Last night, I attended an event put on by PactSafe. PactSafe is a cloud-based electronic contracting platform and clickwrap API for Saas and eCommerce. It’s one of those SaaS platforms where I met the founder while he was just ramping up and now Brian’s vision is now a reality – so exciting.
The speaker at the event was Scott McCorkle of Salesforce fame where he was CEO of the Salesforce Marketing Cloud. I had the pleasure of working for Scott at Salesforce, and it was a great learning experience. Scott was one of those leaders that always found a way to move the product and the company forward despite any roadblock in the way – human or technological.
One of the points that Scott made during his discussion was that the tech stack is shrinking rapidly in its importance, and the customer’s experience is skyrocketing. We had breakout sessions at our tables where Scott shared story after story where this occurred with Salesforce and ExactTarget clients.
Public Pricing versus Value-Based Pricing
The conversation turned to a discussion on public pricing and self-service sales versus outbound sales and value-based pricing. Having worked at SaaS with both models, I shared my experience with each. I also encouraged the table to download and read Freshbook’s Mike McDerment’s ebook, Breaking the Time Barrier (it’s free).
Fixed pricing requires funding or a significant profit to fuel a company’s growth. If you don’t have a significant margin, you’re going to grow organically. That may be all right if you want deliberate, debt-free growth for your company. But slow growth comes with risks. At a time when the barrier to entry for finding cheaper solutions or building your own is becoming a bigger reality, the market may pass you by. If you’re running a SaaS platform today, the chances are that you need to strike while the iron is hot. As Scott put it, you have to be willing to get your nose bloody.
Value-based pricing offers the opportunity to gain huge profits by allowing your customer to price your goods and services rather than you pricing them. Fixed pricing can be a race to the bottom if competitors pop up – which they often do. Value-based pricing can provide the margin and capital you can use for growth. The variance on what some companies were licensing ExactTarget for versus other companies was exponential at times. While there were baselines no one was encouraged to go under, there was no ceiling. So a financial services global corporation may pay much more per message than a small business signed up on the last day of the sales quarter.
The email industry is a combination of both strategies. Players like Mailchimp had public pricing models, whereas ExactTarget had value-based pricing. Both companies exploded in growth thanks to great products and amazing service – but ultimately ExactTarget won the race, swallowing the enterprise market and getting bought by Salesforce. Value-based profits and aggressive sales growth fueled further investment into the company – and the rest is history.
Trust and Authority
I’ve discussed before that online marketing requires both trust and authority. In the tale of MailChimp vs ExactTarget, both were recognized by the industry. ExactTarget worked hard to gain recognition through industry reports like Gartner and Forrester. They also employed folks that pursued large RFPs, Scott shared a story where they won 5 out of 5 RFPs that stressed the companies growth, but where they were ultimately successful. As ExactTarget won large customers, they leveraged those brands to get more brands. And they had a spectacular account management team that built insanely trusted relationships with industry leaders.
In the case of Mailchimp, they relied on self-service sales, a superior user interface, a fun brand, and a responsive service department. In fact, when I opened our DK New Media office, I got a spectacular gift box from Mailchimp congratulating me. I didn’t hear anything from ExactTarget (that’s not a criticism, I wasn’t on their target list). Mailchimp was listening on social media, recognized me as an influencer, and knew I’d spread the word for them.
MailChimp and ExactTarget both worked to create unique customer experiences. The technology was inconsequential. Both companies deliver an electronic message. ExactTarget’s throughput and deliverability early on were huge draws to the company from enterprise customers, but in latter years it was account management and the ability to craft nearly impossible solutions for global clients. They had authority, then built trust by getting the job done.
Self-Service versus Sales Teams
Self-service is a totally inbound experience and requires an amazing brand and a tidal wave of awareness online. If you have a vastly superior product, you can win the market. I believe Slack has done this. Since we have contractors that we work with that are in and out of projects, I was amazed the first time I received a note from Slack that they refunded money to me for users that hadn’t checked in. How cool was that? Forget the app; I was in love with the experience. (Not to mention adding the giphy integration which keeps the laughs flowing all day).
Slack has also penetrated the enterprise. That’s honestly something we don’t often see with a self-service platform. The C-Suite is often difficult to penetrate with social and content marketing. If our clients want to sell into the C-Suite, we’re typically looking at in-person opportunities like dinners, conferences, and other opportunities. Slack is an exception but had a trifecta of purpose, great product experience, pricing and value, and a ton of investment that created a PR wave that swept online. That’s a hard act to follow.
Sales teams have evolved. We’ve discussed social selling at length, and you’ll see a whitepaper out soon from us with some opportunities for training. One has to remember that the customer journey nowadays has pushed the moment of truth to the doorstep of the company. Some marketers mistakenly believe that makes salespeople order takers. Quite the opposite, salespeople have to be sharp as ever because each prospect has done their research and only contacts them at the end of the buying cycle. Sales people aren’t there to educate the client; that’s often already done. Your Sales team is there to overcome the most difficult challenges.
Sales teams are often a combination of talent.
- Teams have young, fresh sales people that are tenacious and don’t take no for an answer. Since I don’t like negotiating, I hate being confronted with these folks. I’ll ignore their calls and emails all day long because they often talk me into products or services that I don’t need. These sales may make your quarter, but over time they’re destructive to your brand’s experience.
- Wise, industry leaders that have a full Rolodex of customer that they can sell to over and over again because they’ve built trust with those buyers at every company they’ve worked at. These salespeople are my favorite because they recognize the value their solution may bring me, and I trust them to price it according to my needs. They won’t risk selling me something I don’t need because they won’t violate that trust. And they’re a networking resource whether they can sell me something or not.
It all comes down to the experience your business is creating. That can be a virtual experience through a superior product, or it can be a personal experience through the human resources that you have internal. Most of the time, self-service products require a ton of investment in the user experience, and there’s little or no room for frustration because your users chose you because they didn’t want to talk to someone.
While you may save money by reducing your human sales force, you’re going to have to invest heavily in creating a superior experience, fostering great word-of-mouth, and driving awareness through public relations to get the word out. That’s not cheap. And if you’re aggressively pricing your platform to compete in the marketplace, you may not have enough left to invest in the necessary marketing.
A truly superior product experience can overcome marketing expenditures, but that’s the holy grail of product marketing. Chances are, you need to have a nice margin to bring in the human resources necessary to overcome any shortcomings and ensure your clients’ success. Value-based pricing may be a better choice in many situations.
© 2016 DK New Media.