MaRS Library Salesforce.com: Lessons in building a customer base
Securing early customers and building a customer base is one of the greatest challenges for startups in any industry. Even before it had a sales team, Salesforce.com had customers.
Marc Benioff, Salesforce.com’s CEO, made personal calls to those in his professional network to find companies who would be willing to try his online customer relationship management (CRM) software.Eventually a friend who ran a company called Blue Martini Software (since acquired) agreed to try out the service.
Diane Mark, Salesforce.com’s product manager, gained the company’s second customer while waiting in line at the local market. She ran into a former colleague who was working as a sales manager at iSyndicate, and won a meeting with the company’s executives who quickly closed an agreement.
Practising a very personal brand of guerrilla marketing, all of Salesforce.com’s employees were encouraged to reach out to friends, families and any other contacts they could.
The Salesforce.com beta site launched in August of 1999, and a month later, the company had five corporate customers. These customers were given free site subscriptions for their sales teams in exchange for their input into the design process as Salesforce.com moved from beta to full launch.
Salesforce.com employees came up with the idea of adding a button to the site allowing these early users to make comments directly to the site engineers. Salesforce.com’s initial customers became the eyes and ears of the company’s engineering team.
Turning “free users” into paying customers
Once Salesforce.com was ready for a full launch, the company hired its first dedicated salesperson. This individual was tasked with converting Salesforce.com’s free users into paying customers, and generating new sales.
The company’s customer conversion strategy succeeded because their early users understood the value of the service, having been able to evaluate it for free, and they were eager for fuller functionality. Additionally, by offering monthly billing without long-term contracts,
Salesforce.com’s solution represented a relatively low-risk undertaking.
When the company began receiving positive coverage in the press, the phones were inundated with calls, and the single salesperson was swamped with leads. To accommodate this new-found attention, Salesforce.com converted their website into a sales rep, allowing interested parties a chance to try out their product. This meant that before any potential customer heard from Salesforce.com, they were already using the service.
New industry tactics for building its customer base
In a market previously dominated by vendors of large, installed CRM systems who relied on face-to-face meetings to close sales, Salesforce.com broke the mould by using phones and video-conferencing to make contact and close deals.
As the user base grew, so did the company’s sales team. They hired bright college graduates, put them through a training boot-camp, and laid out aggressive performance expectations. According to his book, Behind the Cloud, Benioff believes that 25% to 50% of company employees should be salespeople.
Salesforce tracked metrics to analyze results
Benioff and his staff also meticulously tracked metrics to see what worked and what did not. When the company hired Rob Acker, a former Oracle sales manager, Acker noticed that contrary to common belief, the small-business market could prove extremely profitable to Salesforce.com.
While most thought that sales to large corporations offered the greatest returns, Acker’s research led him to believe that very small businesses represented a huge opportunity for Salesforce.com. In this market, Salesforce.com’s close rates were higher, the time to close was quicker and the cost of sales was lower. In under six months, the company grew the number of sales reps for this segment from four to 20.
Since those early days, Salesforce.com has weathered the dot-com bust and has undergone numerous changes, but it remains a leader in applying the software-as-a-service model. The company has grown to employ over 3,800, and has over 68,000 paying customers. The Salesforce.com story has useful lessons for new entrepreneurs:
Useful lessons for startups from the Salesforce.com story
1. Use real customers to validate your offering.
Salesforce.com made extensive use of early customer feedback to guide their product development efforts. Validating early with real customers kept the company focused on building a solution that created a great deal of customer value.
2. Give it away.
Salesforce.com took the risk of charging early customers zero dollars in exchange for useful feedback on their product. Through their early collaboration with Salesforce.com, these customers became dedicated advocates with an interest in seeing the company succeed. Converting them later to paying clients was easy. Given that they had already seen the value of the service, and were presented with a low-risk payment model, they had good reason to adopt Salesforce.com as their permanent CRM solution.
3. Telephone sales work.
Part of what helped Salesforce.com keep the cost of sales low and weather the dot-com bust was its dedication to telephone sales. By hiring bright, personable college grads who closed deals over the phone, Salesforce.com worked more efficiently and cost-effectively than sellers of traditional, installed CRM systems who travelled to their potential customers’ offices for sales presentations.
4. Use metrics to guide you as you scale.
Management at Salesforce.com was able to uncover a lucrative untapped market by studying their sales metrics. Metrics can illuminate the health of a sales organization and provide management with valuable insight into what works and what does not.
According to analyst reports, Salesforce.com is on target to reach $1.29 billion in revenues for 2009. Not bad for a company that started out with five non-paying customers and no sales team.
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Benioff, M. (2009). Behind the Cloud—The untold story of how Salesforce.com went from idea to billion-dollar company, and revolutionized an industry. Jossey-Bass. San Francisco.