How to increase your deal sizes
What is deal size?
Deal size in B2B refers to the total value of a contract between a business and its clients. It is determined by factors such as the price of the product or service, the quantity purchased, and the duration of the contract. Larger deal sizes typically mean higher revenues.
How do you measure deal size?
Deal size is measured by revenue parameters like Average Contract Value (ACV), which gauges the average annual revenue per customer contract. Average Order Value (AOV) assesses the average transaction value. Annual Recurring Revenue (ARR) captures yearly subscription revenue, while Bookings encompass the total value of signed contracts.
Why are deal sizes important?
Decreasing deal sizes can lead to reduced revenue and profitability, affect sales efficiency, and strain resource allocation. It can also disrupt customer relationships and impair forecasting accuracy. However, if the quantity of deals increases or customer retention improves, smaller deals may not negatively impact the overall business.
What are the strategies to increase deal sizes?
Remember, the key to implementing these strategies is to genuinely add value for your customers. It's not just about increasing the deal size, but also about making sure your customers get what they need to succeed. Happy, successful customers are the most likely to expand their contracts and maintain long-term relationships with your company.
Encourage existing customers to buy a more expensive version of the product they currently have. This can be accomplished by highlighting advanced features, benefits, or additional services. Upselling can significantly increase the overall deal size and improve customer experience by providing enhanced value.
Offer complimentary products or services to existing customers. If your portfolio includes other SaaS solutions that can help your customer achieve their goals, cross-selling can be an effective strategy. It promotes a holistic solution to customer needs, resulting in higher deal sizes.
Identifying cross-selling opportunities starts with a deep understanding of your customer’s needs and challenges, as well as a thorough knowledge of your product portfolio. Look for complementary services or products that can address customer needs more comprehensively. Data analysis can also help reveal patterns and possibilities for cross-selling. Regular customer interactions and feedback are essential as well.
Bundle different products or services together and offer the package at a slightly lower price than if purchased individually. Bundling can incentivize customers to spend more by offering a comprehensive solution at a perceived lower cost.
Effective bundling starts with understanding which of your products or services naturally complement each other and would provide added value if purchased together. The bundled products should meet a more extensive set of customer needs and offer a perceived savings or convenience compared to purchasing the items separately. Make sure you clearly communicate the benefits of the bundle to customers.
Offer discounts for customers willing to commit to larger volume purchases. This strategy can increase the overall deal size even if the unit price is slightly lower. Volume discounts encourage larger commitments from customers, thus securing more stable, long-term revenue.
Q: How do I offer volume discounts without reducing profit margins?
A: Offering volume discounts effectively involves striking a balance between incentivizing larger purchases and maintaining profitability. It's important to calculate your costs carefully and ensure that the increase in volume compensates for the decrease in unit price. Also, consider offering volume discounts primarily on higher-margin products or to customers with lower cost-to-serve.
Incentivize customers to sign longer contracts (2-3 years instead of 1) by providing a discount. Longer-term contracts bring more predictability to your revenue and improve customer retention, both of which can enhance overall deal sizes.
Q: How do I negotiate longer-term contracts?
A: Negotiating longer-term contracts often involves offering some form of incentive, like a discounted rate or additional services. Start by demonstrating the long-term value and reliability of your product or service. It's also important to understand the customer's long-term needs and to make sure your offerings align with them.
Q: What are some strategies for retaining customers on long-term contracts?
A: Retaining customers on long-term contracts requires ongoing customer support and success efforts. Regular check-ins, responsive customer service, and efforts to continually demonstrate the value of your product or service are key.
Additionally, you should work to proactively address potential issues before they become problems and remain flexible and accommodating to evolving customer needs.
Premium Support and Services
Offer premium support levels, professional services, or customer success packages for a fee. Many customers are willing to pay for higher service levels. Providing premium services not only enhances customer satisfaction but also contributes to increased deal sizes.
Focus on customer success and make sure your customers are receiving value from your solution. Successful customers are more likely to renew and expand their contracts. High customer success rates often correlate with larger deal sizes and better customer retention.
Revise your pricing strategy. Experiment with value-based pricing, where you set prices according to the perceived value to the customer rather than based on the cost of the product or market rates. Pricing strategy is integral to the negotiation of deal sizes and the perceived value of your solution.
Expanding Use Cases
Continually identify and communicate new use cases for your product to existing customers, encouraging them to expand their usage. By doing so, you add value to your customer's business and potentially increase your deal size.
Customize your solution for specific industries or verticals. Customers are often willing to pay more for solutions that cater to their specific needs. Offering vertical-specific solutions can make your product more appealing and can significantly increase the deal size.
Targeting Larger Accounts
Focus your sales efforts on larger organizations that have the capacity for larger deal sizes. By targeting larger accounts, you can potentially secure bigger deals and increase your overall revenue.
Product Development: This plays a pivotal role in enhancing deal sizes. Regular enhancements, feature upgrades, and cutting-edge innovations boost your product's value proposition. Engage customers for feedback and ensure that development aligns with customer needs and industry trends, increasing the willingness of customers to invest more.
Tiered Pricing: A well-structured tiered pricing model encourages customers to consider higher tiers for additional benefits. Begin with a basic tier providing core services, then establish higher tiers with advanced features, services, or preferential treatment like premium support. This strategy caters to varied budgets and needs while nudging customers towards higher-value deals.
Training & Certification Programs: Offering these for a fee adds another revenue stream while enhancing product usability and customer loyalty. Develop comprehensive training modules to empower customers in utilizing your product more effectively, and offer certification programs to endorse their proficiency. This not only boosts deal size but also improves product adoption and user experience.
Implementation/Integration Services: Charging for these services, especially for complex SaaS products, can significantly increase your deal size. Custom implementation or professional setup ensures customers extract maximum value from your product. Besides enhancing deal sizes, this strategy strengthens customer satisfaction and reduces the likelihood of churn.
License Models: Rethink licensing models to suit diverse customer needs. For instance, if your current per-user licensing restricts ACV growth, consider site-wide or capacity-based licensing. Modifying your licensing models can increase deal sizes by catering to broader customer requirements and usage scenarios.
Customer-Centric Approach: Whether it's upselling, cross-selling, or offering vertical-specific solutions, understanding customer needs is critical. Offering a solution that aligns with customer goals will naturally increase deal sizes.
Bundling and Discounts: These pricing strategies incentivize customers to make larger purchases. Bundling complementary products together or offering volume discounts encourages customers to spend more, thus increasing average deal size.
Long-Term Contracts: Incentivizing customers to commit to longer-term contracts can increase deal sizes and stabilize revenue. Offering discounted rates or extra services for longer contracts can be effective.
Premium Services and Offerings: Charging for premium support, implementation services, or training programs adds another revenue stream while enhancing product usability and customer satisfaction. These strategies can significantly increase deal sizes.
Product and Pricing Strategy: Regular product development aligned with customer feedback, tiered pricing models, and revising licensing models based on customer needs are integral to increasing deal sizes. These strategies boost your product's value proposition and cater to a broader range of customer requirements.