3 expansion data points to show your manager ASAP

New logo is shiny and exciting. Conquering new frontier and ringing the bell… there’s nothing like it. But expansion is slow and steady. It’s built on trust and repeated returns, and it’s crucial to a healthy customer base. When deals are moving slower and opp win rates are lower, it’s a treasure trove for keeping your financials stable. 

Outreach’s latest product release focuses on arming sales and customer teams with the tools they need to better anticipate and proactively respond to upcoming renewals – meeting customer and seller needs. So we turned to our world-renowned selling database for a peek at the state of expansion. We found three major data points we couldn’t wait to share:

1. Expansion deal size has fluctuated, but smaller expansion deal sizes remain the most stable
2. Expansion opportunities are fewer and farther between
3. Integrating multiple contacts and departments can increase your expansion opp win rates

Expansion deal size is down, then up, then back down

We’re getting whiplash over here. For the most complete and consistent data sets, we focused on 2021-2023 and capped initial New Logo value at $100k. The Outreach platform supports small business and enterprise sellers (and all businesses in between), so this is quite the collection of deals. After an interestingly optimistic 2022, expansion deal value seemed to even out in 2023, with deals under $10k as the only exception – with expansion deals becoming more valuable year over year.

This could be an echo of a similar trend we monitored earlier this year: new logo deals under $10k were the only new logo group to experience higher win rates and quicker sales cycles YoY compared to their more expensive counterparts. For their expansions to follow a congruous pattern is notable. In the Touchpoint Tango, we speculated that this enthusiasm towards smaller deals and trepidation towards bigger deals was an indicator of slashed budgets and a shaky market. Smaller financial commitments are easier on advocates and easier for finance departments to approve. 

Once initial trust on a less risky purchase is established, expanding in smaller increments maintains its appeal – for financial departments and in the face of the market. But securing these deals may not be that easy.

B-E aggressive: fewer expansion deals

Even amongst <$10k new logo values, expansions are becoming less likely. While deals of this size made up a majority of expansion deals, their numbers are on a downward trend. From 2021 to 2023, the number of expansions amongst <$10k New Logo deals are down 56%, with similarly drastic decreases amongst $10k - $50k and $50k - $100k.

We don’t share this data to fear monger, we share this data to give GTM teams worldwide the information they need to know what they are up against. 

It could be that core offerings have become stronger, and are better at fulfilling customer needs. The freemium model could be inspiring buyers to just get past the paywall, but not any further. Price structure changes (hello, inflation and price gouging) to core offerings may not be leaving enough financial wiggle room to entertain expansions. Financial departments may be striking down up-sells, asking departments to make due with what they already have. Innovation could be slowing to a trickle, with not much appeal outside of current packages. 

When providers have had their own financial struggles and layoffs, their offering and pricing has undoubtedly changed. No organization should ever take their eye off the market, but that doesn’t mean there isn’t internal conflict, and your customers are recognizing it. In our recent Sales 2024 report, a whopping 61% of respondents cited budget and economic uncertainty as a primary concern, with competitive pressures (58%) as a close second. These are valid considerations, but they’re also extraneous variables, indicating that most orgs are more comfortable blaming the outside world rather than looking in the mirror. The data is the data, the market is the market – but these conditions are not an inevitability.

Now is a great time to look at your internal innovation and your reward structure for expansions. Are you truly offering something unique and valuable? Do those offerings solve customer problems, or are they just vanity decor for your own product? Be honest and tackle head on, but don’t ignore the impact on your sellers and CSMs who have their own goals (and commission) to tackle. When these numbers may be harder to achieve, you will need to keep sellers and CSMs motivated and rewarded. Ensure their goals are achievable and recognized. 

MULTITHREAD (seriously)

If less is good, more is better – at least when it comes to engaging multiple prospects and departments in your expansion opportunities. Statistically speaking, one prospect is good, but more than one is better. One department is good, more than one is better. And we’ve seen this phenomenon before: historical Outreach data indicates when more than one contact is engaged, deals are 37% more likely to close. But cross-department threading has the potential to increase win rates by 56%.

In this study alone, solely amongst expansion deals under $10k, opp win rates increase by 14% when incorporating more than one contact, and increase by 12% when incorporating more than one department. 

But didn’t you just say that more than one department is better than more than one contact? You, eagle-eyed data guru, you. When we turn the dials to focus on departments, it assumes all the contacts in one department and lumps them together – so some of our department-based data insights will organically have multiple contacts within the department, while some just have one. That’s why opp win rates amongst under $10k expansion deals have a little jump, their “base point” is higher. 

Another interesting factoid we uncovered was that as deal size increases, opp win rates organically decrease, which also echoes previously mentioned historic Outreach data. In the Touchpoint Tango, as deals increased in size, win rates became lower and sales cycles became shorter. When everyone has the budget heebie-jeebies, no one wants to make a mistake (especially a big mi$take). 

But multithreading could still be the answer: win rates are consistently higher across deal sizes when more than one contact and more than one department are integrated. Trust is still the key ingredient, and when you build trust across an organization, you can counter limited expansion opportunities. Combat the declining opp win rates by building confidence and comradery, then, everyone can win. 

Selling is not a business of buying, it’s a business of relationship building. Expanding is an act of trust, and the best way to build trust is to keep your promises. The foundation of your core offering must be strong and the innovation of your new offerings must be alluring. Then, your team needs to know how to have meaningful conversations surrounding it. This expansion uncertainty isn’t permanent, but only the savvy will survive.