For years, software and SaaS companies have relied on a process called “white spacing” to drive growth and increase Net Recurring Revenue (NRR). The traditional method was straightforward: review the modules or products a customer currently owns and then focus sales efforts on upselling or cross-selling the ones they don’t.
However, this linear, provider-centric process is no longer effective in today’s market. In my view, traditional white spacing is outdated and needs to be replaced by a modern approach that is directly aligned with customer value.
Why Traditional White Spacing Is Obsolete
This outdated model is failing for three key reasons:
- Evolving Customer Expectations: Modern customers expect the cost of their existing services to decrease over time. While a service’s benefits might expand, the unit benefit-to-cost ratio is expected to decline. For instance, a company paying a specific price per user to deploy security for its first 1,000 employees expects the next 1,000 users to cost less. This expectation, coupled with general pressure for costs to fall over time, means that pushing more modules at a fixed price can put customer satisfaction at risk.
- A Flawed, Provider-Centric Perspective: The traditional approach of adding new modules assumes the platform provider’s point of view, not the customer’s. Customers are not actively looking to buy more modules simply to increase your NRR. Instead, they are searching for value-based use cases that solve their specific business problems.
- Shifting Market Forces: The entire market is moving away from traditional sales models. A significant shift toward consumption-based pricing models poses a direct threat to the legacy process of selling pre-packaged subscriptions and modules.
To illustrate, consider the posting from Zendesk that clearly summarizes the current view of White Spacing. Moving from this internal to customer focus is the development of a new best practice.
The Solution: A Dynamic Value Modeling Platform
The replacement for outdated white spacing is a Dynamic Value Modeling platform. This modern approach is based on the recognition that value evolves over time and must be tailored to specific use cases. By adopting this model, strategic selling becomes use case-driven, maintaining a direct and continuous alignment with customer value. This new model provides significant benefits for the entire organization, from sales to product management.
Selling & Pre-Sales: Focusing on Outcomes
The sales process transforms from pitching products to demonstrating value.
- Outreach: The first conversation with a new customer starts with a “value hypothesis”. This initial discussion is framed in the customer’s terms, utilizing data-driven insights and industry-specific differentiators to create a mutually beneficial scenario.
- Engagement: During the initial sale, a dynamic customer value model or dashboard is created to facilitate ongoing customer engagement. This interactive tool helps the customer visualize and communicate that value internally. It also serves as the foundational plan for implementing the necessary measures to achieve those outcomes.
Customer Support: Managing and Realizing Value
After the sale, the focus shifts to ensuring the customer achieves the promised value.
- The Living Dashboard: The initial value model evolves into a “Living Dashboard”. This dashboard is not static; it must be constantly updated to reflect the customer’s current reality and track outcomes over time. This dynamic nature is critical for showing “value over time”.
- Driving NRR Gains: This dashboard, which showcases “Realized Value,” becomes a central part of every Quarterly Business Review (QBR). It provides a clear, data-backed foundation for conversations about expansion and NRR gains, rooted in the value already delivered.
Product Management: Capturing Value and Informing Strategy
The platform provides crucial data that aligns product development with customer needs.
- Data-Driven Decisions: Metrics that connect specific use cases to realized customer value are essential for product management. This data allows for more efficient, data-driven decisions, moving beyond simply reacting to the loudest “noise”.
- More innovative, Targeted Marketing: These same metrics are key to building a more effective marketing process. Many Account-Based Marketing (ABM) programs push the same high-level messages to all prospects in a vertical. By incorporating value-based metrics with industry- or vertical-specific details, marketing can establish a solid foundation for a dynamic and targeted ABM strategy, ultimately benefiting both the company and its customers.
IMV, this is the foundation for expanding Strategic Selling programs for any Digital platform. The basis for seeking an ideal customer foundation is within the value modeling exercise.
