Here are the five reasons advanced vendors focus on business outcomes –
# 1 – Increased Revenue
This occurs in three ways
- reduced churn – if the customer achieves their business outcome, the likelihood of voluntary churn is low. Preserving existing revenue is the first step in revenue growth.
- Increased upsell and cross-sell – once a customer has achieved an initial business outcome, they’ll look for further improvement. This increases the opportunity for upsell and cross sell.
- Improved new-business win rates – a vendor able to help with everything the customer needs to achieve their business outcome will win against a vendor focused only on their product. This increases new-business win rates.
# 2 – Increased Profit
Particularly for vendors of complex products, it’s expensive to run a sales team. In the past, the profit point (the point in time at which revenue from a sale exceeds the cost of the sale) occurred a short time after the sale is made. That’s because the customer paid upfront.
With subscription pricing, the profit point occurs much later. If the customer doesn’t achieve their business outcome, they may cancel or reduce their subscription before the profit point is reached. And that damages profitability for the vendor. Ensuring the customer achieves their business outcome maximises profit for the vendor.
# 3 – Increased Stickiness
For executives in the customer, achieving the business outcome will get them promoted or a bonus or internal recognition. That’s what they care about. If a vendor helps them with almost everything they need to achieve that business outcome, they will not drop that vendor.
And if another vendor approaches the customer with a better product, the customer won’t change vendors. They won’t put the business outcome at risk. The other vendor would need both a better product and the ability to help with everything else needed for the business outcome.
# 4 – Increased Executive Engagement
Executives don’t care about vendors’ products. If a vendor tries to talk about their product, the executive will lose interest. A vendor who talks about the business outcome will get the executive’s attention. And if the vendor can show they can help with most things required to achieve the business outcome, they’ll keep the executive’s attention. And that builds much stronger engagement.
# 5 – More Successful Projects
Scope creep in projects presents a significant problem for vendors. It increases cost, duration and complexity. And that increases the chance of the project failing. Agreeing a clear and measurable business outcome for the project helps anchor the scope. And it helps focus both the customer and vendor project teams on why they are running this project. A clear scope and focus on outcomes increase the chance of the project delivering a positive business outcome.