By Sramana Mitra and guest author Sudhindra Chada
SM: Enterprise sales cycles tended to be pretty long, especially when there was a complex sale involved. What you are saying is today, you may have figured out a way to use these sales 2.0 techniques to shorten that sales cycle. Is that a fair statement?
DF: Yes! There are only three things you can do to make sales more productive. First, you can shorten the sales cycle; second, you can increase transaction size (the selling price); and third, you can increase your win rate and decrease your loss rate. Today, these technologies are all intended to increase productivity. In our case, with the uniqueness of our sales model, it’s traditionally called land and grow. Our sales cycle is around 103 days. I look at that number on a quarterly basis. We know when an opportunity is created; we know when an opportunity is closed. So, our sales cycle is just a little over three months. What we do is go into a department of a company and sell them our product. We get them installed, up and running, and happy. Then they bring us over to the HR department, then to the training department. So we land and grow and expand virally. I think that is not uncommon in the SaaS world. There are certain technologies you can do that with. As in the case of Salesforce.com, a CRM system, you buy to automate the entire sales force, not just the twenty people in the Northeast region. Yes, the technologies are intended to increase sales productivity. We don’t necessarily shorten our sales cycle because it is already quite short.
SM: Let me push back on that for a minute. You have volumes of prospects that people are bringing into the system, all sorts of random leads with low conversion rates hanging around. When you put that through a qualification process using, let’s say InsideView, and you manage to categorize it by industry, vertical, job function, and so forth, does that not shorten the sales cycle? One of the traditional problems with sales forces has been people wasting time on deadbeat leads.
DF: This gets back to building an integrated marketing and sales process. We use a term called a marketing qualified opportunity (MQO) that is created by marketing. My marketing vice president has a quota; in 2010 she has to produce 2,970 MQOs. Those are then handed over to sales, which accepts or rejects those opportunities. When sales accepts them, they are created in the system as a $0 opportunity. Now, as sales people work those opportunities, some portion becomes dollarized, and some portion creates new account wins. What I just walked you through is called waterfall math. The old math is, you put a hundred and ten come out. My math is 12.1 percent. We put in a hundred, and I get 12.1 deals out of it.
SM: The one hundred that you are putting in are MQOs?
DF: Correct. We have a service level agreement between marketing and sales. Marketing agrees to produce 29,70 MQOs.
SM: This is a very interesting discussion. This $500,000 a year worth of your sales 2.0 technology that you talked about, does that come after MQOs or are they part of the marketing work flow?
DF: They are part of the marketing work flow as well.
SM: There you go. So that is the question I was asking. Introducing MQOs is the most expensive part of the lead qualification process. The hundred you are starting with from MQOs, do they have to be qualified out of a much larger pool?
DF: It’s a question of how you measure efficiency and how you improve it over time. So, one of the challenges we have in sales and marketing is to provide the metrics to actually measure these analytics. What you can measure, you can improve. Those numbers I just shared with you are very important number to me. I need my marketing organization to produce 2,970 MQOs. I also need the sales organization, through a service level agreement working with marketing, to convert a certain number of these. I have three different selling teams with different conversion numbers. When you average all this together, at a high level, I need to see that 12 percent are converting. If marketing does what they have to do and sales does what they have to do and we meet in the middle, at a company level I produce my number. Now, those marketing qualified leads cost $462 apiece. I know to a penny how much they cost. Now the street price, if you outsource your marketing lead generation, ranges from a low of $500 to a high of $700. Let’s call the average $600. I do it for $462, so I can do it for less money and I am in control of the quality and quantity. If I outsourced this, I would not be in control. I would be dependent on an outside company for the quality and quantity of the pipeline.