+ SALES AND MARKETING A

MACHINE FOR ACHIEVING A STARTUP BUSINESS

ANKUR VERMA ABHINAV PARMAR ARVINDERPAL

The Key Elements behind Business Model

Cost to Acquire the Customer (CAC)

Profit from that Customer

There is a common problem:

Startup Killer

An out of balance Business Model

Entrepreneurs are over-optimistic

Cost to Acquire a Customer (CAC)

Monetization

What we are looking for

A well balanced business model

Monetization

Cost to Acquire a Customer (CAC)

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

Sellers need to change

An intimate understanding of the Buyer

Buying behavior Likes Dislikes

is the key to success

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

Its 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.

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

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.

The Touchless Conversion

ZenDesk

Common Funnel Metrics:

10% of visitors do a trial 20% of trials convert to paid

Extraordinarily scalable
Extremely low cost

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

Sales Complexity

Freemium

No Touch Self-Service

Light Touch Inside Sales

High Touch Inside Sales

Field Sales

Field Sales with SEs

A rough estimate of CAC versus Sales Complexity

Freemium

No Touch Self-Service

Light Touch Inside Sales

High Touch Inside Sales

Field Sales

Field Sales with SEs

Rough Estimates of Cost of Customer Acquisition (CAC)

$0$10 $50 $200 $1,000 $2,000 $3,000 $8,000 $25,000 $75,000 $75,000 $200,000

The relationship is roughly exponential

Clearly adding Human Touch dramatically increases costs

CAC (logarithmic)
$100,000

10x
$10,000

$1,000

10x

$100

10x
$10

$1

Freemium

No Touch

Inside Sales Field Sales

Sales Complexity

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

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

$250 per month for very small business SaaS

Another trait of highly successful companies

A Sales and Marketing Machine

BUILDING
A SALES & MARKETING MACHINE
Brand Advertising Email Marketing Webinars Sales Social Media Tradeshows Events

PR

?
WHAT IS A

SALES & MARKETING MACHINE

PREDICTABLE

CLEARLY DEFINED LEVERS THAT YOU PULL TO MAKE IT GO FASTER

SCALABLE

SALES & MARKETING MACHINE 9

INSTRUMENTED WITH GREAT METRICS

AUTOMATED

COST OPTIMIZED

HOW DO YOU GO ABOUT

BUILDING
ONE OF THOSE?

STEPS

1
IDENTIFY
IDENTIFY ALL THE PEOPLE INVOLVED IN THE PURCHASE DECISION

2
UNDERSTAND
SKETCH OUT THEIR BUYING PROCESS AND CONCERNS AT EACH STAGE

3
ENTICE
ADD THE STEPS TO ADDRESS THEIR BUYING PROCESS AND: ADDRESS THEIR CONCERNS ENTICE THEM

ALIGN

ALIGN EVERY MARKETING ACTIVITY AROUND ONE GOAL CREATING LEADS THAT HELP SALES

CLOSE MORE DEALS

Sales

CLOSED DEAL

Blogging

Social Media eMail Campaigns SEO Webinars SEM

Sales

CLOSED DEAL

PR

RULE NUMBER 1

If it doesnt create a lead, or directly contribute towards closing a sale, it doesnt belong

Sales

CLOSED DEAL

RULE NUMBER 2

If the cost per lead is too high, it doesnt belong

Exception to this rule: If you can recover cost through:

higher conversion rate to closed deals higher average deal size

Sales

CLOSED DEAL

LINK

CLEARLY LINK FLOWS FROM START TO FINISH

$
SEO
LANDING PAGE FREE TRIAL EMAIL CAMPAIGN SALES TOUCH

CLOSE

1. 2.

At the end of every action, there should be a clear link to the next action The overall flow from start to finish should be carefully designed

AN ORGANIZATIONAL STRUCTURE

YOUR CUSTOMERS PURCHASING STAGES

PURCHASE CONSIDERATION CLOSED DEAL

AWARENESS

AN ORGANIZATIONAL METAPHOR FOR THE KEY FUNNEL STAGES

SALES MIDDLE OF THE FUNNEL CLOSED DEAL

TOP OF THE FUNNEL

WHAT IS TOP OF THE FUNNEL?

customer is not aware they have a problem, or that your product category exists customer has a problem and is looking for a solution

GENERATE AWARENESS

GET FOUND

WHAT IS TOP OF THE FUNNEL?

RAW LEAD

GENERATE AWARENESS

WEBSITE

WHAT IS TOP OF THE FUNNEL?

RAW LEAD

GENERATE AWARENESS & GET FOUND

WEBSITE

Inbound marketing
Outbound marketing

WHAT IS THE MIDDLE OF THE FUNNEL?

NURTURE

QUALIFY

MQL
(MARKETING QUALIFIED LEAD)

SEGMENT

PROBLEM:
SALES SAYS MARKETING ISNT GIVING THEM ENOUGH LEADS
MARKETING SAYS THATS RIDICULOUS, I GAVE THEM A TON OF LEADS. THEY JUST DONT FOLLOW UP ON THEM PROPERLY.

MARKETING

SALES

CAUSE:
SALES CALLS A FEW UNQUALIFIED LEADS, AND FINDS THEY ARE WASTE OF TIME THEY STOP CALLING THE REST OF THE LEADS

SALES

SOLUTION:
GET AGREEMENT ON THE QUALIFICATION CRITERIA NEEDED TO BE ABLE TO PASS A LEAD ACROSS TO SALES (MQL)

MARKETING

SALES

SALES FURTHER QUALIFIES THOSE LEADS TO

FIND OPPORTUNITIES

USING BANT
BUDGET AUTHORITY NEEDS TIMING

COMMON LEAD STATES

RAW LEAD

CLOSED DEAL

MQL
(MARKETING QUALIFIED LEAD)

OPPORTUNITY
(SALES QUALIFIED LEAD)

AUTOMATE

SALES MIDDLE OF THE FUNNEL

CRM MARKETING AUTOMATION CLOSED DEAL

TOP OF THE FUNNEL

INBOUND MARKETING

LEAD SEGMENTATION

MEASURE
"IF YOU CAN NOT MEASURE IT, YOU CAN NOT IMPROVE IT." - LORD KELVIN

THE KEY METRICS

CAMPAIGNS TO DRIVE TRAFFIC

OVERALL

VISITORS

CONVERSION %
CONVERSION %

TRIALS
(BY LEAD SOURCE) CONVERSION %

CLOSED DEALS

ANALYZE

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

IDENTIFY
YOUR BLOCKAGE POINTS

HOW?

WHAT IS STOPPING ME
FROM INCREASING SALES BY 5X ?

IMPROVE

IN DIAGNOSING MANY FUNNEL BLOCKAGE POINTS, I HAVE FOUND THAT THERE IS A

CLEAR PATTERN

YOU ARE HOPING YOUR

CUSTOMERS WILL DO SOMETHING

THAT THEY ARE

NOT MOTIVATED TO DO

IN OTHER WORDS

YOU DESIGNED YOUR FUNNEL THE WAY YOU HOPED IT WOULD WORK
BUT YOU MAY NOT HAVE THOUGHT ENOUGH ABOUT

THE CUSTOMERS POINT OF VIEW

JBOSS EXAMPLE

PUT A REGISTRATION FORM ON THEIR WEB SITE BEFORE A FREE DOWNLOAD

IMPACT

CUT THE DOWNLOAD RATE BY MORE THAN 10X

GET INSIDE YOUR CUSTOMERS HEAD

CONCERNS
Hate being sold to

- Dont want to get spam sales emails

UNDERSTAND WHAT MOTIVATES THEM

CONCERNS

MOTIVATIONS
Want to solve my problem Recommended by a friend Education Data/ information reports Entertainment Free stuff

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

SUMMARY

THE NINE STEPS

1.IDENTIFY
Identifypeopleinpurchasedecision

2.UNDERSTAND
3.ENTICE 4.ALIGN 5.LINK 6.AUTOMATE 7.MEASURE 8.ANALYZE 9.IMPROVE

Addresstheirbuyingprocessandconcerns
Designactionstopullthemthroughbuyingprocess &addressconcerns Ensurefunnelactionsleaddirectlytosales Linkeveryfunnelactiontothenextstep Usesoftwaretoautomate Measurekeyfunnelmetrics Identifyblockagepoints Brainstormbetterenticementsandwaystoaddress concerns

SALES-DRIVEN FUNNEL DESIGN

TO A

CUSTOMER-CENTRIC FUNNEL DESIGN

CASE STUDY
JBOSS

JBOSS

- FREE open source software - downloaded 5 MILLION times

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

ORIGINAL BRAINSTORMING SESSION

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

JBOSS example

NEEDED: SOLUTION: RESULT:

a carrot to incent them to provide an email address

give away the documentation for free

10,000 leads per month

JBoss - Sales & Marketing Machine

Suspects

Closed Deals

Enterprise Rollouts

Web Leads

Web Scoring

Phone Call

Inside Sales

Lead Nurturing

Metrics: The End Goal

4:1 (25%) Raw Leads Web activity scoring 3:1 (33%) Telemarketing 4:1 (25%) Telesales Closed Deals

Using the model to work backwards

4:1 Raw Leads Web activity scoring 3:1 4:1 Closed Deals

Telemarketing

Insidesales

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)

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

THE RESULTS
Before venture financing
2003 $2m
70 60 50 40 30 20 10

Early 2004
venture round closes

Bookings Growth:
2004 2005 2006
$11m $26m on plan to do $65m

0
2003 2004 2005 2006

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