Lead Scoring 2.0: Measuring Prospect Behavior

Last month, I spoke to a group of Silicon Valley Chief Sales Officers about Sales 2.0.  After my presentation, I invited the attendees to share some of their approaches to reinventing the way they are selling, given changes in customer preferences, the market and economy.  Bill Binch, VP of Sales and Customer Success at Marketo, had a lot to offer.  He is the first to admit that some of his practices are non-traditional, or in his words “edgy”, perhaps the ultimate of compliments to members of Generation Y.  I asked him these questions:

Anneke: For context, tell us a little about your sales organization and how it is structured. Who do you sell to, what is your average sales price and average sales cycle, etc?
Bill:  We use several Sales 2.0 concepts at Marketo. We’ve expanded the standard sales cycle into what we call the “Revenue Cycle,” which means we measure the combined sales AND marketing cycles to learn how our customers want to buy. By measuring from their first interaction, we understand how our prospects behave and how they want to be sold to, and deliver them timely, content-specific information based on their interests and activities.  The result is that marketing provides the sales team with a nurtured, sales-ready leads, complete with their demographics, activities, and behaviors.  Which is really what Marketo as a company is about – we help companies convert, nurture, and prioritize their leads, resulting in better alignment between sales and marketing and higher revenues. So we currently have Enterprise (field) reps who call on accounts with revenue greater than $500 million as well as Territory (inside) reps who are geographically organized that sell to the VP of Marketing and VP of Sales.   Our typical Revenue Cycle runs about 100 days from identification to close with an annual subscription price of $40,000.

Anneke: You mention lead nurturing several times, which is a key concept in a Sales 2.0, marketing and sales aligned company in which measurement, tracking, and accountability are part of the sales culture.   How do you distinguish between leads that your tele-qualification team calls and leads you simply nurture using Marketo.  In other words, how do you determine who gets a follow-up call and when?

Bill: All leads are nurtured in Marketo, prior receiving a call from a tele-qualifcation rep.  Leads are ranked by a score, according to best practices which are published on our web site, and once they reach a certain score, they go to tele-qualificiation for follow up.  If tele-qualification determines a prospect to be “sales -ready,” that prospect is referred to sales. If  prospects are not “sales-ready”, they are put into a new nurture program based on their needs and purchase timeframe.

Anneke:  Tell me more about your innovative approach to scoring marketing-generated sales opportunities according to how likely prospects are to buy.
Bill: The 2.0 process requires the marketing team to provide greater detail and insight for their sales team — what influenced and drove the lead to your site, did they look at your pricing page, your videos, download whitepapers?  Who is your prospect, what company are they from, what size company, what industry, what is their title and role?  What assets are influencing the prospect to select your product and what is their propensity to buy?  By having a closed loop process, we can measure what is influencing our customers, what programs are helping reinforce our message, and what does a typical buyer profile look like.  We can then adjust our messaging and marketing spend to focus on the best sources and processes for gaining new customers.

Anneke: How does this lead scoring system compare to traditional approaches to prioritizing opportunities?
Bill: The 1.0 process was to qualify leads as A, B, or C leads, or at best case a static numeric basis.  In the 2.0 world,  sales reps need to understand the demographics, behaviors, and activities of their prospect.  They need to understand their urgency level.   These can be delivered as individual scores that move up or down dynamically — if a prospect is very active, their urgency is greater and and the sales rep should be alerted to react.  It is the combination of activity level -which shows readiness to engage – and demographic fit that determines the best qualified leads.

Anneke: What is the difference in the results you’ve seen since implementing the new approach?
Bill: The big result is in productivity – our sales team sells.  Instead of burning time researching, prospecting, and back office work, they are focused on engaging with qualified leads that want to speak with them.  By using Marketo and our tele-qualification team, we are able to keep the sales team highly utilized and the majority of their time is customer facing.  The “Revenue Cycle” process has yielded us over 200 customers since launching the product in March 2008.
Anneke: What are some of your biggest selling challenges today and how are you addressing them?
Bill: In the mid 90’s, many companies didn’t have CRM (Customer Relationship Management applications) and didn’t think they had a need, yet today it’s hard to imagine any company not using CRM to run their sales business.  The marketing side is similar – it’s been under-served and not optimized as well as it could be.  So our challenge is redefining how sales AND marketing can work more closely together to have a greater impact on revenues.   SaaS (Software as a Service) has been an enabling paradigm to get software into the marketer’s hands, but similar to what Siebel Systems (now Oracle) and salesforce.com experienced, we need more than technology.  We need to educate customers on new best practices and strategies to help solve today’s sales and marketing challenges.  So we’ve focused on hiring people with that DNA in their background, and that skill has really helped fuel our growth.

Anneke: Are you implementing or testing Sales 2.0 strategies, practices, or technologies in addition to your own product?
Bill: Yes, there are many great technologies out there that are helping us.  We use Zuora for integrated order configuration, order entry, and billing, which is critical in a subscription business.  Echosign is an electronic signature tool integrated to salesforce.com, which speeds up the contract process and reduces redlines and legal changes.  And we use Jigsaw and Tippit for research and industry expertise.
Anneke: And what are the results?
Bill: I think the biggest result is the adoption of the Marketo platform by our customers.  There had been several offerings in this category, but in 3 years we’ve gone from start-up to the 2nd largest player in our space.  Our technology, combined with usability, domain knowledge, and execution has put us on the trajectory to be the leader in the next 18 months.   Customers have been wanting a product that is usable today but also offered the sophistication and growth path for the future, and we’re uniquely positioned to provide that solution.
Anneke: Your web site describes Marketo as “marketing automation that helps B2B marketing and sales drive revenue and improve accountability”.  Can you give me some examples of results your customers are seeing?
Bill: A recent example is a manufacturer who within 30 days of starting with us, launched a campaign that yielded 500% improvement of their click through rates.  A 5X improvement is going to fill the funnel with more opportunities, which will lead to more at-bats for their sales reps.  And that’s just the first 30 days!  We have another customer, Plexus Systems who saw pretty tremendous results, which they documented on their VP of Marketing’s blog. Their results include better understanding of their buyer, better sales productivity and prioritization, and of course more leads, more deals, more revenue.

What lead scoring system do you use?  How has it helped your sales productivity and results?

Tags: CRM, EchoSign, Jigsaw, lead scoring, marketing, marketing automation, Marketo, Oracle, revenue cycle, SaaS, Sales 2.0, salesforce.com, Tippit, Zuora

The Emergence of the Hybrid (Telesales/Field) Sales Rep

In Sales 2.0, the lines are blurring between traditional telesales and field sales jobs.  Inflexible rules about what constitutes a telesales or field sales opportunity are no longer working for companies or their customers. Some companies are experimenting with their sales models, allowing sales reps that are primarily inside reps the flexibility to leave their phones and computers when customers require and warrant a face-to-face visit.
I talked to veteran sales executive, Bill Lohr, to learn about his recent successful implementation of a hybrid inside/field sales model in his last position heading sales for the global leader in on demand Web Content Management (WCM). Bill refers to the new model as the “tweener” model: in between an inside sales model and a field sales model.
AS: What do you call this new kind of inside sales rep?
BL: Given my background in professional services, I gave them the title “Client Executive”.  I think of Software-as-a-Service companies as services businesses, not software businesses. Software is the tool by which to deliver services to customers. Yes there is software involved, but the things that really matter are creating value and trusted relationships.
AS: What made you decide to employ an inside/field sales hybrid model and how do you implement it?
BL: The majority – if not all –of the sales cycle at my last company was conducted over the phone.  However, some customers needed a face-to-face visit if the first year revenue amount was very large, the customer was strategic, or the deal was complex. In general, inside sales reps could make field visits if an annual order size exceeded $500,000. One example is a major newspaper for which we went onsite twice in order to close the deal.  For our first visit, they had 25 people in the room. We were able to establish relationships with key decision makers, who championed our solution internally and allowed us to sell into other departments.
AS: What percentage of your customers required face-to-face visits?
BL: For Enterprise Accounts, probably 50%.  But other than the final closing steps, the rest of the sales cycle could still be done by phone and online.  The fact that the company has no field offices encouraged us to minimize travel.    We even closed accounts in Australia and Holland without ever meeting the client.  You can do a lot with the phone and online tools such as web collaboration products.
AS: How is your sales team structured and what are the responsibilities of each team member?
BL: Given the monthly recurring revenue model, the customer’s need for a consultative sales approach, and the company’s many different kinds of buyers, I needed flexibility. Inside sales reps in most companies don’t have the ability to leave their desks and that didn’t make sense to me. I think of the Client Executives as expert “set up” people while my role as SVP of sales was to help close sales and play a first line mentor and coach role.  I would go to all face-to-face customer meetings with my reps and provide support and education.
AS: Contrast your sales productivity before and after you implemented the new sales model.
BL: When I started, it took only 18 days to qualify an opportunity and 56 days to close. By designing a more sophisticated sales process and implementing the hybrid model, it now takes 26 days to qualify but only 42 days to close.  I lengthened the lead qualification process but ultimately shortened the sales cycle.  The monthly revenues increased exponentially as well because we were doing a better job qualifying prospects out of the funnel early in the sales cycle.
AS: What is the profile for your new hybrid sales rep?
BL: Someone who has experience in telesales (on quota sales) positions, is confident on the phone, and is able to engage customers in phone and web meetings and conduct web demos and presentations.  Our reps also need to be able to navigate an organization by phone, have meaningful conversations with all levels of buyers, and coordinate these buyers– often up to 15 or 20 –within a company.  Ideally, candidates have been in the top echelon of inside sales at a company like salesforce.com and their next step is a field sales position.
AS: What is their quota and target compensation?
BL: Quota is based on one month of the monthly recurring revenue (MRR) for a one-year deal and goes up for a two-year agreement, e.g. a deal that is $20,000/month for one year would get quota credit and the rep would be paid on $20,000.  The MRR can justify this model. Target comp is over $150,000/year at quota.

(Note: For more information on best practices in inside sales quota assignment and compensation, have a look at the annual inside sales compensation survey report conducted by Phone Works.)
AS: Would you hire someone who came from field sales?
BL: I’m not sure I would.  I don’t think they’d fit the mold I need.
AS: How did you organize sales territories? Do the reps close new business as well as work with existing customers?
BL: Sales territories are structured by industry, not geography, since we target named accounts in specific vertical markets.  The client executives just close new business. I have a separate team – Customer Success – that is responsible for customer adoption, upselling, and renewals. The reps on this team are called client managers.  Their job is to do the right thing for the customer; they are not on quota (although thy get paid on the deals they find). Once a sale is made, the customer is immediately handed off from the client executive to the client manager.
AS: Did you have technical sales engineers supporting the reps?
BL: No, but we used technical resources on the client services team to assist the sales team.
AS: What metrics did you track?
BL: My sales organizations are very metrics-driven. I tracked call volumes, activities, sales stages, time in stages, pipeline flow, weekly changes and more.
AS: What sales tools and technologies did you use?
BL: Among others, we used salesforce.com, Jigsaw, Hoovers, GoToMeeting, LinkedIn, Eloqua, and EchoSign.
AS: How did you choose those particular products?
BL: I had two reps that came from salesforce.com, who were familiar with a number of products that integrate with salesforce’s product.  I also attended the Sales 2.0 Conference last fall, which showcased new technologies.
AS: How did the Sales 2.0 technologies help you sell?
BL: Lots of ways.  Jigsaw and Hoovers helped alert us to who the players are in a given account.  LinkedIn got us to the right people faster and increases their response rate because an individual reaching out to another individual makes the outreach more personal. EchoSign accelerated the contracts cycle.
AS: How much cold calling did your team do?
BL: I didn’t want my sales team spending any more than 20% of its time cold calling.  It is too costly to use these resources for that purpose.  Instead, Marketing generated leads for us by running email marketing and other campaigns.  Also, we had sales development reps chartered with cold calling.  Telesales reps are responsible for targeted account selling into vertical industries including high tech, financial services, and media. Their calls are warmer because they are based on research and knowledge.
AS: What have your sales results been?
BL: When I started, we were producing $20,000/MRR.  Two and a half years later, with the same sales team, the productivity increased to $700,000/MRR.

What are your experiences with hybrid sales reps? How do you detemine what telesales sells and what the field sells?

Tags: Bill Lohr, EchoSign, Eloqua, field sales, GoToMeeting, Hoovers, hybrid sales model, inside sales, Jigsaw, LinkedIn, SaaS, Sales 2.0, Sales 2.0 Conference, sales metrics, sales tools, telesales

Twitter: Friend or Foe of Sales?

Last week I attended the oversold (500 people plus) Sales 2.0 Conference in San Francisco and was invited to participate on the panel discussion, “Accelerating Productivity: New Sales 2.0 Tools”.  A week earlier, I was the guest speaker at the inaugural Social Media Breakfast San Francisco meeting (see online video), during which I was interviewed, Fresh Air style, by social media guru, Chris Kenton. There was a common theme between these two events: the most engaging (or should I say heated?) discussion topic was the use of twitter in the sales process.

People are passionate about twitter, whether they love it or hate it.  To the majority of sales executives I know, twitter is seen as perhaps only second to Facebook as a major distraction for the sales force and drain on its productivity.  Garth Moulton, cofounder and VP of Community at Jigsaw,  sums it up in his recent blog post, “Not Digging on Twitter” that “for a working professional Twitter is totally stupid.”

He might be right.  But I’m not willing to accept that until I give it a chance.

Like my dermatologist who tries out every new procedure on herself before subjecting her patients to it, I  have immersed myself in the twitter community and am experimenting with it. A few weeks ago, I didn’t know what a hashtag, retweet, or @reply meant, but I’m enjoying learning about a new communications medium that so may people (some sources say 2,000 new user accounts are created on average per day)  are flocking to. During the opening session of the Sales 2.0 conference, I tried my hand at “live tweeting” the content: broadcasting it out to an audience of twitter users who were following the conference online in real time. You can read some of these “tweets” in several blogs written by members of the Sales 2.0 community: Michael Damphousse’s Smashmouth Marketing, Parker Trewin’s B2B Marketing for Faster Sales, and Andrew Lennon’s The Daily Anchor, among others.

My theory is that when new technologies are adopted enthusiastically by the mainstream, they may just have a place in the buying cycle.  In B2B sales, that might not be the end of that cycle – it’s hard to imagine someone placing a million dollar deal via twitter – but never say never. Twenty-four years ago, I was told I was crazy to expect the sophisticated customers of Oracle Corporation to buy its complex products by phone.

How are YOU using twitter in the sales process? Is it improving or decreasing sales productivity in your company? And most importantly, what revenue has resulted from a twitter interaction with a prospect?

Tags: Andrew Lennon, B2B Sales, Chris Kenton, Garth Moulton, Jigsaw, Michael Damphousse, Oracle, Parker Trewin, revenue, Sales 2.0, Sales 2.0 Conference, Social Media Breakfast, twitter