Growth Frameworks

From Vendor to Partner: Four Strategies to Help Transform Your Customer Relationships

These days, news headlines are filled with uncertainty; across industries, leaders are preparing for a broad-based market slowdown. In a softer demand market, companies often see new customer acquisition decelerate faster than spend from existing customers ¹. There is no better time than now to embrace your existing customers. Transforming your customer relationships – moving from “vendor” to “partner” – can help create a customer intimacy that differentiates you from your competition and supports both retention and expansion efforts.

The concept of partner versus vendor is not a novel one (here’s an article that summarizes well the difference between the two). Yet, in our experience, few customers truly view their vendor’s sales team in this light. Make no mistake: partnership must be earned. In our experience, the following four strategies can help a team build trust and accountability with customers.

1. Stay Current on Decision-Making Processes

In a resource-constrained environment, every expense is met with greater scrutiny. Your customers may have new stakeholders involved in their decision-making process. Are there new thresholds of spending that require different levels of approvals? Are there more individuals to educate throughout the sales cycle and new approvals required for spending? Even if your last transaction with a customer followed a defined process, we encourage you to confirm whether the process remains the same. If your customers see you as a partner in their growth, they will help guide you through these process changes.

2. Manage to Metrics that Matter

In our experience, high-performing sales teams understand and measure the metrics that define success for them and their customers. As businesses evolve and operating environments change, your team needs to keep a pulse on what that means for your customers. A high-growth organization may measure success with growth-related metrics (e.g., ARR and revenue growth, gross and net dollar retention) and/or time-to-value. But if that same organization faces headwinds, it may need to shift its focus to doing more with less – and managing to efficiency metrics such as lifetime value-to-customer acquisition cost (LTV-to-CAC), magic number or EBITDA margin. A partnership-focused relationship will help your team gain insight into how your customers measure the benefit of your product or service to ensure that you are measuring and managing to the metrics that matter to your customer base – and to inform where / when to adapt your value proposition and messaging as a result.

3. Empathize with Customers’ Constraints

Cost cuts are sometimes inevitable. We encourage sales leaders to proactively work in partnership with their customers to understand the business pain points and desired outcomes of a cost-cutting mandate. Are there ways in which your product can support the customer’s goals? Can spend with your products/services result in overall savings for the customer? A true sales partner will have the opportunity to discuss these questions with their customer, align on (new) goals and agree on a go-forward model that works for both parties. Those considered as “vendors”, by contrast, are often left in the dark when customers cut spending and hope they are not impacted. In our experience, even if a customer ultimately needs to reduce spend on your products or services, they will still appreciate your partnership and continue to view your brand favorably, leaving the door open to opportunities in the future.

4. Remember: Renewals are a Two-Way Street

In a softer market, sales teams often celebrate the virtues of an early renewal. Early renewals can help address quarter-to-quarter uncertainty by reducing the number of last-minute decisions or surprises at the end of your contracts. Logically, that makes sense, especially if your goal is to maintain your current revenue streams with those customers. However, we encourage teams to consider the customer’s point of view in these renewal discussions. What can you provide to encourage your customers to consider an early renewal? We’ve seen teams successfully drive renewals with “give-and-get” options such as additional features, preferred pricing or discounts for future spend, additional services, support or training. Should you offer this approach to all customers? Most Enterprise SaaS companies have gross retention rates north of 80%²; therefore, most of your customers are likely to renew without such incentives. Consider the data you have available and perform a retention analysis to help identify those who are truly at risk of churning.  This will allow your team to be more strategic and surgical with this motion.

When sales organizations face headwinds, a common response is to mandate price increases, drive early renewals and get tougher on collections. While these tactics have merit, executing these without customer intimacy will often be met with strong resistance from customers. This erodes trust over time and customers will come to view these teams merely as vendors that can be easily replaced. Instead, by adapting to your customers’ changes, aligning to shared outcomes and successes, empathizing during hard times and providing timely and mutually beneficial opportunities, you can increase customer intimacy and create enduring, long-time customers.

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Cae Keys

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The content herein reflects the views of Summit Partners and is intended for executives and operators considering partnering with Summit Partners. For a complete list of Summit investments, please click here.




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