D-Day Marketing: The Land and Expand Strategy
Let’s start today’s post by acknowledging one important fact. It is usually much, much (did I say “much”) easier to up-sell an existing customer than it is to find a new customer. Yet, our marketing efforts are often focused on selling the whole enchilada to the customer on their first experience with us. This is often counterproductive, and why you may need to adopt the “land and expand” marketing strategy.
This is where the “D-Day” analogy comes in. In World War II the objective of the Allied powers to re-take the European continent was not to capture it all at once, but rather to land in a small area, establish a beachhead and expand from that point. Your beachhead is a group of customers in a particular market that can be leveraged and expanded.
The land and expand strategy in marketing is based on the premise that it is easier to get a minor commitment first and then work your way towards a major commitment, instead of starting with a major commitment. A good analogy is that of dating. You don’t ask someone to marry you on the first date. You go for the smaller commitment (e.g. a dance) and then work your way from there. So how do we practice the land and expand strategy when it comes to marketing? Here are a few ideas:
- Free trial – this offer works well provided you have a good plan for converting the free trial participants to paid purchasers.
- Freemium – in this type of offer, you give a basic level of the product away at no charge. QuickBooks used this strategy to attract tens of thousands of customers, many of whom converted to the full paid version. Dropbox also uses this model – the freemium version is limited in storage capacity and many users upgrade to the paid version. Google Apps is free for 10 users or less but upgrade charges apply after this point.
- Discount the initial offer – publishers use this model extensively. An annual subscription with a retail value of $199 is discounted to $99 for the first year, with a built-in automatic renewal.
- Advertiser supported – many websites offer free information/services but require visitors to be subjected to constant advertisements. The visitor can bypass the promotions by paying a subscription fee. Pandora is a good example of this model.
- Create a recurring revenue stream – the best example of the recurring revenue model are desktop printers, where the printer sale is considered a loss leader, and the customer pays a fortune in ink and other supplies over time.
- Vertical penetration strategy – many industries are insular and they tend to buy only from those who have done business with their peers. To be successful in this type of industry, you need to seed the market and leverage these initial customers into the broader market. One of the tactics to do this is to trade a very low price for a customer case study.
These are just six of the many possible strategies. Remember that it may cost you more to get a new customer with the land and expand strategy than that customer is worth, at least in the short-term. To make it work, you must be able to convert a large percentage of the initial low-dollar customers into long-term high-dollar customers. Here is a B2B sales example of how the numbers work from one of our clients – a Software as a Service (SaaS) company:
|Acquisition cost of a free trial prospect:||$78|
|Conversion ratio of free trials to paid customers:||11.1%|
|Average acquisition cost of a new customer:||$703|
|Average first year revenue for a new customer:||$1,930|
|Revenue payback ROI:||4 ½ months|
This is obviously a strong performance and the key metric is the 11 percent conversion rate. In this case, when tested against the direct sale offer (no free trial), the land and expand program produced much better results.
What’s your version of D-Day Marketing?