is, you know, I'm trying to say that without using too many platitudes, but it's like, understand, yes, who are you well performing customers, fully understand what they want to solve and what other pains you could solve for them and build more product to solve those pains.
[00:29:57] And then figure out, okay, um, if this is my segment, my split, and maybe you don't track costs like this and therefore you can't do a CAC Payback like that, but in your head, you can be like, well, if this is, if this is the outcome here on the, on the right hand side of the bow tie, I can actually overinvest in that part on the left hand side.
[00:30:15] Because it still is gonna make sense
[00:30:17] Mikkel: know, you know, it's also interesting because when, often when we look at existing customers, you will have reporting on product adoption and usage, but it's kind of always in aggregate. You look at, if you look at NPS, which is a terrible metric, but if you look at that, it's always in aggregate. But all of a sudden, if you start looking at, okay, out of the last, I don't know, 10 things we released, are those core customers who expand, are they actually using it?
[00:30:42] Is it, is it for them? I think just that exercise on its own would be interesting for someone in revenue operations or CRO to make, to actually just level set. Because I think a lot of folks are going to say, well, we do know who our ICP is. We, we do know Toni and Mikkel, right? But I think there might be some clues there.
[00:30:57] Actually that's a cool product idea for Growblocks.
[00:30:59] Toni: Just thinking about that. So
[00:31:01] Mikkel: we're building in the open now.
[00:31:03] Toni: Aren't we?
[00:31:04] Mikkel: Yeah, true.
[00:31:05] Toni: know. Okay, well want that, me it would pay for Otherwise Mikkel is not going to build Sorry.
[00:31:14] Mikkel: man. Oh, man. That's kind of it for today, though.
[00:31:17] Toni: a, maybe kind of a quick wrap up. So, you know, figure out what's your, what's your plan, what's your strategy in order to actually, you know, go up this expansion ladder, uh, you know, ask yourself, what have you done for the customer lately, um, and it's not just.
[00:31:29] Some random QBR, it's actually delivering some value. Ask them about new features like segmented MPS that you want to see in one spot, like Roblox. Um, then, you know, potentially think about taking the hit on new business revenue. If you can, there are a couple of downsides, couple of upsides to it. And then triple focus on which accounts work.
[00:31:49] And once you have figured this out, you can actually overspend for those accounts. On the marketing side. Thanks everyone for listening. Thanks Mikkel. good
[00:31:57] Mikkel: a good one. Bye.