How to get enterprise leads that generate the right Customer Acquisition Cost (CAC). April 27, 2014Posted by bernardlunn in Deal-making, Enterprise Sales.
Tags: cac, customer acquisition cost, enterprise sales, lead generation
This is post # 3 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
Winning sales is not enough, you need to win them efficiently so that your CAC (Customer Acquisition Cost) is low enough. The right lead generation is key to this. In ye olden days, most B2B leads came from outbound telemarketing or inbound via advertising or readers surrendering an email address when they downloaded a White Paper. Nowadays we have SEM, SEO and Social Media, but the lead to sales process for enterprise sales is still fundamentally broken. Most enterprise sales people tell you that the leads generated by marketing are no good. This is an age-old debate (often acrimonious) between sales and marketing. Marketing say; “You never follow up properly on our leads”. Sales respond: “If I spend all my time on your rubbish leads, I won’t have time to sell”. Bad leads cost money. Many lead vendors and B2B publishers sell on a cost per lead basis and many marketing departments are measured on this metric; so there is an incentive towards quantity rather than quality. Quantity in this case costs twice over – bad leads cost money to acquire and even more for sales people to “follow up” on. The traditional marketing led leads funnel works reasonably well in traditional red ocean markets where the buyers are shopping for something specific. This is very different in blue ocean markets where the solutions have not yet formed into products that sit within a defined market space. Hearing the screams of pain does indicate that a market will form around any vendor who can fix that pain; but don’t confuse that scream of pain with intent to purchase (which is what lead vendors sell), it is much earlier in the funnel. In blue ocean markets, it is better to hire thought leadership sales people who proactively hunt for the few people in the few companies that will generate big results. The proactive process goes something like this: 1. Pain analysis. This is your long list of potential target accounts. This is your bottom up TAM (Total Addressable Market). Good enterprise sales people are entrepreneurs who look for great products in big fast growing markets. You may give the sales guy a vertical or geographic limitation, so they will do their own TAM within those limits. You need thought leaders who understand the trends in their vertical and geographic market, who know what is driving the CXO agenda in the big target accounts. Is it likely that the pain you aim to solve is keeping your prospects awake at night? That is your Pain Analysis. 2. Competitor Lock-In. You don’t want to obsess about competition, but you must rule out the targets where the competition have a lock on the account. For example, big old vendors will usually have something in their feature set which competes with your product, at least on paper. If you see a company that always buys from Vendor X, even their most shabby products, delete them from your list. It does not matter that you have convincing evidence that your product is in a different league, if it is clear that the target company won’t pay any serious attention to this evidence. Your aim is to win business with the right CAC, not to be a dead hero. 3. Leverage analysis. This makes it into shorter list. You are looking for unfair advantage that you can leverage in this specific customer. This must have something to do with your technical secret sauce. Don’t think that a Board level relationship is an unfair advantage, it is only table stakes. The sales skill is connecting the dots between a) the generic pain point that all customers have and b) your technical secret sauce and c) the specific example of the generic pain point in the target enterprise account. 4. Who are the “innovators with clout” in these accounts? You need innovators who will pay attention to a startup pitch. Most people won’t pay attention, they are too deeply in the legacy box. However you can waste a lot of time with innovators who will moan to you about how stuck in the mud their employer is. That is worse than useless, it is a start-up killing time sink. You need innovators with clout. Usually this means they have delivered business value through innovation before, so the powers that be will pay attention when they come up with another innovation (the one based on your company). Some of this you can do as online research. Thanks to social media, we can do a lot more research like this than we used to. Not only is the buyer much more prepared before they meet the seller, the smart seller is also far more prepared than used to be the case. However, no matter how much research you do “no theory withstands contact with the customer”. Your aim when you get through the door is to validate or discard your theory about that customer. That is what we cover in the next post. Within the context of that proactive, intelligent lead generation approach, it is easier to see that the chances of a lead landing on your desk that happens to fit those criteria is vanishingly small. A good sales person will ignore all the leads that don’t fit those criteria. Within that context, question the wisdom of using an inside sales team as a lead generation engine. Imagine a junior script-following inside sales persons getting that “unicorn” (an innovator with clout in exactly the right target account) on the phone; yep you just blew it with that unicorn. How do you get through the door to those people? It’s simple. Network like crazy, ask for referrals, talk to lots and lots of people. You have to cast a very wide net, while being laser focussed on the few special fish that you want to land. The other critical piece of getting the right CAC, is what you say when you get through the door, what are your first words? When I say “first words”, these could be in an email, on a phone call or in a meeting. This is like your Elevator Pitch to investors; but don’t just copy that Investor pitch. Investors want the macro picture, customers want the micro picture. Its all about “what can you do for me right now?” The opening moves between experienced buyers and sellers is where each is trying to figure out: “Should I invest any more time with this person?”. These opening moves now follow a social media dance along these lines:
- Ping on a social network, initiated by buyer or seller. The ping follows whatever protocol is appropriate to the social network in question (writing on Wall, liking, retweeting, connection request etc).
- You check each other out online. This is the first “should I spend any time on this person” decision. For example you get a ping from a CRM vendor and don’t respond because you are already committed to vendor X. Or it might be a new tool that complements vendor X for a problem that is relevant, so you do a bit of research.
- Some socially appropriate persistence by the seller. This can include old-fashioned more intrusive methods such as email and telephone (now that time has shifted from phone to email, it is surprising easy to reach influentials by phone, they welcome a relief from email). Most sales people impose limits on how many times they will follow-up, it becomes counter-productive quite quickly.
The next post describes what you do when you get through that door, how to focus on the buy process to get the right CAC. Next post in series.