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Building a sales & marketing machine

Building a sales & marketing machine

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Describes the steps required to build a Sales and Marketing Machine that is predictable, scalable, automated, well instrumented, and cost efficient.

This was a presentation that I gave at the Lean Startup Circle in Boston on March 24th, 2011.

Describes the steps required to build a Sales and Marketing Machine that is predictable, scalable, automated, well instrumented, and cost efficient.

This was a presentation that I gave at the Lean Startup Circle in Boston on March 24th, 2011.

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Building a sales & marketing machine

  1. The Key Elements behind “Business Model”  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 problems we are having.” 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. 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.
  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 with SE’s
  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 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
  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. BUILDING A SALES & MARKETING MACHINE Brand Advertising Email Events Marketing PR Webinars Sales Social Tradeshows Media
  24. ? WHAT IS A “SALES & MARKETING MACHINE”
  25. CLEARLY DEFINED LEVERS THAT YOU PREDICTABLE PULL TO MAKE IT GO FASTER SALES & INSTRUMENTED SCALABLE MARKETING WITH GREAT MACHINE 9 METRICS AUTOMATED COST OPTIMIZED
  26. HOW DO YOU GO ABOUT BUILDING ONE OF THOSE?
  27. 9 STEPS
  28. 4 WHY 4 FIRST? BECAUSE 1, 2 AND 3 ARE NOT OBVIOUS SO WE WILL COME BACK TO THEM AT THE END AFTER WE HAVE SEEN WHY THEY ARE SO VALUABLE
  29. 4 ALIGN ALIGN EVERY MARKETING ACTIVITY AROUND ONE GOAL… CREATING LEADS THAT HELP SALES CLOSE MORE DEALS
  30. Sales CLOSED DEAL
  31. Blogging Social Media eMail Campaigns CLOSED SEO Sales DEAL Webinars SEM PR
  32. RULE NUMBER 1 If it doesn’t create a lead, or directly contribute towards closing a sale, it doesn’t belong
  33. Sales CLOSED DEAL
  34. RULE NUMBER 2 If the cost per lead is too high, it doesn’t belong 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 FROM START TO FINISH $ SEO LANDING FREE EMAIL SALES CLOSE PAGE TRIAL CAMPAIGN TOUCH 1. At the end of every action, there should be a clear link to the next action 2. The overall flow from start to finish should be carefully designed
  38. AN ORGANIZATIONAL STRUCTURE…
  39. YOUR CUSTOMER’S PURCHASING STAGES PURCHASE CONSIDERATION CLOSED DEAL AWARENESS
  40. AN ORGANIZATIONAL METAPHOR FOR THE KEY FUNNEL STAGES SALES MIDDLE OF THE FUNNEL CLOSED DEAL TOP OF THE FUNNEL
  41. WHAT IS TOP OF THE FUNNEL? customer is not aware customer has a they have a problem, or problem and is that your product looking for a solution category exists GENERATE GET FOUND AWARENESS
  42. WHAT IS TOP OF THE FUNNEL? RAW LEAD GENERATE WEBSITE AWARENESS
  43. WHAT IS TOP OF THE FUNNEL? RAW LEAD GENERATE WEBSITE AWARENESS & GET FOUND Inbound marketing Outbound marketing
  44. WHAT IS THE MIDDLE OF THE FUNNEL? NURTURE QUALIFY MQL (MARKETING QUALIFIED LEAD) SEGMENT
  45. 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. THEM ENOUGH 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 QUALIFICATION CRITERIA NEEDED TO BE ABLE TO PASS A LEAD ACROSS TO SALES (MQL) MARKETING
  48. SALES FURTHER QUALIFIES THOSE SALES LEADS TO FIND OPPORTUNITIES
  49. USING BANT BUDGET AUTHORITY NEEDS TIMING
  50. COMMON LEAD STATES RAW LEAD CLOSED DEAL MQL OPPORTUNITY (MARKETING QUALIFIED (SALES QUALIFIED LEAD) LEAD)
  51. 6 AUTOMATE
  52. SALES MIDDLE OF THE FUNNEL CRM CLOSED MARKETING DEAL AUTOMATION TOP 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 Suspects BUT EVEN IF YOU ARE MICROSOFT, CISCO, ORACLE, OR GOOGLE YOUR FUNNEL WILL HAVE BLOCKAGE POINTS
  58. IDENTIFY YOUR 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 A CLEAR PATTERN…
  63. YOU ARE HOPING YOUR CUSTOMERS WILL DO SOMETHING THAT THEY ARE NOT MOTIVATED TO DO
  64. IN OTHER WORDS… YOU DESIGNED YOUR FUNNEL THE WAY YOU HOPED IT WOULD WORK… BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUT THE CUSTOMER’S POINT OF VIEW
  65. JBOSS EXAMPLE PUT A REGISTRATION FORM ON THEIR WEB SITE BEFORE A FREE DOWNLOAD IMPACT CUT THE DOWNLOAD RATE BY MORE THAN 10X
  66. GET INSIDE YOUR CUSTOMER’S HEAD CONCERNS - Hate being sold to - Don’t want to get spam sales emails
  67. UNDERSTAND WHAT MOTIVATES THEM CONCERNS MOTIVATIONS - Want to solve my problem - Recommended by a friend - Education - Data/ information reports - Entertainment - Free stuff
  68. CREATE A SOLUTION THAT ENTICES 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 WEBSITE GRADER • 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 WEB TRAFFIC SYSOMOS: SOCIAL MEDIA MONITORING LEVERAGED THEIR DATABASE TO CREATE BLOG POSTS WITH DATA ON TOPICS OF CURRENT INTEREST: • IRAN ELECTION RIOTS • TWITTER’S GROWTH • 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 - I don’t have the time - I don’t want to get 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 CUSTOMER Source: Josh Porter – Designing for Social Traction
  77. 1 4 2 3
  78. PROBLEM: GETTING A MEETING
  79. GETTING TO EXECUTIVE DECISION 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 IS 10X EASIER… ONCE YOU HAVE ESTABLISHED TRUST
  83. YOUR BLOG CAN ESTABLISH TRUST… HOW?
  84. VALUABLE CONTENT EDUCATION INFORMATION ENTERTAINMENT WITH ZERO SELLING
  85. THE KEYS TO SUCCESS DEEP 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 with OUT-OF-THE-BOX THINKING
  86. APOLOGIES MY EXAMPLES ARE ALL SOFTWARE COMPANIES THIS APPLIES EQUALLY WELL IN OTHER BUSINESSES
  87. FINALLY… LET’S GO BACK TO THE BEGINNING…
  88. …AND INTRODUCE THREE NEW STEPS AT THE BEGINNING OF THE FUNNEL DESIGN PROCESS…
  89. 1 IDENTIFY IDENTIFY ALL THE PEOPLE INVOLVED IN THE PURCHASE DECISION
  90. 2 UNDERSTAND SKETCH OUT THEIR BUYING PROCESS AND CONCERNS AT EACH STAGE
  91. 3 ENTICE ADD THE STEPS TO ADDRESS THEIR BUYING PROCESS AND: ADDRESS THEIR CONCERNS ENTICE THEM
  92. SUMMARY
  93. WE WENT FROM THIS: 1. Align 2. Link 3. Automate 4. Measure 5. Analyze 6. Improve
  94. TO THIS… 1. IDENTIFY 2. UNDERSTAND 3. ENTICE 4. Align 5. Link 6. Automate 7. Measure 8. Analyze 9. Improve
  95. THE NINE STEPS 1. IDENTIFY Identify people in purchase decision 2. UNDERSTAND Address their buying process and concerns Design actions to pull them through buying process 3. ENTICE & address concerns 4. ALIGN Ensure funnel actions lead directly to sales 5. LINK Link every funnel action to the next step 6. AUTOMATE Use software to automate 7. MEASURE Measure key funnel metrics 8. ANALYZE Identify blockage points Brainstorm better enticements and ways to address 9. IMPROVE concerns
  96. SALES-DRIVEN FUNNEL DESIGN TO A CUSTOMER-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 example a carrot to incent them to provide NEEDED: an email address SOLUTION: give away the documentation for free RESULT: 10,000 leads per month
  103. JBoss - Sales & Marketing Machine Enterprise Suspects Closed Deals Rollouts Web Web Phone Inside Leads 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 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
  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

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