Who Moved My Customers? How The Internet Has Changed How Businesses Shop

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Who Moved My Customers? How The Internet Has Changed How Businesses Shop

 


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.

Posted by Brian Halligan on Wed, Aug 16, 2006

COMMENTS

I'd love to see a post that goes into more detail regarding the CRM options out ther.

posted on Wednesday, August 16, 2006 at 11:36 AM by Greg


I'd love to see a post on CRM options as well.

I'm also very interested in how this may / may not change depending on the type of "selling" you have observed. For example, what classically might be considered Biz Dev / Channel Development. Are the rules changing as significantly? What ways have they changed that is different from your list & in what ways are they similar?

It seems to me to that biz dev / channel development has typically already involved a good deal of knowledge about both organizations being know entering any conversation. The goal is more transfering / visioning with the potential partner to develop a compelling joint offering / determine there isn't a fit.

However, I'd love to get your observations. Also, I'd love to know how that type of "selling" can be better integrated into the new type of CRM systems.

posted on Wednesday, August 16, 2006 at 1:26 PM by Sean Ammirati


Two small comments, since I don't have much time to write at the moment.

Related to your point #2 above: I think even business customers are increasingly asking "do we really have to pay for this product / service, or can we get it for free somehow?" My current CEO is a good example: he's not from a tech background, yet he thinks it's likely there's an free/open-source tool somewhere for a lot of things, and he likes to look for it first.

So going to the end of your post, the question you pose about being more effective: I think community management has become essential. It doesn't replace existing CRM systems, but augments them: salespeople should be hanging out in the relevant online forums, meeting people (potential leads) there, discussing the product / service virtually on these forums and other online communities. This didn't use to be necessary, but now I think it's increasingly important.

Gotta run to a meeting ;)

posted on Wednesday, August 16, 2006 at 2:19 PM by Yoav Shapira


Interesting... You cover CRM as a technology but never speak about blogs and wikis as sales and marketing tools. Certainly CRM has many lambs but has anyone ever seen a return???

As you say customers/prospects have a better ability to educate themsleves well before and well beyond the sales person. But at the end of the day sales is still about people. Even on Ebay you check who it is that is buying or selling.

posted on Wednesday, August 16, 2006 at 5:09 PM by Chris


This particular question is focused on leveraging the internet to evolve towards CMR and actually grow sales. Were it more general - less sales specific, other important topics to expound on might include things like service delivery networks to create new revenue / business opportunities between and among small companies. And, possibly simple information management (for the masses) to foster daily business and knowledge efficiencies.

Limiting a response to sales and marketing, I'd echo Sean's posting above and expound a bit to say that being able to simply expose as much information about the business and the offerings, so as to appear as visible as possible, would likely facilitate a CMR sales/marketing model. So, specifically, not only do we need more than just brochureware web-sites, we need to be able to easily track, manage and organize the information about our business and then be able to easily expose that in a controlled fashion.

I'd add that not all very small businesses are completely on the 'other side' yet -- or more modern. The same goes for some of the markets that very small businesses sell into. Some conventional approaches are still going to have benefit, if only they were offered more efficiently. For example, consider an important business service such as an online campaign center where targeted marketing campaigns can be designed and executed with the aid of templates and a step-by-step approach. If done correctly, this can provide benefit better than simply paving an older cow path.

Finally, is it all about software capabilities? Perhaps not necessarily the place to start, but certainly value added services to add later include business and market planning offerings delivered by 'industry experts'. Some successful SMB based companies offer this for their partners, many of which pay to use the services. That's more of an enablement model for sure, but once very small businesses are hooked into paid offerings (such as those enabling CMR for example) that are costed based on success of the business, helping to drive that success then becomes an interesting consideration.

posted on Wednesday, August 16, 2006 at 10:29 PM by David Crisafi


Excellent post. As someone that "learned their trade in the ‘80’s and ‘90’s" this is a topic I've been giving some thought to of late. The popular notion seems to be that marketing is "dead" and salespeople are dinosaurs, which IMO is utterly bogus. It's just a different game that needs to be played now. In fact, I believe that the micro-fractured nature of today's markets actually makes concepts like Reis and Trout's positioning even more relevant than it used to be.

Looking forward to the next installment!!!

posted on Thursday, August 17, 2006 at 1:10 AM by fewquid


Wow. I thought we were the only ones thinking this stuff. Perhaps you'd consider a sidebar on circa 1980's and 1990's PR, too since it was the principle adjuct of sales and marketing in that era. Influencing the influencers doesn't make much sense any more when a company can influence the decision makers directly through various online community properties: blogs, forums, wikis, Skyecasts, webinars. SMBs, long-ignored by the traditional media, have at long last found a way to reach/invite their customers in without going through the expensive gauntlet of media bouncers at the dor of the club entrance.

posted on Thursday, August 17, 2006 at 4:30 PM by Sterling Hager


I think you may be granting CRM's too much power, Brian. My experience is that CRM's are not for the customer, nor for business per se; they are there and are leveraged by management to make sure the sales team is doing it's job. I always looked at Salesforce.com as the internet's version of the factory time card.

posted on Saturday, August 19, 2006 at 10:01 AM by Matt Schultz


I think you need to segment the ‘market’. Sales are different if YOU are small or large, if you’re CUSTOMERS are small or large, if you are competing on uniqueness, price or speed, or if you are selling products with services, or services with products.

For example, the affects of the web really depend on how big you are. If you are small you are just trying to get information out there about yourself. As you grow you want to control the information better and the web eliminates your ability to do this. When you are large you have a legacy and the web only has short term affects (look at Exxon and the affects of the Exxon Valdez).

The top of the funnel depends on how you compete. If you are competing on uniqueness, then the web is used by customers to verify you’re unique. If you are competing on price then customers use the web to find lower costs solutions. If you are competing on speed then they are looking at the broader web mediums for validation.

I think CRM vs CMR also depends on your size relative to your customers. A large customer isn’t going to use CMR to manage a small supplier. A small customer probably is more inclined to use CMR if you are large. (it’s easier than dealing with incompetence typically found in larger firms).

As for tools and integration I think again size and maturity matters. Am I managing hope (I’m small and I hope I have customers), fear (I’m growing and I’m afraid I’ll drop the ball on an important accounts), or anxiety (I’m large and predictability is the key to long-term tenure). What tools I use and how integrated they are really depends on what I’m trying to manage to.

I think you are on the right track with CMR; I just think that you need to segment the market you are addressing with your message a bit more to make it sticky.

posted on Saturday, August 19, 2006 at 10:08 PM by Brian Courtney


Well, well, well...

I read this post with a fair amount of interest and having grown up in the days when sales were clearly identified and leads were stacked up neatly for you to pursue.

The Interenet has clearly redefined the wya people look at software, if they look at it at all. This is the generation of "software as a service". It is also the generation of "I can get to that information at any place at any time with almost any device".

Paradigm shifts in products and services require paradigms in sales and marketing. I think that impulse marketing and sales will be all the rage in the future. I will be doing research or reading something on line and I will be subliminally stimulated to follow a path that I never thought about and wind up somewhere that will ultimately offer something that will be just what I was looking for, but "I was'nt looking for anything".

The innovations of today come because of the Internet. Big companies and small companies have been totally equalized and compete with very similar offerings the same way.

The smart large companies will swallow up all the small innovators and create the shopping malls of 2000s. Where I can look and hen choose from lots of solutions.


posted on Monday, August 21, 2006 at 5:53 PM by Howie Morgasen


Brian, her's some thoughts as promised.
http://therainmakermaker.com/2006/09/18/educated-consumers-need-better-salespeople.aspx

posted on Monday, September 18, 2006 at 9:46 PM by Rick Roberge


Hi,

Nice article but questions remains to answer. I need comments on these questions

1. Should we send mails for direct marketing to our prospective clients.
2. Should we send letters or brouchers?
3. Everybody says filter your product from noise, how I can ????
4. We have a nice product, we have market to serve, but how to connect. News paper are too costly and correct emails address are not available.

posted on Saturday, February 17, 2007 at 5:05 AM by Tariq Mumtaz


Comments have been closed for this article.