At Lock 8 Partners we spend a lot of time chatting with, and learning from, operators of SaaS businesses. It was in that context that I began trading notes with James Marshall mid-way through the pandemic. In addition to having an impressive track record of leading sales teams, James has generously shared with me his thoughtful views on the never-ending evolution of sales teams. It was on this topic that James and I recently collaborated; and he was kind enough to codify some of his thoughts. Thanks, James, for contributing the following post to the Made Not Found blog!
SaaS sales leaders find themselves in a crucible chapter for B2B sales, as the pandemic has accelerated trends that pressure sales leaders to modernize. To outperform their competition, the best sales leaders will embrace both the 1) digital transformation of their sales organization and 2) the evolution of their sales processes. Although these may sound like daunting endeavors, there are a few easy wins that can have an immediate impact.
Covid-19 and the Battle for Talent:
A limited talent pool and increased competition for candidates is driving sales into a stage of discomfort. Prior to Covid-19, the recruiting battle for sales professionals was already stretching a limited pool of sales talent; and the pandemic has greatly accelerated this trend. Through the normalization of remote work, North America’s hottest tech centers are now empowered to recruit outside their city limits for perhaps the first time in their existence. Fueled by historically sky-high valuations, tech companies from North America’s hottest startup zones have an edge in the battle for a limited talent pool. Put simply, that enterprise sales rep in Knoxville, TN who could historically be recruited by their local startup ecosystem for a $225k OTE (on-target earnings), is now entertaining job offers from Silicon Valley and Austin, TX for $350k OTE.
Technology companies everywhere are being forced to compete for this talent and increase wages for salespeople. However, sales productivity metrics aren’t changing nearly as quickly as a reps’ base salaries. We all know that high OTE’s mean correspondingly high quotas. Studies done by Salesforce have shown that more salespeople expect to miss their FY sales quotas than attain them. According to Gartner, only 6% of Chief Sales Officers are extremely confident about meeting their revenue goals in 2021.
Sales Productivity Must Increase:
It goes without saying that against this backdrop, sales productivity must increase. Fortunately, there is some fruit — while not quite low hanging fruit — that is within reach for businesses that take the time to revisit their sales process. These advantages are found through unlocking the combined benefits of sales technology platforms and sales process innovation.
Platforms: The Digitally Enabled Rep
While it’s often said that today “every business executive is a technology executive,” too often sales leaders have lagged behind their peers. Whereas 84% of marketing teams leverage AI, just 37% of sales teams do. And of that 37%, I commonly observe sales teams with access to a wide array of tools (e.g. an outbound automation platform, a contact database tool, a conversational intelligence platform, Sales Navigator, a video prospecting platform, and a myriad of great plugins for their CRM), but where team productivity is undermined by low user adoption.
Yet the data is clear: companies that leverage AI-driven sales platforms outperform those who don’t. Whereas 57% of top-performing sales teams leverage AI-empowered sales platforms, only 31% of moderate performers and 20% of low-performers leverage AI in their sales process.
Contributing factors to this low-adoption stem from leadership’s comfort level with sales technology. We commonly observe that sales leaders themselves haven’t made the jump into tech-enabled selling. As a result, many 1) don’t feel comfortable coaching their teams to utilize these technologies as part of their sales processes, and 2) purchase technology without accounting for the sales rep’s user experience.
The great news is that SaaS ecosystem for sales has innovated well beyond the current state of its user community. The best sales leaders will evolve their sales processes to support robust utilization of these products, which will bolster their sales reps’ productivity. The return on this investment is swift and certain. More on this in a future post.
Modernize the Sales Process:
The typical B2B SaaS marketing department has evolved to be the data-driven, tech-enabled functional area that it is today. Conversely, the enterprise field-sales process has evolved very little since the industrial age. In the late 19th and early 20th century, John Rockefeller’s Standard Oil ran a large field sales organization where geographically based salespeople opened new accounts and grew existing ones. Unfortunately, the pace of change in our complex world makes it extremely difficult for today’s reps to “do it all,” as their predecessors did. If that sounds like your company’s sales process, I rest my case.
As an alternative, many successful companies divide the sales responsibility into two and three parts (BDR, AE, and to some extent Customer Success). However, even these models fall short of 1) breaking down the motion of sales-led growth into its simplest parts, and 2) assigning those parts to the most competent and cost-effective people and platforms to execute them.
As a quick illustration, let’s look at how a salesperson spends their time and assign a dollar value to their daily tasks. For the sake of argument, we’ll say that this is a “Field Salesperson” who is receives $250k of annual compensation in exchange for 45 hours of their time and attention each week. At $115 an hour, the business has no doubt hired this person for their ability to sell large deals. Yet in 2018, salespeople reported spending just one-third of their time actually selling. The culprit? Data entry is certainly one of them; and in the case of our example rep, date entry comes at a cost of nearly $700 per day. And, that figure comes before we’ve started analyzing how much time a rep spends on building lists, outbound prospecting, creating sales collateral, etc.
By neglecting the work of sales process innovation, companies are overpaying for customer acquisition. We’ve found that clearing the calendar for even one day of planning often allows sales leaders to identify targeted areas for process improvements that shorten the sales cycle and / or lower CAC.
Many startups and small companies will argue that while this kind of role-specialization would be ideal, they are too small to capitalize on it. Fortunately, the white-collar gig economy is stronger than ever through websites like Upwork and Fiverr. Through some simple privacy accommodations, startups are able to utilize this outsourced talent pool, while quickly segmenting their sales process and increase their effectiveness.
In this environment of increasing expectations, sales leaders have two levers which are well within reach. Sales leaders will gain a competitive advantage by 1) driving user adoption from the rich ecosystem of sales automation technologies available, and 2) analyzing their sales process for opportunities to innovate. Today, it’s not hyperbole to say that any startup or midsize SaaS company is just a few tweaks away from unleashing a force of digitally enabled salespeople who are focused on executing their highest-impact revenue activities. When that happens, everybody from salespeople to investors win.
A prior post explored the concept of customer effort as a critical driver of customer loyalty. That piece referenced Gartner research / articles (here, here, and here) which argued that creating an effortless customer experience — far more than raising customer satisfaction — is the key to retaining customers’ devotion. The data doesn’t lie; and I certainly buy into the concept. To a point.
On further reflection, though, I have a few reservations. These doubts are based on nuances specific to enterprise software and customers’ experience with business-to-business SaaS solutions. Gartner’s research appears to have been broad in scope; it seemingly covered customer service interactions around consumer products / services without focusing on specific industries. This post seeks to double-click into some subtleties to consider around customer effort, with emphasis on these dynamics within the B2B software environment.
1. Timing Matters: In B2B software, timing matters when it comes to customer effort. There is a fundamental distinction between the initial set-up period when the software is being implemented, versus the downstream steady-state period when the solution is being leveraged in a live environment by active end-users. For the sake of clarity, we might characterize these two phases / timeframes as “project” work (up-front) versus “process” work (downstream). Notwithstanding the rise of low-friction, freemium 2nd generation SaaS solutions, many complex business solutions still require thoughtful up-front project work. And, although the SaaS model has vastly simplified and accelerated technical aspects of software set-up, rolling out business solutions still demands organizational commitment of time and resources to do so properly (e.g. mapping processes, configuring work-flows, integrating with existing systems, and supporting user adoption). Gartner’s research in support of low customer effort appears to have excluded that start-up phase (project work) and focused primarily on downstream customer support inquiries (process work). The reality is that customers still need to invest to some degree in project work, even if their appetite for downstream process work is prohibitively low.
2. Value Matters: Building on the point above, savvy institutional software customers acknowledge some amount of up-front work is required to get great downstream value from a technical solution. And while all organizations strive to minimize that work (and time), they appreciate that effort and value are correlated. Gartner’s findings aside, customers are willing to invest in implementation efforts…so long as the downstream value they derive ultimately justifies that investment. Customer’s tolerance is a function of both variables — effort and value. Conversely, if effort and value are NOT correlated, the result will be a painful or seemingly never-ending implementation period, customer frustration, and an inevitable drop in customer loyalty. Said another way, the concept of customer “effort” is certainly relative; and customers must believe that their effort will be rewarded AND that the effort should be minimized with an easy solution to implement, administer, and use. It strikes me that all of these elements might be loosely plotted on a graph like this.
3. Timing Matters (Part Deux): There is another timing-related dynamic that encompasses both of the points above. Just as kids want to play with their holiday gifts immediately upon opening them, virtually all software buyers want to take advantage of their technology purchases as soon as possible. In other words, they want to shorten the time to value capture once they’ve contracted to use a software solution (and this is a critical metric for SaaS providers to measure). Experienced customers know that the more concentrated effort they put in, the faster they’ll get value from the solution. Conversely, a leading reason for slow or unsuccessful implementations is a lack of prioritization and effort on behalf of customers…which leads to dissatisfaction and churn. In contrast to Gartner’s research, this is case where low customer effort certainly will not translate into long-term loyalty. Note: There is also admittedly a nagging chicken-and-egg dynamic at play here; and it is worth asking whether these slow implementations would get higher priority with a more motivated customer if we vendors made them demonstrably easier to execute(?).
4. Economics Matter: There is an old saying that people don’t value the things they get for free. Without getting into a philosophical debate about total cost of ownership or open source software, it is safe to say that people’s commitment to any endeavor rises the more skin they have in the game. This is absolutely true when it comes to tolerance for project effort relating to software. Generally speaking, the less a business pays for software, the lower the willingness to invest effort implementing it. Free models command the lowest effort (virtually no skin in the game). Long-term license models (largely antiquated at this point) drive the highest. Many of us can remember a time when organizations paid huge sums up-front for a perpetual licenses…and then these pot-committed buyers would routinely have to spend years and fortunes implementing those same systems. Thankfully updated SaaS delivery and subscription models have put the onus on software providers to demonstrate value quickly and consistently, lest they risk churning the very customers they worked so hard to acquire. In any case, it strikes me as incomplete to say that low effort is unequivocally the highest determiner of customer loyalty. Rather, business model and up-front costs are other factors impacting customers’ tolerance for effort, with a related “effort curve” looking something like this:
In closing, the research on effortlessness brings an invaluable perspective to the rich topic of customer loyalty. But its application in the world of B2B software has its limits and should be applied with some caution. Specifically, while effortlessness may win the day in connection to downstream process work, delighting customers still seems to have a place in the world of up-front project work. Smart SaaS providers will benefit from understanding of customers’ journey with their solution and apply customer experience strategies accordingly. Similarly, it is important to understand a solution’s go-to-market strategy and packaging / pricing approach. Both will impact customers’ tolerance for investing effort, which should also inform the ideal customer experience. And, finally, the concept of “effortlessness” probably ought not be defined as NO effort. Instead, it is more relative in nature, where the work that needs to be done shouldn’t create unnecessary frustration. Said another way, effort is not the work itself; rather, it’s the infuriating customer feeling of “why does it have to be so hard?!” With that said, any and all customer work needs to be seamless and logical so they can derive value from their software purchases with as little effort as possible.
“The key to customer loyalty is an effortless customer service experience.” These seemingly innocuous words caught me flat-footed and punched me right in the nose. I’d been focused for so long on trying to delight customers that the concept of effortlessness caught me completely off-guard.
Since being captivated by the book “Ravings Fans” decades ago, I’ve been an unhesitating proponent for striving always to exceed customer expectations. But a friend and successful entrepreneur recently initiated a conversation that has brought such longstanding beliefs into question. His perspective is informed by two Gartner articles (here and here) with supporting research that challenges the actual business impact of delighting customers…and points to (low) effort as being the strongest driver to customer loyalty. These articles and concepts caught my eye and are forcing a reexamination of some of my long-held beliefs. Below are highlights from those articles along with some accompanying thoughts and considerations.
Based on research done by CEB (2013) with 97,000 customers, the data revealed four major findings:
The article goes on to offer interesting principles of low-effort service. But the truly mind-blowing part comes in a related article that encourages companies to create effortless customer service experiences (and discourages striving to create loyal customers through exceptional customer experiences). By offering statistics on the outcome of low-effort versus high-effort experiences, the following infographic makes this case in a truly compelling manner:
The takeaway from all of this, according to Gartner’s analysis, is that “customer effort is 40% more accurate at predicting customer loyalty as opposed to customer satisfaction.” Unsurprisingly, Gartner also introduces a metric, the Gartner Customer Effort Score, in order to measure the ease of customer interaction and resolution during a request for help.
To determine the score, simply calculate the percentage of customers that at least “somewhat agree” (those who give a 5 or above) that the company made it easy to resolve their issue. Seems straightforward enough in its implementation, analysis, and execution of steps to address the findings.
This all resonates with my anecdotal on-ground experience; and my takeaway from all of the above is that customer effort simply can’t be ignored. And, since the CES appears to be a metric that is easy enough to spin-up without any notable disruption to the overall client experience, there is every reason to give it a trial-run. Although I’m not quite ready to completely ditch more traditional CSAT metrics like NPS and WOMI, we certainly intend to test out CES and report-back the findings. After all, getting punched in the nose once is enough to create a desire to learn from the experience.