Profit More by Down-Selling CRM
Okay, I can hear the Microsoft Partner community thinking “Why on earth would I ever Down-Sell, and how on earth would that Increase profit?” Okay, got it, you’re from Earth. Before I explain my rationale, let’s quickly cover a few sales techniques that you are already familiar with.
“Would you like fries with that?”
Mickey D’s has mastered the art of Up-Selling and Cross-Selling. Asking if you want fries is a classic cross-sell, since you didn’t order any fries, and pimple face there is suggesting you might want some. “Would you like to Super-Size that?” Pimple face is now employing the classic up-sell motion, trying to get you to buy more of what you did order. What you will never hear from pimple face, if you were to order the Triple-Pounder is “Wouldn’t you prefer the small single burger?” That would be a down-sell. By now you are probably thinking that down-selling is not a very popular, or common thing to do, and you would be right.
Why would anybody down-sell anything… ever?
Well, when your son turns 16 and starts talking about wanting a 500 HP Mustang, you may suggest that the 120 HP Civic would be a better choice. I didn’t say down-selling was easy; your son is going to call you every swear word he learned in his first two years of high school, as soon as you are out of ear shot. So why are you down-selling your own son? Because you know that he can’t handle 500 HP, and would most likely end up hanging from a tree branch soon. You are down-selling him for his own good.
If I can convince my customer to spend more, shouldn’t I?
It depends on how long you want that particular customer. One of the challenges Microsoft is talking to partners about lately is consumption, the idea that there are a lot of sold licenses that are not being used. In many cases these customers were oversold. You can make a lot of short-term profit on customer ignorance. Say you get a call from a customer asking about Azure for their website. Of course they don’t know squat about Azure so you could easily up-sell them over-sized servers or more ram than they could ever need… how would they know? Or maybe you cross-sell them some kind of encryption that they don’t actually need. Clearly, these are examples of dishonesty, but up-selling and cross-selling are often performed in the grey area, with legitimate customer need at one end, and outright ripping-off at the other.
Over-stretching the Penney
Customers share responsibility in the need for the cross-sell/up-sell requirement. More often than not, they start by asking for less than their actual needs require. They may not be aware of this, and up-selling in this case is really just getting them up to where they actually should be. Imagine that you just bought a nice boat. Now you need a truck to haul it and so you go to the dealer to look at their light duty truck. For the weight of your boat, you should be looking at a medium duty truck, and the salesman should properly try and up-sell you to that. If he tries to sell you the heavy duty truck that you don’t need, or tells you the light duty truck you asked about will be fine, when it won’t, your best interests are clearly not his concern. If he properly suggests the medium duty truck, you will naturally become suspicious. Suspicion is the most common reaction to up-selling because each of us had been oversold many times in the past.
My customer wants more, why should I convince them to do less?
That’s enough anecdotes, let’s get back to CRM. As an honest, and conscientious seller, you want your customer to be successful with whatever you might offer them. In fact, with so much of what we sell today being on a subscription, that can be cancelled at anytime, you now have a vested interest in their “long-term” success. So it would be a good thing for you to know that the failure rate for CRM, with SMB customers in particular, is very high. You have two options in order to avoid wasting your time: a) don’t sell CRM, or b) understand why it fails.
I will assume if you are reading this that you have understood the opportunity that CRM presents and plan to sell it, so you really need to know why it fails. User Adoption is, and always has been, the number one reason for CRM failure, since the inception of CRM. I actually had a Microsoft person on the CRM team say a while back “Heck, if I could figure out the adoption problem, I’d be a rich man“. Obviously he spent no time looking, as the reason for lack of adoption is as simple as it is obvious: Up-selling, a/k/a Overselling. Or any kind of selling that is not down-selling.
Down-selling CRM for Adoption Success
We have all had that call from a SMB customer inquiring about CRM with Big Eyes. They probably just finished watching a Microsoft video where some gal got a text on her phone, away from the office, and with one click, the entire company was fully mobilized; production lines started, orders were created, invoices were sent, and products were delivered… in seconds. Demo videos are really showcases of what’s possible, but not probable. They neglect to mention, that in addition to CRM, they were also showing every other product the company makes, and that 100’s of hours would be required to configure it all. This customer has been oversold before they even called you. You could say “Yes, CRM can do that exactly” and close that sale right then and there. I mean, CRM can possibly do that, but probably not for this customer, with their budget and knowledge. Those CRM subscriptions will be cancelled soon. The best thing you can do is down-sell that customer.
Let’s look at another common scenario, you get a call from a guy with a Roofing Company about CRM. He would like to use CRM to build the “Ultimate Roofing Company Solution”. As you start to probe about what would be necessary, he informs you that he is, of course, “very tech savvy”. When further challenged, he says he has a whole team of developers on staff… really… you are a roofing company right? Experienced partners know that this is code for: I don’t want to pay for help, I’d prefer to spend twice us much figuring it out myself. Left to his own devices, this guy and his “Team” will not even get CRM off of the ground, in fact, his bragging about how technologically smart he and his team are, will be their undoing. The best thing you can do is down-sell that customer.
So, remind me again, how am I profiting more?
If you shift your focus from trying to close the largest engagement possible, and instead focus on the shortest path to get that customer to successful adoption (What Microsoft calls Active Use or Consumption), your profit over the life of that customer will be ten-fold. That’s the new metric by the way, CLV or Customer Lifetime Value. Well, not new, but new to us partners.
Here’s how the new CLV math works. Say you slam a $30K engagement down your customer’s throat, and surprisingly, they swallow it. But six months later, massive adoption failures, you are the biggest jerk they ever met, yada yada; CLV = $30K.
Let’s instead, down-sell that same customer to a $10K, start small, and gain adoption first, strategy. Within 3 months, they eagerly want to spend another $10K, and this repeats every 3 months until they are bought up by Intergalactic Corporation, 3 years down the road. CLV = $130,000.
So it is fairly obvious why equity owners of Partners would want this to happen, unfortunately, down-selling ain’t such a good deal for the top selling, commission based employees… or is it? I’ll talk about that in a future post.