Here’s how shopping has dramatically shifted and what you can do about it.
I started my sales career in 1990 at Parametric Technology Corporation as the secretary to the vice president of sales. At the time, the company had $3 million in revenue. Ten years later, I was a senior vice president of sales and the company had $1 billion in revenue. I had a very nice run and learned a ton about selling and the sales process. What’s remarkable to me is how radically different that sales process needs to be today.
There has been a sea change in the way people shop for things and the way they buy things. So there also needs to be a sea change in the way you sell things. I call this new method “inbound selling.”
Here I explain how sales has changed, and how you can now use “inbound selling” to do something about it:
The Sales Prospect Now Has All the Power
As a sales rep in the ’90s, relative to the prospect, I had all of the leverage in the sales process. If the prospect wanted a reference, she came through me to get one. If the prospect wanted to figure out our pricing model, she came through me. If the prospect wanted to talk to Parametric’s founder, she came through me. I did my best to extract a pound of flesh from the prospect in exchange for each of these requests, and took full advantage of the information asymmetry.
In 2013, that leverage in the sales process has completely shifted from the sales rep to the prospect. If a prospect wants a reference, pricing information, or a conversation with your founder, she is just a few mouse clicks or tweets away.
What you can do about it: A lot of companies still pretend like it is the 1990s and try to hide information form prospective customers in hopes that the hidden information will force the prospect to “contact sales.” This might work once in a while, but the reality is that when you hide basic stuff, like your pricing model, you are going to irritate rational buyers who’d much rather just read about it than have to have a 30-minute qualifying call to talk about it with a rep and his boss. My advice is to lean into this power shift and make it much easier for the prospect to find what he needs.
A Sales Rep Gets Involved Later in the Process Than Ever Before
As a sales rep in the ’90s, I interacted with a prospect from the very beginning of the purchase decision process to the very end. In 2013, the sales rep gets involved much later in that process. I’ve seen a bunch of studies about this and they all say that the prospect does about 50 percent to 70 percent of his own research and self-convincing online before hitting the “contact sales” button.
What you can do about it: Embrace the fact that the prospect is getting involved and don’t fight it. Give your reps the tools they need so that when the conversation with the prospect finally does happen the rep has the appropriate level of context and hits the nail on the head quickly.
Revenue Is Recognized Later
As a sales rep in the ’90s, I sold something with a big upfront price tag and a small tail of revenue later, as did most sales reps in most industries. In 2013, almost everyone sells every kind of product as a service with a revenue stream that happens over time. Now profit does not occur on a customer unit basis for many months, or even years.
What you can do about it: Fewer and fewer people are willing to give you a big upfront slug of cash for whatever you are selling, so you need to just give in to this fact, and let them buy it in a way that they pay for it over time. This is going to hurt your cash flow, but you don’t have a choice in this day and age. If you don’t do it, someone else will, and she’ll eat your lunch.
Sellers Now Have to Beware
As a sales rep in the ’90s, I lived in a buyer beware world. The onus was on the buyer to make the right decision. If she made the wrong one or wasn’t served well, her recourse was to tell a few colleagues and her spouse. In 2013, you’re in a seller-beware world. If the buyer is unhappy with the product or wasn’t served well, her recourse is to write a scathing blog article about your product, tweet about it, and post about it on Facebook–all of which your next prospect can easily find with a Google search.
What you can do about it: Adjust your sales commission plans to reward for long-term customer success, not just upfront cash payment. Part of the commission payments should account for length of time on contract, voluntary contract renewal, churn rate, and the loyalty metric net promoter score.
Cold Calling Is Much Harder
As a sales rep in the ’90s, I started almost every sales process with a cold call. In fact, at Parametric, Tuesday was cold call day. Everyone stayed in the office, pounded the phones, and set up meetings for the rest of the week. One of the key qualities in a sales rep back then was that he had to be very aggressive on the phone and have a very thick skin. In 2013, cold calls are significantly harder to make. Everyone has caller ID, very few people have a land line–and, let’s be honest, very few people like talking on the phone even if it’s with people they know well.
What you can do about it: Invest some of your upcoming sales dollars into marketing instead of cold calling. Why? The numbers vary, but something between 50 percent and 70 percent of the decision process is made based on what a prospect finds through Google, your website, and social media. Shift the lead generation burden from sales to marketing. Marketing used to own branding, PR, events, and product marketing. Now marketing needs to also own lead generation because the old methods used by reps for this aren’t working as well.
Fewer Opportunities for In-Person Charm
As a sales rep in the ’90s, I travelled to meet all my prospects face to face. There was no GoToMeeting! All the key protagonists in a potential sale went to the office every day, usually at headquarters. So that’s where I did my best to bond with the prospect and often times had pretty good luck. In 2013, it makes far less sense to travel to visit a prospect because you have GoToMeeting and because almost every important meeting has key players from the prospects side working in several different locations (or from home) anyway. Prospects don’t want to be visited by a rep or have dinner with their rep any more either. They’d rather have dinner with their kids.
What you can do about it: Stop hiring outside sales reps or increase your ratio of inside reps to outside reps.
Different Sales Characteristics Are Needed
Since the rep gets involved later and the prospect often knows as much as the rep does by the time the conversation happens, the sales hire profile should change. At Parametric, I had five criteria for hiring reps, but the No. 1 was “aggressive.” In a world where cold calling doesn’t happen and the prospect has an information advantage, the No. 1 criteria should now be “brains.”
This week at Hubspot, the sales shift has been top of mind. I launched a new sales product called Signals that is meant to help sales reps have more relevant, context-driven conversations with prospects. The fundamental nature of the way prospects shop for stuff and buy stuff has radically changed. Sellers need to radically change the way they sell to match up.
And other lessons we can learn from entrepreneurs in Egypt, Saudi Arabia, Dubai, and North Africa.
In the wake of the violence in Egypt, I’ve been thinking about a story my friend Chris Schroeder, a successful founder and angel investor, once told me about a Middle Eastern entrepreneurship conference.
Three years ago, a Saudi woman in a dark hijab explained her idea for a business manufacturing smartphone and iPad accessories. Schroeder listened politely and urged her to follow her dreams, but after thanking him with equal politeness, the woman pressed for more advice.
She had pre-sold 1,000 units, she explained, and was trying to decide whether to outsource the manufacturing to China. “Should I risk manufacturing my idea with people I don’t know very well? Or should I raise the $45,000 I’d need for machinery and then hire a young woman I know locally to handle production?”
That conversation, which occurred at the Celebration of Entrepreneurship 2010 conference in Dubai, took Schroeder aback, he relates in his new book, Startup Rising: the Entrepreneurial Revolution Remaking the Middle East. Back then, he had the impression that many Westerners have of the Middle East: It’s a war-torn region, culturally and religiously conservative, oppressive toward women, and hidebound. But this woman, and other entrepreneurs he met during several trips before and after, showed him something else was going on.
In full disclosure, I helped edit Startup Rising. A significant part of the narrative that Schroeder describes takes place in Cairo, so I’ve been curious to hear what the dozens of founders and investors in Egypt are saying about the turmoil–and how it affects their ventures. As it turns out, moments before we connected via email last week, Schroeder learned “the chief technology officer of a company I love over there was killed. There is great tension and sadness–and a passion to get back to work and build.”
In light of his book and our recent correspondence, here are some key takeaways from Schroeder’s study of entrepreneurship in the Middle East and North Africa.
The Middle East is Not One Big Place
If you cringed a little at the fact that I started this article by lumping a conference in Dubai with the violence in Cairo, well, good for you. Schroeder says one challenge for Westerners, especially those who haven’t traveled in the Middle East and North Africa, is differentiating the cultures and opportunities in various parts of the region.
“What is happening in the tragedy of Mali is much different than the bustle of Kenya; what is happening in Dubai and even Amman is different than Damascus,” he said. “At the same time, technology–its transparency, collaboration, its connectedness–is a universal throughout.”
The Future is Long-Term
We’ve seen an entrepreneurial renaissance in the BRIC countries–Brazil, Russia, India and China–and Schroeder maintains that taking a slightly longer view in the Middle East suggests some reasons for optimism. To start with, it’s a huge, untapped market.
“Something else is happening at scale based on relatively recent access to technology,” Schroeder said. “I can’t tell you what will happen in six months, but I can tell you within ten years, two-thirds of the planet will have smartphones. Problem-solving and innovation, bottom-up, will come from everywhere.”
Moreover, the Middle East has never had widespread access to landline phones, so if you’re looking for specific technological industries to get excited about, “look for interesting innovation in mobile.”
An Inspiring Spirit
There’s no such thing as an easy start-up, but some of the examples Schroeder talks about are exceptionally impressive, including those in Cairo. He mentions men and women trying to improve solar power in the Egyptian desert, and the creators of WeatherHD (now Clear Day), the highest-selling weather app for iPhone. There are also larger-scale projects trying to figure out how to bring education and tutoring to the masses using video and online technology–a $2 billion industry in Egypt alone.
“I see a huge hunger and humility far more than I see in Silicon Valley regularly,” Schroeder said. “But there may be a special place in my heart for [entrepreneurs who] view their worlds as software problems. Too much traffic in Cairo? Build a crowd-sharing app to navigate it. Not enough water to expand arable land? Build solar pumping capabilities for small farmers. … It is awesome.”
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Google has quietly reduced resources for innovation. Prudent move or short-sighted? Here, Inc. columnists offer advice on finding the right amount of experimentation for your business.
Not every company or department needs to constantly focus on innovation. At some point, you might find that you need to slow down experimentation so you can capitalize on the initial results. That theory may be behind Larry Page’s shift in priority as Google quietly phased out their 20% policy and Google labs.
Given the state of constant disruption in today’s economy, teams need to find the right blend of innovation and repetitive business practices. But there is no set formula or methodology that works for everyone. The key is to integrate experimentation into your culture with resources and time allowed for acceptable failure. Then establish specified methods of feedback. That way people can try, fail and learn about any process in the company or marketplace at any time as the market demands.
Here are more insights from my expert colleagues:
1. Give Innovation Its Own Home
When companies like Google get to a certain size, it becomes impossible to act or think like a start-up. It takes a different leadership team and organizational approach to keep an enterprise that size running. Experimentation and innovation are limited to refining processes and making incremental improvements. The best way to encourage true experimentation and innovation is to separate it from the rest of the organization. Give new ideas an opportunity to flourish without the bounds of politics, red tape and organizational complexity. Once an idea shows it will succeed, work to bring it back into the larger organization. Eric Holtzclaw–Lean Forward
Want to read more from Eric? Click here.
2. Establish Predictable Methods
When it launched Gmail, Google was a private company with roughly 5,000 employees. Today, it has nine times the headcount, plus a high-flying stock price. Poorly timed movies notwithstanding, Google is now the establishment, and as Jon Burgstone and I wrote in Breakthrough Entrepreneurship, bigger organizations almost always innovate less. Why? Because their stakeholders come to value stability, not risk. Google won’t stop innovating, but it will do so in more predictable, stable ways, including acquiring other companies (as it has done with many of its most important products). Bill Murphy Jr.–DC Bill
Want to read more from Bill? Click here.
3. Integrate the Process
Google’s eliminating the 20% policy has nothing to do with innovation or with a change in their business practices. First, the 20% time was entirely about new “blue sky” ideas and inventions. You specifically couldn’t work on anything having to do with your regular work. Since true innovation is all about continual, iterative and incremental improvements in productivity and cost savings in existing business processes, giving the dreamers less time off won’t matter much. Second, innovation is a full-time and fundamental business practice as important as any other. It’s not a sometime thing or a department. It’s not someone’s job–it’s everyone’s job to be thinking about how to work better and smarter with less time, fewer resources and better results. Howard Tullman–The Perspiration Principles
Want to read more from Howard? Click here.
4. Have a Set Formula
Every company needs a balance of steady growth in existing markets and technology along with new, innovative solutions. Google is simply shifting gears to a new strategy: growth and innovation through acquisition. For growing companies, it’s wise to follow the 80/20 rule: allocate 80% of your resources to existing practices and 20% to innovation. Microsoft appears to follow this formula by continually advancing existing technology and less frequently releasing new technology. Their most recent advancement is the integration of Skype and Outlook, allowing people to use Skype video calling and messaging directly from e-mail: an innovative solution via an existing platform. Marla Tabaka–The Successful Soloist
Want to read more from Marla? Click here.
5. Encourage Autonomy
While some companies like Google may be phasing out open-ended innovation programs with no measurable bottom-line result, innovation is definitely not becoming a low priority in American business. More leaders than ever are pushing their people to innovate to work, and to find powerful new solutions to persistent problems. One of the most effective–and most affordable–ways to spur innovation in your organization is to create a culture of innovation. Give your people the autonomy–and the responsibility–to pursue new ideas and to try them out. Support risk taking rather than punishing it. Don’t wait for your organization to create a culture of innovation–create your own. Peter Economy–The Management Guy
Want to read more from Peter? Click here.
6. Innovate or Die
In today’s fast-changing market and even faster-changing communications landscape, innovation is essential. It can be challenging for high-growth and larger businesses to dedicate resources to innovation. But the only constant is change, so it really is “innovate or die.” Try these seven steps to creating a culture of innovation. Dave Kerpen–Likeable Leadership
Want to read more from Dave? Click here.
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Mike Lee emerged from the first dot-com boom with an idea. Along with his brother he built MyFitnessPal from scratch into what he calls “an eight-year-old overnight success.”
More than 40 million people use a utilitarian calorie-and-exercise-tracking site and application called MyFitnessPal. It has, according to MyFitnessPal’s founders, helped people lose more than 100 million pounds.
These numbers are impressive, but perhaps what’s more impressive is that this is no flash-in-the-pan, quick-moment-in-the-zeitgeist popularity story. It’s been eight years in the making for this start-up founded in San Francisco by Mike Lee, a veteran of the first dot-com boom. The company itself, with a rapidly growing user base, widely used API, and a serial entrepreneur at its helm, has all the markings of a hyper-growth Silicon Valley technology company. Only it hasn’t been one; instead it’s been on a steady climb since 2005, financed only by its founders and, eventually, its own revenue.
That changed this month, as outside investors gave MyFitnessPal its first outside backing–$18 million in total, mostly from Kleiner Perkins–to try to achieve faster growth.
Lee programmed his original calorie counter himself, and covered his start-up expenses with savings from his days at Beyond.com and Palm. “But a big reason we did not take funding for so long,” he says, “is that we didn’t consider funding as a victory, but rather as an obligation.”
Lee brought in his brother, Albert, who had experience in finance, as co-founder in 2008, and MyFitnessPal matured into a reliable and simple app and website where people could track their calories–both those eaten and those burned by exercise–and monitor their weight-loss goals. MyFitnessPal stands out from the fray of competing calorie-counting tools (competitors include LoseIt! and My Net Diary) on the basis of its massive food database, from which users can in seconds log meals of chain-restaurant items, grocery-store staples, and entries created by other users. MyFitnessPal can be synced with many of the exercise-tracking devices at the core of the “quantified self” movement, including the Jawbone Up and Fitbit’s Aria scale.
MyFitnessPal’s sole source of revenue thus far is advertising, which has created enough profit to support a staff of 40. “There are so many benefits to not having investment early for us, in terms of operational discipline,” Mike says. “It’s been a forcing factor for prioritizing, and we have a culture of being cheap, which is very valuable.”
What eventually led the Lees to seek outside investment was the desire to scale: to expand internationally, build a data-science team, and, Mike says, “about a thousand other things on our to-do list.”
“So much we want to build that we couldn’t as a bootstrapped company,” Mike says. “When the balance tipped in terms of funding, we pulled the trigger. Now we’re an eight-year-old overnight sucess!”
Owen Thomas, an editor at ReadWrite, has another theory about the investment: It wasn’t necessarily the founders getting to a new place, but rather the venture capital community finally coming around to an idea that caught on first with folks who weren’t tech elites.
Thomas used it three years ago to lose 83 pounds, and wrote about his experience in the New York Times in 2011. Investors didn’t seem to notice. Thomas explored the reasons for that on ReadWrite.
John Doerr, the high-profile Kleiner partner who sits on Google’s board and is joining MyFitnessPal’s board of directors, offers this theory: People in Silicon Valley are disproportionately fit and thus might pass over simpler apps like MyFitnessPal.
“Sixty-eight percent of Americans are overweight,” says Doerr. “We spend $148 billion a year in obesity-related healthcare costs. I don’t think Silicon Valley trains on that kind of stuff. They’re onto the next anonymous, hyperconnected, transient chatting service so you can get hooked up before you get to the end of Palm Drive”–the main drag of Stanford University.
Now that the funding round is complete, Doerr and Andrew Braccia of Accel Partners are joining MyFitnessPal’s board of directors, and the company is looking to expand its tech team, make creative use of the data it is collecting about health and nutrition, and make its calorie tracker even simpler for users. The Lee brothers are relieved fundraising is complete for them–at least for the time being.
“The thing we were most excited about in it was being able to get back to work,” Mike Lee says.