Building a sales & marketing machine

The Key Elements behind “Business Model” Cost to Acquire the Customer (CAC) Profit from that Customer (LTV) There is a common problem: Startup Killer

An out of balance Business Model Entrepreneurs are over-optimistic Cost to Acquire a Customer (CAC) Monetization (LTV)

What we are looking for A well balanced business model Monetization (LTV) Cost to Acquire a Customer (CAC)

The Big Power Shift  The Internet caused the disruption  Buyers are now in charge  Able to find all the information they need on-line  Comparison shopping  Detailed reviews  Consumer reviews, complaints and comments

Buying Behavior has Changed“Please understand that I get dozens of these types of messages a week. Isimply do not have time to read them, dig into them, follow-up on them, orreply to them. The most effective solution to this problem is for me toignore the messages, which is what I usually do. …… Finally, a small comment. As a customer, I find thistype of approach to sales to be largely annoying tome and unproductive for you. We learn far moreabout what we want to purchase by searching theweb, looking for customer references in blogs andforums, word of mouth, and by finding white paperson your site that concretely describe solutions toproblems we are having.” CIO of Large Pharma Co.

Sellers need to change  An intimate understanding of the Buyer  Buying behavior  Likes  Dislikes … is the key to success

Buying Behavior has Changed Outbound Marketing:  Annoying to your customers  Expensive  Increasingly less effective What is the new process?  Google Search  Web Site  Reviews  Blogs & Social Media  Influencers  Trials or Free software / services Requires Inbound Marketing thought processes

It’s not all bad news  The Internet has also given marketers some powerful new tools  Web sites, videos, trials, etc. to convey rich information  Search Marketing (SEO/SEM)  The Social Graph  Viral acquisition  Behavioral tracking  Location information  A/B Testing  Etc.

Business Model Disruption in B2B  New Low Cost Customer Acquisition Models:  The Low Cost Sales Model  (Inside Sales instead of Field Sales)  The Touch-less Conversion  Freemium

The Low Cost Sales Model (Inside Sales)  SolarWinds  2009 Revenues: $116 million  EBITDA: $60 million 52% operating margins  Others: HubSpot, JBoss, LogMeIn, Constant Contact, Salesforce.com, etc.

The Touchless ConversionZenDesk Common Funnel Metrics:  10% of visitors do a trial  20% of trials convert to paid Extraordinarily scalable Extremely low cost

Free Trials require different Product Thinking  The product is your salesperson  Extreme focus on:  Ease of installation  Ease of use  Clear instructions on how to test (short videos, etc.)  Fast proof that it works

Sales Complexity No Touch Light Touch High Touch Field Sales Freemium Field Sales Self-Service Inside Sales Inside Sales with SE’s

How I assumed the two would relate

A rough estimate of CAC versus Sales Complexity No Touch Light Touch High Touch Field Sales Freemium Field Sales Self-Service Inside Sales Inside Sales with SE’s Rough Estimates of Cost of Customer Acquisition (CAC) $0- $50 – $1,000 - $3,000 - $25,000 – $75,000 – $10 $200 $2,000 $8,000 $75,000 $200,000

The relationship is roughly exponential Clearly adding Human Touch dramatically increases costs

CAC (logarithmic)$100,000 10x $10,000 $1,000 10x $100 10x $10 $1 Freemium No Touch Inside Sales Field Sales Sales Complexity

High CAC, requires high scores for: Value, Pain, Urgency Value / Pain / Urgency = LTV (logarithmic) $1,000,000 $100,000 $10,000 $1,000 $100 Unprofitable: LTV < CAC $10 $1 Freemium No Touch Inside Sales Channel Field Sales Sales Complexity 

How SaaS changes Sales Complexity Value / Pain / Urgency = LTV (logarithmic) $1,000,000 $100,000 $10,000 $1,000 $100 $10 $1 Freemium No Touch Inside Sales Channel Field Sales Sales Complexity 

Levers you can use to move from Red to Green Make it easy for customers to sell themselves Make the first decision to work with your product easy  Simple product  Free versions, Free Trials, Open Source Remove Complexity from closing the Sale  Remove IT (SaaS)  Eliminate committee decision making Make the first financial commitment easy  $10,000 or below for enterprise sales  $250 per month for very small business SaaS

Able to leverage the Human Costs dominate: Internet revolution Old world business model Value/Pain/Urgency$1,000,000 $100,000 $10,000 $1,000 $100 $10 $1 Freemium No Touch Inside Sales Channel Field Sales Sales Complexity 

Another trait of highly successful companies  A Sales and Marketing Machine

BUILDINGA SALES & MARKETING MACHINE Brand Advertising Email Events Marketing PR Webinars Sales Social Tradeshows Media

?WHAT IS A“SALES & MARKETINGMACHINE”

CLEARLY DEFINED LEVERS THAT YOUPREDICTABLE PULL TO MAKE IT GO FASTER SALES & INSTRUMENTEDSCALABLE MARKETING WITH GREAT MACHINE 9 METRICSAUTOMATED COST OPTIMIZED

HOW DO YOU GO ABOUTBUILDING ONE OF THOSE?

9 STEPS

4WHY 4 FIRST?BECAUSE 1, 2 AND 3 ARE NOT OBVIOUS SO WE WILL COME BACKTO THEM AT THE END AFTER WE HAVE SEEN WHY THEY ARESO VALUABLE

4 ALIGNALIGN EVERY MARKETING ACTIVITY AROUND ONE GOAL…CREATING LEADS THAT HELP SALESCLOSE MOREDEALS

Sales CLOSED DEAL

BloggingSocial Media eMail Campaigns CLOSED SEO Sales DEAL Webinars SEM PR

RULE NUMBER 1If it doesn’t create a lead, ordirectly contribute towardsclosing a sale, it doesn’t belong

Sales CLOSED DEAL

RULE NUMBER 2If the cost per lead is too high,it doesn’t belongException to this rule: If you can recover cost through: • higher conversion rate to closed deals • higher average deal size

Sales CLOSED DEAL

5 LINK

CLEARLY LINK FLOWS FROMSTART TO FINISH $ SEO LANDING FREE EMAIL SALES CLOSE PAGE TRIAL CAMPAIGN TOUCH1. At the end of every action, there should be a clear link to the next action2. The overall flow from start to finish should be carefully designed

AN ORGANIZATIONALSTRUCTURE…

YOUR CUSTOMER’SPURCHASING STAGES PURCHASE CONSIDERATION CLOSED DEALAWARENESS

AN ORGANIZATIONALMETAPHOR FOR THE KEYFUNNEL STAGES SALES MIDDLE OF THE FUNNEL CLOSED DEALTOP OF THE FUNNEL

WHAT IS TOP OF THE FUNNEL? customer is not aware customer has athey have a problem, or problem and is that your product looking for a solution category existsGENERATE GET FOUNDAWARENESS

WHAT IS TOP OF THEFUNNEL? RAW LEAD GENERATE WEBSITE AWARENESS

WHAT IS TOP OF THEFUNNEL? RAW LEAD GENERATE WEBSITE AWARENESS & GET FOUND Inbound marketing Outbound marketing

WHAT IS THE MIDDLE OFTHE FUNNEL? NURTURE QUALIFY MQL (MARKETING QUALIFIED LEAD) SEGMENT

PROBLEM: MARKETING SAYS THAT’S RIDICULOUS, I GAVE SALES SAYS THEM A TON OF LEADS. THEY JUST DON’T MARKETING FOLLOW UP ON THEM ISN’T GIVING PROPERLY. THEMENOUGH LEADS MARKETING SALES

CAUSE: SALES CALLS A FEW UNQUALIFIED LEADS, AND FINDS THEY ARE WASTE OF TIME - THEY STOP CALLING THE REST OF THE LEADS SALES

SOLUTION:GET AGREEMENT ON THE QUALIFICATIONCRITERIA NEEDED TO BE ABLE TO PASS A LEAD ACROSS TO SALES (MQL) MARKETING

SALES FURTHER QUALIFIES THOSESALES LEADS TO FIND OPPORTUNITIES

USING BANT BUDGET AUTHORITY NEEDS TIMING

COMMON LEAD STATESRAW LEAD CLOSED DEAL MQL OPPORTUNITY (MARKETING QUALIFIED (SALES QUALIFIED LEAD) LEAD)

6 AUTOMATE

SALES MIDDLE OF THE FUNNEL CRM CLOSED MARKETING DEAL AUTOMATIONTOP OF THE FUNNEL INBOUND MARKETING

LEAD SEGMENTATION

7 MEASURE "IF YOU CAN NOT MEASURE IT, YOU CAN NOT IMPROVE IT." - LORD KELVIN

THE KEY METRICS CAMPAIGNS TO DRIVE TRAFFIC VISITORS OVERALL CONVERSION % CONVERSION % TRIALS (BY LEAD SOURCE) CONVERSION % CLOSED DEALS

8 ANALYZE

Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects SuspectsBUT EVEN IF YOU ARE MICROSOFT,CISCO, ORACLE, OR GOOGLEYOUR FUNNEL WILL HAVEBLOCKAGEPOINTS

IDENTIFYYOUR BLOCKAGE POINTS

WHAT IS STOPPING ME FROM INCREASING SALES BY 5X ?

9 IMPROVE

IN DIAGNOSING MANY FUNNEL BLOCKAGE POINTS,I HAVE FOUND THAT THERE IS ACLEARPATTERN…

YOU ARE HOPING YOURCUSTOMERS WILL DOSOMETHINGTHAT THEY ARENOT MOTIVATED TO DO

IN OTHER WORDS…YOU DESIGNED YOUR FUNNELTHE WAY YOU HOPED IT WOULDWORK…BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUTTHE CUSTOMER’S POINT OFVIEW

JBOSS EXAMPLEPUT A REGISTRATION FORMON THEIR WEB SITE BEFOREA FREE DOWNLOADIMPACTCUT THE DOWNLOAD RATEBY MORE THAN 10X

GET INSIDE YOURCUSTOMER’S HEAD CONCERNS - Hate being sold to - Don’t want to get spam sales emails

UNDERSTAND WHATMOTIVATES THEM CONCERNS MOTIVATIONS - Want to solve my problem - Recommended by a friend - Education - Data/ information reports - Entertainment - Free stuff

CREATE A SOLUTION THATENTICES THEM AND ADDRESS THEIR CONCERNS CONCERNS ENTICE & ADDRESS CONCERNS - Customer testimonials address vendor risk - Free trials address product viability and fit concerns

EXAMPLE: DRIVING TRAFFIC TO YOUR WEB SITE GETTING FOUND Not going to find your site unless: - On 1st page of Google search concerns - Recommended by trusted source - Referred to in social media or blogosphere

LESSONS FROM WEBSITEGRADER• Free tools drive viral spread• Low customer work required• High value delivered• Score leverages competitive urge• Builds trust through clear demonstration of expertise

GOOD LINKAGE TO NEXT STEP

using engineering for marketing

USING DATA TO DRIVE WEBTRAFFICSYSOMOS: SOCIAL MEDIA MONITORINGLEVERAGED THEIR DATABASE TOCREATE BLOG POSTS WITH DATA ONTOPICS OF CURRENT INTEREST:• IRAN ELECTION RIOTS• TWITTER’S GROWTH• FACEBOOK USAGE

LED TO: SYSOMOS ARTICLES IN ECONOMIST, NY TIMES WEB TRAFFIC TO READ THE FULL REPORT LEADS – IMPRESSED BY THE CAPABILITIES OF THE SOFTWARE

GETTING CUSTOMERS TO SIGN UP FOR A TRIAL - I don’t have the time - I don’t want to get spam email concerns - Yet another password to remember

RE-THINK THE PROCESS CONVENTIONAL SIGN UP CONVERT APPROACH FOR TRIAL WOW! TO CUSTOMER WOW! FIRST, CONVERT SIGN UP TO REGISTER LATER WOW! FOR TRIAL CUSTOMERSource: Josh Porter – Designing for Social Traction

PROBLEM:GETTING A MEETING

GETTING TO EXECUTIVEDECISION MAKERS TECHCRUNCH FOR INSURANCE CLAIMS

DROPBOX: SIMPLE FILE SHARING SOFTWARE– Get you hooked for free– Storage slowly increases to the point where you need to pay– But by then they have established trust – And it is hard to move your data that is shared with others

First Contact Sell Build BuildFirst Contact Sell Relationship Trust

SELLING IS 10X EASIER…ONCE YOU HAVE ESTABLISHED TRUST

YOUR BLOG CAN ESTABLISH TRUST… HOW?

VALUABLE CONTENTEDUCATIONINFORMATIONENTERTAINMENT WITH ZERO SELLING

THE KEYS TO SUCCESSDEEP UNDERSTANDING OF YOUR CUSTOMER• What don’t they like?• What do they like/need?• What motivates them?• What are their problems?• What does their boss expect of them?• etc.Combined withOUT-OF-THE-BOX THINKING

APOLOGIES MY EXAMPLES ARE ALL SOFTWARE COMPANIESTHIS APPLIES EQUALLY WELL IN OTHER BUSINESSES

FINALLY…LET’S GO BACK TO THE BEGINNING…

…AND INTRODUCETHREE NEW STEPS ATTHE BEGINNING OFTHE FUNNEL DESIGNPROCESS…

1IDENTIFYIDENTIFY ALL THE PEOPLE INVOLVED IN THEPURCHASE DECISION

2UNDERSTANDSKETCH OUT THEIR BUYING PROCESS ANDCONCERNS AT EACH STAGE

3ENTICEADD THE STEPS TO ADDRESS THEIR BUYINGPROCESSAND:ADDRESS THEIR CONCERNSENTICE THEM

SUMMARY

WE WENT FROMTHIS:1. Align2. Link3. Automate4. Measure5. Analyze6. Improve

TO THIS…1. IDENTIFY2. UNDERSTAND3. ENTICE4. Align5. Link6. Automate7. Measure8. Analyze9. Improve

THE NINE STEPS1. IDENTIFY Identify people in purchase decision2. UNDERSTAND Address their buying process and concerns Design actions to pull them through buying process3. ENTICE & address concerns4. ALIGN Ensure funnel actions lead directly to sales5. LINK Link every funnel action to the next step6. AUTOMATE Use software to automate7. MEASURE Measure key funnel metrics8. ANALYZE Identify blockage points Brainstorm better enticements and ways to address9. IMPROVE concerns

SALES-DRIVEN FUNNEL DESIGN TO ACUSTOMER-CENTRIC FUNNEL DESIGN

CASE STUDY JBOSS

JBOSS- FREE open source software- downloaded 5 MILLION times

The Highlights• Breakthrough Business Model – Open Source – A great example of the power of Free – 5 million downloads• The first challenge: How to monetize• The second challenge: Conversion – While keeping CAC low – Solution: Build a Sales & Marketing Machine

ORIGINAL BRAINSTORMING SESSION

THE FIRST BLOCKAGE POINT• 5 million users had downloaded JBoss – But none had given their names• The problem: – email registration in front of download reduces conversion rates significantly

JBOSS example a carrot to incent them to provideNEEDED: an email addressSOLUTION: give away the documentation for freeRESULT: 10,000 leads per month

JBoss - Sales & Marketing Machine EnterpriseSuspects Closed Deals Rollouts Web Web Phone InsideLeads Scoring Call Sales Lead Nurturing

Metrics: The End Goal 4:1 3:1 4:1 (25%) (33%) (25%) Raw Web Closed Tele- Tele-Leads activity Deals marketing sales scoring

Using the model to work backwards 4:1 3:1 4:1 Raw Web Closed Tele- Inside-Leads activity Deals marketing sales scoring• To do $4m in the month: – If Average Deal Size is $10k – Need $4m divided by $10k deals to reach target = 400 deals – Means 1,200 deals being worked in Inside sales (400x4) • Know that each rep can work 60 deals at a time, means 20 reps – Means 3,600 telemarketing contacts (1,200x3) – Means 14,400 Raw Leads (3,600x4)

THE NEXT CHALLENGE: INCREASE LTV• Multi-pronged approach – Add services to the subscription (beyond just support) • Key service was JBoss Operations Network – Broaden the product line and upsell • JBoss Enteprise Middleware Suite (JEMS) – Scalable Pricing • 4 axes to drive pricing higher• Result – Drove average deal size from $10k to $50k – While maintaining the same pipeline flow and conversion rates

THE RESULTS• Before venture financing 70 – 2003 $2m 60• Early 2004 50 – venture round closes 40• Bookings Growth: 30 20 – 2004 $11m 10 – 2005 $26m 0 – 2006 on plan to do $65m 2003 2004 2005 2006

JBOSS SUMMARY• Business Model disruption – Gave the product away entirely free – Monetized support & management• Low CAC – Leveraged free and virality to acquire non-paying customers• Sales & Marketing Machine – Careful study of customer motivations – Low cost Sales model – Excellent Metrics• Scalable pricing model

For More information Visit my blog at www.forEntrepreneurs.com

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Building a sales & marketing machine

by David Skok on Mar 25, 2011

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Building a sales & marketing machine — Presentation Transcript