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Building a Sales and Marketing Machine

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By: David Skok, Matrix Partners. …

By: David Skok, Matrix Partners.

Must have blueprint.


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  • 1.   Cost  to  Acquire  the  Customer  (CAC)   Profit  from  that  Customer  (LTV)  There  is  a  common  problem:     Startup  Killer  
  • 2. An  out  of  balance  Business  Model   Entrepreneurs  are  over-­‐optimistic   Cost to Acquire a Customer (CAC) Monetization (LTV)
  • 3. What  we  are  looking  for   A well balanced business model Monetization (LTV) Cost to Acquire a Customer (CAC)
  • 4. 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    
  • 5. Buying  Behavior  has  Changed   Please  understand  that  I  get  dozens  of  these  types  of  messages  a  week.    I   simply  do  not  have  time  to  read  them,  dig  into  them,  follow-­‐up  on  them,  or   reply  to  them.    The  most  effective  solution  to  this  problem  is  for  me  to   ignore  the  messages,  which  is  what  I  usually  do.          Finally,  a  small  comment.    As  a  customer,  I  find  this   type  of  approach  to  sales  to  be  largely  annoying  to   me  and  unproductive  for  you.    We  learn  far  more   about  what  we  want  to  purchase  by  searching  the   web,  looking  for  customer  references  in  blogs  and   forums,  word  of  mouth,  and  by  finding  white  papers   on  your  site  that  concretely  describe  solutions  to     CIO of Large Pharma Co.
  • 6. Sellers  need  to  change   An  intimate  understanding  of  the  Buyer   Buying  behavior   Likes   Dislikes       is  the  key  to  success    
  • 7. 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  
  • 8.  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.      
  • 9. 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  
  • 10. 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.  
  • 11. The  Touchless  Conversion   ZenDesk         Common  Funnel  Metrics:   10%  of  visitors  do  a  trial   20%  of  trials  convert  to  paid   Extraordinarily  scalable   Extremely  low  cost  
  • 12. 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  
  • 13. Sales  Complexity   No  Touch   Light  Touch   High  Touch   Field  Sales   Freemium   Field  Sales   Self-­‐Service   Inside  Sales   Inside  Sales    
  • 14. How  I  assumed  the  two  would  relate  
  • 15. 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     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  
  • 16. The  relationship  is  roughly  exponential   Clearly adding Human Touch dramatically increases costs
  • 17. CAC  (logarithmic)    $100,000 10x    $10,000  $1,000 10x    $100 10x    $10  $1 Freemium No  Touch Inside  Sales Field  Sales Sales  Complexity  
  • 18. 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      
  • 19. 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      
  • 20. 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    
  • 21. 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      
  • 22. Another  trait  of  highly  successful  companies   A  Sales  and  Marketing  Machine  
  • 23. BUILDINGA SALES & MARKETING MACHINE   Brand Advertising Email Events Marketing PR Webinars Sales Social Tradeshows Media
  • 24. ?WHAT IS A
  • 25. CLEARLY DEFINED LEVERS THAT YOUPREDICTABLE PULL TO MAKE IT GO FASTER SALES & INSTRUMENTEDSCALABLE MARKETING WITH GREAT MACHINE 9 METRICSAUTOMATED COST OPTIMIZED
  • 26. HOW DO YOU GO ABOUT  BUILDING ONE OF THOSE?
  • 27. 9 STEPS
  • 28. 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
  • 29. 4 ALIGNCREATING LEADS THAT HELP SALESCLOSE MOREDEALS
  • 30. Sales   CLOSED DEAL
  • 31. Blogging  Social  Media   eMail   Campaigns   CLOSED SEO   Sales   DEAL Webinars   SEM   PR  
  • 32. RULE NUMBER 1directly contribute towardsclosing a sale,
  • 33. Sales   CLOSED DEAL
  • 34. RULE NUMBER 2If the cost per lead is too high,Exception to this rule: If you can recover cost through: higher conversion rate to closed deals higher average deal size  
  • 35. Sales   CLOSED DEAL
  • 36. 5 LINK
  • 37. 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
  • 38. AN ORGANIZATIONAL
  • 39. PURCHASING STAGES PURCHASE CONSIDERATION CLOSED DEALAWARENESS
  • 40. AN ORGANIZATIONALMETAPHOR FOR THE KEYFUNNEL STAGES SALES MIDDLE OF THE FUNNEL CLOSED DEALTOP OF THE FUNNEL
  • 41. 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    
  • 42. WHAT IS TOP OF THEFUNNEL? RAW LEAD GENERATE WEBSITE AWARENESS    
  • 43. WHAT IS TOP OF THEFUNNEL? RAW LEAD GENERATE WEBSITE AWARENESS &   GET FOUND Inbound marketing Outbound marketing
  • 44. WHAT IS THE MIDDLE OFTHE FUNNEL? NURTURE QUALIFY MQL   (MARKETING QUALIFIED LEAD)   SEGMENT
  • 45. PROBLEM: RIDICULOUS, I GAVE SALES SAYS THEM A TON OF LEADS. MARKETING FOLLOW UP ON THEM PROPERLY. THEMENOUGH LEADS MARKETING SALES
  • 46. CAUSE: SALES CALLS A FEW UNQUALIFIED LEADS, AND FINDS THEY ARE WASTE OF TIME - THEY STOP CALLING THE REST OF THE LEADS SALES
  • 47. SOLUTION:GET AGREEMENT ON THE QUALIFICATIONCRITERIA NEEDED TO BE ABLE TO PASS A LEAD ACROSS TO SALES (MQL) MARKETING
  • 48. SALES FURTHER QUALIFIES THOSESALES LEADS TO FIND OPPORTUNITIES  
  • 49. USING BANT BUDGET   AUTHORITY NEEDS TIMING  
  • 50. COMMON LEAD STATESRAW LEAD CLOSED DEAL MQL OPPORTUNITY (MARKETING QUALIFIED (SALES QUALIFIED LEAD) LEAD)    
  • 51. 6 AUTOMATE
  • 52. SALES MIDDLE OF THE FUNNEL CRM CLOSED MARKETING DEAL AUTOMATIONTOP OF THE FUNNEL INBOUND MARKETING
  • 53. LEAD  SEGMENTATION  
  • 54. 7 MEASURE "IF YOU CAN NOT MEASURE IT, YOU CAN NOT IMPROVE IT." - LORD KELVIN
  • 55. THE KEY METRICS CAMPAIGNS TO DRIVE TRAFFIC VISITORS OVERALL CONVERSION % CONVERSION % TRIALS (BY LEAD SOURCE) CONVERSION % CLOSED DEALS
  • 56. 8 ANALYZE
  • 57. Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects Suspects SuspectsBUT EVEN IF YOU ARE MICROSOFT,CISCO, ORACLE, OR GOOGLEYOUR FUNNEL WILL HAVEBLOCKAGE  POINTS
  • 58. IDENTIFYYOUR BLOCKAGE POINTS
  • 59. HOW?
  • 60. WHAT IS STOPPING ME FROM INCREASING SALES BY 5X ?  
  • 61. 9 IMPROVE
  • 62. IN DIAGNOSING MANY FUNNEL BLOCKAGE POINTS,I HAVE FOUND THAT THERE IS ACLEAR  
  • 63. YOU ARE HOPING YOURCUSTOMERS WILL DOSOMETHINGTHAT THEY ARE  NOT MOTIVATED TO DO
  • 64. YOU DESIGNED YOUR FUNNELTHE WAY YOU HOPED IT WOULDBUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUTVIEW
  • 65. JBOSS EXAMPLEPUT A REGISTRATION FORMON THEIR WEB SITE BEFOREA FREE DOWNLOADIMPACTCUT THE DOWNLOAD RATEBY MORE THAN 10X
  • 66. GET INSIDE YOUR CONCERNS - Hate being sold to - want to get spam sales emails
  • 67. UNDERSTAND WHATMOTIVATES THEM CONCERNS MOTIVATIONS - Want to solve my problem - Recommended by a friend - Education - Data/ information reports - Entertainment - Free stuff
  • 68. 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
  • 69. 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  
  • 70. 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  
  • 71. GOOD LINKAGE TO NEXT STEP
  • 72. using engineering for marketing
  • 73. USING DATA TO DRIVE WEBTRAFFICSYSOMOS: SOCIAL MEDIA MONITORINGLEVERAGED THEIR DATABASE TOCREATE BLOG POSTS WITH DATA ONTOPICS OF CURRENT INTEREST: IRAN ELECTION RIOTS FACEBOOK USAGE
  • 74. LED TO: SYSOMOS ARTICLES IN ECONOMIST, NY TIMES WEB TRAFFIC TO READ THE FULL REPORT LEADS IMPRESSED BY THE CAPABILITIES OF THE SOFTWARE
  • 75. GETTING  CUSTOMERS  TO  SIGN  UP  FOR  A   TRIAL   - - spam email concerns - Yet another password to remember  
  • 76. 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  
  • 77. 1 423
  • 78. PROBLEM:GETTING A MEETING
  • 79. GETTING TO EXECUTIVEDECISION MAKERS TECHCRUNCH FOR INSURANCE CLAIMS
  • 80. 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
  • 81. First  Contact   Sell   Build   Build  First  Contact   Sell   Relationship   Trust  
  • 82. SELLING ISONCE YOU HAVE ESTABLISHED TRUST
  • 83. HOW?
  • 84. VALUABLE CONTENTEDUCATIONINFORMATIONENTERTAINMENT WITH ZERO SELLING
  • 85. THE KEYS TO SUCCESSDEEP UNDERSTANDING OF YOUR CUSTOMER 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
  • 86. APOLOGIES MY EXAMPLES ARE ALL SOFTWARE COMPANIESTHIS APPLIES EQUALLY WELL IN OTHER BUSINESSES
  • 87.  
  • 88. THREE NEW STEPS ATTHE BEGINNING OFTHE FUNNEL DESIGN
  • 89. 1IDENTIFYIDENTIFY ALL THE PEOPLE INVOLVED IN THEPURCHASE DECISION
  • 90. 2UNDERSTANDSKETCH OUT THEIR BUYING PROCESS ANDCONCERNS AT EACH STAGE
  • 91. 3ENTICEADD THE STEPS TO ADDRESS THEIR BUYINGPROCESSAND:ADDRESS THEIR CONCERNSENTICE THEM
  • 92. SUMMARY
  • 93. WE WENT FROMTHIS:1. Align2. Link3. Automate4. Measure5. Analyze6. Improve
  • 94. 1. IDENTIFY2. UNDERSTAND3. ENTICE4. Align5. Link6. Automate7. Measure8. Analyze9. Improve
  • 95. 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
  • 96. SALES-DRIVEN FUNNEL DESIGN TO ACUSTOMER-CENTRIC FUNNEL DESIGN
  • 97. CASE STUDY JBOSS
  • 98. JBOSS- FREE open source software- downloaded 5 MILLION times
  • 99. 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  
  • 100. ORIGINAL  BRAINSTORMING  SESSION  
  • 101. 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  
  • 102. JBOSS exampleNEEDED: a carrot to incent them to provide an email addressSOLUTION: give away the documentation for freeRESULT: 10,000 leads per month
  • 103. JBoss    -­‐    Sales  &  Marketing  Machine   Enterprise  Suspects   Closed  Deals   Rollouts   Web Web Phone InsideLeads Scoring Call Sales Lead Nurturing
  • 104. Metrics:  The  End  Goal   4:1   3:1   4:1   (25%)   (33%)   (25%)   Raw   Web   Closed   Tele-­‐   Tele-­‐  Leads   activity   Deals   marketing   sales   scoring  
  • 105. 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)    
  • 106. 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    
  • 107. THE  RESULTS  Before  venture  financing   70 2003   $2m   60Early  2004   50 venture  round  closes   40 30Bookings  Growth:   20 2004   $11m   10 2005   $26m   0 2006   on  plan  to  do  $65m   2003 2004 2005 2006
  • 108. 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  
  • 109. For  More  information   Visit  my  blog  at  www.forEntrepreneurs.com