Most sales organisations would agree that increasing average deal values is a positive objective, along with shortening sales cycles and improving win rates.
But the same is not necessarily true when it comes to specific sales opportunities. In fact, as a client recently acknowledged, attempts to maximise the initial deal size can often have serious negative consequences.
In striving to increase the value of the deal, we can sometimes make the purchase process more complicated than it would otherwise need to be and delay the final decision.
That’s why, particularly in new customer situations, it’s often better to adopt a “land and expand” strategy…
Smaller orders are often subject to less scrutiny. They frequently involve fewer stakeholders. Their internal approval level within the customer is often lower and more accessible.
That’s why it’s critically important to understand whether our customer has any significant value thresholds in their purchase decision, approval and sign-off processes.
And, of course, if we are a new and unproven supplier, there is less perceived risk in going with our solution if it is seen to require a relatively modest initial investment.
Once we have established our credentials, it is often possible to expand into other areas, functions or projects faster and with much greater speed and ease than in our all-important initial sale.
Unconsidered and undervalued needs
Focusing on unconsidered or undervalued needs is a tremendously powerful way of increasing the perceived value of our solution, our competitive differentiation and the customer’s motivation to change.
It’s an approach I strongly encourage my clients to adopt. But it’s one thing to use this technique to strengthen the customers’ reason to change, and quite another to allow it to drive potentially dangerous scope creep.
If we sense that by increasing the initial scope of the project we will make it more difficult to close, we need to be cautious about doing this in a way that makes the initial sale significantly larger, more complex or potentially risky.
Sales-driven scope creep
This can require a measure of self-control: it’s often very tempting for sales people to expand the potential value of the initial sale by loading it up with additional functionality. We need to be careful about introducing this sort of sales-driven scope creep.
My advice under these circumstances is to focus on what is required to get that all-important initial foothold in a new account. By all means promote a wide-ranging future vision, but we need to make sure that we then re-focus the customer’s attention back onto solving their most valuable problem sooner, rather than later.
The impetus behind scope creep doesn’t always come from the sales person: it can just as often come from the prospective customer, who may have a runaway vision of everything we could do for them.
Customer-driven scope creep
We need to be equally cautious when responding to customer-driven scope creep. This is a particular risk when our primary project sponsor or champion is not the ultimate decision maker, or when they need to bring a bunch of potentially sceptical stakeholders on board.
In their enthusiasm for our compelling vision of the future, they can sometimes be tempted to overload the initial scope of the project to the point where it becomes significantly more difficult to navigate through the approval process.
Whilst unmanaged scope creep can make our individual deal value look larger and our overall pipeline look stronger, it can also introduce undesirable and otherwise avoidable risk factors into the equation.
Establish a foothold and grow
That’s why I recommend – in many but not necessarily all circumstances – that you adopt an “establish a foothold and grow” strategy. Make it as easy as possible for your prospective new customer to give you that critical initial commitment.
Eliminate as much of the complexity as possible. Rather than bulking up the first deal, strip it down to the initial essentials. Solve a time-critical problem better than any of their alternative options.
By all means promote your all-embracing vision of the future but sell them what they need to get the job done right now. Ensure that you prove clear business value as early as possible in their initial implementation and build from there.
Don’t get carried away!
Avoid getting carried away. Don’t introduce unnecessary scope creep into your initial sales cycle, and constructively push back if you sense that an over-enthusiastic customer is trying to do the same. There will be plenty of time to realise your full potential once you’ve got that all-important foothold in the account.
A final thought for sales managers: if the way you manage, motivate and compensate new vs. installed base business today has the unanticipated side-effect of encouraging this sort of scope creep, you may be well advised to adjust your approach so that you are driving what will almost certainly prove to be more profitable long-term behaviour.