Step 1: An irresistible “Buy and Try” offer

Cisco is a major customer of one of our enterprise service provider clients. What’s now a $250K contract started off as a $50K initial purchase. The key was getting in the door at Cisco with an offer they couldn’t refuse. In this case, it was a pay per usage model for a very sophisticated virtual environment. Cisco paid a fixed amount per hour of actual usage and capped expenses at a fixed price. This allow Cisco’s sponsor to eliminate the risk of buying software that isn’t adopted but also limiting exposure to an astronomical bill if user’s did adopt en masse. The lesson learned was to structure the initial offer in a way that allowed the customer to “buy and try” the product before committing to a large purchase. After good initial adoption, a larger deployment contract can be negotiated.

Step 2: Easy add-on purchases

Webex grew from zero to over $300M in less than five years. How did they do it? Their sales strategy was to land beachhead sales in one department then upsell another. For example, they would target Marketing for events, Training for web-based e-learning, and Support for helpdesk productivity. Once in the door, they would reference sell and add-on more users to the existing agreement. These incremental purchases were very easy to buy and required no corporate or enterprise-wide IT signoff. Gary O‘Neall, a former PlaceWare executive, used to call this upsell technique the “crabgrass” approach, meaning adoption happens like weeds that pop up everywhere seemingly at random.

Step 3: Corporate Seal of Approval

Once there’s critical mass with a few happy departments, the stage is set for an enterprise-wide purchase and deployment commitment. VMware, now a division of EMC Corporation, is another good role model of the “land and expand” approach. They grew from zero to $100M in sales in less than 3 years by seeding licenses within specific engineering workgroups. After many development workgroups got hooked on VMware, the sales team would approach corporate IT and recommend a corporate license agreement spanning all departments and multiple products. They proved that this would be more cost-effective than grassroots adoption at full list price. The result was an enterprise-wide purchase agreement making it easier for more departments/workgroups to deploy licenses. The corporate “Seal of Approval” just made it safe for more users to adopt the technology.

Copyright © 2006. Sridhar Ramanathan, Pacifica Group Consultancy Inc.