Transforming Revenue Through Usage-Based Models

Unlock the secrets of usage-based sales models and revolutionize your growth strategy with insights from Daragh King, Vice President of Sales Operations at XBO. This episode is your ticket to understanding how transforming from traditional CRM-based opportunity management to innovative usage-based approaches can give you a competitive edge. 

Through Daragh’s expertise, we explore the intricacies of customer promise and realization, and how a simple pricing agreement can lay the groundwork for accurately predicting and realizing revenue opportunities. Get ready to expand your horizons as we dissect the nuances of this transformative model, particularly in industries like financial services, distribution, and transportation.

Get ahead in the fast-paced world of sales with strategic Revenue Operations (RevOps) insights that optimize processes and deepen customer relationships. Discover how the integration of opportunities with existing revenue and shipments can evolve into an early warning system, shifting the focus from mere data reporting to actionable insights through AI and machine learning. 

As the year draws to a close, learn how prioritizing daily tasks using CRM signals can enhance sales efficiency, streamline priorities, and reduce administrative burdens for a more productive workday. Join us on this insightful journey and seize the opportunity to harness these strategies for tangible improvements in revenue and organizational benefits.

00:03) Driving Growth Through Usage-Based Sales

(13:03) Optimizing Sales With RevOps Insights

(16:27) Increasing Sales Efficiency Through Prioritization

(00:03) Driving Growth Through Usage-Based Sales

Nature's usage-based sales models drive growth in financial services, distribution, and transportation industries, with accurate prediction of customer promises being crucial.

(13:03) Optimizing Sales With RevOps Insights

RevOps integrates opportunities and data to enhance sales processes and customer relationships through AI and machine learning.

(16:27) Increasing Sales Efficiency Through Prioritization

CRM signals can enhance sales team productivity by prioritizing tasks and reducing administrative work, leading to tangible improvements in revenue.

Transcript

Seth Marrs: 0:03

Hello everyone and welcome back to the Innovative Revenue Leader Podcast. This is the second or fourth part series on usage-based sales. In the last episode, Anthony McFartland and I talked about why CROs should care about this, the challenges, and some ways that companies can improve results when using this model. Today we're going to take a shift and we're going to talk a little bit more from a practitioner's view of usage-based, like how to use, and in particular, we're going to talk about how to use this as a growth driver. So AI really consumes all the air around this, and you'll hear a lot of people talk about this new model called usage-based. But the reality is this model's been around for a long time. And there are, it's been used in financial services, used in distribution, used in transportation. So there's a bunch of hidden experts in this area that have been using it for years and working to find ways to drive growth through it. One of those people is Derek King, and he's he's joined me today to talk more about what he's doing in his company. He's the vice president of sales operations at XBO, which is a trucking company. He's run sales operations there for three plus years. Prior to that, he was with Dell for 26 plus years, and as a part of that, also played a big role in the acquisition of EMC, which at the time was the largest technology merger that had happened in tech. So he's well versed in working around usage-based models and using them as the way to gain a competitive advantage. Dara, welcome.

Daragh King: 1:31

Seth, delighted to be here and delighted to have this conversation which you and I have frequently. And by the way, so do a whole bunch of uh, you know, my peer group as well. It's a it's a constant topic of conversation. And like you say, how do we unlock growth for our own companies? And exactly like you said as well, Seth this isn't new, right? It's been here since time began.

Seth Marrs: 1:51

No, it it's not at all. Yeah, so cool. So I I can I look at this and see usage-based as a major opportunity to drive growth in organizations, specifically because many companies are built around a CRM where opportunities are the main way to manage deals. And one of the dirty little secrets around this, you can't use operation, you can't use opportunities in a usage-based model. So with usage, closing the deals doesn't result in revenue, it's just the permission to buy. So there's a second phase that goes into this. So that's kind of what I want to dig into today. Where because opportunities really are not the wrong approach if you're trying to really drive usage-based. So how do you think about the the ramp challenge with this? So and and like what what can you what can you do to give your sales organization more visibility to the opp these opportunities in a world where you don't have an opportunity object or where the opportunity object isn't the right tool?

Daragh King: 2:52

Yeah, no, no, that's that's a great question. And I think that's that's kind of the whole, it's the holy grail for all of us, right? Like RevOps, BizOps, sales ops, whatever you want to call us these days. And and I do think you're right. AI has kind of infused our thought process on this. But we have machine learning before, right? So so like we can we kind of know how to do this from a tech standpoint. So it you're exactly right when you say this the CRM isn't the solve for this, but it's the start of the journey. So the way we think about it, at least, is okay, I've got my close one. That technically for us is my first shipment, but that's the start of the journey, it's not the end of it. So it might be the end of that opportunity cycle. Great, I identified my prospect, you know, I figured out their pain, I brought my solution. Great. End of opportunity process, close one, start of realization process, right? So so the way we think about that is what happened when I close one? Well, the customer made a promise to me, right? So what they basically said was, yeah, I have your pricing agreement. I've given you in in our business, LTL, less than truckload, I've given you a pricing agreement. What that pricing agreement basically entails is here's a set of lanes I want you to transmort my goods from A to B to. You've given me a specified rate card, if you like, for all of those, and I'm gonna pick and choose those lanes depending on my volume. Based on that volume, I've got set of shipments times my revenue per bill. That's equal to my promise, right? So as a seller, I go and enter that in my system. I say there's my close one, and I expect that to realize ideally over the course of the next 12 months. Ideally, it starts to realize on day one. Ideally, the customer is ready for me to go on day one, and everything's nice and level loaded across those 12 months. We all know that that's not the way it happens. So, so when we think about that, we say, okay, I I understand my promise from a customer perspective. I may have happy years as a sales rep, I may decide that that's something bigger, right? But at least there's a there's there's some form of let's call it gentleman's agreement there. Now it's on me as a seller to go realize that opportunity, and that's the growth element of it now. So for us, it's kind of so so I I understand where I'm starting, but now the rest of the journey begins.

Seth Marrs: 4:59

Yeah, so like talk a little bit more around the predicting of the promise because that's a really interesting thing. I mean, you talked about a lane, right? I'm shipping from here to there, and then you need your sales rep when they're signing that agreement to ideally accurately predict what they're promising when they sign that contract. Like, can you talk through a little bit around how you do that? Like, because that seems to be one of the big mistakes that a lot of companies make is you let your sales team do it and they kind of have happy ears. Like they kind of they pick numbers that are way bigger than they should be.

Daragh King: 5:31

And that's it, and maybe that's the Eureka moment we've had here over the last year to say, you know, our our clothes one isn't realizing at the rate it should be. Well, guess what? It was it was it was kind of a swag at the start anyway. So, how could we expect to ever realize 100% of a swag, right? So the way we've thought about that then is exactly what you said is why would we even ask the the salesperson to give us that forecast? Why don't we go calculate that? Because again, in a world of machine learning, in a world of AI, we actually have all that data now at our fingertips, better than we ever had before, especially for for people like us, right? We're a we're a tech forward company, we got churn tons and tons of data. That's something we have a lot of. I know exactly where you're shipping, I know the the length of journey you're making, I know your weights, I know you know your preference, right? I know where where you want to go within within North America. So now we can say with some degree of confidence, all of the things being equal, here's what this business is like. Here's the seasonality of that particular product, here's when the customer tends to do promotions, whatever it is, right? So I can predict that piece of it. Then what I'm trying to inject is well, what does that seasonality look like? Or is there a frequency of uh missed pickups at this account, or is there a frequency of weather challenges in this area in a particular time of the year? So if you start taking the data and then start injecting a set of variables, now you can at least get a promise that you can plan your business on. And now what your seller is doing is they're managing by exception. So you're you're you're serving them up a realization task, you're bringing it to them. And and the way I think about that, Seth, is it's actually an early warning system. So for you, for you as a seller, I can actually alert you and say, hey, by the way, Seth, you know, that account that you said was going to realize at you know, onboard next month, it was gonna realize at 55%. Guess what? It took them six weeks to onboard and they're realizing at 35%. And here's where we think the why is. Here's the lanes we think you have a problem is, here's here's some of the reasons we think that you're not onboarding. So now the seller will receive that. And again, I use the word task. It's not really a task, it's a it's a growth opportunity. It's and by the way, in in the current environment, it's a reason for me to go call a customer.

Seth Marrs: 7:48

Yeah, and and it's like there's a lot that you just said though, that's really really interesting. So you basically determine, and it's true, one of the things that people don't talk about is with the usage-based model, you have massive amounts of data. You have all the history of how things have happened. You've probably shipped in those lanes of of like to and from with thousands and thousands of customers. You have an idea what's going on. So it kind of makes sense for someone with an analytics background to pick that up, really talk to it and and provide the number, and then you let the seller hunt to go get that number. So that that that that makes a ton of sense. It's crazy how few people do that. They leave it with the seller.

Daragh King: 8:26

And I wish we had it perfected, but you know, I think I think the the the again, the holy grail for us will be now we identify the data, we've trapped the variables, we've got some degree of confidence around what that promise number is. We want to get that feedback loop back from the seller, right? Like, what was it that happened? So we have a bunch of variables that can predict what we think happened, but now you as a seller, you go find out. And and again, is there something different there? Is there another opportunity for us there? Sometimes we even find things like, you know, the the signal didn't make it from headquarters to the office in San Francisco or Colorado or whatever. So so maybe there was a you know a break in the TMS, you know, so their transport management system. So there can be many things along the line that maybe sight unseen from a seller. And for the seller to find that out, it's too late. We want to try and get there before the event. And it actually leads me to like, you know, so what's the next thing after realization? So if we say we're on a path to understanding how to realize better and how to grow, now what you're really doing, the flip side of that is you're trying to predict churn and say, okay, this customer is liable to leave the business for X, Y, Z reasons, or rather, this customer is liable to grow more because we've seen X, Y, and Z signals, right? So that again, I think about the tech and the seller combined with a new way of thinking about this, and it it just all points to growth then.

Seth Marrs: 9:48

Yeah, I mean, and think about like let's let's stay on the realization piece, right? Because that is like that is the true growth driver in a business like yours, in a usage-based business, is how do I realize the revenue potential of that customer? Whereas in a lot of deals, it's I realized it when I sold the deal. Here the game is doing that. And you talk about leveling that up to a point where I can I can add more realization opportunities to potentially even overrealize or overachieve what's going on. The the interesting part with this is like you talked about the task. Like nobody really knows how to name this. Like, what the hell is it? Because it's not an opportunity, but it's also not a task. It's it's like an indicator that says my analytics are saying something's off, seller, alert, go proactively engage. Like, talk a little bit more about how how you think of it and how like how on earth do you operationalize that? Because an opportunity doesn't work, the task is kind of not right.

Daragh King: 10:46

Like, how do you do that? But but it's it again, you know, our our our opinion, haven't looked at it for a while, is it's a it's it's a trigger, it's that early warning system, so it's a trigger. So now you go into whatever your homepage looks like, and at least for us, we visualize a home page and say, hey, seller, this is where you start and end your day. There's your list of things to do, and then you go work on that during the day, and then you can kind of measure your success as you end the day and you log off. For us, that's where we put that trigger. So we inject it into your flow of work, so it's it's something you're looking out for every day. So I do have my tasks, I do have my leads, I have maybe my opportunity, uh, overdue opportunities, but now I have this section with my early warning system, and there I have my realization trigger, and I'll go, I'll go activate that that realization trigger. It's funny talking to one of our sellers recently, we were talking about something like that. Like, well, okay, what does that trigger mean? And it was it was easy actually to relate to the seller because you can literally say, Well, I'm looking at your goal, you're gonna miss your goal by like five, six percent based on current course and speed. Guess what? You realize this revenue over here, you just solved that problem that sits over here. So connect that early warning system to your ability to get to your goal. Happy days, right? So that's the internal piece of it. But the second part of it too is the customer may not even know, right? So so again, call your customer and say, uh, hey Seth, what's the problem uh with realizing this revenue and how do we how how do we go solve it for you, right? So um I think there's opportunities there as well when we think about other reasons to engage with the customer.

Seth Marrs: 12:18

Yeah, I mean it it's amazing to hear you talk about like how you're starting to think beyond this because what I what I've seen with a lot of customers is they're like blanking on like how the heck do I like tool, like what's the tooling I need to put in place to do it? If you're someone new in this and really kind of starting up, like where do you start? Like, how do you if if if I were to ask, like, hey, if I I'm I'm I realize this, we have a bunch of usage based in the in like how do I start helping my sellers understand what's going on? Like, what would you say?

Daragh King: 12:51

Yeah, and I think I think that's it. You know, we you you start it simply, you take closed one, so you you're following your normal opportunity journey, you just take your closed one as the start of it, not the end of it. And now you're creating again. We take what we do is we take that that opportunity, we match that in with the existing revenue and you know, shipments in our case. Uh, we bring that off into our you know our our our day-to-day databases. We look at that stuff, we process it all over here, and we bring it back, like I say, as an early warning system to the seller. So it's uh it's a it's a logical step from you know, I'm prospecting to finding my opportunity to closing it, to understanding my shipments day-to-day, my onboarding journey, my realization, and then creating that feedback loop all the way back to the seller. You can do all of that in whatever your CRM is. I mean, there's lots of different plugins and there's other kind of third parties out in the market that can do it. But like you said, a lot of us now, whether it's with ML or AI, at least it's AI inside our organization, but there's also a lot of smart revenue ops folks who can take those signals and understand how to digest and infer insights from that. And I think that's our role these days, set as RevOps people, that we can't just report out the day-to-day news. That doesn't matter anymore. Who cares how many close one opportunities I have? I've just got to go activate them now, right? So that's if if we take that as the start line, really the true measure of success is well, what did that realization rate look like? And is it open to the right? Like that's that's it for us. I mean, literally this morning, that's the first thing I looked at and said, you know, we're coming close to the end of a month. It's been a short month. Uh how are we going to finish up the year? What does our realization rate look like? And how has that trended over the course of the line the last nine months? Almost like taking seasonality out of it and understanding that underlying trend of are we being successful with this approach or not? And I think generally speaking, we are. I mean, we'll always have to get better. There's still things to improve, but I think as long as you've got that thought process as a RevOps person to say, this is a problem to solve. Now, more so than ever, I have all the tools I need to do it. And the sellers are gonna warmly receive what again, you change the language from this isn't a task anymore to this is a path to your goal, Mr. and Mrs. Seller, right? And for customer, I'm I'm gonna make it better for you. I'm gonna tell you where you're not utilizing my services or where maybe you have a problem within your own internal system. And and you know, most customers are gonna appreciate the fact that I am that close to your account and your day-to-day activities that that I that I care to report that to you.

Seth Marrs: 15:24

Yeah, because I mean basically you're reading their mind, right? Like they they have made a decision they haven't told you about that they were gonna either redirect shipments, something went wrong that they've decided to spend less money with you, and you're going, hey seller, this went wrong. And now you're even talking about some cooler stuff, which is not only this went wrong, but now when this goes wrong, this is what it actually is, and here's what you should do type of stuff. That really allows a seller to proactively engage in your business. Like your sellers have hundreds of accounts, there's no way they could possibly understand. So by you giving that, it allows them to be very targeted, engage. And it I mean, you mentioned it before, but isn't that the goal of all RevOps people? Is I don't want to be the report jockey or the person that's going, I want to be the person that helps you sell more. And this sounds like it does it.

Daragh King: 16:12

But that's it. And you know, even we we, you know, as we come up to the end of the year, and and you know, all of us are doing our performance reviews, we always talk internally about what's the impact of the small groups that we typically are in these sales ops and rev ops organizations, what's the impact we can bring? And I think it's this kind of stuff, right? Because again, I'm not creating a task on a seller, I'm not looking to create more administrative for the seller. The opposite, in fact, I'm trying to help you prioritize your day so that when you wake up every day, you see from me a set of CRM signals and you go out on that signals. And I can probably guarantee you, and again, I can't say this factually yet, but I can probably guarantee you that the priorities I'm sending to you are gonna make your your days better, more productive, more efficient, and hopefully get you to your goal. At least, well, that's the that's the ambition, right?

Seth Marrs: 17:00

Yeah, that and yeah, yeah. And and they'll prove that over time, right? As they as they work, you're able to you're feeding you can feed that back in and say these are the signals that end up that end up stopping revenue. And ideally, you'd be able to say, well, month two revenue started going back up. Like you have all these things you can do to benefit your sales team and your sellers and the overall organization.

Speaker 1: 17:19

That's exactly it, Seth. Awesome. Dara, thanks so much for taking some for taking some time to share your wisdom. Really appreciate you joining. Not at all, like I say, start of a journey.

Daragh King: 17:29

So uh, you know, best of luck to everybody who's joined.