Increasing Your Average Contract Value (ACV)
It’s time to increase your ACV
In the modern business environment, enhancing your average contract value (ACV) is key to boosting your bottom line.
So, how do you achieve this? I’m going to walk through 4 strategies that you can use to increase your ACV in the next few months.
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1.The Price Proposition: Increase them
The initial strategy is rather straightforward: increase your prices.
We are in an era where there's a broad-based acceptance of price hikes. You've likely experienced this first-hand during your grocery trips; remember the last time you bought eggs?
However, it's crucial to highlight where businesses often stumble when implementing this strategy.
In my experience, many companies assign the task of communicating price increases to their revenue teams, devoid of any thoughtful narrative from the leadership. When the narrative comes only from the bottom, it could easily be misconstrued as a mere sales gimmick.
The more effective approach? Develop a coherent, global narrative that originates from the leadership, is polished by the marketing team, and is fine-tuned by sales leadership. This strategy ensures that your price increase is presented as a necessity rather than an arbitrary decision.
Crafting such a consensus not only enhances the understanding and acceptance of price hikes among customers but also significantly enhances your company's image as transparent and customer-focused.
2. Diversification and Solution Building: More Than Just Products
The second strategy is about offering more to your customers.
Modern customers and prospects hold an average of 100+ different tech tools, which translates into 100+ different customer success teams, account managers, contracts, and quarterly business reviews (QBRs). It's an exhausting number. The truth is, they would greatly prefer having a select few top-tier providers.
SPIFFS, or special incentive funds, have traditionally been introduced to motivate reps to sell more.
This strategy often generates short-lived results and ultimately loses momentum.
Instead, consider productising a solution set.
If your portfolio includes multiple products and services, bundling them into packages based on specific use cases could be more attractive to your customers.
This not only simplifies the purchase decision for the customer but also conveys a compelling value proposition. The bundled solution must logically align with the customer's journey, adding substantial value to their operations.
3. Securing Multi-Year Contracts: A Win-Win Proposition
Securing longer commitments from your clients through multi-year contracts can substantially increase your ACV. However, this strategy should be more than just a ploy to lock customers into extended commitments.
Companies often push their sales teams to quickly secure multi-year contracts without providing a compelling narrative or strategic rationale. Such an approach tends to puzzle customers and even irritate some of them.
Instead, construct an internal global campaign emphasizing the benefits of multi-year contracts. This should detail the reasons for such an initiative, how it can be implemented, and why it's a fitting solution in the current business climate. By identifying specific customers who are ideal candidates for multi-year contracts, your company can make this proposition a beneficial and strategic decision for both parties.
4. Value Enhancement Through Execution Excellence
This is my favourite strategy. Your ACV isn't only about what you sell; it's also about how well you sell it. Improve your execution and delivery, and your value proposition will naturally elevate. Whatever problem your product or service solves, strive to do it better than everyone else.
However, businesses often fall into the trap of overpromising and under-delivering, leading to disillusioned customers and potential losses. It's important to think about no-cost to high-cost initiatives that can add value to your customers. For instance, arranging for the CEO to interact directly with clients or hosting a virtual training workshop can bring considerable value.
Value creation shouldn't be seen as a complex task; it's about implementing a more methodological and thoughtful approach that aligns your company's offerings with your customers' needs.
None of the strategies shared can be done overnight. They require work, deep exploration and internal ownership. However, the inputs will pale in comparison to the outputs! Embrace them all, but pick the one that makes sense for your business today.
Commit to the change and you will be well on your way to increasing your average contract value, while also building stronger, more meaningful relationships with your customers.
I talk in-depth about 4 tips to help B2B sellers increase average contract value (ACV) on an episode of closing time over at Insightly. Make sure to check that out and leave your thoughts over on LinkedIn!
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A Buyer's World, is our insightful podcast hosted by CEO & Founder of Revenue Funnel Hannah Ajikawo.
On the show Hannah is joined by revenue leaders from across the globe to give you actionable steps that create logical and appealing pathways to purchase.
