Linear #001: The Land & Expand SaaS Strategy
How Silicon Valley titans use the same strategy to grow like crazy
This weeks SaaS breakdown:
Many Silicon Valley software companies use the SAME strategy to grow like crazy.
It's called L&E.
WHAT IT IS and HOW TO use it to become an industry titan:
The LAND & EXPAND (L&E) strategy is widely used in the software world.
What is it?
Land:
Selling an initial product(s) to net NEW customers.
Expand:
Selling other products, seats, or usage to EXISTING customers.
Land products should have as little friction as possible.
Low friction equals:
>Pricing is NOT a blocker.
>Implementation is NOT a blocker.
>The value proposition is crystal clear.
You're just trying to get in the door with a new customer and prove your value.
Docsend is a great example of a KILLER land product.
What does it do?
Enables you to send documents that are SECURE (they're watermarked with the end users email), password-protected, and come with a timer (you can only access them for a certain period of time).
Why is it a great land product?
1) There is no initial cost, with a freemium model you're taking zero risk when you jump in.
2) You don't have to talk to a sales person to start.
3) You can implement the product without a customer success team.
Another great LAND product?
Twilio.
What does it do?
White label text messaging plug-in. Wan't texting in your product? You can build it entirely on your own, or just plug-in Twilio.
Why is it a great land product?
1. Initially, it's very cheap.
2. You can implement it with a few lines of code.
3. Developers don't have to talk to anyone (Big secret with engineers? They don't want to talk to anyone!)
When you nail the 'land' part of SaaS, you can 'expand'.
So let's talk expansion.
Expand products are often MUCH easier to sell because you've already proven your value.
-The client trusts you
-They know you can deliver
They're willing to take bigger risks when it comes to cost, implementation timelines, etc.
Dropbox is great at expansion.
It does so via storage limits.
This is SO sticky.
You're already in it.
You're not going to move a bunch of files elsewhere at this point.
The pricing preys on your laziness.
The result?
Dropbox HAS you now as a paid user.
Airtable is also fantastic at expansion.
They do so via freemium SaaS features as well as seats.
Wan't to unlock more rows because you've spent the last week building out the first part of your project?
Wan't to invite co-workers to the board you just spent hours on?
GOT YA !
When you nail Land+Expand magic happens:
As a company scales the only way to continue to grow quickly is via strong customer expansion.
Net Revenue Retention (the performance metric that shows how you grow pricing with existing customers) is the 8th wonder of the world...
So how does one implement the Land & Expand strategy into their software business?
Step #1. Break up your software offering.
Most first time software founders build out their offering and bundle the entire thing under one price.
This is such a big mistake.
I did this at one point.
DON'T DO THIS.
The amount of revenue you'll miss out on is MASSIVE.
Step #2. Identify your LAND products.
Identify which part of your software offering is best for land.
Remember, land products should have as LITTLE friction as possible.
Expensive pricing, a lot of change required, long implementation cycles are all examples of high friction.
Step #3. Focus your marketing/sales teams on LAND products.
They need to be hyper focused on JUST getting people in the door.
Their effectiveness should dramatically increase because they don't need to learn the ins and outs of every tool you offer.
Step #4. Identify your EXPAND products.
The customer trusts you now.
You can introduce more cost and more risk at this point.
Identify which parts of your software fit better as an expansion offering.
Step #5. Focus your customer success teams on EXPAND products.
Customer Success teams should be focused initially on implementing your LAND products, and then going ALL IN on your expansion products.
Show your customers what they're missing out on!
Who else is NAILING the land+expand (L&E) SaaS strategy?
Reply to this email and let me know…