Relationship Marketing

Relationships are Dead? Smart Sales Models Resurrect Them

For me, reading the Bain and Company white paper, Is complexity killing your sales model? was like being splashed in the face with cold water. The ideas presented here about relationship selling were counterintuitive, at least for this former sales force communications manager. After all, I was used to the sales success mantra of—Relationships are everything! Then I read:

“Buyers can readily gather basic information about products online. Then, in the vendor selection stage, total cost of ownership and return on investment trump relationships. Purchase decisions that were previously controlled by one manager now involve a web of stakeholders.”(page 1)

Crazy, right?

But after I read the entire paper, I realized Bain was telling me how we need to rethink current B2B sales relationships and stop creating complex, inefficient sales models that use these relationships ineffectively.

  • The changing shape of demand means that customers are researching more before they buy, expecting to find solutions for their business problems, not just one-time products. The sales relationship thus becomes more consultative and the relationship even more crucial
  • Smart sales models reward their sales personnel for expanding the customer relationship through cross selling but also put a high premium on the difficult process of landing that new account.
  • Early in the sales cycle, smart sales organizations are loading their sales bench with specialists who are industry experts. That’s how they avoiding losing sales because customers fear salespeople “don’t know their industry”
  • Sales models that include a specialist and a generalist create a team that will grow with the product line. The relationship that a specialist builds with the “new kid on the block” is also rewarded somewhere in her compensation, to ensure that the knowledge needed to close deals expands across the company, across time, and in tandem with the sales cycle.
  • Make sure the relationship between the back office and the sales organization is seamless. According to Bain, the back office is the company’s “secret weapon” in protecting customer loyalty and freeing up to 30% more of the sales representatives’ days for actual selling. (10) Allowing a well-staffed, expertly trained back office to protect the relationship with new and existing customers can save money, untold heartache and, yes, Virginia, I’ll say it — relationships. To download the entire Bain and Company white paper, click here.

SaaS Customer Metrics: Why is my SaaS Business Not Making Money?

David Skok’s valuable blog, SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters – discusses how Software as a Service (SaaS) businesses hone their SaaS customer metrics. The article includes easy-to-use spreadsheets to help these businesses define the cost to acquire their customers (CAC) and how to price effectively and expand intelligently to keep their books in the black.

In my experience, customer relationship management (CRM) activities are usually implemented after the money has been spent to acquire the customer. Moreover, much of CRM activity is limited and short-sighted — tracking leads, follow-up and interactions with each customer – without assigning a dollar value for each step of the customer lifetime. Skok’s exercises allow us to assign costs to each step of the process – from acquisition onward – and truly get a clear view of customer investments. I wish I had had some of these metrics when I was managing the communications projects for a sales force—I could have really put some useful metrics in the representatives’ pockets!

Why is SaaS Different? How is Your Business the Same?

The SaaS business model often requires a high investment in acquiring customers based on its monthly, subscription payment structure. In fact, it often takes up to 13 months after the client signs the contract to experience profit. This causes cash flow problems if it’s not accurately planned for and it’s often unclear as to when to start spending again on new customer acquisitions.

In addition, SaaS companies, in this increasingly commoditized marketplace, need to “grab market share fast” in a “winner takes all” game. You must have solid numbers and know how much it costs to acquire and keep customers to assure investors of the value of your business.

Skok’s in-depth paper also suggests other opportunities for delineating customer value:

  • Skok discusses why sales models with a long sales cycle (consultative sales for extremely complicated offerings) require more resources and better planning to identify CAC and the “profit-point” when that investment pays off. For SaaS, he’s come up with a 3 x CAC ratio to identify the lifetime value of a customer (LTV). Skok also suggests looking at the value of current lead generation activities; customer segmentation for the “quickest return and highest LTV”; and finding out when to push the button to expand.
  • If you haven’t recouped your CAC fast enough, Skok offers some good suggestions. For example, he suggests “variable axis” pricing, up-selling and cross-selling to create more revenue with existing customers. Another way to protect cash flow is to offer discounts for clients who pay in advance or getting paid more up front.
  • A word about customer churn: You need to know when it’s happening, why it’s happening and how to stop or mitigate it. Skok provides excellent, step-by-step instructions to discover why customers are leaving and what it means to your business. Will the expansion revenue from new customers cancel out or exceed lost revenue from churning customers? Skok’s got some excellent SaaS customer metrics and graphs to show you how to find out.

David Skok started his first business when he was 17 and today, he’s one of the most sought-after consultants in the business world. Reading this paper is like having “the smartest guy in the room” deliver all of his hard-earned secrets for free. Find out how much your customers are costing you – and create more value from each and every one.

sales marketing plan alignment

Sales and Marketing Plans Need to be Aligned

As a B2B marketing outsource provider, my team and I usually work very closely with the sales department at our client companies. Marketing and Sales PlansThe goal is to achieve effective alignment between what the marketing and sales teams are doing: driving to a common goal and reaching agreed-upon revenue targets. In the best-case scenario, we get to review and provide input for the sales plan. At the least, we want to understand the sales model so that we can formulate a marketing plan of attack that best supports the sales plan.

As an example of why this is important, imagine two very different sales models: In the first example, awareness is created and generated leads are fed to a business development function. In this scenario, direct sales reps will only see leads that have been pre-qualified, usually by a business development rep (BDR) who has personally qualified inquirers by asking a series of questions about budget, authority, timing and so forth. To best support this type of sales model, we want to drive as much activity into the top of the funnel as possible, creating the critical mass of inquiries needed to achieve the target number of qualified leads that have passed through the qualification process.

Let’s now look at the second sales model and how we align it with the marketing plan. If an organization utilizes a direct sales force, but provides no pre-qualification function (e.g. no BDRs), our focus in the marketing plan will be more on quality than quantity. This is true because we know that in most B2B scenarios, somewhere between 10 and 15 percent of all inquiries will pass the qualification filter. This means that sales reps will talk to 8.5 to 9 suspects before reaching one qualified prospect. This imbalance leads to two negative consequences. First, the reps fail to call all the suspects, finding reasons to disqualify them before making the calls. Second, reps get busy chasing their hot prospects and neglect to make the qualification calls in a timely manner. At some point, slow follow-up is almost as bad as no follow-up. If you want to see the impact of slow lead response, read my blog post on this subject.

In this type of sales model, we purposefully back off the quantity goal and align our marketing plan to deliver leads that are more qualified. Reps that discover that one out of every three or four suspects are qualified. They are then more likely to make the qualification calls and optimize their time. One of the easiest ways to produce quality is to require suspects to provide more data about themselves on the web form, thus pre-qualifying themselves. Each additional piece of data you ask for will reduce the number of responses, but will also drive up average lead quality.

These are just two sales model examples. When you include hybrids, there are dozens of possibilities. And every sales model will require a marketing plan that is tightly aligned. If you have a gap between sales and marketing, it’s best to address this quickly, especially by creating a service level agreement between the two departments. You can read more about Bridging the Gap here.

The above article by Christopher Ryan is republished here
from his blog Great B2B Marketing.

strategic-business-plan

Strategic Planning Basics – Part 2

Strategic Business Planning

By failing to prepare, you are preparing to fail.

Benjamin Franklin

Let’s plan! Planning is an art and science so you need to convert your ideas into an actionable plan.

The conceptual planning or the art of planning is where experience and knowledge of your environment are combined to develop solutions, objectives and assumptions. Understanding the competitive environment, the capabilities of your team and maintaining relationships with customers and partners will help you plan to achieve your goals.

The science of planning involves using measurements and analysis. How long does it take to build your product? How long does shipping take? What are your organization’s procedures and policies? This data will provide you with limitations and help you build your schedule based on measured performance.

I will focus on a blend of conceptual and detailed planning. The following are my steps for strategic planning:

  • Define your goals

    This is the first and the most important step. What are you trying to accomplish? What is your company’s goal? Clearly define your goals. If your goal has been assigned to you or to your department, ensure that you completely understand the goal.

  • Analyze the environment

    What will it take to accomplish your goals? What are your barriers to success–both internal and external to your organization? Who are the stakeholders? Who will you collaborate with? Determine the interdependencies that you will rely on to accomplish the goal.What resources might be required? Have you done a SWOT analysis? If so, how will you react to threats and opportunities? Maximize your strengths and minimize your weaknesses? Finally, uncover all of the assumptions about your environment that your planning is based on and make sure they’re valid.

  • Develop objectives

    What are your long-term objectives? What are your short-term objectives? Do you have milestones? Deliverables? What resources are required? As you develop your objectives, create small executable steps, so progress can be easily measured and those executing the objectives are not overwhelmed by the enormity of the task.

  • Create road maps, general strategies

    This is where the plan comes together; here we create the map or schedule to be followed.How do we accomplish our objectives? Who accomplishes them? When will they be complete? What are the risks associated with the schedule? Explain the strategy here.

  • Execute the plan

    Finally, time to execute! You’ve gone through all of that effort to create the plan– now use it. The planning process should have prepared you and your team to meet your goals.

  • Review, fix the plan if broken

    What worked in the plan? What objectives were not met? Planning is both a continuous and a cyclical activity of the operations process. Regular reviews of your plan should be established and assessments of the plan accomplished.

During the planning process, be careful not to forecast events too far into the future. Too much detail or using too formal of a planning method will delay the plan and complicate the process—and itwon’t improve the end results since planning can never exactly predict future results. The most important aspect about the planning process is what you learn about yourself while you’re planning. Planning helps anticipate future action and will help you adapt to changes.

Strategic Planning Basics – Part 1

Strategic Business Planning

A goal without a plan is just a wish.

Antoine de Saint-Exupery
How do I achieve my goals? Where will we be in a year? If my sales goal is two million dollars, how do I reach that number? How do I allocate resources? Planning is the answer.

As a consultant, I have visited struggling organizations only to find that they struggled because they had no direction and absolutely no plan. I have seen other organizations that have forgotten the basics of a plan. A goal and a plan to achieve the goal are a must!

I also spent some time in the military where developing a plan for an operation might take weeks or months. Despite all of this planning, “No battle plan survives contact with the enemy,” as Prussian Army Field Marshal Helmuth von Moltkof said in the 1800s. The plan changes with the first contact with the enemy because the plan is based upon assumptions and expectations on how the enemy will react to the action. Planning is about the journey not necessarily the battle. The planning journey prepares the army, by allowing the army to anticipate hurdles, allocate resources and reduce risk.

Most for-profit organizations do not have months or weeks to devote to planning, especially if the plan only survives the first contact with the “customers.” That’s okay but the planning process is essential because it allows you to determine obstacles you will encounter; pinpoint the help you’ll need from other departments; set a timeline; and, most importantly, define the goal. A plan should not be blindly followed nor should it be put on a shelf when complete: Planning is a continuous process, so the plan should be altered and updated based on feedback and assessments.

The US Army Field Manual 5.0 defines planning as follows:

Planning is the art and science of understanding a situation, envisioning a desired future and laying out effective ways of bringing that future about. Planning is both conceptual and detailed. Conceptual planning includes developing an understanding of the operational environment, framing the problem, defining a desired end state, and developing an operational approach to achieve the desired end state. In contrast, detailed planning translates the broad concept into a complete and practical plan. Detailed planning generally corresponds to the science of operations and detailed planning works out the scheduling, coordination or technical issues involved with moving, sustaining, administering, and directing forces.

The military planning process is scalable, from the soldier in the field using his or her planning skills all the way up to headquarters and its large planning department. At your business, someone should be responsible for championing the plan and senior leadership should support the planning process. To develop the plan, time will need to be set aside for the plan.

Remember the fundamentals of a plan:

  • Define a goal
  • Planning is a continuous process
  • Plans are time-sensitive
  • Keep plans simple
  • Keep them flexible
  • Be bold!

Keys to Success in Business Planning

You can find many sources of good information about the elements you need to include in your business plan. While these quantitative elements are important, you also need to make sure you are engaging in business planning with a thorough understanding of your mission and the best way to approach the business plan from an attitudinal or qualitative perspective.

If you have decided to bypass the planning process, you might want to reconsider. Business planning has many benefits in addition to what is contained in the plan itself. The planning process forces you to think through many issues that you might otherwise avoid. As the saying goes, “you can’t hit a target you don’t see.” The business plan provides the target.

From my many experiences creating my own business plans, as well as working with our clients on their plans, I’ve identified 10 things you can do to make your business planning much more successful.

  1. Start early – be proactive, not reactive. By early, I mean that you should plan well before you are ready to implement the plan.
  2. Start small and iterate often. Today, I urge entrepreneurs to launch their ventures with a minimum viable product (MVP) or service (MVS). Even though you have major dreams for your business, you are usually better off starting small and iterating over time. In other words, practice the principle of “fail fast and move on”.
  3. Don’t spend major time on minor issues. I’ve seen business owners spend countless hours trying to calculate trivial matters like what titles to give the founding team or how many people they will need in their 47th month in business. As an entrepreneur, your time is precious – invest it wisely.
  4. Focus on your differentiation. If you are using the business plan to attract investors, partners, or employees, you should ensure that it is not a “me too” type plan. State how you are different from the competition in terms of products, expertise, target audience, etc.
  5. Make sure your numbers are realistic and defensible. I understand that entrepreneurs are supposed to be optimists but resist the temptation to wildly exaggerate your financial projections. Many of the potential investors you share the plan with have started companies themselves and they know the difference between a pipe dream and what is achievable.
  6. Spend time on your SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It is imperative that you understand how you rate against your competition in each of these four areas. We have a paper on this subject in the member resources area.
  7. Define your mission, vision and objectives. Don’t neglect to talk about these important subjects early in the business plan. Everything you write and every action you recommend should be based on supporting these.
  8. Specify the necessary actions to achieve objectives. A business plan is for more than outcomes – it is a specific roadmap to success.
  9. Focus on critical metrics. Every business plan should showcase the specific measurements that will be used to evaluate ongoing performance as well as the means to track and monitor results.
  10. Identify assumptions, risks and contingencies. One of the entrepreneurial attributes that investors most like to see is flexibility. Business owners realize that the marketplace and buyer preferences are continually changing so it is wise to identify the potential barriers early and plan accordingly.

Visit the CBM website often for more information about each of these important planning attributes.

Center for Business Modeling

Here’s To Your Business Modeling Success!

Greetings and welcome to our first post. So, why are we here? Because smart leaders know that planning is indispensable in business as well as every other aspect of life. Benjamin Franklin said that, “By failing to prepare you are preparing to fail”. Dwight Eisenhower expressed the same sentiment another way, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

I, and the others who will write in this space, are committed to bringing you information that is both interesting and useful. Our vision at the Center for Business Modeling (CBM) is to create a valuable community for sharing resources and best practices, while becoming the leading provider of online business planning tools.

You may think this is a tall order, and I agree. We can certainly supply the tools and industry leading information about business modeling but we need you to be successful. Your participation can make the difference, not only to your own organization but also to other companies who face the same challenges. Let us know what you think about our content and add your best ideas to the mix.

My colleagues and I believe that a lack of effective business planning has been a real detriment to success for thousands (millions?) of start-up and existing ventures. Like all areas of business, things work much better when you have the right advice and tools from those who have successfully negotiated the business modeling minefield. A well-written business plan can help you get funding, attract the right partners and employees and give you a much better chance at achieving your objectives. A sloppy or poorly-conceived plan can have just as profound an impact, but on the negative side of the ledger.

The CBM Resource Center (including this blog), is devoted to business owners, entrepreneurs, sales and marketing executives, finance managers, students, professors, and everyone else who is interested in collaboration and improvement of their business planning and financial performance. Hopefully, you fit in one or more of these categories. In addition to the paid tools, we will include many free resources on the CBM website.

Please register to receive each new article/blog post via email. I promise that we will keep the content fresh, relevant and practical. Let me know if you want to hear more (or less) about a particular topic. I look forward to sharing important ideas and resources.

All the best,

Michael James Smyth