Why restricting who you sell to is a good thing
Season 5, Issue 6, say what now?
Fairly recently I suggested to a founder that they should put some measures in place to make it harder to sign up/book a demo and they truly thought I was crazy.
My reasoning was that a high volume of leads that could not be followed up (e.g. fake info in forms) were coming through, weren’t activating, and were just taking a look around. It wasted the time of the sales people who were trying to reach out to them, find them on LinkedIn, and research what company they worked for.
In today’s issue, we’re going through reasons why you don’t want to sell to some people, even if they want to buy from you.
Wasting sales’ time
This one is probably the most well known, and it’s why MQLs exist. If you haven’t revisited your requirements for an MQL in a while, try checking in with sales to get qualitative and quantitave info on Closed Lost leads.
What are the common reasons for why they Closed Lost? Note: getting ghosted or losing out to ‘doing nothing’ is a common and valid reason
Try to track down some call recordings to see if there’s anything like phrases or questions common amongst them
Trace back these leads to how they were acquired, what do they have in common? Do they come from campaigns with similar messaging, similar creative, or similar channel?
Start looking for what these leads have in common and see if you can build any of this into your MQL definition. MQL definitions vary for every company, but lets say you are using the points system and have been giving ebook downloads 10 points, but you’ve found that people who came through a common ebook Closed Lost a lot, then you could make that particular ebook worth 0 points.
I’d also recommend running a session with your sales team on what the results of your research are - there might be some red flags that they can look for early in conversations. You might even end up with a persona to not sell to, one that looks good at first, but ends up wasting the time of your sales team.
If you find commonalities in the marketing that these leads came from, make sure to document messaging/creative/channel that has a high rate of Closed Lost - don’t want to run it again if it doesn’t work out at the end of the funnel!
High churn rates
A big part of the theory of SaaS as a business model is that as long as your lifetime value exceeds the acquisition cost, it doesn’t matter how expensive it is because you’ll earn it back and more in time. But if your customer churns after one year, it’s likely you won’t make that acquisition cost back, and that customer will be a loss, not only from the marketing side of the budget, but also from sales and customer success perspectives.
You can run a similar analysis to the one above, but apply it to churned customers and run it with your customer success team.
Low contract values or low value to the customer
Once again, this comes back to the maths of the SaaS business model, and who hasn’t heard “we need higher contract values” as a sales goal? If it’s going to take you years and years to earn profit from a customer, you will probably get more value in the long run by spending your time and marketing budget on fewer, higher value customers (although convincing your boss that this longer term strategy is better than a short term sale is a difficult one).
Most products care a lot about “stickiness”, i.e. how attached the customer gets to the product, in the hopes of becoming irreplacable and ensuring future contract renewals. Some products or platforms have a way to measure this, or have an onboarding process that focuses on getting to being sticky as fast as possible (also called ‘time to value’).
There is some argument, then, that if you’re selling to a customer who is below your average contract value, they may never reach this sticky point. It could be because you’re a collaborative tool and they only have one person signing up, or you’re a data platform and they don’t really have that much data to ingest. Either way, they’re small, they’re not paying you a lot, and they will probably question what they’re getting out of you when it comes to renewal time.
A lot of these characteristics are often captured in your ideal customer profile (or ICP) - the customer is a certain size or above, has x number of staff, a certain number of global locations, whatever it is. There needs to be a point where you say “this lead doesn’t meet enough of our ICP criteria, so we’re going to refuse the sale to them”. Obviously you do this in a really nice way, tell them you don’t think they will get their money’s worth from you, recommend an alternative, whatever it is.
I had to go through this process in a previous job, where we decided we were going to really discourage leads who passed MQL and even were enthusiastic to buy that we weren’t a good fit for them. After all that if they still wanted to buy, they could, but we would start accounting for them in churn forecasts.
Here’s a messaging example that would work best on the phone, perhaps after a discovery call:
We’ve found [product] works best in [circumstance, e.g. team size > 20]. With teams below that, the feedback we’ve received is that there is [not enough value in the product/specific features missing we don’t plan on building/other].
I would hate to waste your time, and given you’ve said your goal is to [insert goal here], I don’t have confidence that you would get that result through this product.
Of course, if you’re only getting a few of these, it’s not really that big a problem. But when 5% of your sales are made up of them, and your churn target is <3%, now you’ve got a problem.
If this is something that you have a hunch is a problem for you, going about the analysis is a little more difficult than the above suggestions. It’s more likely you’re going to need a team effort on this (and everyone in that team actually care about it). It could include getting customer succes, sales, and even a CEO or country manager involved. If none of these people think it’s a priority, just let it go then. Without a larger buy in, this will go nowhere.
Stickiness, time to value, and ICP are all really valuable concepts to look into if you aren’t familiar with them, and they’re also good terms to throw around when you’re trying to get that buy in.
To sum up, not all sales are good sales, and the more of them you can avoid, the easier your future will be!
Last week I announced the Mehdeeka Focus Network! I was pretty nervous to put it out as I am averse to the idea of this newsletter being sales-y in any way, but thank you for the response to it! There are no spots left which I am extremely grateful for.
The beta group will run through to the EOFY and then I will hopefully (fingers crossed) have a positive update about it!
Shout outs to good resources
First of all, Axel Sukianto is not only posting Australian B2B/SaaS marketing jobs every Monday, he also runs a Slack community that I’ve found very friendly and helpful. Reach out to him via LinkedIn to get an invite!
I met a couple of people recently who had never heard of UTMs (if you have never heard of them, don’t worry about it but it is definitely something you should be aware of). Here’s an explainer.
Here’s an explainer of time to value and suggestions on how to measure it.
A print Mars ad I saw at the airport.
See you next week!