How Much Upsell Goes Un-upsold? How CPQ Supersizes Your Deals
When sales organizations have their acts together, their sales teams are upselling machines. They know what offers should be made in tandem, and they know what upsells work for which types of customers. When I say “know,” I’m not asserting that every member of the sales team is gifted with an astounding memory and a full grasp of every combination of product and service in your company’s arsenal. Indeed, in this era when product mixes change with tremendous frequency, there’s no way that a salesperson could carry the latest data around in his or her head. While some combinations of products will be front-of-mind to salespeople, to avoid missing every opportunity to add value to deals some automated “assistant” is needed – usually in the form of CPQ. A decent CPQ solution provides salespeople with the right upselling options during the generation of quotes. There’s enormous value in this – it increases the ROI of the money you spend on sales instantaneously. That said, most companies have yet to see the light when it comes to CPQ. The industries with complex product mixes and customized products (think discrete manufacturing, high-tech, health sciences and health care) had needs for fast, accurate quoting and proposal generation, and guided selling features came along for the ride. But more verticals are starting to need CPQ – and that means more of them will benefit from the upselling capabilities it provides. How much could they benefit from CPQ? And how much are they missing out on today? No one’s done that study, but Aberdeen’s numbers showing a massive impact on deal size – increasing it by an average of 105 percent – points out that companies not using CPQ may be leaving a lot of money on the table with every deal. CPQ’s not just useful for initial sales, especially in a subscription economy. How useful? You can get an idea from a recent For Entrepreneurs survey of SaaS companies. Looking only at Cloud software providers, the survey discovered a median percentage of new annual contract value (ACV) came from upsells. That rate exploded as the size of the company increased – and large companies are more likely to use CPQ than small companies. For companies with over $40 million in GAAP revenue, revenue coming from upselling amounted to 26 percent. A similarly revealing question compared the percentage of upselling revenue in the fastest growing companies against upselling revenue in the rest of their peers. The survey split the respondents into the 50 percent growing fastest and the 50 percent growing slowest; the fastest growing large companies (again, above $40 million in GAAP revenue) realize 33 percent of revenue from upselling, vs. 23 percent for their slower-growing peers. The trend held for smaller companies, as well – in the $10-$15 million in annual revenue segment, the top half realized 17 percent of revenue from upselling vs. 15 percent for the bottom half. The data suggests that, if you want to grow at a rate that outstrips your competition, you’d better get your upselling processes nailed down. In the case of a $10 million dollar company, the high-growers reported that upselling accounts for $1.7 million, or 17 percent of total GAAP revenue. Admittedly, this is data from a discrete vertical, and there will almost certainly be some variance between verticals. But what CPQ does to make the sales rep exponentially better at upselling is universal. First, CPQ steers the rep away from his or her small stable of “favorite” products, the ones the rep is most comfortable selling, and toward the best product for the customer. It’s also ensuring that the deal is for the highest value possible, and that the sale includes components beyond the product that drove the sale that also help the buyer succeed. CPQ can also deliver all the content on the selected product without forcing the rep to rummage through your portal, ensuring that an upsell is still an educated purchase by the customer, and thus a more confident purchase. It protects margin, makes the sales force much more efficient, and improves and accelerates the buying experience as well. The list of benefits is long, and companies that invest in CPQ often discover its biggest benefit comes in solving problems they’d never before even considered. So why would a business continue to send its sales force out to do battle in the market with one hand tied behind its collective back? To learn more about how to choose and deploy a CPQ solution, read the CPQ Buyer’s Guide.
Chris Bucholtz | March 11th, 2016