During a recent Speaker Series, the founders of Segment, Honeycomb, and Radar discussed how founders who identify more with technical users than procurement teams, can make the transition to enterprise sales. If you’ve already watched the panel, read on to learn more as they respond to some questions from the audience.
Does a self-serve bottom-up strategy work well only in early phases?
Christine: It depends on whether you’re talking about overall revenue split or customer count. Self-service is always going to be a great source of lead gen for us, a great way for them to try us out. That split answer reflects who is engaging with your product. Since observability is still pretty new, there’s a lot more folks in self-serve. But honestly, I would be surprised if the enterprise side grew to own as much of that pie in the next couple of years, because there’s still so much interest in, “what’s this new thing? I want try it out and see if it works for my organization.”
Coby: It can be a self-fulfilling prophecy. If you design enterprise tiers at a certain cutoff, all of your revenue will fall into that bucket. It depends on what the market looks like, and if your insertion point is bottom-up and most of your buyers want to buy that way instead of engaging with a sales rep, it probably makes sense to have a larger portion of your revenue come from self-serve. If you’re working with a bunch of buyers who want a consultative process and there’s fewer of them with bigger budgets, then it makes sense to have a shift that’s 90:10 or 80:20.
Peter: If you’re looking at the motion of self-service versus a heavy enterprise sale, really what you’re talking about is how big of a chunk of money needs to be allocated by someone. If it’s a really small chunk of money and people buy it individually at the lowest levels of an organization, you can probably have a self-service model that goes quite a long ways. You see things that are very team-based like Slack or Jira or Dropbox, and they actually have self-service models that do quite well even at scale. If you have a model like Segment, where you deploy in business units, you can’t sell to individual people.
Therefore self-service is only congruent with what you’re trying to deploy. You actually need the CIO or the CMO and you need those people all bought in. You’re going to need a sales process to sell an ACV that encapsulates that whole thing. It depends on what the product deployment is actually going to require from the organization, and if you can atomize it into a bunch of tiny pieces, self-service might scale beautifully. If you can’t, then realistically, it’s gonna be a sales model. As your ACV gets above $10,000 a year, you’re going to have a sales person because it’s just going to be more effective. If you get to $100k ACV, you’re going to have a heavy enterprise motion. It has more to do with the structure of the deployment model than anything else.
What type of content has worked well for your teams to market your platforms to an audience that generally doesn’t want to be sold to?
Peter: I’m going to say something that’s not kosher. The Hacker News community generally has a reputation as being very against marketing. But if you share a real story about how engineers saved the day by solving some hard infrastructure problem, I guarantee you it’s going to do well on Hacker News. and no one there is going think that it’s marketing. But it is marketing. You have to understand the mentality of the person that you’re marketing to. Developers don’t react well to value-based enterprise/executive-level messaging of solutions. But that certainly doesn’t mean that developers don’t like marketing as a whole. It just means that you need to get the message right. For us that has often been writing deeply technical blog posts about how engineers have solved really hard problems.
Christine: The best tactic I learned from a marketing organization was to define a spine of content. “This is our value prop. These are the things that differentiate us from our competitors. Now, let’s spin off a version that our sales team will use and a different version that our marketing team will use.” We’ve been a content machine because of our roots of wanting to engage with our fellow engineers. We want to talk about how to run more effective engineering teams, how to minimize burnout, and how to make more humane on-call solutions. Honeycomb the product is a piece of that, but because we’re talking about problems that everyone has and everyone can relate to, it doesn’t come off as “buy our product” or “here’s a piece of marketing.”
What was your product’s value proposition to engineering leaders and CTOs, as you went to market?
Christine: The thing for us to remember to speak to is that: for engineering leaders, there’s a technical argument for why your product is better, and for people leaders, there’s an emotional argument. When you can tap into the frustration and the burnout, the fear of someone being the single point of failure, and not just the functionality of the product, then it begins to resonate a lot more. “You’ve got a 5 person engineering team that has been tackling this problem. Everyone is unhappy and it’s resulted in a poor business outcome for the last couple of quarters. We can help.” That’s a message that engineering leaders want to engage with because it lives at the intersection of technology and people. Individual practitioners don’t care as much about this proposition.
What technology are you exploring to make the buying process easier for customers? Do you think that technology could ever fully replace the need for human sellers?
Peter: No, I don’t think so. If you’re going to replace human sellers, you need to change how companies buy. Until companies change how they buy, there will be human sellers, especially in the enterprise where the role of the seller is to help the person understand value and help them in their own process of understanding what value they are trying to get out of purchasing a piece of software. It’s a very consultative process of forcing them and the stakeholders to consider what value they get out of it, and getting all of them on the same page. That’s not something that foreseeably can be easily automated.
How do you balance marketing to serve both the bottom-up motion and the top-down motion?
Christine: This is a question that we would ask our marketing leaders. More important than that balance is what’s that inflection point? If you’re, in theory, going to put some content in front of a customer, it’s hard to understand where the boundaries of the bucket are between practitioner content, buyer content, and content that reflects where they are in the customer journey.
Coby: For us, anything that’s one-to-many becomes a persona that we’re going to want to play down the business ROI metrics. It becomes more tutorial driven. Gated stuff like case studies are for a one-to-one sales cycle. It’s about matching the content with the persona and then figuring out how to distribute that, whether through the sales team or publicly.
What are some lessons for the do’s and don’ts of enabling your first sales rep?
Peter: Some advice that we got that we didn’t take was to hire two reps if there’s no prior benchmark for what a sales rep is capable of doing in your particular company market, so that we could compare them and understand relative performance. Something that went right that I would do again is, testing out new messages all the time. Our sales rep had a different position and messaging for every pitch during the first three months. It was valuable to figuring out what the pitch was. Your sales rep should have the flexibility and willingness to do a lot of the dirty work, of setting up a Salesforce instance and doing inbound qualification, etc..
Christine: When my co-founder and I started the company, we were determined to not make the classic mistakes that technical co-founders make. Which is to assume that the product needs to be build first and sales and marketing could be figured out later when it came time to deal with it. We told ourselves we wouldn’t do that but we made all of the same mistakes anyway. I wish I would have grabbed coffee with a sales person and immersed myself in all the pieces that are involved in getting the right contacts, building those relationships, structuring a contract for growth. There was a lot of learning on the job. Don’t reach a point where there’s a six figure deal on the table and you’re sort of blundering your way through.
Coby: One of the things that I learned from our first sales rep is, to embrace a more formal and rigid sales process. My tendency was to be a bit loose in how we would define stages. She brought us some much needed rigor and taught us to hold ourselves to a checklist in the early days to figure out out what the funnel needed to look like. That ended up accelerating a bunch of our deals and helping us move faster.
Christine: Our mantra for our first year was “to meet folks where they’re at.” “We’ll make it work, we just want to get you going.” What didn’t click for me for several years is that flexibility sounds nice but no one actually wants to know or feel like you’re figuring it out as you go. They want to know you have a plan of getting them to the next milestone. They’re putting their engineering organization in your hands, so you have to make them feel safe.
How did you figure out whether the sales process should contribute to top-line value or reducing costs/FTE?
Peter: The two ways I’ve seen it done are both awkward. One was is to ask why, even when the answer to the question should be really obvious to you. For example, you go to a potential customer and you ask them, “tell us about the situation. Why are we here today?” It’s a weird thing to ask, because your response would obviously be, “guess what? We have a solution.” You can just launch into it, but if you pause for a second and further ask, “why are you trying to fix XYZ?” They’ll probably start to explain that their engineering team doesn’t have the resources to deal with it. Then you ask “why?” again and they’ll tell you they don’t have the budget for it. Finally, you get to ask how big the budget would be.
It’s very awkward but our second rep had the gumption to ask why enough times that he would get the answer to the “what is the actual value here?” question. It becomes a trivial sales process because now you know what the budget is and you offer to help them solve the problem for half the price. The other way is to just ask for a really high price and when they start squirming, you ask, “what is the value to you?” and you get them to explain why. In order for them to justify a lower price, they’re going to have to explain the ROI that they see.
Coby: I agree with Peter. At a high level, the sales person’s job is information gathering. If they’re successful at that, they’ll uncover a high price point and a clearing price that’s favorable. In terms of aligning incentives for your buyer, consider whether that buyer is going to get a promotion and look like the hero of the company, either because they saved the company a bunch of money or deployed something that’s going to bring in revenue. It’s an easier narrative for someone to say, “I made X, Y and Z investments that yielded $5 million in increased revenue. Then I made X, Y and Z investments that saved the business $5 million in costs.” That’s why part of the top-line-growth ROI is where you see some of those bigger ACV deals.
If you had to go back and do it again, what would you do differently for building your sales process or team?
Coby: I would hire the same people but if there’s one thing that I wish we had done a little bit earlier, it would have been to experiment with a more mid-market seller to compliment some of the enterprise AEs. I would have looked for someone who was more experienced with quick transactional deals at a different type of price point, than where the enterprise reps were working.
Peter: I would definitely get a closer who’s willing to be pragmatic and do the BDR work. You can also outsource BDR work so there’s no reason to hire a person in-house.
Christine: I would go back and tell myself that there needs to be a plan for what the touch points and signals are for getting someone to try the product. I would go back and figure out what “good” looked like and consistently measure against it rather than meeting folks where they’re at.