Session 205 5 Sales Model for SBb

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Information about Session 205 5 Sales Model for SBb

Published on December 7, 2007

Author: Ming


Slide1:  “…The most convenient imaging software we’ve seen to date” CNET Selling Over the Phone:  Selling Over the Phone Software or service must be downloadable or serviced over the internet Download size should be under 200MB Registration must be achievable both before and after download or trial Product must solve one problem for individual contributor Product must be able to be installed without interaction from support 98% of the time Product must be able to be installed in less than 15 minutes Products that are sold by server or device work better than products sold per user Product should have a large competitor Product should be able to be tied into or complementary to other brand name products Product value has to be definable in less then three sentences Product must have a direct competitor End user must be definable by title Product must have large market appeal Solution to the customer cannot require the company to change its internal processes End users must have common communication mediums Entry price should be under $3,000 Product needs to be able to be reviewed by editors Product needs to have at least 10 words / phrases that can be used in paid search Pricing needs to be simple and have very few options Software install cannot require multiple people install Office Space:  Office Space Phone System Voice mail Monitoring Listen In Conferencing IP phones for cost of under $.04 per minute for local and long distance Office Space Parking - 4+ Per 1000 Square Feet Access to food - delivery Thermostat controls in key offices Natural Light is more important then you might think Separate AC unit for server room Separate breaker for server room Access to building - 7X24 Lighting to parking area Entrance badges Proximity to public transportation Market with greater than 500K people Office Space:  Office Space Lease Never more than 3 years with option to extend Empty adjacent space if possible Open Layout – 1 office for every 8 cubes Common area multiple can have a big impact on costs Validate condition of communications to building Always ask for a few months few rent Cost per square foot in Burlington $12.00 Office keys should be included Heating and cooling options after business hours Build out should include refrigerator & dish washer Heads per Square Foot Nice – 5.5 per 1000 square feet Good – 7 per 1000 square feet Tight - 8 per 1000 square feet Possible 9.5 per 1000 square feet 1 Conference room is enough to support 70 heads Little need for reception area Storage Area - Loading Doc Office Space:  Office Space Assets PC vs. laptop computer – recommend desktop Server room Router (Use Brand Name) Firewall Terminal Server Two Servers Email File server VPN – Part of firewall Backup software – Acronis Backup power supply Microsoft Partner Program and reduce software costs Furniture Plug and Play is worth $1.50 per square foot Used is always better - $800 per cube set up, $85 per chair Hiring:  Hiring Sources Online Sources Corporate Website Hotjobs Dice Monster Sales Ladder Military Job Services Colleges Interns Recent Grades Internal Referral Program Management:  Management One Manager to 10 Reps Up to 20 with team leads Focus on process No discounting without management approval Task manager Recommend to hire after 90 Days Recommend the manager keep 3 accounts MUST LEAD BY EXAMPLE Monitoring in Critical – Hawthorne Studies (1933) Phone Opportunities Quotes Leads Number of transactions in the pipeline Emails Hours in the office - HR Laws Metrics for Success:  Metrics for Success Lead Generation by Market:  Lead Generation by Market Compensation:  Compensation Total Compensation = (Salary + ((Average Deal Size * Average Commission Rate) * (# of Calls Per Day * Hit Ratio * Close Ratio * Sales Days Per Year) Base salary should be between $32K and $52K depending on skill set Salary & Variable compensation should be 50% / 50% Sliding Commission Rates Less expensive for reps that don’t make it. Less turn-over at year end Reps at 100% make significantly more than reps at 80% Quota should be no greater than 25 times ASP Compensation:  Compensation Bonus Programs Ego can be more valuable than cash Help build resumes and careers Example Rewards Building Blocks Night on the Town $100K in One Top Rep gets Dual Monitors or Nicer Chair Career Path Telemarketing Customer Retention Rep Associate Rep Inside Sales Rep Senior Inside Sales Rep Interview:  Interview Set Correct Expectations 70 Dials 20+ Hits 2 Hours on the Phone Office Hours equals territory hours People fail for 1 of 4 Reasons Lazy Stupid Lack of Integrity Motivation Interview:  Interview Questions / Test for: Excel Basic math skills First job to get money College History – 4 or 5 years to complete, 3.0 GPA Competitive nature Family back ground Diversity Good Profiles Photocopier reps who have sold for less than 3 years Phone or telephone line systems Former military Telemarketing reps from large IT firms Single mothers over 30 People changing careers Bartenders and bouncers Training:  Training General Knowledge Time Management History of Computing Personality Profiling Revenue Recognition Deep Carpet Selling Excel Skills Large Transactions Negotiations Closing Computing Basics Forecasting Financial Planning Goal Setting Territory Management Product Competitive Large Software Companies Training:  Training Sales Methodologies Sadler High Probability Selling Spin Selling New Strategic Selling Red Hot Cold Call Selling Terminations:  Terminations Immediate for Lying – No exceptions Force First Line Managers to terminate bottom 5% to 10% each quarter Reps who have been on quota for one full quarter who are in the bottom half of performance and in the third in terms of monitored stats for effort. Never do performance reviews for sales reps Marketing:  Marketing Inside Sales Dies Without Marketing Leads per Rep – Minimum of 3 Warm Leads per Day Must be able to track!!! Lead Source Revenue and Number of Leads by Source Customers Renewal Maintenance Cost per lead Marketing to Install Base Read Seth Godin’s books on Viral Marketing Channel marketing is just as critical as end user marketing Territory:  Territory Good Fences Make Good Territories Claw Backs Poaching Channel Neutral Commission after leaving the business Split Policy Territory Plan Up to 13 – States Up to 52 - Area Code Higher by Zip Vertical Territories Federal State & Local University K-12 Healthcare Install base Sales Cycle:  Sales Cycle Selling to Install Base:  Selling to Install Base Sales Tools:  Sales Tools Sales Bible Data Sheets ROI Win Stories Internal Reference List Customer List Into Emails Product Road Map Release History with Features Call Scripts – Bullets Top 50 Targeted Accounts Territory List Objection Listing Tracker Business Drivers Needs per Customer Type and Roll Sales Tools:  Sales Tools CRM Online – Salesforce or SugarCRM Parent Child Relationships Security by Roll 24 hour Lead transfer to Rep Time Back end automation with Marketing Replication Reporting Data Sources Purchase Orders Channel Sales Discussion Points:  Channel Sales Discussion Points How software products reach the end user Channel definitions What can channel partners do for your company? Is your company ready for the channel? Are your products? The realities of the channel How to engage the channel Working with volume resellers / government resellers Working with value added resellers (VAR) and system integrators (SI) Working with working with distribution Developing a channel program and recruiting partners The channel sales organization Channel marketing Channel conflict with your direct sales organization / rules of engagement Pricing and discounts (street price) Q&A Reaching the End User:  Reaching the End User VARs SIs Volume Resellers End user Distributors OEM Direct Sales Online Sales Retail Republishers Software Company Channel Partners - Definitions:  Channel Partners - Definitions VARs SIs Volume Resellers End user Distributors Software Company Distributors Often referred to as two-tier or two step distribution Buys directly from software company, sells only to resellers Access to thousands of resellers, preferred way to purchase Handles fulfillment between a Software company and its resellers Reseller Portal An online store set up to service the fulfillment needs of resellers. Typically outsourced to an e-commerce company like Digital River. Handle credit card processing, provide immediate access to licenses Transaction fee and percentage of sale model Volume Resellers National in focus. Purchases products from a distributor or directly from a Software Company. Prefers to purchase from a distributor. Sells only to End User customers. High volume / low margin model. 90%+ of Fortune 1000 companies and many government agencies purchase have all of their software procurement needs managed by a volume reseller. Value Added Resellers and System Integrators Professional Services/Consulting oriented companies focusing on specific solution set or practices. Examples: IT Security, Storage. Purchases from a distributor or directly from a software company. Typically regional in sales focus, some are national Some have an outsourcing model where they manage the entire IT infrastructure of small companies or in the case of National SIs, large businesses or government agencies. Why Channels:  Why Channels Extends your sales organization Help expand the market for your products Relationships with end user accounts Solution sale with complementary products Shorten the sales cycle…help navigate procurement Enable your business to scale more rapidly and cost effectively Is the Product Ready for the Channel?:  Is the Product Ready for the Channel? Is there a commitment from top management to using the channel for at least a portion of the company’s business? In general, products that meet the criteria of Over the Phone (OTP) products are ideal, but the channel has additional needs. Does your product solve a problem that a channel partner’s customers care about? Is your product complimentary to other solutions that your potential channel partner currently offers? Is there a services drag along effect from your product? If not, is it complementary to a product that does? Does your company have a proven repeatable sales process? Is your pricing/licensing model easy to understand? Does it make sense? What is your average deal size? If your product cannot generate opportunities in excess of $10K, channel partners will lose interest. Do you have good technical documentation for your products? Realities of the Channel:  Realities of the Channel Your Channel Strategy must have support from top management, or it will fail. Recruiting a channel partner is more difficult than selling directly to an end user. Good partners are being approached by hundreds of software companies to sell their products. Just signing an agreement does not mean a channel partner will sell anything for your company You must take responsibility for a channel partners success. You are still responsible for creating demand It takes a lot of work to get a channel partner ramped up and requires the alignment of all company resources to the strategy. Mindshare is hard to get - Channel partners sell other products/services besides yours. Getting a channel that produces significant revenue generally takes longer than you think. Direct Sales versus Channel Sales: a blended model using both direct and channel sales is often the best solution. Direct sales help a company better understand customer issues and the sales process It is much easier to train a third party to sell/support your products, if you understand the process yourself. Because of the above, a 100% channel model for new software companies is often a mistake. How to engage the channel:  How to engage the channel Understand the different types of channel partners and how to work with them Develop a channel program and recruiting plan Treat the channel as an extension of your own sales organization Support the channel The Channel Sales Organization Channel Marketing Rules of Engagement/Resolving Conflict Set appropriate channel pricing policies Volume Resellers:  Volume Resellers Likely the first channel partners you will run across as a new software company National sales footprint, one-stop-shopping for IT products and software Help shorten sales cycle…getting the PO 90%+ of large corporations have a software procurement contract with a volume reseller. Provide access Federal GSA Schedule – required for sales to US Government State contract relationships – make it easier to sell to state government entities Volume Resellers won’t “sell” your product Value Add is being on the right approved vendors list, state contract, and with End User procurement Volume Resellers work on a high volume, extremely low margin model. Margins are typically less than 10% For large customers volume resellers work on a cost-plus basis (usually 2-5%, sometimes less than 1% for large deals) Volume reseller discounts should be set carefully as these channels can significantly impact your street price. Examples: Volume Resellers:  Volume Resellers Volume Resellers reach thousands of End User customers. If your products meet the general criteria for OTP products then it may be worth some investment in the volume reseller channel Simple reseller agreement to start doing business Will not commit to sales goals for smaller software companies Transactional relationship Marketing Programs are available on a case by case basis for smaller Software Companies Sales Training/Lunch and Learn Programs Spiffs Sponsorship of sales conferences Funding Catalog ads Volume Resellers will typically not focus on vendors doing less than $1M in annual business with them. Some, notably CDW may not engage with a company until volume of $500K/month is achieved. Exceptions may be made for products in a strategic emerging market area Working with VARs and SIs:  Working with VARs and SIs Professional services oriented companies that put together complete solutions for their clients. Storage, Security, etc. VARs and SIs are the most difficult type channel partner to recruit. As a rule the larger the VAR or SI, the more difficult it is to start a relationship. Expect the process to take months and up to a year for national companies Create a strong channel program to attract VARs and SIs serving your target market. Technical People at VARs are the gatekeepers, if you can get them interested in your product you will have a much easier time getting the attention of the decision maker. Approach companies that are already reselling complementary products. Find out from your end user customers who the best VARs are that sell to them. VARs will create demand for your products through their customer relationships Margin expectations are higher, as a result Because of greater margin requirements, VARs and SIs will not have negative impact on “street price” Use NFL cities as prime locations for VAR coverage. At least one top level VAR in each city. Working with Distributors:  Working with Distributors 99% of Volume Resellers, VARs, and SIs do business with one or several of these distributors. Most prefer to buy from distribution Distribution will not “sell” your product It is your responsibility to make your product easy to order from your distributor If your total annual sales are less than $10M major distributors will not be interested, unless your product is a strategic complimentary fit to their business. DO NOT go into distribution too early: If you fail to generate sufficient sales volume ($1.5M annually), your agreement will likely be terminated. You would then be forced to secure relationships with all of your resellers directly and lose sales momentum in the process. If you can’t generate this volume and distribution still makes sense for your company, avoid major distributors in favor of a smaller distributor (Lifeboat or Alternative Technologies) Pricing: Set your discount to distribution carefully Distribution markups are small, average 4-6% can be sub 1% for large deals Distribution really doesn’t care what their discount is off of list price Range is 15 – 45% depending on how close list price is to street price. Can negatively impact your street price Examples: Distributors:  Distributors At a major distributor generating $1.5M in sales of your products annually, be prepared to spend $100K+: 2% Coop, $30,000 Market Development Funds ($15,000+) for programs not covered under coop. 2% Volume incentive rebate, $30,000 required if you want to be a focus vendor ½ of a Funded resource, $25,000 minimum required Spend as little as possible on their internal marketing programs Some spending is necessary to remain in good standing Spiffs are a waste of money at the distributor level for most software products. Funding employees at the distributor Often a requirement ($45-100K per head) Can be split with other vendors Add some value Getting things done internally at a distributor is hard without these resources Hire a resource from distribution to manage your distributor relationships Less expensive than software executives Know the business intimately and can create shortcuts Developing a Channel:  Developing a Channel Your Channel Program should provide the most emphasis on partners who can create demand for your product. VARs/SIs Multi-level to account for different types of partners 3 tier is norm (i.e. silver, gold, platinum) Top Level offers best benefits Should have an annual fee Not to generate revenue, but we value something more if we actually pay for it Fee is a filter that will get you working with partners who are serious about building a business Build value for top partners Web listing NFR (not for resale software) Priority Technical Support Should differentiate VARs from Volume Reseller partners, as their sales models are completely different. Lowest level is a “catch all” and creates a community of resellers that can be promoted to a higher partner level in the future. Developing a Channel:  Developing a Channel Negotiating the agreement Avoid exclusive agreements Keep it simple Flexibility to change to adapt to future business conditions Keep a 30 to 60 day out Require regular training of partner sales and technical resources Require a written sales and marketing plan that includes shared revenue objectives. Follow up and measure progress against the plan on a quarterly basis. Opportunity registration – create an incentive through additional margin or backend rebate for channel partners share information on potential sales. Provides a competitive advantage and protects the channel partner that did the work. Paid as long as the company wins the business 10-15% extra margin or rebate incentive A way to keep channel discounts under control Channel Recruitment:  Channel Recruitment Remember: Recruiting a channel partner is more difficult than selling directly to an end user. Good partners are being approached by hundreds of software companies to sell their products. The larger the partner, the longer it takes If you haven’t won over the technical staff at a VAR, you aren’t going to be successful. They drive decisions on partnerships. Active Recruitment vs Passive Recruitment active recruitment activities are proactive outbound marketing activities designed to bring partners to Acronis. passive recruitment activities are systems, materials, processes that are set up to ensure that potential partners who contact your company can be responded to in a quick/efficient manner. It is easiest to recruit partners who want to work with you. Recruitment activities should be planned with this in mind. Channel Recruitment:  Channel Recruitment Active Recruiting Activities: Examples Call campaigns with our distributors: utilizing distributors sales people, interested parties are passed back to the company. Examples from Acronis: New partner recruitment campaign for Acronis at Lifeboat Distribution targeting VMware VIP Resellers Planned September telemarketing campaign at Tech Data targeting resellers who have sold Symantec’s LiveState recovery solution. Internal Call and e-marketing Campaigns with our inside channel sales team, made to a specific list of resellers Partner recruitment webinars twice per month PR activity in channel publications: CRN, VAR Business, Redmond Channel, etc. Trade Show Participation: TechEd, LinuxWorld, VMworld, etc. Passive Recruiting Activities: Examples We have a dedicated group of inside channels sales representatives who are responsible for responding to all inbound partner inquiries. We receive inquires from potential channel partners from: Company web site: Place a channel partner area prominently on the web site and have a convenient online inquiry form. inbound calls Channel Sales Organization:  Channel Sales Organization For the small or early stage company Start with an individual contributor who owns channel sales Experienced in channel sales Has some technical capability For the more established or expansion stage company Your Channel Manager should be one of your most senior executives reporting directly to the CEO. Working relationship with VP of sales/VP of Marketing, extremely important Inside Channel Sales Regional Channel Sales Executives Major Account Managers Technical Resources – Training Support Channel Marketing:  Channel Marketing Types of Channel Marketing Activities Joint Seminars/webinars Joint marketing to VAR customer base A must to keep the sales pipeline moving Case by Case approval for Channel Marketing Spend Must be shared investment. DO NOT pay for an entire program Coop accrual only for Volume Reseller or Distributor Usually 2-5% of sales volume Coop accrual for regional VARs would accumulate too slowly Disproportionately Invest in partners with promise Channel Conflict:  Channel Conflict “The channel isn’t adding value” “They didn’t do any work on this deal” “They don’t know how to sell our product” “Why should I give up 30% of my sale to the channel partner” “The channel doesn’t have a sense of urgency” When you hear this kind of feedback, it is a sign of misalignment between your reseller channel and your direct sales organization. Can signal channel training deficiencies, lack of understanding of the channel discount model, lack of a channel neutral sales compensation plan, or a lack of proper rules of engagement in general between direct sales and the channel. Rules of Engagement:  Rules of Engagement Avoid Channel Partner conflict with your direct sales organization. Taking a deal direct, when a channel partner has been involved can be a blow to a relationship. Word spreads like a bad restaurant Create a Channel Neutral Commission Plan for your Direct Sales Team Direct Sales should receive commission on channel sales in their territory Ideally there should be no perceived penalty for taking a sale through the channel Price Quotes Direct Sales must follow discounting rules that do not allow them to undercut a channel partner. If a channel partner gets involved in a direct deal: i.e. deal goes out to bid. Channel partner must given an equal possibility to win. Sales Leads Distribution to channel partners by direct sales. Used as a give and take tool…reward mechanism. Registered Opportunities Guarantees a win for the partner if there is a win for the company All partners must register opportunities to earn a preferred margin rate. Taking a registered deal direct is grounds for termination. Pricing and Discounts:  Pricing and Discounts List Price or Suggested retail price means nothing in the marketplace “street price” is the price of your product that is generally available in the marketplace. Your “street price” is how you should gauge the competitiveness of your product offering in the marketplace A companies “street price” is directly impacted by discounts that are available to the channel. Distributor and Volume Reseller customers impact “street price” the most. VARs and SIs will tend to get full value for the product and retain margin. Many companies leave money on the table by offering too much of a discount to the channel. “Street price” for the company’s product ends up too low. Discounts to the channel are a balance The partners need for a perceived substantial discount, a “good deal” A company’s need to ensure that “street price” is competitive. Set up Channel discounts so that your partners can make a their expected margin by selling at the prevailing “street price”. Pricing and Discounts:  Pricing and Discounts Typical Discounts and expected margins Distributors: 20-45% discount from list price, 3-8% margins Volume Resellers: 15-40% discount from list price, 2-10% margins VAR/SI: 15-50% discount from list price, 15-40% margins Example: Company A - $1000 list price product Distributor: 35% discount from list price, sells for 5% margin Net proceeds to Company A: $650, Distributor Sells for $682.50 Volume Reseller: buys from Distributor, sells to End User for 8% margin End User: buys from Volume Reseller for $737.10, Saving more than 26% from list price. Street price is $737.10, 26% discount from list price, is this what is desired? How does this discount compare with a direct sale? To make 15% minimum margin and to be competitive with the street price, a VAR/SI would have to buy Company A’s product for 626.53 or 37% discount from list price, which is less than the cost to distributor. If street price is too low, fix is to reduce discount to distribution.

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