By Michael Costa
Software publishers typically have an opportunity to increase revenue, grow market share and reduce sales time and cost by effectively upselling and cross-selling to existing customers. Most new customers don’t buy all of the applicable products in your portfolio, even if they could derive substantial benefits from their use. New customers tend to limit their initial purchases with new suppliers until they’ve accumulated rewarding experiences. That, and the likelihood that you’re continuously developing and releasing new products and/or add-ons well after initial sales have occurred, provides a great deal of up-selling and cross-selling opportunity. The opportunity to increase revenue and grow market share is fairly straightforward, and effectively targeting existing customers can significantly reduce the time and cost it would otherwise take to sell those products to new customers.
Effective up-selling and cross-selling requires customer intelligence, a comprehensive process and effective IT systems. On the intelligence end, you need highly accurate data on which products your customers have purchased and continue to use, including product combinations. You could always target your entire customer base with up-selling and cross-selling promotions, but that will probably yield a large volume of opt-out requests and SPAM complaints – making promotional marketing off-limits to a large number of your existing customers. The key to promotional marketing effectiveness is relevance – sending promotions only to those for which the offer is relevant. In addition to a relevant target audience, you also need to know which unsold products are most effectively paired with previously sold products – effectively augmenting existing product capabilities with new product capabilities. Basically, deciding which products to promote for up-sell and/or cross-sell given the mix of existing products. The process part covers the sequence of steps that you, your customers and your systems perform to promote and close incremental sales. The IT systems role is to 1) manage the installed base data such that it’s always accurate and complete, 2) dealing with the marketing functions such as promotion, measuring program effectiveness and, in many cases, 3) automating incremental sales with ecommerce, etc.
There are many effective processes and a large number of very effective, efficient marketing automation and ecommerce systems available to use. The biggest challenge software publishers face with their up-selling and cross-selling programs is inaccurate, incomplete installed base data. The primary underlying challenge is the number, variety and complexity of post-order license transactions – rehosts, upgrades, transfers, returns, etc. In fact, the problem with inaccurate installed base data also negatively impacts maintenance and subscription renewals, but that’s a separate topic. The reason why installed base data is usually erroneous is because standard IT systems are not designed to manage the lifecycle of a software license – providing the means to perform, track and report on all of the transactions associated with software licenses. As it stands, these transactions are usually performed using a variety of disparate systems and manual processes. And some of the transactions aren’t tracked or recorded at all.
Some software publishers recognize these challenges and attempt to address them with extensive IT system customization and/or manual data manipulation. And some of those systems, while expensive and time-consuming to develop and maintain, are relatively effective initially, most don’t handle change well, if at all. Keeping up with the new software license models like subscription and computing environments like virtual and mobile computing is a must-do for most software companies. Software publishers don’t usually have the expertise to develop license lifecycle systems that consistently yield an always-accurate installed base and are easily configured to address current and future requirements.
The right entitlement management system helps you increase your up-sell/cross-sell effectiveness by helping you maintain an always-accurate view of your installed base. Such a solution provides customer self-service to manage all entitlement and fulfillment transactions, including the post-order types – resulting in an always accurate view of the installed base. Alternative approaches either try to customize the Installed Base (IB) module of ERP systems or use a ERP/CRM system for order data & augment with a variety of other systems/sources to manage post-order entitlement & fulfillment data. Alternatives are usually very expensive to develop and maintain, leave large installed base accuracy gaps and yield lower up-sell & cross-sell success.