A Common Challenge for B2B technology, SaaS and Professional Services Businesses

If market demand was a fixed commodity, attracting new business would require only that you create awareness and build interest around well-known needs. Companies who see their marketplace in this way often subscribe to a “lather, rinse, repeat,” approach to pipeline management – focusing marketing dollars on prospects already well-along their purchasing journey, identifying qualified opportunities, but paying little attention to the world of prospects who do not yet see their needs as urgent.

Though closing business right now is an ideal that everyone can appreciate, it’s a perspective that, taken in isolation, ignores the reality that it is in your power to create market demand. It takes a keen focus on both sales and marketing fronts to look beyond the current need for leads and build demand that continues to feed a hungry funnel over time. It can make sense to turn to innovations in demand generation designed to develop, rather than fulfill, the market need. Surprisingly, this often requires that you narrow, rather than expand, the world of suspects that you are targeting.

It starts with focus – which is a big challenge in some industries, particularly, in technology related businesses and in B2B marketing, because these types of businesses often sell their solutions broadly and then deploy them quite differently through onboarding and professional services that tailor solutions for different types of use cases. This means that what is relevant to one segment of buyers is often irrelevant to another.

So, how do you know whether increased focus can help your demand generation efforts?  Here’s five questions that will help you diagnose whether narrowing your focus can help:

1. Do less than 30 percent of your inbound marketing leads convert to sales conversations? Your marketing efforts should be driving people to visit your website, to download some information, and to click through to some social media. Maybe you have a lead scoring system that identifies likely prospects based upon their responses -- but if you’re finding that even the ones scoring high somehow just “fall away” before an actual sales conversation occurs, then your value proposition may be insufficiently focused and differentiated.
   
   
2. Does your in-house sales team rely on marketing to fill over 70 percent of their new business pipeline? A healthy B2B sales team should be generating 30 to 50 percent of new business through direct referrals, word-of-mouth, or other sales-driven networking. If you are not serving a critical mass of self-referencing customers who have common needs and characteristics, the likelihood that you will drive non-solicited referrals from even your best customers will go down. If you sell across a highly diverse set of customer types but fail to be perceived as a leader/player in any, even getting referrals proactively will be more difficult because you have to find them, talk to them and individually convince them to become a referral for you. You need to have a group of successful customers with common interests to turn positive experiences into referral business for you, independently from your own efforts. Those shared successes will tend to be perceived as relevant, and your sales team will find it easier to generate referrals as a result.
   
   
3. Are you competing in a mature marketplace where you do not have a significant share of market? Here’s a truth that can be a tough pill to swallow for CEOs in a technology enabled business: The least sustainable advantage that you have may be the differentiation that you have in your offers. That’s because cheap capital helps even upstarts compete quickly in most technology segments. If you narrow your focus to specific parts of the market you can hone your message and differentiate your products, pricing, partners, or channels in a way that trumps larger, more established competitors who compete more broadly. When you become the top 1 or 2 amongst that group you will be more likely perceived as the de facto choice well before the prospect enters any lead generation funnel that you may have.
   
   
4. Are your customer acquisition costs dramatically different between different types of buyers? Companies start measuring their customer acquisition costs (CAC) in aggregate for financial reporting reasons – often reporting out a simple CAC Ratio defined by total sales divided by total sales and marketing costs for new customers. This is fine as a high-level health indicator, but it can hide what is really going on between different classes of customers. With software, SaaS and professional services companies, CAC ratios can vary a lot by segment because services and support groups scope implementations up-front even though actual implementations happen post-sale. Significant differences in customer acquisition costs are an indicator that these customer types are radically different in ways that your single message and sales approach may not match -- different purchasing journeys, different criterion for purchase, different influencers, and different implementation requirements. If you want to increase demand for your offerings, prioritize your attack. Focus on one, or approach them in very different ways.
   
   
5. Is customer retention consistent between buyer types? Like your customer acquisition costs, when retention rates vary dramatically between market segments, your buyers are having significantly different experiences by segment. There are lots of reasons why you may be experiencing high churn or low upsell, but if you answered yes to one or more of the other questions here, it may be an indicator that your team is creating expectations that are too high, or that your product is being used differently in different segments. Evaluating customer success using a Net Promoter Score by buyer segment can be a leading indicator here.

If you answered “yes” to two or more of these questions, it’s likely that your sales funnel challenge has as much to do with market development and focus as it does with the effectiveness of your marketing campaigns to capture inbound leads. As I said at the start of this post, the great news is that you can exert influence by deploying a market-based strategy that causes certain classes of prospects to develop faster. First, you’ll need to understand where and how you want to focus and truly commit to that as a leadership team. It will require that marketing, sales, services, and support march to the same direction and follow the same KPIs, and that the CEO and executive team are all bought-in and perceived as leading the change.

As it turns out, deciding where to focus is the easy part. I’ll provide some ideas around that part of the effort in my next post and follow that with other related thoughts.  Until then, I think blogs are best when they are a two-way dialog, so let me know what you think!