tech

The rise of enterprise marketing

Building an enterprise software company used to be largely about sales, because enterprise software was sourced and purchased by high-level business people. Those business people needed to be charmed and convinced, an activity that was distasteful to many technologists.

Internet-based delivery (“SaaS”, “cloud”) dramatically lowered installation costs, letting individuals or small groups buy software on discretionary budgets or use basic versions for free. As adoption spread throughout the organization, the value of the software eventually percolated up to high-level business people who could write large checks to get features big companies need, such as administration, security, integration, compliance, and support. This ”bottom-up” approach was pioneered by Salesforce and open source companies like MySql. Recent enterprise success stories also follow this model, e.g. New Relic, Yammer, Twilio, and Github. Many of these companies have processes that would have seemed crazy ten years ago – e.g. sales people only handle inbound inquiries or only call customers who already use their product.

Thus enterprise software went from being about sales (one-to-one) to being about marketing (one-to-many). Marketing requires crafting a compelling message, figuring out the right channels and then optimizing. But the most effective marketing is a compelling product that can be easily tried. As a result, as Benchmark’s Peter Fenton said recently: ”We’re seeing a fundamental shift from sales-driven companies to product-driven companies. The companies that are leading the way there let this consumer and product focus permeate the culture of their companies.”

One of the most visible manifestations of this shift is the refreshingly accessible language on modern enterprise websites. Sales-driven enterprise software companies speak the arcane language of CIOs. Marketing-driven companies talk directly to business users (e.g. Yammer) or developers (e.g. Github).

This is good news all around. Enterprises are more likely to get software that incorporates the advances made over the last decade in consumer software. Startups get a shot at creating this software, and get to do so on a fairly level playing field. The product and marketing focus should also attract a lot more technologists who were turned off by sales. The only losers are incumbents who continue to pursue the old model.

Categories: tech

78 replies »

  1. I’m working on an enterprise product and hate the idea of having to do one-to-one sales. This is partially because it’s not really in my DNA (I’m a engineer / designer) and partially because one-on-one sales don’t seem to be worth it given the relatively low price tag on my SaaS product.

    Recently I had dinner with an enterprise sales guy with 20 years under his belt. I told him that I wanted to start getting customers and he suggested finding a killer sales guy and giving him a chunk of the company.

    After reading this (which corroborates my opinions re github, yammer etc) I’m going to focus more on product (ease of trying it) and marketing in the right channels.

  2. Plus there is the benefit of advances in packaging, portability, and delivery that some purists might say stymied pure SaaS and pure premise plays respectively.

    Today, because of the flexibility in dev and ops there are at least three paths (unless you want to talk hybrid models):

    1) SaaS aka discretionary credit-card-and-go
    2) Private hosted options at your choice of service provider(s) to leverage high capacity networks, topologies, app network affinities, etc.
    3) Traditional on premise deployment (whee! ITIL nerds unite)

    More importantly, you can move from each to each as your appetite for opex/capex mix may dictate.

  3. One thing is really broken in the “old” model — sales people are driven only by short-term revenue in vast majority of cases. They don’t care about after-sales support and long-term customer satisfaction. They see customers more often than anybody in the organization, but they are unable to collect valuable feedback from customers for further product development because they’re too far from R&D process.

    Perhaps “new” model can fix it.

  4. At Lettuce (http://www.lettuceapps.com), we have the same mentality. We are taking ‘order management’ (famously provided to large enterprise companies by Oracle, IBM, or SAP) and simplifying it to almost a consumer-like product (its beautiful), using the SaaS model to offer much more competitive prices for the SMB market, and focusing on marketing in combination with inside sales.

    We have found that at each stage, there is a shift from one to another…for example, in the beginning, we are focusing much more on direct sales, but as we grow our user base, we are shifting more towards marketing efforts. It’s a natural evolution as a company grows where marketing can not only be the primary source of inbound leads, but also a much more optimal and cost effective method of acquiring a customer.

    Great article!

  5. Yes! I think when it comes to startups, enterprises or brands and software it’s also interesting to talk about agencies are they are still receiving a large chunk of what brands/enterprises are willing to put in new technology bounded projects often based on technologies created by startups…. but agencies as the ones pursuing the old model, wil soon be dead anyway.

  6. Totally agreed. Important distinction is that the marketing should be focused on the user, not on the buyer. Yammer pushed out to where users would see it and try it out for themselves. Salesforce tried marketing Chatter on the Superbowl and that didn’t really get them anywhere.

  7. The benefit of SAAS is enterprise customers can quickly take a test drive and then engage in the buying process.

    Whereas for small and medium businesses often find the SAAS as the only alternative. They simply don’t want to install and maintain any software.

    With our dashboard software (http://www.infocaptor.com) there used to be a lengthy process for enterprise customers but after the introduction of web based model, it becomes easy for enterprise developers to do the POC and then simply forward the URL to their team for going forward.

  8. Well, it really depends on your go-to-market model… you say you are building a SaaS product, so that does imply you may not need 1-1 sales folks. On the other hand, what is the effort to setup and use your product? Will it be tens (or hundreds) of dollars a year, of thousands?

    While I agree with Chris for the most part, there is one main area where enterprise salespeople still add tremendous value – when the purchase price gets large and you are now dealing with a multi-faceted sale – lots of people and personalities. This is a complex situation that few people do very well.

    Keep in mind that Salesforce has a very large direct sales force. This is not a one-size-fits-all discussion. You should read David Skok’s blog post on the cost of sale for different go-to-market strategies – it is awesome and explains the nuances exceptionally well. You can find it at http://www.forentrepreneurs.com/sales-complexity/. I also wrote an article about this (note – shameless self-promotion) where I reference David’s blog post and a few other smart folks – http://www.repeatablesale.com/the-easiest-person-to-fool-is-yourself

  9. Great post, Chris. But I’m skeptical of the % of revenue that Salesforce or Yammer really generates without the intimate involvement of a salesperson.

    Yes, “trialability” is a fantastic way to market a product. But I’d bet it’s mostly serving the purpose of generating good leads for salespeople. It still takes a salesperson to do the painful work of driving a meaningful deal through the bureaucracy of large organizations (finding an executive sponsor, presenting to management committees, negotiating business terms with finance, legal terms with lawyers, security reviews, etc.).

    While I agree with the premise that b2b is on the path to becoming more product-driven, I’m not sure we’ll see a major shift until companies change the way they buy.

  10. And, let’s not forget to mention the impact on the SG&A (Sales General and Administrative) expense line items…which contain sales salaries, commission, bonuses. It crushes those parts flat, again making it hard for the incumbents to compete. Transitioning to a very different cost structure means getting entrenched interests out of the way and timing the shift perfectly with product and market readiness. Tip o’ the hat to all who pull that off!

  11. Great post, Chris. But I’m skeptical of the % of revenue that Salesforce and Yammer really generate without the intimate involvement of a salesperson.

    While “trialability” is a great marketing tactic, I’d bet at this point it’s mostly generating good leads for salespeople, rather than material sales.

    It still takes a one-to-one interaction to drive a deal through the bureaucracy of a large enterprise (finding an executive sponsor, presenting to management committees, creating urgency to make a decision, quantifying value, negotiating business terms with procurement and legal terms with attorneys, etc.).

    While I conceptually agree that we’re on the path more product-driven b2b, I think companies are going to have to change the way they buy before we’ll see a substantial shift.

  12. Fair enough. I don’t know e.g. Yammer’s cost/revenue structure. But David Sacks has said very similar things to my post in public. And I agree these things take time to change. But our job as entrepreneurs/investors is to project forward through the data points.

  13. Agreed. Hence the importance of free or inexpensive trials. Yammer et al are applying consumer tactics to b2b, hence all the talk about “consumerization of the enterprise.”

  14. Unless the company offers self-serve product for an SMB market, sales is inevitable in conversion and renewals. At Pinfluencer — which is SaaS based pinterest analytics — it is all sales. Marketing creates the credibility cover and some enterprise level inbound leads but nothing beats direct sales, demo, account management.

  15. This relates to company who (as we do) offer B2B2B SaaS

    Our direct customer effectively wholesales for us to end user clients. Our job is to make the barrier to sales as low as possible – which is all about giving our clients sales team (who are utility account managers) an attractive useful product.

    So we sell once in effect and then spend all our time developing accounts (up-sales and more end user clients). Direct sales for us is more like opening up new distributions channels (territories, or brands) which amount to more of a marketing challenge.

    So your model still applies in effect, despite the complication. But then is it very much different to food manufacturers promotional trials to encourage a retailer to become a stockist. And yes it is all about impression and accessibility – rather than one-to-one selling. Why? – because unlike C-level staff Sales staff always need to know the client need and understand the product / market fit.

  16. I am currently working on an enterprise software with a couple college buds. We would like to continue working on it full time and need investment to do so.

    Part of the problem is that our software is primarily geared towards the higher ed industry and there are long lead times in terms of sales. It takes at least 6 months to go from the first meeting to payment. This is a blessing and a curse, in that, once you get a higher ed client, you can count on them being a very long term client.

    What advice would you give to a startup that wants to get investment even though it will require us a bit of time to build up a client base. I’ve always heard that long lead times results in investors not being excited about the idea.

  17. Chris – your post prompted me to look at Yammer.

    And I think it makes your point – first the negative…

    If they are based on Inbound Enquiries, they must surely have USP – So why (in my limited eyesight) is there nothing on their site to differentiate them from say a bit of Google Drive or Dropbox + a bit of a private linkedIn and Facebook ? I could sign up for a free trial ;- but why would I ?- Why would anyone ?
    Now the positive – I don’t know – and that’s the point !
    I may be an idiot – but I just didn’t get it after a good ten minutes kicking the tires. but suppose for a moment I am CEO of a big company (I am not) who does not get it (I am) , then If I employ staff who sign up *wisely* – they Yammer get under the skin of my company – as you suggest. And my staff help them do their job – good and everyone wins !However, if my staff were irresponsible & non-discerning, it would soon get closed down and the trial doesn’t waste our corporate management time or cost much – also good !

    Bottom line – Senior staff should not buy utility services !

  18. Thanks for the resources. I’ve wanted to read the Lean Startup stuff for a while now. I’ll push it up in my reading list.

    Even though 6 months may be fast for B2B, it’s slow when you’re using it to pay rent and such. We want to build the product without worrying about expenses like rent.

  19. Nice post Chris – As with many issues, the comments reflect the reality that ‘sales’ v. ‘markrting’ is an over generalization. What works will vary across phases/models and the state of the pendulum.

  20. I think today it’s more important to bring on board (maybe as an advisor) an influential member of your target market. E.g if you sell a marketing tool, you may want to be advised by a well connected VP of Marketing of some big enterprise, because he will be able to talk to his peers. Get a killer sales guy only if your product is a sales tool :)

    On the other hand I still think if you are not a great a sales you may need the help of an experience sales man to close the big contracts.

  21. I don’t know Yammer’s internal numbers but Microsoft buying them for $1.2B implies they are very good. The fact that you can’t tell from the website might imply you need to use the product for a while to see its value. Which I think would reinforce my argument.

  22. I think the bigger factor holding back enterprise software innovation is really enterprise IT itself. Pockets of adoption of innovation do not really translate into economies of scale, and in a way, open source technology and cloud adoption on a per group/dept basis are probably just as bad as the old days when every IT dept manager had “their IT guy” set up a server for every single possible perceived need, until they were all outsourced and consolidated.

    I frankly dont see much hope at all for enterprise system innovation given the current climate inside large enterprises, and the external sales model which has preyed on their ignorance for a couple of decades.

    Paranoia does not make positive future outcomes likely.

  23. Couldn’t agree more. Enterprise are getting used to cheaper, faster more powerful software with a tangible ROI. Bizodo is obsessed with making an enterprise software simple enough for the consumer to use while robust enough for the enterprise.

  24. I just returned from Dreamforce, the largest software event in the world. The vast majority of the platinum sponsors (spending over $500k for a booth) are marketing as a service software companies (Marketo, Pardot, Eloqua, Silverpop, etc). They are leading the revolution of a blended marketing & sales team driven on inbound leads, the demand metrics funnel and focused sales efforts. This all supports your claim…except for one thing:

    These 4 companies, and even salesforce.com have the strongest enterprise sales teams in the B2B world. They out-shadow their marketing teams & are fully required in order to get the job done. Marketing is absolutely necessary and plays a larger (more measurable) role than ever, but somebody HAS to close their deals and the style of a great marketer is typically not that of a closer.

    I would argue instead of (marketing > sales) that the scenario is this:

    Marketing + Sales = Blended Revenue Generation Team (focused on inbound, land & expand, enterprise contracts).

    What do you think Chris?

  25. I think the Marketos and Eloquas of the world aren’t really what this article is talking about. They are SaaS providers, sure, but their approach to sales and marketing is still surprisingly traditional (Eloqua, for instance, still wants you to talk to a sales rep before you can see a demo).

    Compare that to a 37 signals, GitHub, or even Atlassian and the approach to sales and marketing is markedly different. (I believe Atlassian still doesn’t have an outside sales team).

    In fact, Atlassian and Eloqua are great case studies in why SaaS doesn’t necessarily a frictionless sales process. Eloqua has had a fully SaaS product from day 1, and has never had the option for self-provisioning, or doing much at all without a sales rep’s involvement. Atlassian’s products have traditionally been on-premise, and has never focused on sales much at all.

    (Full disclosure: I’m an ex-Eloqua employee)

  26. Good question, and I don’t know. You’ve made a strong case for it — undoubtedly product adoption at the user level is less dependent on high-level sales than 5-10 years ago. But organizational systems morph and adapt to these kinds of changes (even if slowly), so one-to-one sales (in my opinion) will continue to show up as a necessary component in various ways. If ‘marketing’ is defined as “one-to-many,” and relies on a strong product-market fit (i.e., addresses an end-user need), then I believe that healthy startup growth has always been (and will always be) about marketing at a fundamental level. Sales that drive top-down adoption of mediocre products eventually lead to product abandonment anyway. Thanks again.

  27. One key point not to be missed in the discussion is “the most effective marketing is a compelling product.” B2B products have traditionally fell short here. Design and user experience is now becoming a key differentiator. Your product is your best salesperson.

  28. Right now I’m seeing Saas trials as more of a gimmick, but this is due more to the price point requiring a higher level of signature. Once more B2B products are delivered in a mobile app store model, and the buyer and user become the same person, this consumerization of IT will complete and salespeople will find their roles shifted to customer support.

  29. The reality I’m seeing revolves around the fact that smart companies now are turning their salespeople into marketers — by this I mean not just sales people. Smart sales people in turn are seeing the value in creating their own brand, an asset that for them becomes transferrable. In the process they establish their expertise, thought leadership and ultimately stay top of mind in their prospects minds.

    There have been tons of studies pointing to the fact that when sales people “get social” and truly engage with their audience, they show around a 3X improvement in their output. We’ve seen that fact born out over here at xydo.

    In todays world there simply is no way to separate the product from the company. The wall marketing once put up has been all but blown apart with consumers ability to share opinions and direct connect to a product or service. Since they are directly connecting, you had better give them a chance to do that on a product level as well. If not – NEXT

  30. An area we’re seeing this “Language of business users” is a lot is around big data / BI tools; seen more than one company which makes the case of building tools for analysts / business professionals, instead of for the IT staff, so to speak. Ie, in a previous life at a consulting company, we had no real say as to whether we were using Factiva or CRSP or what not, and we were the “leading edge” (sarcastic quotes) of this kind of analysis at that time.

  31. Great post. I think the shift that started this is not a shift on the vendor side but a shift at the enterprise. Budgets are moving (quickly) away from IT and toward the LOB. Why? Because IT got simultaneously caught up in becoming overly focused on compliance and risk mitigation while at the same time trying to dramatically cut costs. At one time CIO’s were seen as business enablers. Today they are frequently the department that tells you you can’t do stuff.
    It only makes sense that the business side of the enterprise is finding creative ways to get around that and are now getting their fair share of budget authority to implement their ideas. Saas-based software makes it easy to do this without getting the department of “no” involved.
    As for marketing vs. sales – that’s an interesting one. Most of the big enterprise software players sell to IT and don’t have strong sales relationships on the business side. The reason the traditional enterprise vendors are sales oriented is because those accounts already have account managers and that makes closing additional business fairly easy. For new vendors selling to the business side marketing might be enough but I wonder how you do a larger deal that involved purchasing and legal without sales involvement. I also wonder if you aren’t missing an opportunity to develop a deeper relationship with the larger accounts by not having someone (sales or otherwise) owning that relationship.

  32. A product-driven approach can also shift SaaS away from the
    strategy of ‘moving up the chain’ to the enterprise in cases where it’s considered the most scalable tier.

    Rather than product tiers targeting individual-> SMB -> enterprise (with ‘call us’ for enterprise pricing), product would be built from the ground up for the enterprise user. The upsell becomes broader teams/use cases/req’ts within the enterprise and product focus is not diluted.

    As the shift continues, I’d expect to see more of the ‘help me help you’ approach for marketing-driven SaaS- optimize the early adopter channel, turning enterprise users into an extended salesforce.

  33. There are way more Marketo’s & Eloqua’s than Atlassians.

    Don’t get me wrong though…I believe in the trend, hell I participate in the trend, but I don’t believe we’ve gotten to the point where Chris’ opening line is correct:

    “Building an enterprise software company used to be largely about sales”

    It still is. There are just a bunch of other best practices you’ve got to do to make sure your product sells.

  34. I just got 184 results for the LinkedIn search of “Sales” with Yammer as current company. Granted they are all not titled “sales” today, buts that’s a bunch of peeps selling shit. Is that # higher or lower than you would have thought?

  35. True, in the product-driven company, the product sells itself (almost) via the online marketing channels. The enterprise buyer behaves like a consumer. They buy quickly.

    The key shift is in the sales cycles and buying/approval patterns. Because SaaS is cheaper, the sales cycle must come down, or nothing will take off.

  36. I think there comes a point where the SaaS solution starts requiring more “account management” as you point out. Trick is that it’s cost effective for the vendor to do so when that point is reached.

  37. When I ran a marketing department at a F500 company I could spend without going to purchasing up to a certain limit (in my case 100K but most heads of marketing I know have a much smaller limit). If it was more than that, I needed to go to purchasing and legal to get approval. Both groups needed a point of contact at the vendor. As a customer it would be hard for me to get through that process without human support from the vendor.

    As a customer if the price was small and I could do it out of my own budget without approvals, I was happy not dealing with sales and just being able to get up and running as quickly as possible. The minute I had to deal with other groups, I had a preference for vendors that could be very responsive to my requests so I could work through the internal processes as quickly as possible. A vendor that was actively working with me through the process would have a real competitive advantage in that case.

    And for what it’s worth, last year while working at a global 500 company I was involved in several purchases of Saas software and there was a vendor sales rep assigned to us in each of those except where we were doing very small (sub $500) transactions.

  38. In these “bottom up” companies, there are certainly still people called “sales” but I’d argue they do things that are more about handling inbound inquries and account management. Also, you are right, the world doesn’t change over night, but this is the trend I’d bet on as an entrepreneur or investor.

  39. I don’t know the specifics of Yammer’s staff, but here is a relevant recent quote from the CEO David Sacks:
    “…That’s half of consumerization. But the other half is we’re actually giving employees a voice in deciding what tools they use because they can just pull Yammer into their company. They don’t have to wait for it to be installed by somebody. Employees can start using it for free, message with their coworkers, and then they company can decide to endorse it, pay for it, that sort of thing. It’s very similar to what employees are doing with iPads and iPhones. They’re saying this is the tool I want to use; this is the tool that’s going to make me productive. And come on, IT, let’s get with the program.”
    from http://www.infoworld.com/t/consumerization-of-it/yammer-ceo-were-consumerizing-the-enterprise-191435?page=0,3

  40. I still think you need sales people in the sense of handling inbound, upselling, and account management. Also, I’m talking about a trend that won’t happen over night. So I think I agree with your points. Thanks.

  41. I mainly agree. Building an enterprise software company used to be largely about sales because sales complexity and installation costs were higher. However, I don’t think it’s because high-level business people were involved and they needed to be wined and dined. The “bottom-up” approach makes sense for freemium models, which don’t require salespeople, because they are simple and free.

  42. Definitely some truth the bottom up approach being adopted and used effectively. Do you think this is isolated to the uber successful companies (Yammer, Github etc.) or a widespread trend that’s working for everyone?

    I think the approaches varies geographically as well. Having moved west from Minneapolis, this approach hasn’t really made it to the enterprise companies in that market.

  43. Totally true. In fact, at Parlay, we’re actually bringing on a product marketer at 3 months into the product dev cycle because we want to shape our shipped product by the product marketing message we intend to tell (which we will spend significantly detailed amounts of time testing and validating).

    I think this is a truly fundamental shift that changes how all enterprise companies will be going to market.

  44. Six simple Enterprise marketing 2.0 steps:
    * Free version of the product to fill the top of the sales funnel.
    * Sales booths, competitions, sweepstakes, targeted promotions, re-marketing ads and what ever the marketing team can come up with to introduce targeted prospects to the product.
    * Email campaigns to keep prospects up-to-date about whats new.
    * Bottom up install process to let any employee use the product without a CXO approval.

    * Make the product sticky and engaging to hold on to the prospect.
    * Build a transparent product, so others in the company can join organically once setup.

    If the above is a check list, how many can your start-up check?

  45. Terrific concrete examples! Key ingredients that were as necessary for a successful web 1.0 business as they are today.

  46. Good examples but they stop short of the place where money changes hands. Marketing needs to be accountable to revenue as well, not just the stuff that happens in the early part of the buying cycle. You can’t stop at the top of the funnel, you need to be marketing through sales, post-sales and renewal.
    In my mind that’s the biggest shift that’s happened in marketing. We can’t just take prospects to the top of the funnel and then say it’s a sales problem if the numbers don’t work.

  47. I love your core premise, dude: Dinosaurs are getting their lunch eaten by smaller and smarter beasts.

    To call the way that these hungry little monsters add users “marketing” is to suggest big ad buys, though. They’re engaging in a very specific form of marketing that combines social aspects, blogging, SEO and good old-fashioned spunk and personality (Mailchimp’s a good example).

    Growth hacker dudes are making hay in this environment. Like all gold rushes, I suspect many of these folks and their nimble employers will go bust trying. But all in all, we’ll all be richer for this.

  48. It’s a good definition. I’d just say that the biggies have always done marketing. The rise of unpaid marketing, though, has allowed small and nimble enterprise vendors to scale their story in a way they could never before afford.

  49. Hi Chris, Long time reader and listener on TechCrunch TV really appreciate all your knowledge sharing and opinions. Sorry but could you explain above. You are saying Marketing is One-To-Many customer acquisition strategy where a product can get 1 user who then acquires others (Yammer)? Wouldn’t this more be a Network Effect or a Referral strategy? Paid Marketing would then be the cost to acquire the 1st person. Thank, Humphrey

  50. I think you are right. There are certain things that individuals inside a big corporation can do. Organize their time, move files etc.

    However there are certain decisions that have to be made that affect the entire organization. Take for instance accounting. That is always going to be an enterprise sale.

    As an engineer with a business degree that has been building technology companies for twenty years, the one thing that I had to learn on the job was sales.

    Technical people have always had a disdain for sales, but the bottom line is that its always been important. Not studying the subject is stupid. You can get good at it with practice but it is much better to have learned about it first, and then apply some principles.

    Some tech people kid themselves, when they think sales isn’t important. Raising VC? Sales process. If you’re a VC looking to invest in a hot company? Sales process. Which lawyer to pick? Sales process. On and on and on.

    If you are paying more than $100 for something it is a sales job. Yes you can aspire to sell millions at $10 a month and then it doesn’t require a sales team, but there are many opportunities where instead of getting a hundred thousand small orders, its getting a small number of hundred thousand dollar orders.

    Since it costs a hundred thousand to employ a person eventually you need to be generating that revenue, because VC money doesn’t last forever.

  51. I would put referral strategy as one type of marketing. When I say “one-to-many”, I’m trying to distinguish it from sales which is one-to-one (or more like a few-to-a-few). The point is enterprise sales used to be very high tough and personnel expensive. Now there are many other mechanisms people are using that look a lot more like marketing. Another way to think of marketing is much more like what B2C internet companies do (one reason people talk about “consumerization of the enterprise”). Does that help?

  52. Not to retread the freemium debate, but I’m not sure a free version of your product always makes as much sense as some kind of adjunct free feature that is useful but not really part of your core product.

    That feature drives brand awareness and demand for your product without actually cannibalizing the market that is willing to pay for it.

    Canonical example is hubspot website analyzer.

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    me tell you, you’ve hit the nail on the head. The issue is an issue
    that not enough men and women are speaking intelligently about.
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