How to Develop New Business and Break Into New Industry Sectors (Quadrant 4)

develop new business

“How to Develop New Business and Break Into New Industry Sectors” is part of our “Four Quadrants for High Growth Quick Start Guide”.  To access the full series click here

 

Quadrant 4: Develop New Business Outside your Industry

Overall Goal: Find a new customer type for each new product every two years, thereby increasing sales by product by another 10%-20% every two years.

By now, it may be apparent that the first three quadrants are very similar to each other. Quadrants 1 and 2 are closely related  since they consist of your existing customers, and Quadrant 3 addresses the same industry as your existing customers.

Quadrant 4, however, is different. It consists of non-customers from different industry sectors than those you normally market to. It is actually an exercise in new business development.

The right approach to developing Quadrant 4 is to follow Geoffrey Moore’s advice in Crossing the Chasm and first establish a beachhead.  Assemble a team of your best people to target a few selected accounts that will generate key wins for you within the new industry, allowing you to establish credibility early on. Your team members should be highly entrepreneurial and have a very strong “whatever it takes’’ attitude to winning these new customer types in an industry that no one in your company is familiar with.

In Quadrant 4, your objective to sell a product you first developed for a different market segment, with some modification and customization. You have some idea of what that customization might look like, but in truth you won’t really know until you are trying to make your first sale in that segment. This is more like a custom project, which is why you need a team that is highly entrepreneurial— capable of building something from the ground up and finding  solutions for problems that you have never really addressed before.

Below you will find a Best Practices checklist for optimizing high growth within Quadrant 4 for Marketing, Sales, Customer Service, and Innovation.

 

Marketing Checklist

GOAL

Identify other market segments similar enough to your current market segment so you will be able to leverage many of the capabilities you already have.

KEY OPTIMIZATION ACTION ITEMS
  • Set up a Market Strategy team that explores applications of your current products in solving problems outside your current market.
  • Build a disciplined market segment analysis approach to identify the best opportunities.

 

Sales Checklist

GOAL

Find the early adopters and key accounts in the new market segment

KEY OPTIMIZATION ACTION ITEMS
  • Set up a New Business Development unit charged with finding the right entry points within the selected potential growth area.
  • Define the compensation plan for rewarding success.

 

Customer Support Checklist

GOAL

Do everything necessary to create highly satisfied and referenceable customers.

KEY OPTIMIZATION ACTION ITEMS

Set up a “Special Accounts” team whose priority is to do whatever it takes to make these early adopters highly successful with your products.

 

Innovation Checklist

GOAL

Make it easy to custom fit your products to new market needs within 90 days.

KEY OPTIMIZATION ACTION ITEMS
  • Create a platform for your products that enables you to customize and support various versions of your products.
  • Rapidly complete Proof of Concept (POC) projects.
  • Rapidly convert approved POC into stable products.
 

How to Increase Your Customer Base with 4 Handy Checklists (Quadrant 3)

“How to Increase Your Customer Base with 4 Handy Checklists” is part of our “Four Quadrants for High Growth Quick Start Guide”.  To access the full series click here

 

Quadrant 3: Increase Customer Base

Overall Goal: Increase the number of your customers by 15%-20% per year

Quadrant 3 Sales is what most companies think of when they talk about revenue growth—increasing your customer base numbers. In fact, many of the companies we work with invest so much time, effort, and money into Quadrant 3 that they neglect Quadrants 1 and  2.

At the same time, most of these companies do not use the most critical strategy for farming in Quadrant 3: Four Funnel Framework. This is the most important strategy for winning new customers because it ensures tight integration of Sales and Marketing efforts. We will discuss the Four Funnels Framework in more detail in the next section.

Below you will find a Best Practices checklist for optimizing high growth within Quadrant 3 for Marketing, Sales, Customer Service, and Innovation.

 

Marketing Checklist

GOAL

Deliver the necessary number of Marketing Qualified Leads.

KEY OPTIMIZATION ACTION ITEMS
  • Define the marketing content (assets) necessary to drive prospects through the various levels of interest: awareness, understanding, acceptance, preference, and conviction. The marketing assets must deliver the first three stages to generate Marketing Qualified Leads (MQLs)
  • Build the automation that scores the activities of very early prospects and provides them with more marketing assets until they score high enough to be MQLs ready for handoff to the Tele-prospecting team

 

Sales Checklist

GOAL

Increase the number of customers by 15-20% per year.

KEY OPTIMIZATION ACTION ITEMS
  • Define the qualification criteria that makes a Sales Qualified Lead (SQL).
  • Develop the qualification and SQL acceptance process and build it into the Sales Operations and Sales Automation system.
  • Automate the handoff and notification process so that Sales immediately follows up on SQLs.
  • Build the right compensation plan that rewards progress through the Sales Cycle so that deals do not get stalled in the middle.
  • Build the right comp plan that rewards hunters for getting even small deals in key accounts that have significant upside potential.

 

Customer Support Checklist

GOAL

Convert new customers to happy and fully satisfied ones within the first 2-3 weeks.

KEY OPTIMIZATION ACTION ITEMS
  • Design the new customer onboarding process to be as quick and as painless as possible.
  • Develop a scorecard that identifies the components of onboarding a new customer and rates the new customer onboarding team along each component.
  • Map the components of the scorecard into the customer support system and processes so that agents can do their work with a high level of efficiency and accuracy.

 

Innovation Checklist

GOAL
Make your products easy to learn, use, and support in order to free up scarce resources for new products.
KEY OPTIMIZATION ACTION ITEMS
  • Review your current products and determine how they can be centralized, standardized, componentized, and optimized so that they are easy to sell, support, and use.
 

How to Sell New Products to Existing Customers (Quadrant 2)

existing customers

“How to Sell New Products to Existing Customers” is part of our “Four Quadrants for High Growth Quick Start Guide”.  To access the full series click here

 

Quadrant 2: Introduce new products

Overall Goal

Increase the number of products that each customer uses by 15-20% each year.

Quadrant 2 is all about selling products and services you offer that your customers have not yet purchased. The most important of these are Upgrades, Add-ons, and Bundles or Packages. Quadrant 2 offers some highly attractive growth opportunities for a company that is set up to take advantage of it.

Below you will find a Best Practices checklist for optimizing high growth within Quadrant 2 for Marketing, Sales, Customer Service, and Innovation.

 

Marketing Checklist

GOAL

Continually market to current customers by demonstrating how the value of their existing products increases significantly when used with another product that you sell, but that they don’t currently use.

KEY OPTIMIZATION ACTION ITEMS
  • Have an accurate database of which customer has which products installed.
  • Build an automated marketing strategy? system? that works on the logic: “If a customer has product A, then use Campaign X. If a customer has products A and B, then use campaign Y”, and so on.

 

Sales Checklist

GOAL

Build an effective account management team that excels at selling new products to existing customers with the goal of increasing revenue per customer.

KEY OPTIMIZATION ACTION ITEMS
  • Set up an account management system that uses the marketing database to call on customers to cross-sell and upgrade them to higher tier products.
  • Build your compensation plan to reward such account penetration.

 

Customer Support Checklist

GOAL

Make customers highly successful at using your new products within 30 days of acquiring them.

KEY OPTIMIZATION ACTION ITEMS
  • Build a library of training material and resources to enable customers to teach themselves to use new products.
  • Build scalable support infrastructure such as chat and self-help portals to provide quality customer support with less impact on the Support organization.

 

Innovation Checklist

GOAL

Introduce new products and services on a regular schedule—at least every 2-3 years.

KEY OPTIMIZATION ACTION ITEMS
  • Set up a Product strategy team that continually reviews the product pipeline and prioritizes new projects.
  • Set up agile development practices to enable rapid and iterative releases of products to enable quick changes based on shifts in customer priorities and preferences.
  • Set up Product Management to translate big initiatives that come from Product Strategy into clearly defined tasks that are implemented through the agile development process.

How to Sell More to Existing Customers (Quadrant 1)

This article is part of our “Four Quadrants for High Growth Quick Start Guide”.  Click here to access the full series.

Quadrant 1 Goal: Increase Usage from Existing Customers

Overall Goal: Increase usage of existing customers by an average of 5-10%

Quadrant 1 consists of existing customers who already buy a particular product. The goal here is to influence these customers to order more of what they are already buying. If you sell software licenses, can you persuade them to subscribe to more licenses? If they buy boxes of widgets, can you get them to order more boxes?

Regardless of the product your aim is to increase customers’ consumption of that product by a targeted amount. If you are selling software licenses, can you increase the average license purchase per customer by ‘x’ amount? If your customer orders 100 boxes of widgets a year from you, can you increase that to 110 boxes? And how do you do that?

This is a low-touch sales environment. You want to simplify and standardize your operations, automating as much of it as you can. Your sales operations should  resemble a self-serve portal in which customers can order what they want, when they want. Ensuring this kind of consumer behavior requires continual and targeted marketing strategies

Below you will find some important tips on optimizing sales and marketing in this quadrant.

Marketing Optimization

GOAL

To reiterate, the objective  is to automate all marketing to continually touch existing customers and give them new reasons to buy more of the products they are already using.

KEY OPTIMIZATION ACTION ITEMS
  • Continually envision new ways for customers to use your existing products
  • Constantly update customers about new features that increase ease of use and efficiency
  • Offer additional promotional incentives to increase usage–price savings on additional purchases, discounts on other products, etc.
  • Make certain premium services free for customers who purchase  higher volumes
  • Send at least one promotional email campaign each month to make sure you stay front-of-mind

 

Sales Optimization

GOAL

Increase Sales of existing products to existing customers

Ideally, Quadrant 1 sales can be completed without the help or involvement of a sales rep.

KEY OPTIMIZATION ACTION ITEMS
  • Make it very simple for customers to order more and for orders to be fulfilled immediately
  • Automate price quotes, contracts, and ordering
  • Automate workflows to send orders to fulfillment as soon as contracts are signed

A Quick Start Guide to the Four Quadrants Model of High Growth

Four Quadrants

The Four Quadrants of High Growth

The Four Quadrants of High Growth is a highly effective sales strategy that enables B2B companies to optimally deploy their limited marketing and sales resources to maximize revenues. The model divides a company’s total addressable market—first vertically into two halves of customers and non-customers, and then by product into existing products and new ones.

Unlike other segmentation strategies that mostly focus on non-customers and can be difficult to implement, the Four Quadrants system ensures that Sellers look at the entire potential market for growth–including their existing customers, and new markets that they can enter.

We discuss each of these highly targeted strategies in the sections below:

  1. Quadrant 1: Increase usage
  2. Quadrant 2: Introduce new products
  3. Quadrant 3: Increase customer base
  4. Quadrant 4: Find new lines of business

Four Quadrants

The end result is four quadrants representing different levels of risks and relationships:

  • Quadrant 1: Selling existing products to existing customers. Here we are selling more of the products that our customers are already buying from us.
  • Quadrant 2: Selling new products to existing customers. Here we are launching new products within our existing customer base.
  • Quadrant 3: Selling existing products to new customers. Here, we are selling our standard products to non-customers.
  • Quadrant 4: Selling new products to new customers. This is the same as entering a new market.

Quadrant 1 has the lowest perceived risk from the buyer’s perspective, followed by Quadrant 2, 3, and lastly 4. What we need to do in terms of marketing and selling is also quite different from one quadrant to the next.

In Quadrant 1, the seller hardly needs to educate customers on the company or product since they are already very familiar with both. At the other extreme is Quadrant 4. This is a totally different market from the one(s) to which the seller has traditionally sold, and the likelihood that Quadrant 4 buyers have adequate familiarity the company or its products is quite low.

Therefore, using the same approach for all quadrants will not work—marketing and sales efforts will likely be overkill in Quadrants 1 and 2 while insufficient in Quadrants 3 and 4.

By segmenting our total addressable market into four quadrants and optimizing our messaging, offerings, and resources for each, we are more likely to maximize revenues at the lowest costs possible, thereby maximizing our net income.

The Four Quadrants approach is one of the foundational strategies of the Predictable Revenue Model; it’s designed to position a company to achieve a consistent High Growth rate.

Strategy Matters

Companies that out-perform their competitors do so primarily because they execute a defined strategy. They don’t try to go after everyone with the same message, product, or offering. They segment — then tailor everything they do to fit that segment.

Segmentation makes it easier to isolate the right opportunities for a given company and highlights the right strategies to win those opportunities. Because you have the right message and the right offering for the right customer, you can shorten your sales cycles and increase your closing ratios. Effective B2B marketing naturally leads to effective B2B selling.

This is the essence of strategy – focusing limited resources on the best opportunities in the most optimal way to maximize results.

The Four Quadrants approach makes the segmentation process more intuitive. It also makes execution simpler and more full-proof.

Each Quadrant is Different

We all know that if we really want to sell our products and services, we have to tailor them to our customers’ preferences. What we tend to forget is that this is just as true regarding how we market and sell our products. We must tailor our sales and marketing according to how customers want to buy.

Marketing/selling to existing customers is totally different from marketing/selling to non-customers. And even for existing customers, the kind of marketing/selling necessary to get them to order more of what they already purchase is different from the strategy that gets them to try new products they haven’t used before. We know this is true from our own direct experience as customers.

Sometimes the right strategy is just to automate and make it simple for customers to order whenever they want. Why slow them down by having them talk to a sales rep?

At other times, there is a great need for consultation before sales can happen. Case studies, demos, and references are all a necessary part of reassuring a skeptical buyer that she won’t regret her purchase. And while the high-powered consultative sales rep is essential with a new customer buying for the first time, he would be expensive overkill for a simple reorder of a product a customer has purchased dozens of times before.

The essence of Four Quadrant selling is matching a company’s limited resources to the type of selling opportunities a company has and doing this as an everyday process – increasing sales, while keeping the costs of selling low.

  • Quadrant 1 is about customers who buy a given product. Your goal is simple — get them to buy more of what they are already buying. How do you get them to do that?
  • Once you have maximized your revenue from Quadrant 1, the only way you can get more business from existing customers is to get them to buy some of the other products you sell. That is how you get growth in Quadrant 2. What is the best way for you to do that?
  • As mentioned above, there is only so much you can sell to existing customers. And sooner or later, for one reason or another, you are going to lose some customers. You must acquire new customers not only to continue to grow but also to replace those you lose. That’s what growth in Quadrant 3 What is the best way to achieve this?
  • And if you are very successful and grow fast, you will eventually saturate a given market segment and can’t sell more there. We will need to find a new market segment where you can continue to expand, which is what Quadrant 4 is about. How do you do that?

When you look at it this way, it is apparent that your sales and marketing strategies in each quadrant need to be sufficiently different.

However, it is not just the strategies that need to be different. Systems, processes, assets, and people you use in each quadrant also need to be optimized for that quadrant to achieve the best result in that quadrant. Just as you look for a specialist when you want to see an eye or heart doctor, you also need specialists if you need to grow each sector on a consistent basis. You need people who are experts in each quadrant.

End Goal–Predictable Revenue Growth

If you have one-size-fits-all marketing and sales strategy, you will see mixed results. You want reliable, predictable revenue growth. That is why you have to optimize sales and marketing for each Quadrant.

We discuss these highly targeted strategies in the sections below:

  1. Quadrant 1: Increase usage
  2. Quadrant 2: Introduce new products
  3. Quadrant 3: Increase customer base
  4. Quadrant 4: Find new lines of business

Why the Four Funnels Framework is Your Key to Predictable Revenue

The Four Funnels Framework is a systematic methodology for generating high-quality B2B leads that deliver predictable revenue. This framework helps to overcome the “missing link” that sometimes develops between a company’s marketing and sales functions. Businesses can bridge this gap by implementing the following four funnels.

Four Funnels Framework

Funnel 1: Build Awareness

In order to sell to buyers, companies must first build awareness with their target market. The constant noise and crowding of increased market flooding creates buyers who are habituated to tuning out. Due to this, it takes nearly 16 distinct touches to sway prospective buyers to purchase; and this number only continues to rise.

Regardless of this tune out, businesses must still sell. To do so, they must first generate attention from prospective buyers. Buyers cannot purchase what they do not know exists. The most effective way to generate attention is by generating and publishing genuine marketing content. B2B sellers need to display knowledge of the pains and problems faced by their targeted buyers. Only when buyers feel that sellers understand their troubles will they consider entering into a purchasing transaction.

The goal of Funnel 1 is to drive a high number of the target buyers to where they can find out more and deepen the engagement with the seller.

Funnel 2: Build Trust

B2B buyers have little to no care about sellers’ particular products and services. Their primary concern is how to identify and address the problems they face in their companies and industries. To capture potential clients, B2B sellers must demonstrate care and understanding by freely providing the information required by prospects to solve their concerns and complications.

While such actions may appear to be giving away something for little to no return, providing this information establishes trust in the vendor. Trust generates quality leads that are more likely to transition into loyal clients.

The goal of the second funnel in the Four Funnels Framework is to feed the pipeline for Funnel 3—where Business Development Reps (BDRs) call those that have shown marketing engagement, qualify these, and pass on to Sales.

Funnel 3: Qualify

Until this point, seller engagement with buyers has primarily occurred electronically through the sellers’ websites, social media, and email campaigns. Now that contact information has been exchanged, it is time to qualify the potential buyer to determine if they are ready for engagement with Sales.

The object of this third funnel is to create a sales pipeline for the fourth funnel. In order to achieve this, sellers must ensure that the first point of in-person contact is done a professional, senior-level staff.

Many sellers have the mistaken notion that this is “telemarketing” and believe this is an entry-level job. Nothing can be further from the truth.

The task here is to interrupt a busy senior level buyer and in a matter of 20 seconds intrigue her enough to agree to a longer call or meeting at a later time. Most of the time, this requires not only knowledge of the subject matter and industry of the prospective buyer, but also an ability to know when to push and not, when to chat and when to get down to the point, all in a matter of seconds and over the phone. This is a task for an experienced Business Development Rep (BDR).

If the buyer agrees to talk for a bit, the BDR’s job is to make sure this buyer is qualified and then set an appointment with a sales rep as soon as possible.

A predictable revenue stream depends on two qualities of the Sales Pipeline:

  1. High Quality leads that close at a higher rate and close faster
  2. Sufficient number of HQLs to meet the company’s new revenue targets

Funnel 3 is responsible for achieving these objectives.

Funnel 4: Engage

With BDRs focusing on keeping the sales team’s pipeline full, sales reps can now focus on their primary role— deeply understanding the buyer’s world and building a partnership in solving the buyer’s issues, leading towards a successful close of the opportunity.

This is the primary function of salespeople—to work closely with motivated potential buyers and place their full attention on solving the issues of the buyer. Holding them responsible for both Funnels 3 and 4, while it may seem reasonable, is actually counterproductive.

In fact, a survey of sales professionals by Sales Insights showed that they spend over 26% of their time on average trying to generate a qualified lead. This is clearly a demanding task and takes a great deal of time away from a sales rep primary role.

Once a healthy sales pipeline and a quality sales lead has been established, the sales team can focus on continuing to qualify prospects while integrating them into the buying cycle.

 

The Four Funnels Framework provides a methodology for consistently achieving predictable revenues by generating High Quality Leads through a process that integrates marketing, prospecting, and sales. This integration removes duplication and waste, significantly lowering the total cost new customer acquisition.

 

Predictable Revenue Model

A Predictable Revenue Model enables a company to become a market leader by unleashing its full revenue potential so it can consistently achieve a high growth rate, year after year.

Why High Growth Rate Matters

Companies that grow at a high rate tend to be market leaders. Market leadership is important because brings with it strong financial rewards, such as high valuation and high profitability.

  • Customers generally prefer to buy from market leader, as they feel it is less risky to do so. This naturally reduces the cost of marketing and selling for the market leader. Furthermore, customers expect to pay a premium for buying from the market leader. Higher prices at lower marketing and sales costs translate into higher margins.
  • Vendors as well prefer to work with market leaders and are willing to give favorable pricing and terms to gain their business. This further enables the market leader to keep input costs low while charging premium prices for its products and services.
  • Finally, market leaders have less recruiting and hiring costs compared to their competitors, while still attracting the best talent.

More profits and better talent will eventually result in greater competitive barriers being erected, enabling the market leader to become dominant for possibly a long time.

Clearly, high growth rate matters. The real question might be how does one achieve it. And how much should that rate be? And how much will this expensive initiative cost?

A Predictable Revenue Model attempts to provide answers to these critical questions.

Structure Predictable Revenue Model

A Predictable Revenue Model (PRM) has three main phases: plan; execute, and learn. Each has its own role to play, but all three have to work together to deliver the true power of PRM.

  • Plan
    • Targets
    • Metrics/KPIs
    • Resources
    • Execution Plan
    • Budget
  • Execute
    • Setup
    • Nail
    • Scale
  • Learn
    • Measure
    • Analyze
    • Adjust
    • Document

These are the components of a Predictable Revenue Model, whose purpose is to enable a company to become a market leader by unleashing its full revenue potential so it can consistently achieve a high growth rate, year after year. It is agile, constantly renewable and repeatable, and it should work in any company.

How to Fix Missed Revenue Targets

In our work with clients, we have identified three fundamental reasons why companies have missed  revenue targets

  • Not enough opportunities in the sales pipeline to start with
  • Not enough of these opportunities are closing
  • And the ones that close take too long to close

Fixing these issues can have very significant consequences on revenues.

  • Improving pipeline provides directly proportional results. A 100% increase in Sales pipeline will result in a 100% increase in new sales, provided the quality of the incremental pipeline increase is comparable. In many cases, companies can grow their sales pipeline by two to five times by utilizing dedicated Business Development Reps (read Case Study).
  • Improving closing ratios, however, can have more than a one-to-one impact on incremental sales. It depends on what the delta (the difference between the old and the new closing ratio) is compared to the old closing ratio. For example, if the old closing ratio used to be 15% and this was improved to 20%, then this alone will increase new sales by 33%. The same 5% improvement when going from 20% to 25% will produce only a 25% increase in new sales—which is still a substantial increase.
  • Similarly, reducing sales cycles can have a dramatic impact on new Sales. The analysis of the effect is a bit more complicated and we discuss some of the consequences here. However, briefly stated, reducing the time it takes to close deals makes revenues more predictable. This, in turn, enables a company to invest aggressively with more confidence in areas that impact its growth and profitability. Which only improves pipeline development, closing ratios, and sales cycles–creating a virtuous cycle.

In this article, we first define the problem and its causes. We then recommend some solutions we have seen work for other clients.

 

Insufficient Size of Sales Pipeline

Typically, when a company’s sales pipeline is shallow, it is primarily because it is relying on its Sales organization to build the pipeline, rather than on Marketing.

Ideally, two thirds of a company’s sales pipeline should come from leads generated by Marketing Operations, either through outbound campaigns or from inbound leads.

However, in many of the companies that miss their revenue targets, the opposite is true. Far too few leads come from Marketing, and sales reps are expected to prospect and build their own sales pipelines.

However, today, this is a nearly impossible task, and we discuss the reasons why in in a blog, “Why B2B Sales is no longer working”.

 

Low Closing Ratio

While the issue of Insufficient Sales Pipeline is primarily about quantity of leads, the problem of low closing ratio is one of poor quality leads. The issue is that “leads” that sales reps are working on are not yet well qualified.

These leads may be unqualified for one or more of the following reasons:

  • The prospect doesn’t have a compelling need.
  • The prospect has a compelling need, but there are too many show stoppers to make it work for the prospect

The likelihood that these kinds of prospects will become customers is very low. So why would Sales work on these?

There are a number of reasons why Sales take on leads that are not ready:

  • Marketing campaigns are probably not focused enough
  • Marketing is passing on to sales any “Lead” without first qualifying these
  • Because sales rep don’t have sufficient sales pipeline, they tend to be apprehensive about letting go of even unqualified leads

This is a highly unproductive use of expensive sales resources. Yet, we see it happening far too often.

 

Prolonged Sales Cycle

In many ways, this is a variant of the previous problem. Eventually, a lead may closes, but it takes far too long. The reasons are the same as for those that don’t close at all:

  • Not enough ROI for the prospect to move her along quickly
  • Too many things that have to be overcome on the company side before a prospect agrees to sign
  • Working with a prospect that has no decision making authority
  • Working with a decision maker that doesn’t have a budget this year

Any of these reasons can cause a stall. In the meantime, sales reps continue to hang on this deal thinking it will close next month, and if not then, the month after… The close date on these deals keeps shifting forward—from one quarter to the next. Each quarter’s forecast is missed.

As in the case of low closing ratio, the problem of prolonged sales cycle is a quality problem.

 

Fixing Insufficient Sales Pipeline

The key to building sufficient sales pipeline is building a robust b2b Marketing Operation.

  • Focus on the prospects that have the most compelling reason to buy.
  • Refine your message to make your case quickly and clearly to them
  • Educate and empower them with information so they know they are working with a company that understands their pain and potentially has a solution for their pain.
  • Contact them at the right time so they welcome your calling them
  • Have a Business Development Rep (BDRs) call, qualify to make sure he or she is talking to the right person and schedule time with one of your reps.

 

Fixing Low Closing Ratios

If a sales rep’s pipeline is filled with good quality leads, she is not going to be apprehensive about letting go the ones that are not likely to close. And because she lets those go, she will give her full attention to those that have a high probability of closing, which only increases the odds that these will close.

The solution, therefore, is to keep the sales rep’s pipeline 80% or more full at any given time. For example, if the ideal closing ration is one out of three, and a rep must close 20 deals a year to make her number, she needs about 60 high quality deals in her pipeline. At least 80% of these should come from Four Funnels operations (she can make the remainder through referrals and her own prospecting).

The key point here is to generate the necessary number of Marketing Qualified Leads (MQs) first. However, these should be well qualified before passing on to the sales team.

 

Fixing Prolonged Sales Cycles

By definition, leads that have a high probability of closing are the ones most motivated to solve their problem in the short term. This addresses the final problem of prolonged sales cycles. Motivated buyers have a timeline they need to keep and communicate that clearly. Whether they buy from you or your competitor, they will have arrived at a decision by then. There is no stalling.

The fix to long sales cycles is to improve the quality of the pipeline. The sales pipeline should only consist of highly motivated prospects with decision-making authority. The best practices for fixing this quality problem is to use a Four Funnels Methodology that enables you to control what’s in the sales pipeline.

While Sales reps are more than capable of qualifying prospects, they rarely do it since it is hard to connect with busy decision makers. It requires a great deal of dials to reach even decision makers that want to talk to a vendor. A BDR can make 80-100 dials a day and is far more likely to catch a prospect and make the appointment.

The conclusion seems to point to focus. First, focus on the right prospects. Then, focus the right skills on the right job. Let Marketing take care of the harvesting, let BDRs qualify and find the nuggets. And let your sales reps focus on closing the most motivated prospects. This is the Four Funnels Framework at work.

 

Why B2B Sales is No Longer Working

Overview

A fundamental shift is occurring in Business-to-Business (B2B) sales as prospecting and sales results seem to be taking a turn for the worse. Lead conversion rates are lower, sales cycles are longer, and closing ratios are not what they used to be. We hear many Sales and Marketing executives complain that “solution selling” and other sales methodologies are no longer as effective as they once were.  We also hear that sales reps are losing control of the sales process, and that prospects just aren’t picking up their phones.

The problems our customers are facing can all be traced to the shift in control over the flow of information from sellers to buyers.

In past decades, sales representatives were conduits of highly valuable information for prospective buyers. They might open a sales call by saying, “…if you are anything like my typical customers, you probably have these challenges that are costing you a great deal of money. We have been very successful at solving those kinds of problems, and I would like to share with you how we do that.”

Twenty years ago, that opening was pretty effective. Aside from spending the time and money to attend conferences, buyers had limited ways of accessing information, insights, or new ideas on how to solve their latest problems. Speaking with a highly informed consultative sales rep was critical to finding viable solutions to their challenges.

Today, we have a different story. We have a digital generation of decision makers who prefer to guide their decision-making with digitally available information. In other words, they don’t want to talk to your sales rep until they are reasonably certain that they won’t waste their time doing so.

 

What B2Bs can learn from B2Cs

Business to Consumer (B2C) companies have always relied on marketing to draw potential customers to where they distribute their products or services—either a brick-and-mortar store front, or an online ecommerce site.

They live or die by their marketing strength, which means that they intimately understand their customers—their issues, worries, preferences, etc. They also know how to cut through all the noise and grab the attention of their prospects, as well as how to convert that attention into a sale at a consistently high level.

B2B companies, on the other hand, have always relied on their army of sales reps to get business. Consequently, once their sales reps started having trouble accessing prospects as well as they had in the past, sales began to suffer.

This problem manifests in many ways, but a key ramification is the huge difference in sales performance between the top and bottom sales performers. In some cases, we have seen a five- fold or more difference. This tells us that the top sales performers have figured out how to gain access to the right prospects, even in the absence of help from marketing, while the bottom performers are left floundering helplessly.

Continuing to believe that it is the sales rep’s job to gain access to prospects and leaving the entirety of the task to Sales would be missing the point. Just like you wouldn’t expect a waiter to first cook the food he serves you, you shouldn’t expect your sales team to do the marketing work of getting the prospect’s attention. This paper discusses how Marketing, Prospecting, and Sales have to work together to deliver predictable revenue, quarter after quarter.

First, let’s take a look at why B2B sales is struggling in the age of digital decision makers.

 

What B2Bs Sales looks like when it doesn’t work

Below is a typical scenario of how marketing and sales function in companies that struggle to consistently meet their revenue objectives. Essentially, Marketing and Sales have little or no relationship and actually resent and blame each other for missed revenue targets.

 

Problem 1: Marketing is not held responsible for generating leads.

While the Marketing team works very hard every day, it does not have a clear mission or mandate. Lead Generation is just one of its many responsibilities, not its priority. Because it does not focus on lead generation, it typically hands over all of the contacts in its marketing program for Sales to sort out.

Problem 2: There is no well-defined, tested, and proven sales methodology that members of the sales team follow. Each sells his or her own way, with little data captured in any system. Most of the information regarding sales is typically found in the rep’s email inbox, hard-drive, or mobile phone. Management is forced to rely on verbal reports and to hope for the best.

Because they have a skinny pipeline, sales reps that do get a meeting immediately launch into their pitch rather than properly qualifying the prospect first.

They jump too early into providing a proposal for a prospect that is not very engaged, and then they wait and hope for the best.

In such cases, it is typical to see sales opportunities remain on the sales pipeline for a year, two years, or even longer. In fact, the quickest indicator of a lack of process is the extremely wide range in average deal size, average sales cycles, and average closing ratios. 

The Exception to the Rule: On the other hand, businesses may have a top-notch sales rep that brings in a far greater proportion of the total sales than anyone else. In many cases, we have seen such a person bring as much as 50% or more of the sales in a company that had anywhere from six to eight additional sales reps.

This top-seller uses a very efficient process and methodology. However, she is typically the only one with a disciplined approach to prospecting and sales. She generally does not rely on Marketing to provide her with leads, and instead cultivates her own resources.

In some cases, we have seen such a sales rep actually employ someone to pre-qualify and set appointments for her so she can focus on moving her pipeline through closing.

The numbers for this top-notch sales rep are remarkably consistent, as the rep closes practically the same amount of business every quarter.

Unleashing Untapped Revenue Potential for Sustained High Growth

What is Untapped Revenue Potential?

Untapped Revenue Potential  (URP) exists in every company.  It is the difference between the revenues that a company is capable of generating, were it to take full advantage of the opportunities available, and what it is actually generating.

This delta is inversely proportional to a company’s rate of growth. The faster a company is growing year to year, the smaller the delta, and vice versa. In other words, companies growing under 20% year to year are far more likely to have significant Untapped Revenue Potential.

Amazon’s S3 cloud storage business (where customers rent online storage space) provides an excellent example of how a more vigilant company sees URP and acts to unleash it. When Jeff Bezos launched Amazon.com as an online bookseller in 1995 with the vision of some day building it into the largest online retail store, he could not have anticipated the Cloud Storage business. So, why get into that business and compete against well-established data centers?

Well, because it made sense. As a natural outcome of its relentless pursuit of becoming the largest online retailer, Amazon developed the necessary expertise and infrastructure to build and run one of the largest data centers in the world. It seemed logical for Amazon to simply build excess capacity and sell the excess to customers that needed the service. In doing so, Amazon not only increased its overall revenue, but it now has double the reason for constantly improving and upgrading its data centers. The need to be competitive on the cloud storage business end enables it to have the fastest, most secure, and most reliable online store, increasing the distance between itself and its online store competitors.

This is the most important definition of a true Untapped Revenue Potential (URP). Unleashing a true URP not only will bring incremental revenue from that new source, but it will also increase revenues you earn from the rest of your business.

Why Untapped Revenue Potential (URP) Exists

Imagine if you had a ten-room house, but you were using only 4 or 5 of these rooms. It could be because you didn’t even know you had the extra rooms. More likely it would be because you didn’t have the resources necessary to make the rest of the rooms fully livable.

And so it appears to be the case with URP. URP exists for a variety of reasons—partly because it gets created without anyone really knowing it, and partly because companies do not pursue what they already know exists.

One important source of URP is the huge amount of features and capabilities that get into very mature products and services as a natural outcome of being in business for several years. As a company grows and begins to handle a variety of types and sizes of customers, it starts building “hidden” products and services for which it never thinks of charging money. The more a company works to accommodate and satisfy an increasing size and variety of customers, the more it creates new sources of revenues that were not available to it before.

Another source of URP is less hidden. Companies actually have products for which they charge money, but they don’t have a systematic program of making sure that their customers are aware of them and buy them. Why? Because the companies typically don’t know which customer has which product and therefore, can’t do targeted marketing and sales.

In our experience, both these reasons tend to coexist, increasing the size of URP. Sometimes our clients indeed were aware that certain sources of revenues were available to them, but they lacked the skills and resources necessary to develop them into moneymakers.  And there were still other sources of potential revenues that our clients didn’t even know existed.

Ten Examples of Untapped Revenue Potential (URP)

If you don’t think your company has URP, take a look at the examples below. Any company that:

  1. Continues to add features into its products and services, as new and bigger customers ask for them, and doesn’t do anything to break the product into several versions, charging more for those that have more capabilities has URP.
  2. Makes complex products and does not have a Maintenance Service Program where its customers purchase assurance that their expensive equipment will be routinely maintained so as to eliminate the risk of costly downtime has URP.
  3. Has customers that are sourcing what it sells from multiple vendors and doesn’t know how much that is, and hasn’t done much to win this additional business has URP.
  4. Does not know the delta between the number of licenses it has sold into an account and the number of potential seats available in that account has URP.
  5. Discounts deeply to win business over cheaper alternatives without explaining to its customers why they are actually saving money by paying its higher prices has URP.
  6. Sells several products and doesn’t know how many of its products are with which customer has URP
  7. Has lower closing ratios and/or longer selling cycles than its competitors has URP
  8. Does not receive sales leads from its customer support organization has URP
  9. Has not built at least 25% of its customers into raving fans that will bring it new customers on their own has URP
  10. Has NOT integrated its accounting/billing system with its marketing systems such that marketing information automatically go out to existing customers based on what they have purchased, when, and how much has URP.

There are many more examples of URP. The question is not “Does URP exist in our company?” Rather it is, “How much URP do we have at our company?”

Identifying Untapped Revenue Potential

The Four Quadrants of High Growth is a the most effective and systematic approach to identifying the URP available to a company by breaking up the total addressable market available to a company into four quadrants. Quadrants 1 and 2 are of existing customers while Quadrants 3 and 4 are of non-customers.

The model helps companies identify the sources of information that reveal the URP in each Quadrant. Once you know the URP in each Quadrant, you can add them up to arrive at the total URP, which then enables you to define and build a Predictable Revenue Model™ for your company.

Quadrant 1

If a given customer purchases say 100 units of a product that you sell, but they buy only 47 units from you, then they are getting the rest (53 units) from other vendors. There is URP of 53 units from this customer. If you then determined similarly for all your customers, then you can come up with the total URP in Quadrant 1 for just that product.  The next question how much of this URP can you tap into in the current fiscal year?

There is another form of URP in Quadrant 1, which is perhaps even more difficult to determine than the above example. Let’s say you sell 47 units to the company and that is all the company is buying—in other words, it has given you all of its business. However, although it has not given its business to anyone else, it still has need for 100 units, since there are other needs in the company that your product could have addressed—a need is latent and unexplored. It is up to you to identify this new need and bring this latent need to the front so that your customer is aware that purchasing more units from you can address this previously unmet need.

Quadrant 2

If you sell more than one product, then your Quadrant 2 URP falls into one of the following categories:

  • Add-ons: These are additional services or components that customers typically need when they purchase another stand-alone product. A Maintenance Service Program or product warranty is a type of add-on that makes sense to sell along with an expensive or complex product
  • If you have two-or more levels of a product or service—for example you have a professional and enterprise edition—then every customer who is on the lower, less expensive version, is a candidate for an upgrade. This gap is part of your URP.
  • If you sell two or more standalone products that nevertheless could be designed to work together such that buying both actually returns higher value than the sum of the cost of each, and you haven’t either done that or are not selling the package, then you have URP left on the table.

Unleashing Quadrant 2 URP requires looking into the design of your products and services such that you can easily add and sell them as packages, as well as making it easy for your customers to upgrade to a higher level of product or service. The more automated these are the faster and easier you can unleash Quadrant 2 URP.

Quadrant 3

Quadrant 3 is what, typically, companies think of when they think of growing revenue—getting new customers. However, this is far more expensive way of generating more revenue when compared to Quadrants 1 and 2, partly because these are non-customers who see you as high risk since they have never done business with you yet, and partly because they already have some way of addressing the need that you want to take care of for them. For them, the devil they know is better than the devil they don’t know.

However, broadening the customer base is still critical to growth since that is the enabler for Quadrant 1 and 2 sales in future. There is a more effective way to go after non-customers in your current market space. Our Four Funnels Framework is an excellent methodology for leading customers from a very low state of buyer readiness in Funnel 1 to a much higher state of readiness to buy in Funnel Four.

The Funnel Math is a precise tool for calculating what you need to do to tap into Quadrant 3 URP. In fact it is the only reliable way you can see the level of investment needed to achieve your desired revenue growth in Quadrant 3 and budget for it appropriately.

Quadrant 4

Working in Quadrant 4 is like space exploration—expensive and risky, but with a lot of upside if done correctly—or think of a home run. It is basically an attempt to answer the question, “What other market segment(s) is/are there that can use our products and services, where our success stories in our current segment are still relevant enough to convince those customers we can help them, and we can do so with moderate amount of customization to our products and services?”

This requires a systematic search of another market sector for you to develop cost effectively—a sector that has a compelling need for a solution that you can bring to market quickly, where competition is not too entrenched, where the customers can afford your solution, and are accessible to your marketing and sales efforts.

Unleashing Untapped revenue Potential (URP)

So, how do you unleash your company’s Untapped Revenue Potential?

There are five key steps to unleashing URP:

  1. Discover all possible sources of URP by systematically working through each of the Four Quadrants—basically doing what we call a Corporate GAP Audit
  2. Determine the investment required (proforma P&L) to tap into each potential source of revenue
  3. Prioritize according to the amount of URP and cost/risk of unleashing each URP source
  4. Define the project plans for the top candidates
  5. Implement the necessary projects to unleash URP

None of these five steps is particularly difficult to do. So why do so many companies leave so much URP? It turns out that the companies that have significant URP never even get past step #1, for a variety of reasons. It seems that that the hardest part for most companies is actually finishing the Discovery phase–perhaps because they don’t have the time or expertise to do that in-house.

This is where outside expertise and resources can make a big difference in getting an initiative off the ground quickly and cost-effectively.

How SOMAmetrics can Help

SOMAmetrics helps companies to identify and take full advantage of their untapped revenue potential so that they can consistently grow 20% or more each year.

SOMAmetrics has developed proven methodologies and best practices for unleashing URP, honed while working at and with over 100 companies with a variety of sizes, maturity, complexity, and belonging to a wide range of industry segments.

Unlike other consulting firms that simply diagnose and prescribe a solution plan, SOMAmetrics goes much further to provide the necessary implementation expertise, project management skills, and resources our clients need to unleash their full revenue potential.

Contact us today to discover and unleash your Untapped Revenue Potential for sustained high growth.