Thursday, April 21, 2011

Lesson #21: Setting a Sales & Marketing Plan For Your Startup

Posted By: George Deeb - 4/21/2011


& Comment

Sales and marketing planning are my favorite part of building any company, as they are the key drivers of the company's revenues.  The lack of a solid sales or marketing plan is typically the #1 reason a business fails, as any shortcomings here will result in revenues and profitability falling short of goals.  So, this area requires intense focus for any startup to succeed.

First of all, what is the difference between sales and marketing.  Sales is typically human driven, with a salesperson introducing your company to prospective customers.  These salespeople can either be inside salespeople, residing in the home office, or outside salespeople, traveling to clients' offices.  What drives the ultimate success of your sales plan, is the quality of the salespeople in terms of their training, skill base, and Rolodex.  So, hiring the right salespeople with the right relationships will make or break your efforts here.  In addition, it is critical to make sure these people are appropriately incentivized with a meaningful commission plan for closing sales and hitting their targets.

Marketing is typically media driven, where an advertisement or other communication is introducing your company to prospective customers. Marketing can be driven via multiple channels, including the internet, social media, word of mouth, print, television, radio, billboards, events and direct mail, to name a few.  What drives the ultimate success of your marketing plan is a smart marketing team that has properly studied your prospective customer demographics, and placed the appropriate marketing messages in front the appropriate media placements where these customers are looking.  So, hiring the right marketing team with proven experience working within your industry and desired budgets will make or break your efforts here.

Most B2B companies are sales driven organizations, and most B2C companies are marketing driven organizations, with numerous examples of companies overlapping between the two.  The reasons most B2B companies are sales driven are three fold: (i) they are usually dealing with a much smaller base of customers, more easily reachable by a sales team; (ii) corporate customers are typically relationship driven, and want the comfort of working with a salesperson that best understands their needs; and (iii) the average transaction size can get very large, often into the millions, which needs the comfort provided from a face to face meeting to close a sale (e.g., the trust factor).  

So, for example, if you are an auto parts manufacturer, your prospective calling list in the U.S. is pretty small, with GM, Ford and Chrysler your primary prospects.  But, as you can imagine, given the size of those companies, tons of auto parts manufacturers are trying to get their attention, since any one order can make or break their business.  And, only a saleperson with solid relationships in the industry can break through that clutter, get the attention of the key buyers and closes those sales. 

The key downside of a sales driven organization, particularly for large ticket orders, is the lead time can be very long before transactions start to close (e.g., 6-24 months, depending on the product).  So, it will take a lot of money to keep the business funded until revenues start driving, especially when trying to break into big Fortune 500 companies, where established relationships and processes are hard to change.

The reason most B2C companies are marketing driven organizations really comes down to one primary reason: media is the most efficient way to get in front of millions of prospective customers.  It would not be practical building a salesteam to call on 300MM Americans.  Media comes in multiple forms and reach, from 500MM unique monthly visitors on websites like Google, YouTube or Facebook, to 100MM households on cable channels like Discovery Channel or History Channel, to 10MM people that drive by a certain billboard each month to 5MM people you can direct mail to the National Geographic subscriber list to 1MM people that read the Chicago Tribune.  You get the point, lots and lots of different marketing options, based on your desired medium, reach, demographics, frequency and budget.

As a startup, your marketing budgets typically can't afford that thirty second ad on the Super Bowl for $3MM, despite almost one billion people watch the game worldwide.  You need to be much more frugal in your initial spend, looking for cost effective (or even free) tactics.  Especially since you want to test all tactics first, with small budgets, to make sure they are working as planned, before hitting the accelerator and spending a bigger budget.  Here you are talking about doing search engine optimization of your website for free inbound traffic, keyword based advertisements in Google's search results on an affordable cost per click basis, leveraging the powerful word of mouth benefits of social media via Facebook or Twitter, affililate or cross marketing relationships with similar businesses, and PR based communications, to name a few.

The downsides of marketing are: (i) it can get expensive for any budget, so you will need to have cash resources to spend; (ii) the results are not always perfectly attributable to a specific marketing piece, so you may not be able to know with 100% certainty which tactics are working better or worse than others; and (iii) we are living in a world where small budget startups are competing with big budget brands for the same marketing real estate.

Given the importance of these topics, I will dig into more details in following posts.

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