Landing New Logos: Small Improvements to Make a Big Difference
How many new logo accounts do you need to land in 2014, how much will you to invest to achieve your objectives, and what can you do to get more bang for your buck?
Landing new logo accounts is essential to the health of any business. As hard as we try to maximise the potential of existing accounts, there will be some natural attrition over time as personnel and priorities change. New logos help build your base of accounts to expand, and landing new logos is an indicator of your relevance in the market and your ability to compete.
However, landing new logos is expensive, slow and time-consuming. It typically cost three to five times more to land a new logo than to grow an existing account, and the sales cycle for a new logo is typically several months. This eats into profitability and productivity. New logo acquisition is difficult and uncomfortable, and without focus and accountability, many sales reps push new business development to the bottom of their priority list. You need a game plan for new logo acquisition to get the right level of focus, activity and accountability in your organisation.
Expected Contribution from Existing Accounts
Finding the right mix of revenue from new vs. existing accounts is an important first step in developing your plan. Start by looking back historically at how much of your revenue comes from new vs. existing accounts. Then, ask yourself if you need that mix to change.
As I mentioned earlier, selling into new accounts is typically more expensive and slower than selling into existing accounts, so your mix will impact the cost of sales and profitability. However, maybe you’ve fully penetrated your account base and growth requires getting more accounts. Or, maybe you have too much business concentrated in too few accounts, and the risk of losing an account could put your entire business in jeopardy.
The optimal mix is really dependent on your specific strategy, but your decision should be informed by what is realistic and achievable given where you are and where you need to go.
Average New Logo Deal Size
Increasing the average deal size for a new logo sale will reduce the number of new logos you need to acquire and the investment required to achieve your new logo revenue goals. However, increasing the average deal size comes with its risks, as you are asking someone who doesn’t know you or maybe even trust you to make a larger commitment to you. This can be done through a few ways, such as premium pricing, upselling, bundling and offering incentives for longer-term commitments.
Trying to increase the average deal size might also increase the perception with your customer that you’re expensive. You don’t want them to succumb to “sticker shock” and get frightened off. You need to understand what’s important to your customer and offer them something of value that helps them achieve their objectives. You also need to understand what they expect to pay and just how much they’re willing to invest to achieve their objectives. They may have some real budgetary constraints, and you don’t want to price yourself out of the market.
New Logo Opportunity Close Rate
Close rates, especially in the context of new logos, are significantly impacted by your ability to qualify the opportunity and your pursuit strategy and process. However, if you can win a greater percentage of new logo opportunities, in theory, you will need fewer new logo opportunities to make your number.
Pursuing business in a new account can be like shooting in the dark. When you’re on the outside looking in, there’s so much that you don’t know and can’t see. You don’t really know the nuances of their business, you don’t know the buying influences or the political dynamics and you may not know the competition.
Many sales reps get “happy ears” and spend too much time, energy and resources on a deal that has a low chance of closing. You need to recognise the signals that indicate if the deal is a good fit for you and lose fast if it’s not. There’s no shame in losing if the deal isn’t the right fit for you to realistically win.
Improving the close rate is best achieved by learning what has worked well for you in the past for similar opportunities and having the discipline to replicate the process. When you have a process, you can make better investment decisions, and you can more effectively coach to the process.
New Logo Lead-to-Opportunity Conversion Rate
Here’s where sales and marketing really need to be on the same page. There is value in building a brand, and marketers often build a brand through campaigns that have broad appeal and drive as many responders to a campaign as possible. Publish a great report and everyone will want to download it — more responders means that a campaign was successful, right? Well, not necessarily.
You can run a great awareness-building campaign that doesn’t drive a nickel’s worth of opportunity. Marketers need to create content and offers that are an indicator of a prospect’s willingness or need to buy what you sell. It’s the difference between Top of the Funnel (TOFU) content and offers and Middle of the Funnel (MOFU) content and offers. TOFU is great for awareness and brand building, and MOFU is great to separate the lookers from the buyers. A TOFU offer might be an awesome research study with some tips and tricks to improve individual performance. A MOFU offer might be a buyer’s guide that someone wouldn’t want unless they are really serious about buying. MOFU offers will drive a much higher lead-to-opportunity conversion rate than TOFU offers.
If a MOFU offer meets a pre-determined “Ideal Customer Profile” and is acted on quickly, it will drive a better lead-to-opportunity conversion rate. Research by MIT indicates that lead follow-up diminishes significantly after two hours. Sales and marketing need a service-level agreement that specifies the time frame that a TOFU offer that meets the ICP criteria will be followed up by sales.
In addition to timeliness, you need to consider quality and effort. Better preparation and more rigour will lead to better conversions. Conversion rates should be tracked for every sales rep. The quality of the conversation your sales rep has with a prospect matters and will make an impact.
Cost Per New Logo Lead
This really falls under the responsibility of marketers, especially if you invest in driving traffic to your website through search engine optimisation and paid search programmes, such as Google AdWords. Better targeting and messaging to prospects that meet your ideal customer profile will result in fewer “wasted” leads. Better calls to action, landing pages and web forms will improve the conversion of traffic to leads. All of this drives down costs and drives up efficiency and productivity. There has been an explosion in the number of channels available for marketers to generate leads and opportunities. Depending on your target market, some of these channels might be better options than your current marketing mix. It is difficult to know for sure until you test it.
One caveat here: it is very important to evaluate channels for quality as well as quantity. You can drive down cost per lead, but you can also drive down quality in the process. This will surface as a higher cost per opportunity. It is also very helpful to track cost per new logo opportunity as a check against cost per lead. Keep this in mind as you test and evaluate these different investment options.
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