The more you move from consumers to enterprise clients, the more you’ll need a sales force able to manage complex sales. As a rule of thumb, a more expensive product, in B2B or Enterprise, will require an organizational structure around sales. An inexpensive product to be offered to consumers will leverage on marketing.
- Beware, a good product doesn’t mean a successful company
- Distribution can be a branding hack
- Some practical suggestions for your sales processes
- How much to spend on Marketing vs. Sales? It’s all about the product and the target customer
- Summary and conclusions
- Enterprise Case Study: Zoom Complex Sales Organization
- Consumer Case Study: Apple’s Branding Power
Beware, a good product doesn’t mean a successful company
As pointed out by
As a former software engineer and CEO, I used to hold the “engineer-centric” view that sales is not a critical function in an organization. I believed that product excellence and market fit obviated the need for a formal sales function: Build a great product, and customers will come.
That view was short-sighted, to say the least. The technology companies that are able to both build great products and integrate a strong sales function are the ones that succeed, whether consumer or enterprise — from Microsoft to Salesforce and yes, even Apple and Facebook. You may not hear about it, but all the world-class companies have a strong sales force.
This is critical to remember especially for founders that often have a technical background. As tech companies are gaining momentum, more and more often we see founders that are also engineers, developers or programmers. That technical background is critical as it allows them to develop applications that might improve 10x over competitors. Think of Brin and Page, Google’s founders. When they started to pitch their new search engine based on PageRank, they knew it was 10x better than any other search engine on the market.
However, it was when they started to think like businesspeople and stopped thinking as academics that the business took off. They understood the importance of distribution. And it is important to remark that even though Google initially was already used by millions of people, but very far from becoming the tech giant we know today.
In a story told by John Doerr, a venture capitalist and one of the first investors in Google, in his book “Measure What Matters.” When he met the young Larry Page, he knew that even though Google had entered the market pretty late (Google was the eighteenth search engine to enter the market), it was a product, 10x better than its competitors. Yet John Doerr’s future valuation of the company (the maximum growth it could achieve) was about a billion in market capitalization.
However, when he interviewed Page, that young entrepreneur surprised him by saying they would reach instead of a ten billion dollars revenue mark! Which according to Page made the company worth around a hundred billion dollars.
At the time of this writing, Google is worth over eight hundred billion dollars. What made Google successful?
Several factors, comprising pure luck. But of course, an incredible execution is what mattered the most. When you have a company that is growing so fast the most challenging thing is to make sure it will not implode.
In short, putting together a sales process that works it means to keep well in mind the difference between marketing and sales.
At the same time, it is also critical to remind that sales are primarily about the bottom line, but it can also be used a propeller for a company’s brand. Google’s AOL deal is one of those cases.
Distribution can be a branding hack
You might think that Google was great at marketing itself, and in a way it was. Yet, what propelled its growth wasn’t just the marketing side, but rather the distribution side. Many associates sales and distribution as something purely connected to the bottom line.
While sales and distributions focus on the bottom line, they can also be leveraged to build up a strong brand. Think of when Google got the AOL deal, by taking it away from its main competitor at the time (Overture). Well, the distribution agreement with AOL, not only was a sales strategy that guaranteed an explosive growth.
It also represented a massive branding campaign. One that with marketing alone would have taken years to build. In other words, Google used an already established brand to grow its business, and it also worked as a propeller for its brand. As suggested by Google Ngram, by 2004 the term “Googled” had already become a cult!
Therefore, the primary role of sales and distribution should be to look at the bottom line. Yet, once that role is resolved, it can also be leveraged as a powerful branding tool.
You might think that for a consumer product company like Google, which offers a set of free tools to masses has been mainly driven by marketing. However, if we look at the business part of it, what brings revenues to the company is the advertising network where millions of small and medium businesses and enterprises spend their marketing budget. In this scenario, you can understand how sales and distribution become critical.
Some practical suggestions for your sales processes
suggests a few practical ways to have a sales process within your company, as a CEO:
- Have a weekly meeting with your sales VP where you review the pipeline and forecast, have the VP sales educate you on what he or she is doing, and ask questions
- Ask what you can do to help your sales VP: Can I help with closing a deal, visiting a customer, or rallying the troops?
- Spend time together! In fact, there’s no better way to build morale with your sales team than to do so with them and your customer
- Hold your sales VP accountable by setting clear objectives with quantitative (not qualitative!) agreed-upon metrics; you should also know the quotas and productivity of each salesperson
- Be sure to interview the first sales hires to ensure alignment with your head of sales as well as with organizational culture and values
- Encourage engineers to spend time with sales, and sales to spend time with engineers; the more the two organizations interact solving real product and customer issues, the less foreign each will be to one another and the better your product will be
How much to spend on Marketing vs. Sales? It’s all about the product and the target customer
When it comes to marketing vs. sales, it is critical to start the assessment from your target customer. In general, we have three kinds of customers:
- Small and medium business
The idea is the more you move from consumers to enterprise clients, the more you’ll need a sales force able to manage complex sales. However, imagine the case you sell a simple product, which is worth $20, would it make sense to have a dedicated sales force? It might not. This would be too expensive and not scalable.
In other words, with a less expensive product that is targeting consumers, marketing will be a critical aspect. Where, instead of with an expensive product, which focuses more on small and medium businesses and enterprise clients, sales will become the most relevant aspect of your business.
Of course, this is a simplification. Yet it is a good starting point to understand and trace a line between marketing and sales. Take the case of a freemium business model. In that case, the investment in sales would be minimal if not none as you’ll be leveraging on free product features as marketing investment for the company.
While in a subscription business model that targets mainly enterprise clients, the sales force will solve a critical role.
Summary and conclusions
In this article, we’ve seen the main difference between sales and marketing. But also how sales and distribution can be used to hack the branding of an organization – where marketing would take years to build a strong brand.
A single distribution deal can generate revenues and visibility for the business. We’ve also seen how in some cases marketing might be easily confused with sales. Take the case of Google, where it has a free product targeting consumers. In that case, you might be fooled to think Google is all about branding.
Yet if we look at its beginning, Google’s main ability has been to create a powerful distribution strategy by closing the right deals. That distribution strategy turned into a branding hack, which turned the company into a cult, by 2004.
We’ve also seen how a few actions can have a large impact on a company’s future growth, by establishing some practical actions (like weekly sales meetings, accountability, and clear quotas).
A last critical aspect you can understand how to create the right sales and marketing mix by looking at two things, the kind of product you sell and what customers it targets. The more it will be an enterprise customer the more the sales processes will become important. The more we move toward an inexpensive product thought mainly for consumers, the more marketing will lead the game.
Enterprise Case Study: Zoom Complex Sales Organization
While Zoom offers a free product available to anyone, it also has available packages which are enterprise. In this case, Zoom leverages a model that I defined freeterprise as it moves from a free product to a potential enterprise account, thanks to the ability of its salesforce.
Consumer Case Study: Apple’s Branding Power
Apple has been among these companies who figured an effective distribution strategy, that enables its products to be sold at scale. Therefore, even if the Apple’s products are usually sold at a premium price compared to other similar products.
Apple leverage a strong brand, and distribution capability without relying too much on a complex salesforce. Although Apple does direct sales through its store. A lot of its distribution also happens via indirect channels, which enable a wider reach for its products.
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