riverside_mike_& richard _ aug 25, 2024 001_some_goodness podca-enhanced-51p
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[00:00:00] Richard: In Forrester's recent B to B e commerce report. They estimated that by 2027 digital sales in the U. S. Will reach 24 percent of total U. S. B to B sales.
[00:00:11] Customers are increasingly wanting to buy anytime, anywhere and often without the interaction of a sales rep. Today we explore what it takes to lead and manage a digital first sales motion. All right. And so here's the intro. Welcome to some goodness where we engage seasoned business leaders and experts to share practical guidance and tips to help new and future seed level leaders maximize their impact.
[00:00:37] My guest today is Mike Fouts, a chief business officer with. Deep leadership experience in sales, enablement, channel sales, and marketing for global enterprises. Mike, welcome.
[00:00:49] Mike: Hey, thank you, Richard. I have been a listener and subscriber of your podcast, so I am not only excited to be here, but I'm honored.
[00:00:58] You've had a great lineup, and I'm really honored to join. So thank you for having me.
[00:01:02] Richard: Oh, that's that's tremendous. That's great to hear. Well, let's just dive in. , just about every industry has been undergoing a digital transformation for a while. So it's not surprising that the sales engine needs to adapt as well, right?
[00:01:15] But before we dive into the details of digital first or a digital sales motion, let's start with what is digital first being to you?
[00:01:25] Mike: Yeah, good question. So we define digital first this way. customers where they are. So, As generations have changed, as things like a pandemic changed, customers want to buy in a different way.
[00:01:40] And we find that a large portion of customers want to have this motion where they have some control over it and they can run that Sales motion. So that's what it means to us. Meet customers where they are. And then when you dive down below that, what we're trying to provide is a low or no touch sales lifecycle motion.
[00:02:04] So to us, that's four things. Try, buy, expand and renew. So they can do their entire life cycle in a digital e commerce manner.
[00:02:16] Richard: Wow. I love that. Try, buy, and then what were the next two? Expand and renew. Try, buy, expand and renew. I think that's a great framework. And as we think about managing a business, I'm, I'm guessing that that has, you know, all kinds of implications of things that you would do differently, right?
[00:02:36] I just think about the transition we've been through in our career from, you know, traditional sales of solutions with enterprise license agreements to then software or anything as a service and subscription licensing model. And then now this whole, digital first sales motion.
[00:02:53] So, what are some differences in terms of managing a business in this way that come to mind?
[00:02:59] Mike: Yeah. You know, I kind of grew up in that era, right? Where we sold a widget, we sold a thing and you had a, motion to do that. And now we've moved into this e commerce motion where we drive the customer to it.
[00:03:11] We go do acquisition, through a digital motion. We drive them into this e commerce business and we may or may not have interaction. And the interaction with it may be a light touch even. So, first of all, that's very different, right? Versus talking to a customer, creating a sales call, running your traditional, sales methodology, right?
[00:03:34] It's, it's very different. So when you get into that model, you're forced. Quickly into a data driven mindset. It's less about, hey, let me go talk to this customer and make sure I check off all the things in my methodology so I can move from one stage to the next. It's more about how do I model this? How do I forecast this?
[00:03:58] How do I look at pipeline? How do I drive pipeline? What's my conversion rate? What's the time to conversion? So moving into that data driven view of it is very, very different for someone like me.
[00:04:13] Richard: That's great. And so forecasting a deal and opportunity versus really having a pulse on the health of your business.
[00:04:22] And, just like you were saying, it's not now widgets, but it's almost usage based on trials or freemiums, et cetera. Right.
[00:04:30] Mike: That's right. That's exactly right. I joke with people all the time. They ask me what's the difference and how did you transition? And it's not for the faint of heart.
[00:04:38] Right? You have to you have to be courageous and you have to be accepting of the data and use it that way. I moved personally from this deal based forecast model, right? Which I'm sure lots of folks use. We grew up with and now we're moving into, this model that is Is all data driven.
[00:04:59] So if it's okay, I'll give you an example. 71%. So almost three quarters of our business are customers, less than 50 users. So when I think about a sales motion, it becomes inefficient.
[00:05:15] And too costly for me to put the traditional salesperson model into that with a head, right? So we have to create this, this base of digital first. And then where I put my sales people and where my investment is, is an expansion. They come in, our typical buyer buys three users, right? When they come in in the digital first motion.
[00:05:41] So then the salesperson's job then becomes. To farm that account and grow it from three to other use cases to more users and so forth. So it really allows me to be more targeted with where people go and where humans spend their time and then take this, uh, traditionally costly customer acquisition model and move it to digital first, which is much.
[00:06:08] Less expensive.
[00:06:10] Richard: That's interesting. And so I'm just, my, wheels are turning here in terms of the implications of that and one is, in a traditional sales motion, we spend a lot of time with proactive outreach and business development and filling the funnel. What I'm hearing here is your funnel is getting filled, right?
[00:06:29] I'll be it with very small number of users. And so it's not necessarily the traditional kind of land and expand and model, but it's how do we capture the opportunities that's before us with these small trial users. And so that upfront engagement is going to be extremely important for you to maximize your growth and turn those five users into 15 into 50.
[00:06:52] Mike: Yeah, that's right. There's a few things that really change for you, right? That's the first one. So, so, so you're pushing at the top of the funnel a lot of volume and velocity. Right that's what happens and that's how you build that particular business , that's the first thing you do and then as you get into it, you're right then it becomes Okay, I want my people, if I can put a salesperson, , in front of an existing customer, they have a very high rate of success, right?
[00:07:23] Of doing something, of growing that, of building pipeline. And everybody says for my entire career, you've heard it, we've all heard it, which is it's easier to sell to an existing customer. It's easier to keep an existing customer. That adage is so true once they come in, , it is easier to sell to them because they use our stuff.
[00:07:46] It's easier to expand and it's easier to talk about different business, , cases and different business problems. So it really does reinforce that old adage.
[00:07:58] Richard: That's great. It brings to mind we have several, , what's known now in the industry is PLG. Product led growth customers, the freemium, the trial based model, just like you're talking about, right?
[00:08:10] With, with the digital first sales motion. One of the things I'm hearing. Yes, some of those things are easier, but one complication is a lot of times, hey, they're getting from their end users or trial users. I don't want to talk to you cause you're just going to try to sell me more.
[00:08:26] Sometimes there's that rub of how do we reach out in a way that's, , the appropriate, value add approach versus. Hey, I know you've got five users. Let's take it to 50. That's why I want to talk to you. Any advice in terms of what you found to be successful there?
[00:08:43] Mike: Yeah, that's a great point and a great question.
[00:08:46] The person I collaborate with most in the organization is our product leader. I do that because we have a PLG motion, right? And, and what I needed him to build in and what we have put into, although it's, it's, It's an evolutionary process, right? This, this will continue to evolve and get better, but we have some basic, uh, AI and machine learning in the product.
[00:09:09] And so we can see what the customer's doing, what they're trying, what they're using, what they're not using when they're nosing around in our product growth. Right. So it gives us background into it. So yes, you do have folks that say, I don't want to be sold. I just want to buy it online. That's fine. Right?
[00:09:28] We have that motion. Go for it. But a lot of folks, what we find is they do appreciate, uh, us understanding what workflow they're trying to accomplish and what they're trying to do. And then it becomes less of a sales motion and more of I see that you've been trying to do this. You can do it this way, right?
[00:09:50] And that's less sales and more consultative. And we get a really good response that way. That's
[00:09:56] Richard: great. So, leveraging the data and the insights that we have on their usage. That's right. We can see, right? And then having a very, consultative approach to engage them and say, Hey, we want to make sure you're getting the most value out of the product.
[00:10:13] That's right. I like that. And are you finding that that consultative sale then maybe changes, your hiring profile of some of the reps that, may have been maybe traditional hunters or inside sellers and now, well, they're not going to be the best fit for following up with some of these trial users.
[00:10:30] Mike: Yeah. You know, we, as a SaaS company and really a true SaaS company, It's historically been a retention, right? So I focused on making sure there's meaningful active use and retaining the customer. What became evident as we moved into this model was you still need that value selling component and people that can articulate the value and why you should do these things and w and how you apply it to your business.
[00:10:57] So if I'm an accountant, how is this going to make me, have more billable hours? How's it going to make it easier for my end user client to upload documents to me, right? Things like that. We discovered. That as we move to it, you absolutely need those, uh, value selling skills. That's great. Well,
[00:11:18] Richard: Great, fantastic conversation so far.
[00:11:21] I want to make sure we don't miss an opportunity to dig into some details around your model of, try, buy, expand and renew. Are there any, elements of those three phases that would be helpful for our listeners to understand from your learning?
[00:11:37] Mike: One thing that kind of surprised me that I wasn't expecting, was how important it was, , to get your website correct from a usability perspective, right?
[00:11:49] You think it's easy, right? Oh, I'll set this up so somebody can do a demo and off you go. Uh, no, there's a, there's a life cycle journey. There is a tremendous amount of data and research and psychology that goes into that. We, uh, initially gave our customers when they would come in their choice of which product they would want to choose.
[00:12:10] Three levels, kind of small, medium, large. Uh, in, in the first iteration, they always chose the small version, the cheapest version, then decided after doing a bunch of research and talking to an external agency who specialized in e commerce, , we defaulted them into the most expensive package and forced them to pick something else, our conversion rate into our higher price package is almost a hundred percent.
[00:12:39] Wow. It's incredibly rare that when someone comes in and does a try and then moves into the buy motion, incredibly rare that they downsize into a lesser version. So, you know, just little things like that, that you don't, you don't think of, or you might not have as a sales leader and a traditional direct or indirect sales leader, you might not have that expertise.
[00:13:01] So interesting. And we had to go get some, some of that knowledge externally to help us design that.
[00:13:07] Richard: Well, that's a great insight. And, , like you said, something that I didn't really think about, , or expect, the implications of how you design and set up your website, the workflows, the things that you default them into.
[00:13:18] That's fascinating. One thing that comes to mind is, okay, there's some differences in how we engage our customers. There's some differences in how we manage and forecast the business and potentially the, , hiring profile of our people to follow up with that, , that trial user. Let's switch gears to from, , direct sales to indirect and the partner community.
[00:13:39] I know you've done a lot of work with channel and partner and selling to, through, and with what comes to mind in terms of some implications of a digital for sales motion for channel partners or just other partners in general.
[00:13:51] Mike: Yeah, there's, there's really, a few things that, that came into play here, right?
[00:13:55] And, I'll be very transparent and, open about it. The first one is it changes your model. Right. So, you aren't required to run a standard two tier distribution model, right. So, so that's the first big change. The second one is around, incentives and compensation. So for example, I desire to have our partners guide customers into this low to no touch motion.
[00:14:25] It's best for us and it's best for the partner and exact reasons. So we have to make sure. In that example, there's no transactional margin, right? It's occurring on our e commerce platform and our digital first platform. So you have to figure out, , how am I going to incent the partner? And what is the value for if I'm a partner in that motion?
[00:14:49] Right. , so those are probably the two biggest things. And then, , the third one, when you get into it and you come up for things like a renewal. You can easily auto renew through an e commerce motion, right? And digital first. And that's what customers want. So we had to reposition and move our partners into other spaces.
[00:15:13] So, , that's a challenge in and of itself. If you have a partner community, that's used to a traditional transactional margin model and a renewal margin model. Now we had to shift them to different spots and we moved their cheese around is what it amounts to. I love that. There's an old book
[00:15:29] Richard: reference.
[00:15:31] , so really thinking about value, right? The value add of the partner in your sales motion into your business is going to change. That's right. You need to recognize that , and adapt to that. But then the value to them is going to be changed, right? So thinking about how. They're going to win, , could be, totally different than they were used to.
[00:15:52] Mike: That's right. That's exactly right for us. I'll just give you an example of us, right? There were two things, , meaningful active use is an area where we incent the partners on, right? We find value in that and, uh, services. There's still a services component, especially as you move into that expand motion, right?
[00:16:12] And you. Have a customer who says, okay, well, I've used it for three of my folks. Gosh, it's, it's great. Now I want to use it for 10, right. And I want to roll it out to all my lawyers or all my accountants or whoever they are. Uh, that just doesn't happen. Right. , so, you know, that's an intersection with the partner that is a different value proposition than we had before.
[00:16:33] Richard: It's great. Yeah, my mind initially when I thought about partners went to, the follow on, ancillary services, right? As an opportunity for them. But I like that, that usage angle. Can they help our clients, our trial users or early adopters, make sure to get the value out of the solution, use it in the right ways, et cetera.
[00:16:55] Well, this is great. We're coming up on the end of our time. Before we wrap up though, any other tips come to mind, just thinking about, What, what worked well, what didn't work well, any additional kind of quick hit practical tips that you might throw out there.
[00:17:09] Mike: Yeah. Let me give you a three Richard that, that, , really popped up and were big curves for me. So I'll share them with, with your listeners. The first one, comp plans. Not only for the partners which I talked about, but for your internal sellers. So you want to make sure that you don't de incentivize a seller sending someone to that e com and digital first motion, right?
[00:17:33] So you have to make sure that whether it's net new business, Or whether it's an existing customer, you want them to continue to use that platform because it's highly efficient. It's low cost for the company. It's all goodness, but you got to make sure your comp plan's right. Otherwise they'll fight and sell against it, right?
[00:17:48] That's number one. Number two, I mentioned earlier, 71 percent of our business are customers less than 50 users. That's an overall look, but contrary to what you might have heard, size does not matter. So we see small, medium, large enterprise customers that want to at least begin their journey and their life cycle.
[00:18:13] So don't get caught in the trap of, Oh, this is only going to be small customers. We see large multinational customers come in and that's how they want to start the process. So keep that in mind. And then, , for those that also think about this component, we measure marketing differently. , so let me give you an example here, right?
[00:18:36] Our average purchase is three users, and that's roughly 1, 000. It costs us in marketing, it costs us 1, 000 to acquire that customer. So in a normal model, you would look at that and go, that is the, that's terrible that we're doing. You're spending 1, 000 and you're getting 1, 000.
[00:18:56] What are you doing? But in this model, the average customer life for us is six years. So if, even if I don't sell them anything and I don't do any expansion, my real ROI is a minimum of 6, 000. So it's a six to one ratio. We had to, we had to upend the way we looked at marketing, measured it, thought about it and, and derive value from it.
[00:19:22] So that's a, that's a little tip I'll share with everyone as well. That's
[00:19:26] Richard: really great. I was initially thinking, okay, we've disrupted the traditional marketing funnel a little bit, right? Right. And so some of those conversion metrics kind of go out the window, but I didn't really anticipate you saying that there's that long tail, right?
[00:19:41] A trial user. I mean, six years is compelling. And then, and that's, if you do nothing, it's six to one. That's right. Just think about, , Hey, let's let them kind of marinate a little bit. We've said that we've met a lot of opportunity to, to expand, right?
[00:19:55] Mike: Yeah. If you add two years over the course of that six years, all of a sudden your ROI is expanded significantly.
[00:20:01] So yeah, fascinating.
[00:20:03] Richard: Well, thank you for that. , great practical tips, great learnings. I know everybody out there will appreciate it. , as we wrap up today, , I gave you a heads up. , we love to just kind of think about goodness in, in all terms. And so outside of our discussion today of digital first sales motion, anything come to mind you'd like to share with others that you're finding goodness in?
[00:20:22] Mike: Well, for those that know me, , and if you don't know me, I love to read. I only read nonfiction, , so lots of biographies, lots of history and things like that. So I'll share with everybody one of my favorite books of all time. It's called American Icon, and it's the story of a Ford Motor Company in the, , financial crisis of 2007 to 2009.
[00:20:44] And it's number one, it's well written. Number two, it's a story of how Alan Mulally came from Boeing to Ford as their CEO. They did not accept any government bailout money, transformed an entire organization of 300, 000 people, and it's a great leadership story. It's got tons of great tips in there about how to manage and lead through a transformation.
[00:21:09] Plus it's a fun story around it. So, , that's my, , goodness. I'll share the goodness of that book with you and your listeners. Oh, that's fantastic. , I'm
[00:21:17] Richard: going to have to put that on my list. You can tell from my bookshelf, I like to read as well. Maybe not, uh, as much as you do, but, uh, I'm going to put that on the list.
[00:21:25] That's awesome. Well, thank you, Mike, for your time. You've been, uh, a gracious guest, and we've learned a lot, and I appreciate it. You're very welcome. Thanks again for having me, Richard. Alright. Talk soon.
