Selling to enterprises(cdixon.org)
cdixon.org
Selling to enterprises
http://cdixon.org/2010/02/06/selling-to-enterprises/
5 comments
How does this apply to subscription-based models? I'm guessing that the valley of death bounds change when you're talking about monthly recurring revenue.
If most managers can approve a $5,000 purchase without much hassle, what's the magic number for monthly subscriptions? Is it $5K/12? Higher? Lower?
Also, with subscription-based sales, you often have the opportunity to sell more plans to the same organization if your product solves their problem. Is there some magic number that people have experienced here? If it's proven by one business unit, can you get enough "grass-roots" support to equal something close to $100K/12? That would be nice because it cuts down on the timeline of the initial sale and is a natural way to recruit internal champions.
If most managers can approve a $5,000 purchase without much hassle, what's the magic number for monthly subscriptions? Is it $5K/12? Higher? Lower?
Also, with subscription-based sales, you often have the opportunity to sell more plans to the same organization if your product solves their problem. Is there some magic number that people have experienced here? If it's proven by one business unit, can you get enough "grass-roots" support to equal something close to $100K/12? That would be nice because it cuts down on the timeline of the initial sale and is a natural way to recruit internal champions.
I vowed after my first startup never again to build an enterprise product for this reason. Plus I don't like golfing and drinking with some random guy in Omaha trying to convince him my product solves one of this top three problems.
During my 3 years doing enterprise sales at Akamai, I learnt a ton of things from my customers and met some really interesting people. Not all enterprise sales involves golf and drinking and schmoozing.
Edit: I would also add that you tend to learn a lot more about your product from your customers. In addition, once you target a certain industry and speak to all the major players, you get some insight that helps with product, sales, marketing.
Edit: I would also add that you tend to learn a lot more about your product from your customers. In addition, once you target a certain industry and speak to all the major players, you get some insight that helps with product, sales, marketing.
Yeah I didn't mean to sound like that's ALL there is. But I was time and again surprised how often buying decisions had nothing to do with the product, company's need etc. I guess I was perhaps a little naive :)
So was I when I started. There are so many reasons folks buy that doesn't involve our product or company, it's mind boggling.
The #1 question to ask when selling to the enterprise is, "What are the spending authority cut-offs?" Nothing means more.
Funny, in my experience, the 5K and 100K numbers are pretty accurate.
I recently assisted in the purchase of business intelligence package. The CIO (my contact) had authority to spend up to $100K. Anything more had to go the board, and that "just wasn't going to happen". One vendor knew what to ask and bid $93K. The two others were much higher. Guess who (automatically) got the sale. The other 2 may have been better, but we'll never know. They were effectively eliminated by rules they never asked about.
At the low end, almost everyone has authority to spend up to $5K, even users. They bring in desktop software or SAAS under IT's radar. There's huge demand for solutions to their problems that fit under their spending limits.
Funny, in my experience, the 5K and 100K numbers are pretty accurate.
I recently assisted in the purchase of business intelligence package. The CIO (my contact) had authority to spend up to $100K. Anything more had to go the board, and that "just wasn't going to happen". One vendor knew what to ask and bid $93K. The two others were much higher. Guess who (automatically) got the sale. The other 2 may have been better, but we'll never know. They were effectively eliminated by rules they never asked about.
At the low end, almost everyone has authority to spend up to $5K, even users. They bring in desktop software or SAAS under IT's radar. There's huge demand for solutions to their problems that fit under their spending limits.
Yeah. Joel Spolsky wrote about this stuff in his essay on pricing: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie... :
Notice the gap? There's no software priced between $1000 and $75,000. I'll tell you why. The minute you charge more than $1000 you need to get serious corporate signoffs. You need a line item in their budget. You need purchasing managers and CEO approval and competitive bids and paperwork. So you need to send a salesperson out to the customer to do PowerPoint, with his airfare, golf course memberships, and $19.95 porn movies at the Ritz Carlton.
In other words, there's a natural price delta between end-user software and "enterprise," or whatever you want to call it, software. People seem to keep rediscovering this over and over again.
Notice the gap? There's no software priced between $1000 and $75,000. I'll tell you why. The minute you charge more than $1000 you need to get serious corporate signoffs. You need a line item in their budget. You need purchasing managers and CEO approval and competitive bids and paperwork. So you need to send a salesperson out to the customer to do PowerPoint, with his airfare, golf course memberships, and $19.95 porn movies at the Ritz Carlton.
In other words, there's a natural price delta between end-user software and "enterprise," or whatever you want to call it, software. People seem to keep rediscovering this over and over again.
How willing are the people to disclose the spending authority cut offs?
That said, there are times when you want to price high enough to force the issue to the board.
Most importantly when the pain your product addresses becomes a corporation-wide priority. You want to get buy-in from the execs before your competitor does and knocks you out of a department level deal.
Most importantly when the pain your product addresses becomes a corporation-wide priority. You want to get buy-in from the execs before your competitor does and knocks you out of a department level deal.
It's interesting you bring up users spending "against" IT's wishes. In larger organizations, there's quite a bit of that going on. IT wants to control the desktop, make enterprise-wide decisions, use favored vendors, have total integration, etc.
Users just want their problem to go away. And there have been many, many purchases at the low end based on user problems and not corporate policy.
Perhaps you'd call that Commando Enterprise Sales. Go in under the radar, keep a low profile, and spread virally.
Users just want their problem to go away. And there have been many, many purchases at the low end based on user problems and not corporate policy.
Perhaps you'd call that Commando Enterprise Sales. Go in under the radar, keep a low profile, and spread virally.
Relatedly, you can shave the educational purchase cycle from 18 months to under 3 minutes by selling directly to the teacher rather than to five decisionmakers in three buildings, including two whose sole job is to say "no" to everyone.
Do people really think that customers that sign up for $10/mo "to-do" apps are more sophisticated buyers than enterprise customers?
In my experience, many people who complain about the enterprise sales process are failing for their lack of real domain expertise not their distaste for "schmoozing." They are also usually underestimating the intelligence of their customers and unwilling to build relationships.
Disclaimer: My companies do enterprise software. Edit: I've also played golf exactly once in seven years since we started.