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SaaS and the Hunter Farmer Debate
Posted by Trish Bertuzzi on Tue, Oct 20, 2009 @ 12:11 PM
We recently wrote a post called SaaS and the Evolution of Inside Sales. We got great feedback in the form of comments, but what I found most interesting was that so much of the dialogue focused on the challenge that arises from SaaS and that challenge centers on the hunter v. farmer model.
Here are some select comments:
Having been a VP of Sales for 5 years with a SaaS company and now a Founder of SaaS company I have found that two things to be true:
1) People still buy from people and want to know who they are working with
2) The line between inside sales and account management has become blurred.
With a SaaS product I have seen that a inside sales person can make @ $10K sale via the phone and webex (I have not seen a higher sale without someone having to jump on a plane) but once that sale is made that same inside sales person then becomes the account manager also.
The customer only wants to "deal" with the same person who sold them the product. As most SaaS sales are a subscription, account management becomes critical. The SaaS model falls apart if the renewal dip below say 85%.
So, while you may be able to make the sale inside, you will eventually have to have some kind of field team continually building and strengthening customer relationships
posted @ Wednesday, September 23, 2009 8:19 AM by Jonathan
A little personal rant, I have purchased a few SaaS offerings, and I have to tell you that it is very frustrating how little attention I received after the purchase is completed. I want my insides sales rep/account manager to care about me after I sign that contract and pay my bill. Don't assume I am going to sign a contract for year 2 if you treat me so poorly. I have 2 contracts due this month and I have had the rep forget to call me at a time that we scheduled, assume that an email is enough information, and arrogantly assume I am going to sign up because you did all this. Better processes are needed, better coaching is required - I will not buy from a robot but a respectful person on the other end of the phone. Rant over. ; )
posted @ Wednesday, September 23, 2009 9:41 AM by Noreen Vincent
I would add that SaaS is beneficial to buyers in that their risk is reduced by only renting for a short period of time (typically a year) and that this puts pressure on vendors to bend over backwards for buyers to encourage renewals.
posted @ Wednesday, September 23, 2009 9:43 AM by Robert Lesser, Direct Impact Marketing
Good point about the blur between SaaS inside sales and account management. With many SaaS products, as opposed to being locked in, customers pay as they go. This makes account management, as you cite, very critical. The relationship needs to be continually nurtured to maintain the existing subscriptions and grow ("farm") subscriptions from within. The hand-off can be a tough one; when clients get used to talking to one person, they want to continue that. We have similar blurring going on between inside sales and support.
posted @ Thursday, September 24, 2009 8:57 AM by Shawn
So, it appears customers don't see us as hunters and/or farmers they see us as suppliers. I came across this quote from Sam Walton the founder of Wal-Mart.
| There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. |
So, with all of our talk about buyer centricity, when we segment hunters and farmers are we shooting ourselves in the foot by not giving the customer what they want?
And, if we don't segment the model, do we eventually turn our hunters into farmers and what does that do to our growth strategy?
This is a complex issue so I would love to hear your feedback. I'll post again with what we find. Thanks for listening and sharing.
COMMENTS
This is Jonathan from the first quoted posting. One way I have dealt with this sticky problem is to eliminate the stereotype of "hunter/farmer" all together. I look for people who have who look at sales like building relationships (hunter) but they have the attitude of the relationship does not end when the sale is made (farmer) I ask the question "As a hobby do you collect anything?" If the answer is yes I know I found my person. I also changed the commission structure so that the sales person receives commission on the original sale but also receives (smaller) commission if the person renews their subscription (we charge annually). This commission structure definitely keeps the sales person engaged with the customer as renewal commission can really grow and become predicatable. Finally once the sales person goes over 50 accounts (my number based on experience) there needs to be a discussion of an account manager stepping in. The sales person will protest because of the thought of losing the recurring commission so be prepared to work that out. I am glad to see you are exploring the hunter/farmer issue further. I am interested to see how other people are dealing with this growing issue.
Trish asked me to comment, and I do so happily. The question of how to handle customer renewal in the SaaS model is a very important one - just consider that for a mature SaaS company renewals will count for 80%+ of revenue. It's a complex topic, but we see some trends (we have 50+ SaaS companies as customers and partners): - New logo sales are conducted by a different team than renewal sales. Renewal sales are often a training ground for new logo sales. - Customer success (aka Account Management) is seen as a critical function responsible for customer on-boarding, and sometimes also for handling renewals. In other companies, there is a renewal sales function separate from Customer success/Account Management - The real renewal work happens right after the new customer is signed. If they start using the service right away, see value, and get addicted the renewal will be a snap. If they are not seeing value 11 months into the relationship, last-minute renewal heroics are likely to fail. So much more to be said about this. Trish, maybe we need to do a webinar on the topic :-)
Trish, this is a great conversation and I love hearing all the different points of view. In my experience, customers accept a "team approach" (hunter/farmer, new business/account management or whatever you call it) if they feel their needs are being met. To make selling teams with hand-offs work, there have to be clear roles and transition processes communicated to customers and a "we are working together to make your experience better" attitude from the sales team. Don't we have similar issues when we pair inside with field reps in a team quota situation? I believe the best way to support this kind of cooperation is to establish shared (in addition to individual) performance metrics and compensation. What is your view?
At HubSpot, we recently trialed and then deployed an interesting structure that helps address these issues. We implemented PODS of three salespeople and one Internet Marketing Consultant. The salespeople work with the IMC to on board the customer effectively and introduce the person in the sales process so there is no anxiety in the transition. The IMC is given any special instructions and talks to the prospect before the deal closes; this gives us the best of both worlds- world class salespeople helping prospects make a decision and good account management that keeps them around
Thanks to all who have commented so far! From what I have gathered via conversations both online and off, there is no standard answer to the question. Although it does seem that certain models are more readily accepted at certain stages in a company's growth cycle which in turn is tied to their name recognition and product stability. In our next several posts we will lay out in detail these models and ask for additional input from market thought leaders. Thanks again and look forward to learning more!
If management rewards "sales hunters" for hunting, they will eventually starve in an SaaS world--and so will their employers. This issue was at the forefront of one client project. "Sales hunters" were rewarded for signing software subscription deals. But management was convinced that the hunters would be "complacent" if they were rewarded commission for renewals. It didn't take an objective sales expert to figure out why customers churned. Sales hunters were discouraged from maintaining continuity with a new account, so they didn't. Because they weren't rewarded long-term, lead qualification didn't involve uncovering the value of the customer relationship over time--customers were valued for their revenue RIGHT NOW. Did this result in a "hard sell" applied to customers who were a marginal fit for the product? You bet! Gotta make my monthly quota! It gets better. When subscriptions lapsed (many did), the customers went back into the New Account Pool, which meant the "Hunters" could call on them again, and could be compensated for signing them as a "new account." Think the hunters weren't watching--and hoping--for their accounts to lapse? Nobody can trash a hunter for not going after low-hanging fruit! I wrote about this in a blog "Six Ways Companies Promote Sales Failure," http://www.customerthink.com/blog/six_ways_companies_promote_sales_failure Also, for a related article, please see "Sales Hunters and Farmers Will Starve in a Sales 2.0 World," http://www.customerthink.com/blog/six_ways_companies_promote_sales_failure
At Genius.com we’ve grappled with the same issue. At the end of the day it’s all about providing great service. The question we ask ourselves is: How can we provide the best service to meet our prospects needs based on their buying stage? What processes should be put into place and what’s the best team that we can assemble to deliver upon those needs? We’ve put together four areas of focus and employ cross-teaming to constantly collaborate on meeting customers’ needs: - Account development reps in charge of prospects who need more education before buying - Account managers who work to bring on board new customers - Customer success managers who manage our existing customer’s renewals - Client Services managers who provide additional support to ensure customer success We've been very successful with this approach and compensate the teams based on overall customer success (usage, retention, loyalty) along with new customer acquisition.
lthough customers always see us as "suppliers", it looks like what they are experiencing is hunting and farming behavior.....which is not matching their needs. The "personal rant" comment points out that "I want my insides sales rep/account manager to care about me after I sign that contract and pay my bill". This is the common problem when hunter's are in charge of both new sales and account management. The customer has a good experience up until they sign the contract, because hunters are good at selling new business. When the customer needs service, the hunter fails at it.....because servicing an account is not within the hunter's skill set. Hunters are good at prospecting (cold calling, cold networking, etc.), qualifying, and often closing new business.
Because the customer has such a great experience with the hunter during the "courting process", they naturally will want the hunter to service the account as well....it just makes sense to them that they will continue to have a good experience. But as a sales manager (and as a company), you know that your hunters will not be as good at servicing the account as they were at selling the account. So it is your job when the account is sold to transition it over to an account manager.
As the comments suggest, the last thing customers want is to buy a product from someone (the hunter) they trust and have had a great experience with and then have their trusted salesperson disappear as soon as they sign on the dotted line. They key to a successful transition is a "transition of trust". In other words, until the customer feels that they can trust and rely on the account manager, they will always object to the "bait and switch". Generally this transition period is marked by both the hunter and the farmer working the account, and once the customer feels comfortable the service piece of the account can be transitioned. There are of course many intricacies to the transition, but the bottom line is that the skill sets of your people need to cater to the desires and needs of the client to create a good customer experience.
I have found that the best way to figure out if and when you need to transition different people onto an account is to put together a sales funnel that outlines all the stages of the buying and account management cycle, the buying and selling activities that need to take place to move a customer through each stage, and then map the skill sets of your people/job roles against those activities. That should tell you if and when you need to transition an account to create a customer experience that will result in repeat business.
In todays economic climate, where competition is fierce and people will undersell to get the business, it is more important than ever that customers have an identifiable person they deal with, preferably one they like....
What I find interesting is how sales people are viewed as a commodity. I also find it interesting how organizations are all to happy to pay big money to salespeople to help the business grow, but once it gets sizeable, the same management team finds ways to reduce the payout to the salesperson. It is FACT that the biggest killer to a growing business is churn. It would be interesting to find a company that actually incorporates this into their compensation plans. For example, why would you offer a reduced payout to a sales person for keeping a customer? Is that not as important as earning a new one? Again, instead of commoditizing sales people, why dont we view them as a value add? One thing is for certain, most business owners/CEO's/everyone thinks they can sell, but when the leather meets the street it is a different story. Another point is that people behave the way they are incented to behave. This is not just sales people. How about a discovery of integrating operations into the sales process to give the customer piece of mind. Incenting EVERY team member (employee) to work hard ofr the sale adn keep the customer. I bet that would be a very successful organization. Here is the big question: Are any of you doing that?
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