Moneyball Meets Sales and Marketing: Tips from Two Masters
Moneyball has come to sales and marketing.
I’m trusting you know about the revolution that hit baseball due to the arrival of sophisticated data and analytics—and if you don’t, well, read Moneyball by Michael Lewis.
It shouldn’t be a surprise, in any case, to hear that the same type of data-mining and number-crunching that turned baseball on its head has revolutionized sales and marketing in recent years. And last month in San Francisco, Xconomy teamed with Polaris Partners to host a private dinner that explored this revolution (hat tip to Polaris’s Dave Barrett for the Moneyball analogy and for driving this collaboration, and to Silicon Valley Bank for helping sponsor).
On hand to steer the course were two leaders in the field: Ken Krogue, founder of Inside Sales, and Sean Ellis, founder of Costa Mesa, CA-based GrowthHackers and Qualaroo. This dynamic duo of sales data led our discussion, which was attended by a stupendous group of about 25 other CEOs and sales leaders who asked great questions and added their own lessons from the trenches.
I found the discussion extremely illuminating, and wanted to share some of the insights from the dinner. It was hard to scribble detailed notes while eating and talking, and, yes, drinking—so I focused on the take-homes and highlights (supplemented by some follow up e-mails from Krogue and Ellis).
Everything Can Be Done Better
That was the core guiding (and testing) philosophy espoused by Ellis. Establish baselines and then constantly experiment to find better ways of selling products, segmenting your customers so that you can run smarter tests. “Every single thing you are doing, there’s a better way,” he said. “Keep iterating and measuring improvements against baseline.”
T-e-s-t. That gem courtesy of Krogue (pictured at left). It’s another way of saying what Ellis said: try different approaches with your sales and marketing materials and test them relentlessly.
Passionate Customers Drive Growth
“Look for ways to create more passionate customers, such as refining targeting, highlighting ‘must-have benefits,’ and better onboarding them into a ‘must-have experience,’” Ellis advised. “Passionate customers are the most important growth driver for most businesses.” (I personally couldn’t think of a better example of this than Uber, the car-for-hire service, which rewards customers with ride credits for referrals—constantly bringing in new customers without spending much, if anything, on more traditional advertising and marketing.)
When is a Customer Acquired? Never!
The biggest dread in software-as-a-service sales is churn. “It sucks, but it’s also an opportunity,” Ellis said. “The problem is that it can really create drag on growth. The opportunity is that it forces SaaS businesses to rethink their entire sales process.” The way to realize that opportunity is to understand that a customer is never acquired.
Speed Doesn’t Kill—It Helps You Live
Speed is the single most important factor in responding to leads, Krogue said. If salespeople respond within five minutes of a lead coming in, the odds of reaching the interested party are 100 times greater than if they wait 30 minutes, and they have a 21-fold greater chance of qualifying that lead—i.e., setting up a follow-up appointment.
Fun Facts About Sales Effectiveness
Most of these bullets and the point about speed are from Krogue’s article 7 Best Practices for Increasing Contact Ratios, which also cites other sources for some of the stats.
—Only 27 percent of sales leads coming in to a company actually get spoken to.
—The odds of a potential customer picking up the phone go up 58 percent if the caller has a local phone number.
—Persistence pays. Most salespeople give up after an average of about 1.5 calls. But it really takes six to nine phone calls to improve contact ratios (the number of contacts per call made).
—The first big problem in sales is that salespeople don’t make enough calls. They should make at least 50 calls a day—and up to 170 depending on the size of the business.
—The best times to reach someone on the phone are 4-6 pm, with 8 am second-best.
—Wednesdays and Thursdays are the best days to reach people. Fridays are actually very good for reaching them, but people are less likely to make buying decisions on Fridays.
—You get three times the number of appointments if you have someone’s direct dial phone number.
—Fax is eight times better than e-mail for reaching people, and LinkedIn is seven times better than a fax. That seemed really weird to me, and I think to others. But, Krogue asked, when was the last time you didn’t read a fax?
Fun Facts About Response Rates (Including Our Dinner Guests)
—An InsideSales survey of the top 540 Web marketing companies, according to Alexa, indicated 45 percent didn’t call back at all when responding to a sales lead, with a 56-hour average response for those who did. “That’s like going to Nordstrom on Wednesday and the sales guy says `Why don’t you come back Friday afternoon?’” Krogue said.
—As a bit of fun discussion fodder, Krogue’s team called the companies of our dinner guests with “real” sales leads. The good news is that only six of the 27 didn’t call back—much better than the world’s top corporations do. The not-so-good news was that the average response time was 17 hours, 22 minutes, two seconds. (Yes, they tracked them down to the second).
One company, Logentries, responded in four seconds!
Other Pearls of Wisdom
Ellis: Large companies should take an “Ocean’s 11” strategy and look for teams that together have all the skill you need. Don’t try to find all those skills in one person—that isn’t realistic. “Startups usually don’t have the luxury for a full growth team, so they need an individual growth hacker that’s pretty dynamic,” he said.
Krogue: Learn from others. “True innovation is taking something that works in another field and applying it to you.”
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