At a time when enterprise software demand is slowing, customer education could be a way to increase sales. In the last few months, I have been hearing quite consistently from early stage enterprise software companies that their number one company priority is to increase one of three metrics: sales pipeline, average sales price (ASP) per deal, or average recurring revenue (ARR). This is not surprising considering the softening enterprise software marketing. Demand is slowing, valuations are falling, and funding events are few are far between. And don't even think about IPOs in 2016.
They are all trying to extend what cash they have to make it through this slow patch in the market.
I believe these companies can put a lot more focus on customer education as a means to generate demand and increase sales. I know this from a confluence of three experiences:
- I see it: Many of our customers use customer education to increase sales.
- I hear it: Prospects are asking us this specific question frequently.
- Others say it: Phil Fernandez, Marketo CEO, believes, and has stated publicly, that customer education (or lack thereof) is the biggest growth limiter in the marketing automation space.
And since I have heard this question "How can we increase pipeline, ASP, and/or ARR?" repeatedly since the beginning of 2016, it is about time I summarize a few customer education strategies software companies can put to action to help increase these metrics.
Why Customer Education Can Work to Increase Sales
Before we get into specific strategies, it is useful to understand why customer education would work to increase sales.
As we all know, Google changed everything. Hardly anyone makes a move anymore without searching for it on Google, including enterprise software buyers. Before anyone talks to your company about your product, they have done some search to learn something about the problem they are having, how it can be solved, and what solutions existing to help them solve it.
A few years ago, the Corporate Executive Board conducted research that showed a stat that confirms my assertion above:
57% of the purchase decision is complete before a customer even calls a supplier.
So, people search Google. When people search Google, do they find your software company?
Do a google search for your product or your underlying technology and see what comes up. Do you? Do your competitors? Now, change the search to "Learn 'your technology'"
What comes up?
Consider the following search terms to see what I mean. Try them yourself.
- Openstack training
- Hadoop training
- Marketing training
- Learn DevOps
In each of these cases, software companies are among the first results. So I ask again, when people search for similar terms in your industry, does your company come up?
Once we understand that people are trying to educate themselves about solutions to their problems, we can start to develop strategies for helping these people discover us and educate themselves using our "stuff."
Now, let's get back to the three customer education strategies you can use to help increase sales.
Increase Pipeline Contribution
So, we agree that people are searching for solutions to problems and that we want our company to come up in the search results. One way we can do that is to offer free training on our website that anyone can find. The training could be product training or training on the underlying technology or training on best practices for how to do that job better or even education about the art of what's possible with your technology.
The key point is that the learning has to be discoverable, easy to sign up for, and free. Your free training cannot be behind a paywall or available only to customers after they log in to their account. The goal is to be discoverable and to raise awareness of your brand and to provide something valuable that helps people learn something new or otherwise learn to do something better. This is not about how great your stuff is. It is about how great the learner/prospect will be if they put this new thing (your technology) into action.
We have customers who offer training for free and track that free training as direct influencers to increased sales pipeline.
Yes. This is a longer term play because once pipeline has increased, which just means that new sales opportunities have been created, the sales process truly begins. And depending on the average length of your sales cycle, could take a few months.
If your need is more immediate, don't worry. You can focus training on a different audience and stage in the buyer journey.
Increase Average Sales Price (ASP) Per Deal
If your priority is to increase average sales price (ASP) per deal, you can use training to do that too.
Directly and indirectly.
Directly speaking, your sales team needs to be able to sell training as part of your deals. It can be packaged in several ways. First, as a number of training seats to already publicly scheduled training or as private training. Private training can be big money and with much higher margins than professional services.
Think if it this way, private, onsite training can be sold for $5,000 to $10,000 per day. This is for one trainer. You likely cannot bill those rates for professional services just for one consultant. Software companies send professional services teams out to customers, who essentially end up conducting training, which we now understand is often at lower rates and at much lower margins than if training was sold. If you are selling to enterprises, many will expect training, and if you can package a private training session of two or three days, you can increase deal sizes by $10 to 30K.
Indirectly, you can increase ASP by offering free training during the pre-sales process. If you educate prospects on what is possible with your technology, you will increase the likelihood that customers will buy more of your product because they understand what they can do with it.
Increase Annual Recurring Revenue (ARR)
One of the most important metrics in a subscription business is annual recurring revenue (ARR). If it is your company's priority to increase ARR, customer education can play a role in increasing that metric as well. According to SaaS expert, Jason Lemkin:
“If SaaS companies are doing what they’re supposed to be doing — building, selling, and servicing a product that customers can’t live without — renewals should take care of themselves,” Lemkin explains. “If customers love your product, they won’t let their contracts expire.”
Customer education can play a direct role in "servicing a product that customers can't live without" and to help "customers love your product." You can do this two ways:
- Effective on-boarding - You can make a huge impression on customers by getting them started with your product on the right foot.
- On-going training - This is often overlooked because we are so focused on educating new customers. But if you have on-going training that keeps customers current with release notes, keep newly hired customer employees educated, and otherwise continue to educate customers on what is possible and what value they achieve from your product every day, you will increase the chances that your customers believe they cannot live without your product.
Are You Under-Using Customer Education as a Business Driver?
Perhaps your company has not been affected by a slowing market, and maybe your top priority is not to increase sales pipeline, average sales price (ASP) per deal, or average recurring revenue (ARR). However, what if you could make the case that customer education could contribute more directly to the growth of your company? Would that help you get more budget for your customer education team? Would it increase the role of the education team in your company? Would it help your customers be more successful using your product? I suspect you could answer "Yes" to each of these questions.
I hope this post helps you think about how customer education can be used to grow your business and how you could put together a business case for increase the investment you know you need in the education team.
To help you build your customer education business, we developed a maturity model, which helps you diagnose the current state of your operations and make informed decisions about what goals to set and the actions needed to achieve those goals. We wrote a book describing how to use the model. Click on the button below to download the book.