Category: Sales & Marketing

08/24/07

08:18:44 am, Categories: Entrepreneurship, Sales & Marketing  

I had a moment of clarity a couple of days ago on how a start-up should think about positioning its products & services in the market to achieve the most traction. I will go into this in a bit more detail when I pen the SalesQB Diary for 2007. But even in general terms, there is a key lesson to be learnt, I think.

Take a look at how SalesForce.com evolved. It focused on providing CRM / SFA functionality to SMBs as a simple, one-size-fits-all, on-line service at a low monthly rate. Compare this to the huge, highly customized CRM implementations that larger enterprises went through at 7, 8 and 9 figure tabs. But the key point is that CRM in larger enterprises was an established phenomenon before Salesforce.com could do what it did. Yes, Salesforce.com had to invest a huge amount in marketing in its first year ($25M, according to their own financials) before it could gain traction, but that was to convince the market about the viability of the Software as a Service (SaaS) model, not about the value of CRM.

Think about other major product & service categories in the high-tech space, such as websites, Internet connectivity, network equipment and enterprise applications, and you will notice that they first gained traction in larger enterprises and then made it to mid-sized and smaller companies. You will also notice that high-tech vendors use progressively lower cost sales & delivery models as they move to the mid-sized and smaller market segments. And the numbers justify this approach. Deals in larger enterprise customers tend to be in the 6 – 9 figure range, those in mid-market customers tend to be in 4 – 7 figure range while smaller customers would be hard-pressed to justify any deals larger than $10K. This is why sales to enterprise customers are made through field sales reps, those to mid-market customers are done through a combination of field & inside sales reps and sales to smaller customers are garnered primarily through marketing & small doses of inside sales.

So, what is the point? My theory is that products & services that start of as being “discretionary” have the best shot of gaining traction with larger, enterprise customers. Once there is media attention in this space and industry / financial analysts start tracking it, then the mid-market becomes a viable customer segment. It is only after the above two precedents that the product or service category can be sold to small business customers profitably.

The catch word in the above para is “discretionary”. If a small business customer absolutely has to do something, such as tracking its financials and paying taxes, then associated products & services could well be directed at the small business market segment first. An example being QuickBooks. And if a product or service is developed only for small business customers, such as dentists or veterinarians, then obviously my theory doesn’t apply. But, if a product or service starts of being discretionary (not a “must-have”), then the ease with which traction can be accomplished in its formative years decreases as you go from large to mid-sized to small customers. And the reasons are obvious. Small business customers tend to be risk-averse and not have cash to burn. They need to be strongly persuaded about the value of a discretionary product or service, which is very hard to do with just marketing and inside sales. Field sales reps, meeting with executive decision markers in person at larger enterprises, tend to be a good bit more persuasive.

The situation is not completely black or white though. Sales cycles in larger enterprises tend be long, anywhere from a few months to a year or two. Sales cycles in small business tend to be less than 2 – 3 months, if not smaller. Field sales reps are also a lot more expensive to hire than inside sales reps. So, the sales overheads for enterprise sales are a good bit higher. Compare this to spinning your wheels with smaller customers, when that market is not yet ready for reaping, and achieving sub-par sales performance.

So, as an entrepreneur, think about what you sell, how ready the three key markets are (enterprise, mid-market and small), what your average deal sizes will be, how long you expect your sales cycles to be, what your sales overheads will be, whether revenue generation is more important than profitability, when you expect to raise external working capital, what the VCs / lenders you approach will look for in a company (revenue, profitability, number of customers) such as yours and then trust your gut.

Sampath

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03/20/07

As an entrepreneur starting a Web 2.0 company, I have often made the mistake of adopting the “build-it-and-they-will-come” attitude toward our offerings. As I mentioned in a previous article, it is seductive to draw comparisons with significant trends (social networking, Web 2.0, SaaS, Enterprise 2.0, Services 2.0 etc) and large success stories (Google, Yahoo, eBay, MFG.com, SalesForce.com) and think “If only we could capture 3% of that market …” There are a slew of Web 2.0 entrepreneurs out there today who are thoroughly convinced that their offerings will change the world, but are not seeing any market traction.

I was reading a book called Freakonomics on a flight home and had a moment of clarity. In this book, the authors talk about all human behavior being influenced by three types of incentives; financial, social and moral. They go on to explain several confounding phenomenon just based on this premise.

I started thinking about using just this approach to predict whether Web 2.0 offerings would gain traction. Very simply, think of your offerings as an incentive program. What is in it for the user to get excited about using your offerings? What is his financial incentive to do so? What is his social incentive to do so? And in the case of not-for-profit organizations, what is his moral incentive to do so? If you have compelling answers to do the above questions, you offerings will probably gain traction. If not, starting working on your next idea.

Now I realize that taking a hard look at the value of a company’s offerings is not really a novel idea. But I do think that thinking about Web 2.0 offerings (the audience for which is typically an individual) as an incentive program makes a lot of sense.

Thoughts?

Sampath

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02/07/07

There is a mind-numbing amount of information in the public domain about how Web 2.0 and Enterprise 2.0 will change the world for ever. This article attempts to provide an entrepreneur’s perspective on these trends and distill the key issues with a bit of common sense. The term Web 2.0 was first coined by Tim O’Reilly to denote a new breed of Internet services companies. The key traits of companies in this new breed, according to O’Reilly, were:

  • They were platform plays. E.g. eBay & YouTube
  • They had a social networking component. E.g. MySpace, Skype & Amazon
  • They had community driven content. E.g. Wikipedia & eBay
  • They released users from the software development lifecycle, meaning that users would access Web 2.0 services using a simple web browser. In tech-speak, this is called Software as a Service or Saas

Whether the above differentiators really warrant a new category or not is debatable. One could easily argue that these basic characteristics should have been incorporated into most, well thought-out “Web 1.0” Internet companies that were launched in the mid 1990s and that we are only now coming around to fully understand the implications. Nevertheless, Web 2.0 is a handy way to characterize these companies & somewhat comprehend the implications.

From its consumer underpinnings, Web 2.0 evolved over 2005 – 2006 to take on an enterprise flavor. Terms like Me, Inc., Prosumer and Enterprise 2.0 have been used to describe companies adopting this approach. Examples of companies in this space include SalesForce.com, SugarCRM, NetSuite etc. The case that is being made here is that business services can be delivered using a consumer model to professionals, hence the Prosumer go-to-market strategy. According to Philip Lay at TCG Advisors, the cornerstones of Enterprise 2.0 are

  • Software as a Service or SaaS
  • Service Oriented Architecture (SOA, read Web Services) and
  • Open Source Computing (E.g. Ajax)

Philip rightly points out that now (2007) is not the time for us to get overly excited about Enterprise 2.0. We are not going to see Fortune 500 companies jump onto this bandwagon and move all their front & back office applications to an Enterprise 2.0 model in a big way. What we will see is niche solutions being brought to market with this model, focusing on narrow audiences & their key business problems. Over the next decade or so, the broader Enterprise 2.0 market should pick up a good bit of steam.

OK, now for the entrepreneur’s perspective. My thoughts on launching an Enterprise 2.0 start-up:

  • It is seductive to get caught in the jargon / tech-speak and draw analogies with companies with eBay, Google & Amazon. Have been guilty of getting caught in that trap myself on several occasions. Instead of getting carried away with technologies and analogies, focus on pressing business problems that your core audience loses sleep over today
  • Deliver compelling, comprehensive solutions & value propositions to these critical business problems. How will you get your target audience what they need faster, better, & cheaper? SaaS & Web2.0 are just enablers. How will you deliver highly targeted, personalized, context-driven business services to individual professionals? How will you incorporate “mass-customization” into your solutions?
  • Ensure that there is a large market for the solutions you are offering and that you have a scalable plan to get to the finish line

Thoughts?

Sampath

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01/31/07

Sales reps have long struggled with positioning their products and services to deliver the most business value to their customers. Successful sales reps will attest to the immense benefit of robust, professional sales methodologies. Others will confirm the need for deep industry knowledge to deliver business value. And the insightful sales rep will emphasize the need to “think-on-your-feet” to dissect the customer’s business issues and map them to product features. I believe that the key to successful solution selling is the seamless integration of all the above three components; a robust sales methodology, deep industry knowledge and the intelligence to apply the methodology and knowledge to a deal’s unique business context. Let’s now spend a few cycles on each of these components.

A Google search for sales methodology returns over 8 million hits! There is certainly no dearth of sales methodologies out there. Leading sales methodologies include those from Miller-Heiman, Sandler and Porter Henry. A good bit of money is spent by enterprises on training their sales reps on these methodologies. But research conducted by the Society for Sales & Management Training reveals that over 80% of the skills taught in a classroom are not applied by sales reps in the field. With sales reps and their managers juggling numerous deals at the same time to meet their monthly quotas, it is small wonder that these methodologies fall by the wayside. Yet another example of something that looks great on paper, but doesn’t work in real-life.

In a previous post, I talked about the issues with sales intelligence tools out there that attempt to provide a sales rep with industry knowledge. The major failings with the sales intelligence offerings in the market today are that they are too coarse (categorized only by industry sector) & not personalized, and they do not focus much on sell-side insights. All these result in the sales rep having to plough through a mountain of information to identify the industry knowledge that would be applicable to each of his deals. Not an ideal situation when time is one of the sale rep’s scarcest resources.

Even if a sales rep has the bandwidth to apply a sales methodology and has identified the industry knowledge relevant to a deal, he has one more challenge to tackle - the deal’s business context. Some clarification here. A sales methodology, by its very nature, is generic and will need to be morphed to be relevant to a deal. Examples of issues that could influence how the methodology is applied in a deal include whether the sales rep’s organization already has an existing relationship with the customer, the types of external / internal competition that the sale rep will face, dynamics in the customer’s organization structure etc. It takes significant effort to determine how to apply a generic sales methodology in a specific deal. Similarly, just having access to the relevant industry knowledge is not sufficient. The sales rep still has to figure out how to apply the industry knowledge to develop a compelling value proposition, draw the customer’s attention and then map his product / service features to the value proposition. Understanding the business context of a deal and then figuring how to apply a generic sales methodology and industry knowledge requires intelligence, the ability to “think-on-your-feet.”

So where does all this rambling lead us? To my contention, that for sales methodologies & industry intelligence to be useful, they need to be tempered with the unique business context of each sales opportunity. And what better framework to develop such a personalized solution than Web 2.0? We think this a good idea and have been working on it for a while. Check out the SalesQB Diary category, if you are interested in our progress ...

Sampath

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01/10/07

11:48:11 am, Categories: Sales & Marketing, Business Trends, Web 2.0  

When you talk about a sales rep’s network, the first image that comes to mind is that of a rolodex. We have all heard of the anecdotal sales rep that goes through his rolodex to sell his current employer’s solutions, switches to another employer, goes through his rolodex again and continue the cycle. No one doubts the importance of a sales rep’s ability to generate leads by leveraging his network. But solution selling introduces some twists.

A recent special HBR issue on Sales talks about four different social networks that sales reps need to develop to effectively sell solutions. The social network described above is only the first of the four social networks that are crucial to the sales rep’s success. Here are the remaining three.

Once the sales rep has identified a prospect using his first social network, he will need to develop a complete picture of the decision makers (org structure, personalities, preferences etc) in the account who will be influencing the deal. Herein comes the second social network. Leveraging his network of other sales reps who target this account, his coach in the account and account-specific research, the sales rep will need to identify the decision makers and the roles they will be playing in the deal.

Next, in today’s market of ever-more-sophisticated business solutions, the sales rep will need to network with the appropriate decision makers and vendor partners to develop a solution. In B2B sales, the chances that the sale rep will have all the products / services to deliver the complete business solution are very slim. Most enterprise projects involve 2 – 3 vendors, each bringing specialized products / skills to the table. So, the sales rep will need to jointly envision the business solution with vendor partners and position it in the account for a win-win-win (customer, himself and partner). This is the sales rep's third social network.

The fourth social network kicks in when the rep is trying to close the deal. At this stage, the sales rep needs to sell on the basis on business cases, ROIs and references. He will need to pull in past customers, industry analysts and champions within the account to convince the executive sponsor about the value of the deal.

Needless to say, it would be incredibly short-sighted for sales reps to focus on just the first of the above four social networks. In the B2B sales, the latter three networks are just as important. We never said solution selling was going to be easy, did we?

Sampath

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