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Why expansion revenue is important in 2023
As we enter the beginning of the fiscal year for many SaaS companies, driving expansion revenue from existing customers and reducing churn is a top concern for revenue leaders. While net new business will always be a focus, ensuring that your product is sticky and enabling a frictionless upsell motion are core priorities.
The main reason why is that it’s getting more expensive to acquire new customers for many B2B software companies. There are a few reasons for this:
1) Sales cycles for net new business wins are increasing. Based on a recent report from Vendr, average time to close is trending up. This is due to increased scrutiny from the CFO and other key stakeholders.
2) Many teams have had layoffs meaning there are fewer resources to enable sales and marketing teams to identify the best new business opportunities and generate demand.
3) Marketing budgets are often one of the areas cut when companies attempt to become more efficient so the ability to attract and nurture new (or expansion revenue) is challenged.
New business wins are getting harder to obtain, which is obviously a strain on GTM teams. At Correlated, we believe driving expansion revenue should be an area of focus in light of the issues highlighted above. Here’s the problem: expansion opportunities are also taking longer to close!
Again from the team at Vendr, they are seeing substantially longer sales cycles for in-cycle expansion deals (meaning mid-contract expansions vs. at renewal time).
This means having sales, CS and Account Management focus on proactively driving expansion opportunities should be a top priority. When you consider that net new ARR often costs $1.6 for every $1 of churn, the importance of driving expansion and retention becomes even more clear.
The importance of product usage signals for determining intent
So if you’re tasked with driving expansion revenue, how should you think about going about that effort?
Leveraging product usage as a signal for intent is one of the most effective ways to drive expansion revenue, reduce churn and drive upsell for SaaS GTM teams.
This is because if you combine product usage from current customers at either the individual user level or the account level, you can have extremely personalized and timely conversations with customers that relate to the problems they’re trying to solve with your product and the functionality/use that’s currently outside their contract that would lead to an upsell or expansion.
Before you get started building these playbooks, we’d recommend that you check out our post on the data you’ll need to enable expansion plays.
How to build playbooks that work
At Correlated we work closely with our customers to build out GTM playbooks that work across the customer lifecycle. Expansion plays are a very important piece of the puzzle. We walk through some specific plays below, but if you’d like to explore our library you can find all of the plays we’ve seen work here.
We’re also very excited to see that our friends at ZoomInfo are doubling down on data-driven plays — they just launched the latest version of GTM Plays, a vast collection of successful go-to-market strategies that users can put into motion right away. Here’s one that taps into product usage data to drive immediate opportunities for critical accounts.
Let’s dive into what goes into playbooks and how to build them!
Using PQL/PQA Scoring to find hidden intent
Central to Correlated’s approach is our Customer Lifecycle Scoring product.
We allow our customers to set definitions around key moments, churn or expansion for example, and then our product uses AI to identify the individual users or accounts that appear most likely to expand or which are at the highest risk of churn. We call these scores Product Qualified Leads (PQLs) or Product Qualified Accounts (PQAs).
This approach allows our customers to identify unexpected indicators and then arms the sales, CS, or AM teams with context on why a particular account appears primed for expansion or at risk of churn.
Finally, we believe data is only useful if you can take action on it. We recommend setting alerts, automatically updating CRM and even triggering emails based on these scores.
Combine product activation with ICP
Many of Correlated’s customers rely on enriched data from ZoomInfo to combine with the product usage data they’re leveraging as trigger conditions. Using firmographic and demographic data allows you to target the right people or accounts at the right time with their product usage as the key timing trigger.
Here are some examples of the right firmographic and demographic data to use for expansion:
- Title
- Employee count
- Region
- Funding
- Hiring trajectory
Let’s describe some practical examples of playbooks that combine product usage triggers with firmographic and demographic data that you would use to drive expansion.
Examples of expansion plays at a large SaaS company
Correlated and ZoomInfo are both working with a major SaaS company that provides software for customer support teams to help them run expansion plays. Here are a few examples of plays that combine product usage triggers with firmographic/demographic enrichment:
- Example 1: Seat’s usage metric exceeds 10% growth within mid-market accounts in North America
- Example 2: Increase in new inbound conversations from Enterprise accounts in EMEA with the account admin logging in
- Example 3: People usage metric is in overage in SMB accounts
This company is pairing these trigger conditions with actions by attaching them to custom email sequences in Outreach, Slack notifications within collaborative channels and Salesforce tasks + custom reports to coordinate action.
By combining relevant trigger conditions related to product usage that indicates expansion intent or cross-sell opportunities with firmographic or demographic intent signals, sales teams can run effective plays that are proactive vs. reactive. It’s more important than ever to proactively seek out expansion opportunities vs. waiting for hand raisers based on the increasing time to close these deals in the current economic environment.
How can you implement these tactics?
In 2023 it’s critical that GTM teams take a proactive approach to identifying expansion opportunities within their existing customer base. Net new deals are taking longer to close as are expansion opportunities. Waiting for customers to raise their hands to purchase more or add new products is no longer sufficient.
Leveraging intent from product signals using Correlated and combining that with best in class 3rd party data from ZoomInfo gives GTM teams an advantage when it comes to identifying and closing expansion opportunities. If you’d like to learn more about how to do this, reach out to Correlated here and ZoomInfo here.
