SCIENCE OVER SUPERSTARS
Many business functions, from operations to marketing, have changed from being driven by intuition and individual contributors to data and process.
To be efficient and effective, companies should standardize the entire customer-facing relationship. That includes marketing, sales, and customer success.
When those teams get in trouble, sales leaders first ask “Who can we hire?” to fix the problem rather than “What process can we improve?”
What is a superstar culture? It is one that relies on a few high-achieving individuals in either sales leadership roles or individual contributor roles. The problem with relying on this model is that superstars are expensive and hard to find, and the performance of the system is highly variable.
Early-stage startups experience this as “Founder Sales.” In the early stage of a company, its founder acts as the sales superstar and closes most, if not all, of the deals.
Successful high-growth companies should make the transition to a science culture to support scaling. A science culture focuses on process, technology, enablement, skills and teams. Most leaders struggle to work scientifically because the demand to hit revenue goals never stops. In most cases, instead of diagnosing the situation based on data and properly designing the right process, the response is to fire and hire. This fire-and-hire strategy often exacerbates the problem because systems and process require stability to take root.
We expect that in the years to come, we will see continued specialization of sales leadership roles, with the role of VP of Sales focusing on the realization of growth through the acquisition of logos and/or revenue. Other roles:
- Sales Leader/Organization.
- Sales Coaching.
- Sales Enablement.
- Sales Operations/Technology.
- Sales Analyst/Scientist.
- Sales Strategist.
Important elements of new sales approach:
- The use of process to allow iterative improvement over a short time.
- Data-driven decisions in which measurability creates accountability.
- Team performance over individual performance creating scalability.
- Use of a common methodology creates repeatability.
CHANGES IN B2B SALES
In the SaaS-o-Meter, we show how businesses operate along an arc between two extremes. On the far left, the buyer pays upfront, as would be the case with internet routers, servers and perpetual software licenses. On the far right, we live in a “no cure-no pay” world where clients only pay for results, such as in online advertising.
On the one hand, it is much easier for customers to sign up for a solution because there is less on the line. On the other, it is just as easy for them to quit. In the recurring model, customers take little risk upfront when they pay as they go. Unless you deliver business impact again and again, customers churn.
It now is common to first sample the impact through a smaller pilot before expanding the use of your product to other parts of the organization. This model is often referred to as a “land and expand” model.
Conversion rates in freemium to paid contracts are often lower than one in six. If customers become accustomed to free, they are unlikely to pay you in the future. Also, churn moves in an inverse proportion to contract length as well. Freemium customers churn at the highest rate whereas annual or multi-year contracted customers churn at the lowest rate.
A new model is used which is referred to in the industry as a “bowtie.” The bowtie must cover two critical gaps; the impact stage where sellers must ensure that customers achieve the expected impact; and the critical activity of growing the business together with your customer.
Some organizations with a recurring revenue model experience this shift in revenue and profits. But almost all fall short in allocating resources such as people, tools, training, and marketing campaigns to where most of the revenue and profits are generated; the impact and growth stages.
For years, the compensation and quota in B2B for perpetual hardware and software sales were around $ 250,000 in compensation in on-target-earnings for a quota of $ 4M.
To get less experienced sales people up to speed more quickly and predictably, companies have responded with role specialization.
When executed well, job specialization can increase sales velocity and improve effectiveness. Organizations need to ensure that specialization is paired with a well-defined, cross-functional process and job training for each role.
The specialization of the workforce is not unique to recurring revenue and subscription businesses. Many B2B organizations selling hardware and/or perpetual software have long had a highly specialized workforce.
When selling perpetual software, specialized roles are used to improve effectiveness of winning 6-to-7 figure deals. However, when selling 4-to-5 figure recurring revenue deals, specialized roles are used to increase efficiency!
THE SAAS SALES METHOD
In a transactional sale, the prospective customer experiences the entire journey through awareness, education and selection in a self-supported way. The frame of reference in a transactional sale is the “close” and the decision criteria for a transactional close are:
- Price
- Maturity
- Service
- Response time
Solution selling is a sales methodology in which, rather than just pitching an existing product’s benefits, the seller focuses on learning about the customer’s problems and pitches the benefits of the product in that context. Solution selling is closely aligned with inbound lead generation. In a solution sale, speed matters, and the client is often ready to move ahead immediately. The problem with solution selling is that if you are not on the customer’s shortlist based on their decision criteria, you are out of contention without knowing it.
The term ‘consultative selling’ first appeared in the book Consultative Selling (1970) by Mack Hanan. In it, Hanan explores the needs for a selling technique in which the salesperson acts as an expert consultant to the customer. This approach is still the most common B2B sales methodology and can commonly be found when sales teams are large, price points are high, and customers have little information against which to benchmark.
In 2009 Philip Lay, Todd Hewlin and Geoffrey Moore shared an article in HBR magazine called “In a Downturn, Provoke Your Customer.” Provocative selling challenges the customer’s view of the problem itself, the way to implement a solution, the impact it can have on their business, and even its urgency. But in order to be effective in provocative selling, you need to understand the market, the problems the market experiences, the solutions needed to solve them, and the impact of the solutions on the business.
Starting around 2008, a variant of the previous sales methodologies found its way into the marketplace. As the markets collapsed, the CAPEX budgets melted away. Right at this time, Software as a Service (SaaS) offered a solution on a SaaS contract which could be purchased with OPEX budget, which was still available. But in recent years, many inside sales organizations using the inside sales methodology have found it no longer to be effective or efficient. At 20 + SQLs per month per rep, this model works well. The effectiveness is based on a number of factors such as average sales price, win rate, salaries and so on. However, over the past years, the effectiveness the number of SQLs generated per rep has declined considerably. It is not uncommon to hear less than 10 SQLs per month per rep.
The SaaS Sales Method is the sales methodology first developed and implemented by software as a service. It is now finding its way into all business-to-business sales, especially where a large percentage of customer lifetime value is realized after the initial sale. A hallmark of the SaaS Sales Method is to not only make a customer aware that they have a problem, but also to constantly show the impact of the solution in a way that is coordinated and ongoing. The SaaS Sales Method offers a new uniform methodology for all customer facing roles in businesses with a recurring revenue model, including but not limited to; marketing, prospecting, selling, customer success, and account management.
THE SCIENCE
It is important to measure from the same point and compare against the same criteria in the same way. Since most decisions in sales today are guided by data, we have to establish the data model.
There are three metrics that contribute to the SaaS Sales Method data model:
- Volume metrics measure how many leads, deals, meetings, and wins.
- Conversion metrics measure how many inputs are needed to generate the desired outputs.
- Time metrics measure how long it takes to convert input into output.
The most interesting insights don’t come from the actual data itself but from the patterns in the data:
- Trendline is a comparison of metrics against yourself over time.
- Benchmark is a comparison to others in the industry using the same model.
- Performance analysis is a comparison of a person-to-person or product-to-product Gap analysis is a comparison of metrics against the desired outcome.
In sales, you first qualify then you accept.
When you look at conversion rates, CR3 and CR4 stand out. CR3 refers to how many meetings were set for the sales team versus how many of those turned into an opportunity. CR4 refers to how many opportunities it takes to win a deal, or win-rate.
One of the most common marketing mishaps involves an inbound lead or MQL. When a client reaches out, they generally have a pain that motivated them to do so.
An inbound call is time sensitive: The faster the response, the higher the chance of a successful outcome.
The SaaS Sales Method is built on the idea that revenue is the product of connected activities across a series of meetings working together in a system. To take advantage of the unique characteristics of a system, companies must measure and optimize around: Volume metrics (#), Conversion metrics (CR), and Time metrics (ΔT). This model develops a 2-stage revenue propulsion system:
- Stage 1. Customer Acquisition: System impact consisting of a series of small improvements across the board to create an exponential one-time impact.
- Stage 2. Establishing recurring revenue: A compound impact based on the churn, upsell and contract length metrics.
MOMENTS THAT MATTER
There are a few special moments that you need to pay attention to. And if you get these moments right, they work in concert to give you a great year. These are called the Moments That Matter or MTMs.
There are a few fundamentals you must get right:
- Get the key moments right.
- Align the key moments.
- Identify the critical event.
- Assist the customer.
There are two ways that impact is perceived: rational, which is measurable using facts and figures, and emotional, which is about feelings and experiences.
There are two key differentiators between emotional and rational impact:
- Emotional impact first benefits a person; rational impact first benefits a corporation.
- Emotional impact such as ease-of-use follows the laws of habit formation which means it is harder to change the longer a customer uses it.
Impact is a function of time. You will notice that over time, a priority increases from nice-to-have to want-to-have, and at one point, even reaches need-to-have. Sales organizations must excel at determining where clients and customers are on this horizon.
A critical event date. It is a date so important it literally drives the timeline of the decision. You cannot create a customer’s critical event, you can only discover it.
BLUEPRINTS
We have found that if you follow the next five principles, you are genuinely authentic, and not fabricating it:
- Understand their pain.
- First emotional, then rational.
- Educate, do not pitch.
- Assist the buying process.
- Provide value in every interaction.
In today’s world, a SaaS solution can be integrated into a cloud platform with a single click, or the provision of a login via an email. Outdated qualification methods designed around multimillion dollar products do not apply to high velocity sales.
How to have a sincere conversation (TALKER):
- Tone of voice.
- Ask questions.
- Listen actively.
- Keep accurate but brief notes.
- Elaborate and follow the thread of a conversation while teasing out pain and impact.
- Repeat what you’ve heard.
We love to tell clients that prescription before diagnosis is malpractice. We’re not the first to say it but that is because it is very, very true.
When salespeople negotiate, they tend to think in terms of numbers and percentages moving up and down. In a high velocity sale, we notice that they often discount quickly and in large increments. As a result, they often give away discounts far more than they should, and for little in return.
In trading, both parties give up something of value in order to be better off. By definition, trading is win-win. What do they trade for? There are any number of things a customer can do or say that will significantly help a business. References, case studies, social media mentions, PR quotes and all kinds of other items can form a menu of trading options at different levels of price adjustment.
Onboarding is a term that has lost its meaning through overuse. Everyone thinks they know what it means, which usually comes down to something like “getting the customer set up with the product.”
The relationship before and after the commitment has undergone a fundamental change. Before a commitment was struck, the buyer did not want to provide too much insight because they feared losing leverage. Similarly, the seller may not have been completely transparent on how things really work. However, after the contract is signed, the buyer is often willing to provide a lot more insights to ensure success.
So instead of just onboarding the customer into the product, this should be treated as an opportunity to orchestrate the entire business relationship from that point forward.
Practice how to handle frustration when an issue occurs Communicate:
- Establish a solid way of communicating, e.g., TALKER
- Disarm: Express empathy/disarm the situation without taking on blame
- Research: Important to find relevant materials! Do not diagnose without it!
- Diagnose: Perform a proper diagnosis based on the research.
- Proof: Before you prescribe, accumulate proof of your case.
- Prescribe: Recommend based on research/diagnosis/proof.
- Communicate: Summarize, and offer help to implement.
Expanding the impact or growing the business is a function of two factors: Impact and Benefactor. For example, when an existing client renews the contract, and wants more of the same impact, it is referred to as a renewal. However, when an existing client buys more services, such as more seats or additional features, this is considered an Upsell. When a new benefactor in an existing account needs to be won over, this is referred to as a cross-sell.
ACE the meeting. Check the end-time and set the end goal of the meeting.
- Appreciation: Appreciate you taking the time to meet today.
- Check time: Are we still good till 11am?
- End goal: This is an introductory call to see if we can help you. If so, we normally move forward with a demonstration. Does that sound right?
HOW TO KEEP GOING
Implementing a process-driven sales method is not easy. It requires patience, deliberateness, and long-term thinking. We know these are not the traits of your average sales team! But as selling evolves into more of a science and less of an art, making the investment will pay off in the form of predictability, scalability, and ultimately, customer impact.
Step-by-Step program
Buy-in from the top. This program requires not just executive buy-in but more importantly executive involvement. We have found the best way to be a one-day workshop with all customer-facing roles such as marketing, sales, customer success, and even product management present to discuss. Sample agenda:
- Data Model: What are we measuring, definitions and criteria?
- Growth Plan: What are the Growth aspirations over the next two years? What is the Growth model and the Growth formula based on the business?
- The SaaS Sales Methodology: Discuss using the same methodology.
- Moments That Matter: What are the moments that matters most to our clients?
- Data Driven: Where are we now on each key moment?
- Blueprinting: How to create a blueprint for each moment and improve by 10 %.
