Enterprise sales and marketing models have traditionally been built around large sales forces, C-suite relationships, and enterprise-wide implementations. A disruptive new sales model, however, is emerging: digital-enabled enterprise sales more closely resembles B2C e-commerce models where large enterprise customers can research, test, and start paying for products without stepping away from their computer and with minimal sales touches.
A handful of software companies have embraced this model to optimize sales, marketing, and product design, with impressive results: doubling of revenue growth and 30 percent better sales efficiency compared with companies using a traditional enterprise sales model.
A new era in B2B customer engagement
Two trends―the consumerization of the enterprise and ever-more distributed decision makers―have opened the door for the digital B2B enterprise sales model. For example, while software purchases were once the exclusive domain of the CIO, today these decisions are increasingly made by business unit leaders and end users throughout the enterprise. Moreover, while users have long researched products online, cloud-based platforms now allow them to try software through demos and “freemium” offers then seamlessly purchase or upgrade once the value has been demonstrated.
This digital approach enhances sales efforts in several ways: businesses can focus their salespeople away from basic tasks that digital can now manage and toward more profitable targets, such as surgically upselling thereby dramatically increasing the effectiveness of outreach. In addition, companies can improve sales and marketing by gathering data on potential customers who research online or use free trials. With this information, salespeople can analyze customer interactions with the company and its products to identify individual sales approaches needed to close or expand deals.
For example, once a salesperson has learned that five to ten people in an organization have become active users of a product, he or she can visit that company to sell an enterprise-wide license to accommodate more users. With this approach, companies are able to reach existing customers far more economically and penetrate new segments that were previously too expensive to target.
In the Software as a Service (SaaS) industry, early adopters of this digital-enabled sales model compete alongside companies with more traditional models. McKinsey’s SaaS benchmark database reveals that while few companies fully embrace this new approach today, those that have are achieving 2x revenue growth rates, 3x customer growth rates, and 30 percent higher acquisition efficiency than businesses using the traditional sales model. In addition, this digital-enabled approach leads to lower customer churn rates (8.5 percent compared with 12.5 percent.)
Moving to digital sales
Companies can significantly improve growth and sales effectiveness by focusing on three key areas:
- Aggressively shift your new customer acquisition spend to digital marketing. Rather than approaching acquiring new customers in aggregate, B2B companies should take a page from B2C e-commerce and focus on highly segmented digital acquisition marketing. By analyzing customer needs based on referral paths, search terms, conversion rates, industries, geographies, etc., companies can identify the best prospects at the microsegment level and customize their user experience with personalized landing pages, messaging, pathways, offers, etc. Companies have achieved 5 to 15 percent revenue improvements by setting up a test-and-learn platform to optimize digital marketing based on funnel conversion performance.
- Use your product as a sales tool. Leading companies create – and give away – trial versions of their product that let customers test the value proposition before ever speaking with a seller. As customers use the trial, the company can run analytics to determine if a customer will convert without additional input, convert with targeted seller attention, or continue as a free user. However, creating pricing tiers and deciding what’s included in the trial are crucial: provide too much and customers will never upgrade; give away too little and your customers won’t experience the product’s value. Clients that do this well can convert 30% of free trials with little to no additional sales spend.
- Predict what customers will want to buy next to increase upsell efficiency. The digital sales model allows for predictive analytics to estimate customer lifetime value and prioritize outreach to high-value customers. Algorithms based on customer usage patterns can predict when a customer will be interested in a specific product, and provide sales teams with prompts to approach the customer with tailored upsell and cross-sell offers. We have seen these efforts achieve improvements of 10 to 15 percent in EBITDA in subscription businesses.
Much as Amazon and eBay transformed retail marketing and sales a decade ago, digital-enabled sales holds enormous potential for not just software companies but also B2B businesses across a range of industries.