How to improve your marketing and sales funnel conversion rates using a deep understanding of what is going on in your buyer’s mind as they navigate through their purchasing process, and experience your marketing and selling? That was one of the questions David Skok posed in his opening keynote on the first day of SaaStock18. Below you will find the entire video of his talk as well as the transcript in full, lightly edited.
- The source of most conversion rate issues
- How to design conversion triggers
- How to design a growth process that matches the buyer’s journey
About David Skok
David is a general partner at Silicon Valley-based Matrix Partners, which has invested in Zendesk and was an early investor in HubSpot where he still sits on the board. Prior to his investing career, he founded three companies, which have gone to have successful exits. His blog, For Entrepreneurs, has become a go-to resource for SaaS startups and companies looking for practical insights and advice on SaaS, sales, and marketing.
You will be able to see 40 hours of similar useful content from the finest thoughts leaders in SaaS at SaaStock19. Grab a super early bird ticket before June 1st.
Good morning. It’s a real pleasure to be back here again. This is one of my favorite conferences in one of my favorite cities, and I think many of you may know that I spoke here last year, and I briefly touched on a subject, which got a lot of interests and people asked me to talk about in a bit more detail. So today I’m going to talk to you about how you can use an understanding of your buyer’s mind to really improve your funnel conversion rates. And before I start, I’d like to tell you a little story of where this journey began for me. A long time ago I started my very first company when I came straight out of college, and it was in the days before VCs and advisors and what have you, and I found myself selling CAD systems to architects with a long nine months sales cycle that was driving me mad.
And so, one day I sat down and said, “I need to try and change this, anything I can do to shorten this would be great.” So I spent time thinking about this and the result of it was I came up with an event and ran the event over one day. At the end of that day, something very strange happened to me. A customer walked up to me and said, can I place an order? I’d never thought that would happen. So I had to get my assistant to quickly run down and type up an order form and go and create a bunch of photocopies from that. And at the end of that day, we had $4 million worth of orders that were taken. So we’d taken a nine-month sales cycle and cut it down to one day. I wish I had time to tell you the full details of everything we did. But what I really want to do is give you the ideas and techniques that were used in that to see if they can help you with changing things that are going on in your funnel.
So to start off with, what I’d like to do is really question the simple basics here. Why do we actually need a growth process at all? So imagine a situation where you’re selling your product, and you go and create a website, and you put a video of your product up on the website, and you then put a price up there. In this case, it’s $10,000, or just under $10,000 and you put a buy it now button. How many of you in this audience are really ready to click on a buy now button for a $10,000 product just after having watched the video? Anybody want to raise their hands. There’re a lot of people laughing because no, you clearly wouldn’t do that. So the question I think is really worth investigating in your minds is why wouldn’t you do that? What problems have to be solved before you’re actually comfortable in purchasing a product? And so what we’re going to do is try to study those particular things then.
I think the answer is that it comes down to two categories of questions and concerns that buyers have that you have to address. And they sometimes also have a buying process where you’ve got to deal with the purchasing agent before you can actually get an order out of them. So what we do to respond is we typically try to break things down a little bit and maybe instead of trying to get you to buy straight away, we say, “Hey, have a free trial of the product and then decide to purchase it after that.” And because not everybody who comes to the website will do the free trial and not everybody does a free trial will convert, you end up with a funnel where not all of these people are flying all the way through. And what I’ve seen, I love funnels by the way, I’ve been spending the last 30 years of my life studying funnels and how they work and what have you.
And the thing that I’ve found is looking at the blockage points is that the thing that’s causing most of these problems is that people design their funnels around how they think things should work. Often times they might go to a conference like this, and they’ll hear a great company like Atlassian who came up with a very cool way to sell, and they’ll say, “Hey, let’s go and copy that.” Or they find out how HubSpot sold, “So let’s go and copy that.” So there’s a fair amount of that kind of thinking that goes on and what I want to try and do here is show you why that runs into trouble. The reason why it goes wrong is typically because you are asking your customer to do something in your sales process that they’re not actually motivated to do. And so we have to think about how to get inside of their brain and really design funnels in a different way, in a buyer-centric way as opposed to a vendor-centric way here.
So I’d like to tell you a little story here and ask you to imagine that you have gone to the station to pick up your partner, but you’ve arrived about half an hour too early and you, in order to kind of deal with this extra time, you wander into a clothing store, and the first thing that happens to you is a salesperson rushes up and says, “Can I help you?” And you say, “Well, no, thank you very much. I’m just browsing.” So you walk off, and you’re actually moving around the store to the sweater section, and you notice that the salesperson is kind of following you. They’re sort of hovering behind you and you pick up a sweater, and you’re just kind of having a look at it and they rush over, and they say, “Yeah, that’s from our new Italian collection. Great designer, that would look really good on you. Would you like to try that?” Can I ask you, does anybody in this audience like what that salesperson is doing? Can you raise your hands?
Does anybody dislike what that salesperson is doing? Can you raise your hands? Okay, so pretty clear. Here’s a different story. You’re on your way to a black tie wedding, but you don’t have a black tie. You’re in a hurry, you rush into Nordstrom, there’s no salesperson around to help you. You can’t figure out where the hell these damn black ties are. How do you feel about not being able to find the salesperson in that situation? It’s not good, right? So why in the first situation do we not want the sales person and then the other case we’re upset because we can’t find a salesperson? The answer to that lies in this kind of well-known diagram by now, which is the buyer’s journey. In the first situation, we’re dealing with a place where we’re not really intentionally trying to buy something, we’re just in the awareness gathering stage. Whereas in the second situation, we were quite far down the journey, and we’re really in the purchase phase where we absolutely clearly wanted to buy something.
I think one of the interesting mistakes that I see most companies making is that they hand their salespeople these leads, and the sales people treat every single lead as though they were all right down and ready to buy. And of course it’s very off-putting, it’s exactly the reaction that we all got here, which is that’s so annoying. Please don’t do that, because that just frustrates me as a buyer here. I understand why the salespeople do that because they think that I’m being paid a lot of money and if my manager found me not selling, they would probably kill me. So I better be selling, so that’s kind of where the thing goes wrong. So I would guess that if you looked at the people coming to your website that only 15% are considering to buy something, 80% are really still in that awareness gathering stage. And only about 5% are really ready to be treated the way you’d like to rump jump onto them, which is they’re actually ready to buy something from you.
So we need a different way of talking to them that really reflects the fact that they are not yet in this mode of wanting to buy. We need to actually help them with different types of dialogues. So the dialogue in the awareness stage is nothing to do with the product. It’s all about the problem and the pain and making them aware of that pain and helping them understand that other people have solved it and they’ve gotten great benefits from it. But whatever you do, do not talk about your product, or do not sell. It peaks as annoying if I got up on stage here as a vendor instead of talking to you about something valuable and educational, I started talking to you about my product and it’s just completely out of place at that point in time. So, later on, you can start talking about your product as you get further down here.
Another interesting thing that happens in the buying cycle that’s really worth understanding and that is, it often takes a trigger to get somebody to move from the awareness stage into a purchasing mindset. And if you can think about it, it’s worth understanding what is your trigger for your particular product, because that’ll help you understand how to talk to people and also, which set of people to focus in on that is likely to have had that trigger happened in their lives as well. I can also tell you that it is possible to create the trigger for people. One of the best examples of this was HubSpot who had with this website grader a score that presented you at the end of your website grading experience, told you how good of a job you were doing with your SEO on your website. If you got a low score and if you’re like most people, you’re not happy with a low score. So that actually acts as a trigger to make you want to jump forward and consider whether you can actually do something better and fix that problem then.
So if we want to get better at this, we need to create a buyer persona. I’m not the first person to tell you this, but what I typically find is that most people have done these, but they’re sitting, dusting, gathering dust, and not really being used. And I have different questions in the way that I look at a buyer persona. So maybe these will be more helpful for you. So really we want to identify who the specific people are by certain identifying characteristics. But then we want to understand what motivates them. What does their boss expect them to do? What are the objectives that they have to accomplish to be successful in their job, in the eyes of their boss? What motivates them personally? What are their aspirations? Then how do they describe the pain that they have? Is it something they’re even aware that they have or do we need to educate them that they have this pain? What language do they use and what triggers might they have?
And then how do they go about buying, what techniques do they use to search for a solution? What language do they use when they’re searching? Which influencers do they talk to? Which websites, which review sites do they look at? These are all important things that help us understand what we should be doing to market to them. And what kind of reactions will they have when they see our product? Will they like it? Will they not like it? If they look at competitors, which competitors will they look at and what will they think of those competitors? All helpful things in helping us construct a path and a message for them. So once we have that, we can start thinking about how to design a funnel. And the essence of this here is we’ve got these four phases. I added a fourth one here, which is the post-purchase phase. This is important in a SaaS company because you need to retain your customers and upsell them to really have a successful SaaS business.
We’re going to really want to design four stages here, one to help attract strangers and turn them into visitors to our sites. Then to convert them from visitors into leads and then when we have them as leads to close them into customers and then delight them and turn them into promoters. So those are our primary design goals when we’re designing our funnel. And that results in a series of different funnel stages, which I ordinarily spend a lot of time on but today I have to rush through, but you can get more info from my blog if you’re interested in more. I would say once you’ve thought about that, typically you’re going to come up with an initial guess of what you think your growth process might be. And here’s a simple one, start with a website and send them to a free trial. Many of you I’m sure have this flow, and what I next to recommend is that you now take the time to think about how your buyer is working through their buying process.
So if you have a group of buyers, create a council of them and ask them what do they actually do as they go about buying the product here. And you’ll find that they probably do things that you hadn’t thought about, like shortlisting a group of vendors and going out and checking reviews sites, and they probably have to present an ROI to their boss. So what we want to become experts at is thinking about what’s going on in their brain as they’re buying. And then also what happens as they see our particular experience that we want them to go through. How are they going to react to that? I’ll give you some more clues on how to do that in a second. But once we have this mismatch between the buyer’s journey and our particular process, we need to fill and change our process. So for example, if they’re shortlisting vendors, why not give them a competitive features listing, which shows them the competitors and why we’re better than those competitors.
Why not, if they’re going to go to review sites, take the trouble to instead tell customers that we have to go and complete reviews so that there’s a bunch of really positive reviews about our product up there. And if they need to do an ROI, which people are typically very bad at doing, can we not do that for them and give them an ROI calculator that spits out a good presentation for them. And then we need to address the concerns that they have. So for example, if many people have a security concern when they deal with a SaaS product, is my data going to be secure? So you can potentially address that by actually going and getting a third party security audit done by a really reputable company and having a white paper on your websites. So just immediately cuts out that particular step of evaluation that they would go through for him.
They may also be worried about whether you’re a safe vendor to buy from if you’re a small startup. And one way I’ve found to be very effective at addressing that is to find a channel and sell through a channel that they feel very comfortable with and trust to overcome them. So at some point in time, as you’re thinking about your funnel design, you’re going to start to think about a go to market model. There are a bunch of different options here. There’s freemium models, there’s low touch models, there’s inside sales and field sales. And I kind of, I don’t if you know this but I was one of the very early people to write about CAC and LTV. And I’ve been very interested in the correlation between the cost to acquire a customer and how complicated your sale was. And in my mind, I drew this kind of diagram, which said, the more complicated your product is to sell, the higher your CACs going to be.
And I thought it would be linear, but when I went out and studied the numbers, and I was lucky enough to be able to talk to Gail Goodman at Constant Contact, and I was on the board at HubSpot, so I had that data. I was on the board of a company that was selling very high-end data warehouse products for a million dollars, and they had a very high cost to sell. So I got these numbers down, and I plotted them out, and I got quite a shock. It’s not a linear correlation at all, it’s an exponential correlation. So in other words, clearly any adding of human touch into your sales motion incredibly impacts the cost of customer acquisition. And you get this 10 inch jump between a light touch process such as Constant Contact had, and the heavier touch inside sales process that we had at HubSpot, jumping from $400 to acquire a customer to $5,000, jumping up to $50,000 if you’re using a field salesperson and a hundred thousand, if you’re using a field sales and an SE person.
So what this clearly tells us is anything we can do to cut human touch out of our sales motion is a really great thing to do. And in order to do that, I think you have to go back and kind of again address what’s happening in your customer’s mind that makes your product complicated to evaluate. Is the price too high, which requires them to go through a long process. Is it complicated to evaluate? Does it have to integrate with other products that they have to test beforehand? So our goal is to redesign the sales process and get rid of the packaging problems, the pricing problems that create these issues. I think one of the best techniques that we’ve seen for this is the idea of a land and expand motion where you use something like a freemium bottoms-up approach to get people using the product without really any friction.
Then you take advantage of the fact that it’s much easier to sell an existing customer that’s seen benefits then that trusts you than it is to work with somebody that’s got no idea who you are at all. And so you’ll see a lot of focus these days on something called a product-led growth model. And certainly at HubSpot, one of the key things that we were always asking was why do we have a need for salespeople at all, why can’t we get to a low touch model? And that’s driven them to give a free version of their product out to everybody, and they use the product to qualify leads. Somebody who’s using the product, who is putting up their hand to say, “I need more features, or I need some help with something,” as a way to get through that stage in the funnel then.
So here’s some fun things that I used when I solved that nine months sales cycle. What I like to do here is find the worst blockage point in anybody’s funnel when I talk to them and then I do a simple thing, which is I ask what is the friction for the buyer as they hit this phase that you want them to jump through and what’s the concerns that they have in their head? And if we can’t fix those, lets either redesign this step or sometimes we can’t fix them at all. So then we have to do something different, which is come up with a really strong motivation to pull them through that friction and to get them to actually do what we want them to do. And if the motivation is not strong enough, they won’t have, you won’t have a very high conversion rate. So let’s take a look at a couple of places where this has been done as examples.
One place is many of you get visitors on your website, but you need to try to get their email address out of them. And so what we do is we drew this diagram, and we realized that buyers have a very high degree of concern about giving anybody their email address. They’re fed up with email overload and spam, so there’s a lot of friction here to get them to do this step. So we try to motivate them by putting something good in the way of content on the other side of the barrier then, and sometimes it works, but oftentimes this isn’t as successful. A redesign of this that I really like is what Drift has come up with, which is the notion of using a bot to talk to them, which looks like it’s something far more helpful and less of a barrier and a pain in the journey for them than that annoying form that stops me from getting to the pdf that I just wanted to have a quick look.
Let me tell you about another area where I think there’s a lot of friction. When you ask sales development reps or BDRs to make cold calls, how many in this audience like getting a cold call? Anybody? Okay. I’ve got one person. Terrific, excellent. So most of us hate cold calls but at the same time, we still subject our customers to them. So let me tell you why I think cold calls go wrong. And the reason why they go wrong is that what you’re trying to do is get a meeting to happen with a sales rep who’s going to put you into that high-pressure sales situation that we all hate. So I think there’s a way to redesign this. And the way I would do this is to basically change the outreach so that instead of inviting them to a sales call, you come up with something that is of high value to the customers. So for example, it could be an educational event, it could be an event where they get an opportunity to mix with their peers and talk about strategy with their peers.
It could be something where you get to show them data that’s of high value to them. It could be a chance to see their own data in a new, it’s anything which is a value to them, not a value to you. So you’ll see at the very end of this presentation, I’m going to give you an idea that I think really makes a lot of sense. Think of your customer as a bank account. You have to make a deposit before you can ask for a withdrawal. And this is effectively making a deposit, giving them something that’s of value, free of charge, no product selling messages or anything like that in there at all that gets them to be interested in. And then from that, I would like to try and build a relationship with the customer. And I also try to build trust because I know that if I can build trust with them, something fascinating happens. They will turn around to me and ask me in a consulting fashion to help them solve their problem.
So instead of selling, you’re now doing something far more constructive and friendly and helpful to them. So here’s something that I saw from one of my portfolio companies, Conductor. They got sold to WeWork recently. They write an email, which is based on public data that they’re able to get at on the search engine optimization problems facing a company. And for this particular company, it says, “I notice you’ve lost a significant amount of traffic, 4,400 visits over the past month. Were you aware of this and what contributed to it? I noticed you dropped off the first page of Google and 11 searches, but there are tons of opportunities, 916 search opportunities that you could fix that with.” So this email is not so much a standard cold email but it really goes out with a very personalized message with concrete data that they were able to pick up publicly. So it’s worth thinking about, is there anything you can get at in the way of public data about your customers that you could use to create valuable content to approach them with?
Here’s another particular thing, how many of you know of Clearbit? Anybody using them? Great. So they have a good customer. Whereas Clearbit basically has a product that will take your single piece of information, like an email address that’s been entered into salesforce.com and go and fill it out with all of the other information like company name, job title, address, things like that, that are used and it’s useful to really help you qualify that customer. So I spoke to Alex MacCaw who’s the CEO and I tried to do the same funnel analysis for him. And he told me that the key concern of their buyer is they’ve seen many products that claim to do the same thing, but they have terrible data. So data quality, the buyer is very concerned to see if the quality is any good?
And then the second thing they’re concerned about is does Clearbit have good coverage of my data? Because if I have a million records, and they only have 10,000 of them covered, that’s not worth a lot of money to me. So the problem they ran into was they, in order to show that they had good data or show the coverage, they had to connect to Salesforce, which required this buyer to go to the IT department and get the Salesforce credentials to login. And this turned out to be a huge blockage point that was causing their sales function not to work well. So what we did, we brainstormed about this, and I suggested that he use a chrome extension which the buyer is very comfortable to drop into their browser. And the chrome extension is very clever because it can rewrite the page, making it look like you’ve actually installed their application and showing you at the bottom the Clearbit enhancement where you can actually see all the enrichment that’s taken place.
And this lets the buyer immediately evaluate the quality of the Clearbit data, and they can also run a report to see what the coverage is then. So what we did here was we did something important, which is we eliminated a dependency on another person in the buying cycle and really created a much simpler and easier, low fear way of getting the answers to this particular stage here. And the conversion rates have gone way through the roof since they started implementing that idea then.
So lastly, I would like to end on products. I think in today’s world, particularly with SaaS, one of the most powerful tools we have to help sell ourselves is our product. The product is underused and under thought of as being a salesperson. But it really is your most powerful salesperson. So what I like to do is go through and ask the question, what is your time to wow? And to start off with, we need to define what do we mean by wow. So I have two kinds of wow moments. I have a mini wow, which is where your buyer has seen something kind of fun and interesting that gets them kind of encouraged to keep with your product. But the full wow is the thing I’m really after. And that is when have they seen enough proof that they feel very confident to actually hit that buy now button and go ahead and purchase from you.
So once we think of those concepts, I’d like to know how many steps are involved, how much time does it take, and how much friction is there, and then go through and remove steps and remove friction. So I want to give you an example of one of my portfolio companies. It’s a company called Salsify based in Boston. And in order to do that, I have to explain a little bit about what Salsify does. So all of you, I think use eCommerce to buy stuff. And what makes you buy is typically all of this really powerful rich content, the description, the photographs, the ability to look at a video of a product, the reviews, all of those sorts of things. Now if you’re Nikon and you’re having to produce that content, it turns out it’s a pain in the backside to pull all this info together. But the bigger pain is that every time you go to a different retailer they wanted in a completely different format. So publishing to different retailers is very painful.
Salsify solves that whole problem because they have connectors for every one of the retailers that are out there and they’re able to just immediately add new retailers for you. So let’s look at their original trial experience. And this is where drawing a micro funnel is super helpful. So once you sign up, they had this annoying thing where you had to wait for them to set up a sandbox environment for you. So they would email you a while later to tell you that you are ready to go. Then you would open up the application, and you’d be faced with this blank slate, and you’d have to learn the user interface. And in order to get some data into the App to be able to do anything worthwhile, you’d have to go and locate an expert that had this data, get an export from them and bring it into Salsify. And then to really get to the true wow moment, the big one, you’d need to see some revenue creation from Salsify.
And the way you would prove that would be to sign up a brand new retailer, instantly publish your data to them and start getting new revenue because you’ve got a new channel of them. So this is a lot of steps here. And let’s show you how bad it looked when they started. So they had this landing page, kind of a boring one, way too many fields on it. And then as soon as you’ve finished filling in that form, you’ve got this annoying thing, which says wait for the email before you’re ready to actually start going. And then when you did drop into the product, here’s this very powerful product, but hey, it doesn’t look very powerful to me because it’s got nothing in it, no data here, nothing too to work with at all. So we went back, and we went through and analyze the problem areas in this funnel, and the signup was a problem, waiting for the email to open, get started was a problem.
Learning the UI was a risky area. The really bad area was locating the content and being able to get that exported because that required somebody else involved and a lot of time typically and a delay. And then signing up a new retailer also turn out to be a big problem because that requires the business group to go and negotiate and do discount calculations and things like that, and a new contract with the new retailer. So lots of friction and problems here. So let’s look at what we solved here. First, we killed the need to wait for an email by immediately setting up a new environment. So here’s what the signup form changed to, much simpler, single email address field only needed and lots of encouragement. The motivation here is to keep going with the process. Seeing other users, three people with testimonials and good names like Coca-Cola and Nine West encouraging to go further.
Then you land in the App and you’re still stuck with this kind of problem phase here where you have to locate content before you can do anything about it. So one solution for this is to give them sample data to play with and that certainly helps a lot. So then if you see that there’s enough value with sample data, then you’re actually more motivated to go and find your own data and bring it in. So now they changed it so that you have the option of sample data as well as your own data. And that still left you with a problem of the risk that you don’t know how to use this very sophisticated product, and you don’t know how to get guided to definitely get to the wow moment. So what they introduced here was guided navigation to make sure that there was no risk, that you didn’t get to the wow moment. Plus also they put human help available in the bottom right-hand corner to ensure that you didn’t get lost then.
So those three actions there changed the conversion rate by a factor of 3X and was the first step that we took in this. But when we go back, we still have a couple of big problems here. The one that was really interesting as we thought about it was how can we solve this long delay to get a new retailer signed up and was a lucky thing that happened, which is Google had come out with something called Manufacturer Center that’s designed to let brands send them information and Google now presents a shopping link on their search site. And if you, for example, put in DSLR camera, they give you this very nice faceted navigation where you can say, “Well look, I want a full frame camera, and I want to spend between this much money and that much money.” But in order for a brand to have their camera show up there, you have to export your data to Google and get it to them in their form. And of course, it was getting another proprietary format for data.
Good news, Salsify can automatically export to Google for you without any work at all. So what we did here was instead of needing to sign up a new manufacturer, they added a button to export to Google, which nobody had at this point in time. And you immediately got new customers buying from you because they were using this Google search to find the product there, so that was pretty cool. So last problem, left here, really ugly problem. How do we get the data into this thing? Well, the more we thought about this, the more we realized that data is actually sitting up there on the web, and we can go and scrape it from other retailers websites and pre-populate Salsify, so that the moment you arrive inside of the system you’re ready to because it’s instantaneously populated with your data, and it shows you all of the problems that you have in your data, missing photographs, inadequate descriptions, things that need to be corrected that are really going to help you fix your problem.
So now we end up with this amazingly nice, slick, simplified whole trial process where you sign up, you jump into the product, you’re guided straight through seeing your own data and what to do and fix about it. You can instantaneously get new business value by exporting it to Google Plus. So hopefully that gives you kind of the mental mindset that I want you to come away from this with, which is this ability to think about your funnel from the buyer’s perspective, not from your own vendor-centric perspective and get these major breakthroughs in conversions. Every time I look at any funnel I’ve been able to significantly help cause some breakthrough like this, just using these techniques here. So I recommend to make this really work that you have a funnel optimization meeting and as you solve one blockage point it will move somewhere else, and the group that you want to bring in, you have to do something important here, which is break down the silos that exist in your organization.
Typically, you have sales, marketing, product, and customer success all working separately. To get a good growth meeting you need to bring all of these folks together and I think the tool to use is a diagram of your funnel, particularly with as much emphasis on the buyer thought process as you’re going through the funnel. And that, if you need it where you have things like a free trial, do micro funnel step by step, by step analysis of all the work that has to happen to get to wow then. I already mentioned this idea to you, I think it’s really powerful. And the other thing that I always like to tell people is I’m somebody who sells a lot as this, used to be as a CEO, but I never ever felt like I was selling. I hate selling, I can’t stand salespeople. What I always found that I was doing was not doing what most people do, which is going straight from the meeting into selling.
I always found that I took the time to build a relationship with somebody. And then once I built the relationship, I went out of my way to try to build trust with them, to show them that I cared about them, and was enough of an expert in solving their problems that I could get them to turn to me and say, “Could you help me solve my problem?” And that’s a fabulous way to sell. So I think if you can change your whole funnel to work like that, it becomes a far more effective funnel from the buyer’s side. So my parting words here are design a funnel that delights, entices and motivates your customers to flow through it. Thank you very much.
You will be able to see 40 hours of similar useful content at SaaStock19. Grab a super early bird ticket before June 1st.