OnStartups

Editor’s note: This article has been guest authored by Brian Halligan. Brian is the co-founder of my current startup (http://www.hubspot.com). He has significant experience with startups and sales. We’re in the process of kicking off the HubSpot blog in the next several weeks with more regular posts on issues of interest to small businesses with an emphasis on technology trends and sales/marketing.

Who Moved My Customers?
By Brian Halligan

I spent the bulk of my career managing sales forces at PTC and at Groove Networks (Ray Ozzie's company, before it got bought my Microsoft). More recently, through my work as a venture partner at Longworth Ventures, I have consulted at a series of startups on sales and marketing strategy. It is striking how the state of the art in terms of sales and marketing has changed in the last ten years and how ill-suited the current tools are for helping executives deal with the new reality. Here are some of the changes/issues I see in the modern sales and marketing world.

1. The Internet Levels The Playing Field: The Internet’s power is in how it “flattens” markets. The internet is really good at connecting the guy who makes left handed monkey wrenches in Atlanta with the left handed plumbers in Zurich. If you need evidence, look no further than Amazon, eBay, and Google who built large companies by connecting makers of niche products/services with consumers of niche products/services in a more efficient manner. Pre-internet, the size of your organization, the number of relationships your salespeople had, and similar metrics were most correlated with success. Bigger was usually better. Post-Internet, the playing field is more even. Even small businesses now can have global reach. Even small businesses can find their most ideal customers – or more accurately stated, can have their ideal customers find them. The Internet has made it possible for many small businesses to acquire the right customers efficiently and compete with much larger enterprises.

2. Top Of the Funnel Has Changed: Much has been written about how the Internet has changed how consumers shop. Little has been written about how the Internet has impacted the way businesses shop. Ten years ago when I was at PTC, if a customer wanted to learn about our products and potentially buy them, he engaged one of our sales reps by calling one of our offices. Information was asymmetric. The sales rep held most of the information and the customer had little power. The sales rep selectively released the information to the customer from the top of the proverbial funnel all the way to the bottom of the funnel. Today, if a customer wants to learn about PTC’s products, I suspect the first thing he does is start Googling, looks at PTC’s website, looks at PTC’s competitors websites, participates in discussion boards, subscribes to related industry blogs, etc. I suspect the potential new customer today doesn’t talk to a PTC sales rep until he is halfway down the funnel intellectually and knows almost as much about the product as the sales rep.

3. Codification -- Old Tools & Old Practices: Most people running sales and marketing organizations in today’s companies learned their trade in the ‘80’s and ‘90’s. The tools used by these people (brochureware website + CRM) are remnants of the 1990s. These tools basically codify the pre-Internet best practices, many of which no longer work. This combination of a staff trained in the pre-internet era using tools architected for the pre-internet era makes evolving sales and marketing practices to leverage today’s business shopping behavior quite difficult.

4. Creating Customers v. Counting Customers: Despite major initiatives around it, most small businesses do not reap much value from CRM investments. It turns out that the important business problem is no longer about counting customer relationships in new ways as solved by CRM tools, rather it is about obtaining new customers in new ways. What businesses need to do is enable customers to find you, filter you from the noise, and foster a relationship with you at the top of the funnel. Today, customers want to manage their relationship with you. This is what some are referring to as Customer Managed Relationships (CMR) as opposed to Customer Relationship Management (CRM).

5. Front and Back Office Not Integrated: The CRM system used by most small companies is either a complicated spreadsheet or something like Salesforce.com, a hosted version of the product Siebel took to market twenty years ago before the business shopping transformation occurred. [If there’s interest, I can create another entry dedicated to the myriad of CRM issues/opportunities I see – too much to fit in this article]. The typical small business has a third party convert a brochure into a website which is hard to edit (so reflects last year’s strategy), is static (so keyword landing pages can’t be created), has a low pagerank (<5), is not easily discoverable with the relevant keywords through Google, provides un-actionable analytics, etc. Both of these customer systems have problems in and of themselves, but the core problem is that the front-office/website (a.k.a. top of your funnel) and the back-office/crm (a.k.a. bottom of your funnel) are not connected.

Ok, so things are changing in the sales and marketing world and the tools no longer work effectively. So, what’s the answer? How does a forward-thinking smallish business leverage the Internet, evolve towards CMR, and actually grow sales? I plan to share my thoughts on these topics in the next installment in this series of articles. Until then, would love to hear your thoughts and ideas in the comments section. I’ll take the best and most relevant of these comments and incorporate them into future articles to further the conversation.