The quarantine effect on B2B sales; free v. paid trials; training power users

This first appeared in the monthly a16z enterprise newsletter – subscribe here.

In this edition

The quarantine effect on B2B sales

During COVID-19, sales teams face a set of twin challenges – reduced IT budgets in an uncertain market and selling when business is virtual. But there is a silver lining: downturns are typically when the most dramatic changes in relative market share happen. Just as the 2008 recession allowed many SaaS challengers to become the new incumbents, today’s downturn can be a boon for B2B startups – the trick is to survive.

From talking with a number of CROs and founders, here’s what the Enterprise team at a16z is seeing:

  • Cash has become very important – TCVs are lower, and we’re seeing a 30% drop in upfront cash, as actual payments are delayed or deferred
  • Major drop in pipeline, with companies that do sales-led prospecting and have direct multi-stage sales + implementation being hit the hardest
  • More involvement of execs, like CFOs, in deals and procurement process
  • Channel is more important, with the proportion of deals coming from channel and renewal rates relative to bookings both up.

So how can sales leaders adapt to this new environment? See below…

– Martin Casado (@martin_casado)

6 strategies for selling in COVID-19

Our enterprise general partners share six strategies:

1. Build pipeline through targeted virtual events. With everyone WFH and easier to schedule, including executives, rethink how you leverage your C-suite. Rather than just doing large webinars featuring execs, use smaller events around specific topics of interest to get your CEO or CTO in front of key buyers. What you lose in quantity, you’ll likely gain in quality and higher intent. But be aware that the pipeline from virtual events may not progress the same as a traditional pipeline, so understand and monitor the conversion rates of your virtual event funnel.

– Peter Levine

2. Get creative with your BDRs (business development representatives). If customers can self-serve initially, that will provide marketing qualified leads for BDRs to follow up on. If you don’t have enough warm leads for your BDRs, consider switching BDRs to customer success managers (CSMs) to focus on adoption, retention, and renewal, since the two talent pools often overlap. Especially in a SaaS business, the CSM role comes to the fore because customer success drives adoption, and adoption reduces churn and drives up renewal rates. In the 2008-9 recession, many SaaS businesses used this tactic, and it often has the added bonus of helping BDRs better understand customers.

– Kristina Shen (@kshenster)

3. To renew customers, be flexible on all levers, except price. In a downturn, it’s easier to retain a customer and renew, or even expand, an existing account than to acquire a new customer. Extending flexibility to customers, when you can, will win you customer loyalty and referrals in the long-term, assuming you can deliver successfully.

However, whatever price you hold now will dictate what prices you can charge in the future and determine your total addressable market (TAM). If possible, when renegotiating or changing contract terms, look to other levers beyond price – flexible payment terms or additional professional services.

– Kristina Shen (@kshenster)

4. Implement a deal desk. Once one sales person gives something away to close a deal, an incentive for a specific deal can quickly become the new standard for all deals. We recommend implementing a deal desk, usually in the form of a mailing list or a chain of sign-off for deals over a certain threshold, to maintain deal structure around incentives and discounts – and prevent reps from giving away too much.

– Martin Casado (@martin_casado)

5. Manage the psychology of your sales people, as well as your quotas. You want to set expectations that are achievable and realistic, not only because people need to get paid, but because great salespeople need to win. For great sales people, much like for a top athlete or prize fighter, confidence is a big part of your game. And the way you get confidence is you win and you have an attitude: “I never miss a number. I usually blow it out. I never lose to a competitor.”

Sales numbers feed that psychology, so what you don’t want to do is have a number based on life before the pandemic, and now, all of a sudden, you are not getting paid and you are losing confidence. Eventually, your psychology will get to the point where you start making silly mistakes. You don’t listen carefully. You’re not patient. You press too hard.

You need to support your sales team in keeping their confidence high and that starts with a reasonable plan and then having an understanding of what’s going on in these cycles.

– Ben Horowitz (@bhorowitz)

6. Look for channel partners with strong customer relationships and pull from the field. Partners who don’t have to do prospecting but can pull you into existing relationships are the better partners right now. This may mean shifting your channel strategy from scrappier, more boutique channel partners to more established players who have the relationship and account control.

Behavior follows business, so look for pull from the field sales team to evaluate a partnership and know that it is strategic. Once you see that pull from the field, you can match up your sellers with their sellers, identify the accounts they’re in that want your functionality, and then do the integration that the sales people want.

– David Ulevitch (@davidu)

Of course, these are just the start. What are the metrics to watch right now? How do you qualify leads? How do you evaluate the risk v. opportunity of channel partners?

Read the full article “16 Questions for Selling in COVID-19”»

To charge or not to charge: free v. paid trials

The beauty of a bottoms up business is that people can try your product for free, and a certain percentage will convert. While a free trial works really well for products that are self-serve, when you move to selling more complex products for the mid-market or enterprise, a product trial often takes work and cost to implement. Do you give away the trial for free and bear that as an acquisition cost? Or do you charge for the trial?

Charging for a pilot puts customer skin in the game, so they invest in onboarding employees, scheduling meetings, and giving you the data and access necessary. Ultimately, you can get to a point where the only difference between a pilot and an actual customer is just the signing of a contract. Alternatively, annual contracts with a one or three month opt-out can give you the commitment from a customer, and the customer has the same optionality from a paid trial.

-David Ulevitch (@davidu) & Kristina Shen (@kshenster)

Listen to “The SaaS Go-to-Upmarket” »

Training power users

Developers are the original software power user, and the ways they work, such as keyboard shortcuts and command palettes, are increasingly becoming features of the software we all use. But when building software for power users, how do you train less savvy users to use powerful features? On the a16z podcast, David Ulevitch and Superhuman founder and CEO Rahul Vohra discuss how to train power users, plus when to expand to a second product, and how to use pricing to position a premium product.

Listen to “Building Products for Power Users” »

Security: humans are the weakest link

The recent Twitter hack reminds us that our digital lives are the new attack surface, vulnerable to social engineering attacks, like phishing, business email compromise, or even just rogue employees willing to work with hackers. And that means we each have to take responsibility for shoring up the vulnerabilities.

Read “16 Steps to Secure Your Data” »

Watch “The New Attack Surface is Your Life” »

***

The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. 

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The Long-Tail Problem in AI, and How Autonomous Markets Can Solve It
Growth+Sales: The New Era of Enterprise Go-to-Market
PREV
The Long-Tail Problem in AI, and How Autonomous Markets Can Solve It
NEXT
Growth+Sales: The New Era of Enterprise Go-to-Market