A guest post written by Dave Chase as a follow up to his “Five Fatal Flaws that are Killing Local Internet Plays.”
For publishers in the local Internet media marketplace, what can be learned from the dotcom bust that can be applied today? In an earlier piece, Five Fatal Flaws that are killing local Internet plays, I laid out the common flaws in local media. As a publisher, it helps to apply lessons from the last downturn that have already been applied with success in today’s environment with other digital media sellers. At the end of this, you can complete a Sales Readiness Scorecard to get an assessment of your sales process and whether your Sales organization is adequately applying the aforementioned lessons learned.
Those of us “old-timers” who were in the business in the aftermath of the dotcom bust remember it was a trying time, especially for emerging businesses whether they were new lines of business for traditional companies or a startup. With startups, it was a matter of life and death to get sales acquisition costs as low as possible. For established companies, it was the difference between mere survival and using the downturn to gain competitive advantage. Nationally, interactive media is much more proven as a business model today than it was earlier this decade. However, on a local basis, it is still new for many prospective customers of local Internet media so plenty of challenges remain.
On a bright note, companies such as Procter & Gamble have proven time and again that companies can gain market share in a recession. Pop quiz: What do GE, Disney, HP, and Microsoft all have in common? They were all startups that got off the ground during steep declines in the U.S. economy. GE started during the panic of 1873, Disney started during the recession of 1923-24, HP began during the tail end of the Great Depression, and Bill Gates and Paul Allen founded Microsoft during the recession of 1975. During those same periods, well-established companies shut their doors and startups never got off the ground. On a less grand scale, my consulting firm emerged in the shadow of the dotcom bust with one simple mission — help emerging businesses gain revenue traction while minimizing cash burn which was particularly apropos in those lean times. The lesson from all of these examples is that forced discipline in a downturn prepares one to thrive after things turn around.
How can you ensure that your business is a success story like HP, Disney, and Microsoft? Naturally, having a some cash reserves and a compelling product are absolutes. However, many digital media companies had both of those and didn’t thrive in the aftermath of the dotcom bust otherwise known as the Digital Nuclear Winter. When access to capital is tight, the cheapest form of capital is sales revenue, thus it’s critical to ensure your end-to-end sales and marketing process is operating with maximum efficiency. In addition to the issues outlined in the “Five Fatal Flaws” post, here’s a list of problems and bad management practices that we frequently encounter when working with emerging businesses:
- Planning and execution in the Sales and Marketing departments are dramatically out of sync.
- Too often, companies have significant deficiencies in their end-to-end sales process which decreases the potential yield from their sales and marketing investments. Such process defects often result in wasted precious resources; lead generations methods are too expensive and sales reps are hired to qualify leads when they should be with customers selling.
- Lack of sales and marketing focus on the most profitable “lifetime” customers.
- Superior products are being disqualified as “too risky” due to poor confidence building with the right prospects.
- Real customer input and market trends are not being communicated or addressed by the company.
- Chief executives have poor visibility into the sales pipeline and don’t understand how to optimize the end-to-end process for increased revenues.
It’s worth noting that consumers and businesses don’t completely stop spending money during a recession, and that truth runs back through the Great Depression as well. They just want better deals. To enable “deals” on your products, it is vital that your sales process is efficient so that the “deal” can be structured, delivered and profitable. Even before this downturn, there has been price pressure for quite awhile. A byproduct of the price pressure is that traditional lead generation methods and expensive shoe-leather sales people aren’t penciling out the way they once did. In their place, web-driven leads coupled with much heavier use of telesales resources and better sales and marketing processes are enabling businesses to operate with fewer costs while generating strong revenue on the backs of emerging products. We’ve developed what we affectionately call “Sales in a Box” that captures the myriad lessons learned, best practices and templates we’ve gathered over the last 10 years optimizing sales organizations that I’ve highlighted below.
Unfortunately, very few senior executives have experience in these telesales-heavy models. To their surprise, businesses often learn that telesales models will drive deals well into six figures. The following 10 elements are what publishers need to put in place to run sales efficiently:
- Understand your customers and the market landscape: Take a step back and do qualitative research in your market to talk with customers and non-customers alike. The focus is understanding their underlying needs as opposed to whether they like your Product A or Product B. This is also an opportunity to understand your competition.
- Develop a H.O.T. (High Odds Target) Opportunity Profile that defines your most profitable lifetime value customers. Profile elements can include vertical markets and sub-segments, psychographic elements (such as risk aversion) and specific company and contact criteria. This will drive how you articulate your value proposition.
- Set up the optimal Sales Organization Model that determines whether it is optimal to organize around industries, geographies, stage of the sales process (i.e., lead gen reps, acquisition reps, development reps and retention reps).
- Tightly define each step of the sales process with the corresponding likelihood of closing the deal. Here’s an example of the stages in the sales pipeline — notice that each should have a corresponding set of questions answered or work completed to promote them to the next stage of the pipeline:
- Lead qualify
- Lead promoted to opportunity
- Develop solution
- Remove roadblocks
- Ask for the order
- Present end close
- Deal closed
- Sell case study
- Optimize lead generation efforts by starting with your own in-house list. We find these lists are surprisingly under-utilized and can rapidly become stale if there isn’t a “drip-irrigation” program (i.e., regular email communications that provide valuable information to your marketplace) for staying in contact with these prospects. This is set against a backdrop of understanding the attributes of the highest value Lifetime Customers.
- As you might imagine, having a CRM system like Salesforce.com is vital to properly manage all of the moving parts. Used properly, it’s a vital tool for the reps and management alike. Proper use of a CRM tool is something an entire book can be written about. In short, it’s vital that the tool is customized to map to your sales process.
- Organizational assessment and building ensures that all of the steps above aren’t in vein. It’s extremely common to find Farming Hunters and Hunting Farmers. In other words, there’s a mismatch of talents. Having the proper job descriptions and corresponding compensation models and success metrics is paramount.
- Since it is likely that you’ll have to bring on new talent, having a structured hiring and on-boarding process greatly increases the likelihood of success. This includes a training regimen that starts from Day One until the individual leaves the organization. As I like to say “it’s a journey, not a destination”. This includes everything from group training to brownbag sessions to individual role playing.
- Another “it’s a journey, not a destination” item is refinement of call and email scripts. This is an ever-evolving landscape and media sales and marketing teams need to think like a direct mail expert. That is, they are constantly doing A/B testing to determine what works best.
- We are big believers in establishing what is referred to as a “Rhythm of the Business”. This takes into account both external and internal dynamics. Customers have seasonal cycles in their business when they are more or less receptive to being contacted. Internally, we also establish weekly, monthly, quarterly and annual processes that establish a natural rhythm
There’s much more to it but the companies taking the ten steps outlined (above) have consistently reduced their cost of customer acquisition by 50 percent or more. In many cases, we work with organizations that have an expensive field-heavy sales model that will transition to a hybrid field-inside sales model or even pure telesales models. Over the course of several months, their sales process can be overhauled while seeing the benefits just a couple months into it. For publishers, not only can they expand their customer base, but it also means selling a higher percentage of inventory at their premium CPM levels as opposed to putting that inventory into lower CPM ad networks and exchanges. One of the lessons of the last Nuclear Winter was that those who acted decisively were able to thrive while those who didn’t contracted or shuttered their doors.
History has shown that recessions are a great time to launch new products or gain market advantage for existing products. In fact, 16 of the 30 companies whose stocks make up the Dow started during recessions. Smart companies can thrive even during steep declines if they have the right strategy in place. Better yet, they slingshot out of the recession when it is over as they are well-positioned for long-term success.
Fill out this Sale Readiness Scorecard if you’d like to find out how ready your sales organization is to capitalize on the opportunity.
Dave Chase is a partner at Altus Alliance, a Seattle-based venture consulting firm, Publisher of SunValleyOnline.com and co-founder of NextNewsNet. Altus has worked with more than 60 companies to help improve their sales and marketing efforts. Chase may be reached at firstname.lastname@example.org.