Carrie Maslen,
Co-founder & Managing
Partner of Gilroy Associates

July 29, 2020

5 Things You Need To Nail When Selling to the Mid-Market

The multi-billion dollar mid-market continues to be a coveted space to target. It is also the most challenging segment to sell into successfully, and we liken it to the tale of Goldilocks.

Enterprise solutions, implementation, and pricing are “Too Big”, Small Business products and support are “Too Small”. The mid-sized customer is looking for a right-sized experience with solutions that are right-sized in scope and pricing. The companies who get the mid-market formula right enjoy market leadership in this segment which is so critical to innovation, and job and economic growth globally.

An Enterprise Approach to the Mid-Market is Too Big

Many companies clearly know how to sell into enterprise: They deploy a huge team of pre-sales engineers, sales specialists, and executive sponsors; and have many other teams at the ready including purchasing and legal. The cost of sales is high, but so is the short-term and long-term potential of closing an enterprise customer.

When an enterprise customer believes the vendor can solve their pain point(s) and will be their trusted advisor on helping them grow into the future, the initial sale is just the beginning of the relationship. They understand that rolling out a complex solution will involve multiple phases of implementation and enablement. And they know that the end vision will deliver value for years to come.

We’ve seen companies try to push their enterprise solutions “down” into the mid-market, only to miss on some critical considerations. For example, a minimum quantity of users in the thousands, with the accompanying price, might be appropriate for the enterprise, but it doesn’t make sense for mid-market companies. Along the same lines, very complex solutions with long implementation timelines are often necessary for the enterprise, but they can’t be absorbed by a mid-sized customer without crushing them.

A Small Business Approach to the Mid-Market is Too Small

Similarly, many companies have clearly mastered selling to the small business segment. This customer set is often looking for a frictionless procurement process, a competitive price, and a quick and painless installation. Yes, the small business also wants value from their solution, but an SMB engagement tends to be more about the transaction. In a small business sale, there won’t be massive rollouts or thousands of upgrade opportunities. In fact, this may be the only time that the customer will buy from this vendor.

We’ve also seen companies try to push their small business solutions “up” into the mid-market, completely missing the nuance that the mid-market customer needs more than “just a product.” They need technology solutions to drive their growth, from AI to cybersecurity to supply chain management to collaboration systems. They also need technology investments that will scale and grow as their business scales and grows. In a small business transactional sale, there is often no consideration to the future viability of the solution — a big miss when it comes to the mid-market segment.

The Paradox of the Mid-Market: Getting it Just Right

Mid-market companies have more complex needs than a small business, but don’t have the buying power of an enterprise. They need quick implementations since they don’t have the same depth or breadth of IT staff that enterprise companies have. They can’t afford to wait for a long-term payoff — they need results and ROI sooner rather than later. They think of themselves as large, and by many objective and absolute measures they certainly are; but suppliers, vendors, or manufacturers can’t afford to invest the same resources as they would in an enterprise company.

One Company’s Journey: Developing Their SaaS Solution for the Mid-Market

We recently worked with a company trying to break into the mid-market. They have an industry-leading SaaS solution which they’ve successfully sold into some of the largest companies in the world. They wanted to know if their product would be viable in the mid-market segment.

We recommend that any company trying to win in the mid-market consider their current state for competitiveness and for mid-market relevance in each of the five categories below.

1. Solution

Their solution was designed to automate and integrate multiple elements of a classic enterprise. While their solution was well suited for the enterprise market, it was too complex for the mid-market in its current state. Being designed for a large organization, the full solution was really complete — there were no modules to bring a single department up to speed quickly. The minimum quantity thresholds that made sense for a large customer were overkill for the mid-market.

Our Advice:

Look at your solution set to determine what can be stripped out or simplified to better meet the mid-market segment. As a side benefit, we have also seen these changes improve the customer experience and time to value in enterprise customers.

Determine what can be separated into modules.

Evaluate your minimum thresholds (e.g., number of users) and test them for mid-market relevance and reasonableness.

2. Sales Process

Because of the comprehensive nature of the solution, multiple pre-sales engineers were required to configure, demonstrate, and create Proof of Concepts for the solution. Each engagement started from scratch, and there were no templates to leverage. This all contributed to a 12 – 18 month sales cycle, and another 12 – 18 months until it was fully implemented — all of which are impractical in the mid-market.

Our Advice:

Determine what could be put into templates to simplify each engagement and to enable repeatability without starting from scratch every time.

Look for ways to simplify and shorten the sales cycle to get solutions to the customer faster.

Understand your SG&A (selling, general and administrative) expenses. Is your SG&A sized appropriately for a mid-market deal size and margin?

3. Procurement

Once you’ve reviewed the actual solution and the way you’ll sell it, think about how your mid-market customer will buy. Procurement includes two elements: price and the contracting process.

In our example, the vendor’s product was priced for an enterprise budget, which made sense for the number of users, and for the long-term customer value. But, it was well outside the mid-sized business budget.

Plus, the enterprise contracting process was long and slow. A large enterprise will have a team of lawyers on staff to negotiate terms of an agreement. But an in-house legal team is too costly for mid-market companies, who may need to seek outside counsel to review the legal terms.

Our Advice:

Look at creative ways to price your solution or modules for mid-market consumption.

Determine if and where you can use boilerplate language to simplify your contract.

Avoid customized procurement processes to keep legal costs down.

4. Implementation

As mentioned earlier, not only was the sales cycle 12 – 18 months for this solution, but so was the implementation period! A mid-market customer can’t invest that far ahead of seeing a return. By the way, many (if not all) of the improvements that will pay off for mid-sized customers will also benefit your enterprise customers. For example, even enterprises will appreciate a simplified implementation process, Fast Start modules, and any other improvements that deliver a quicker time-to-revenue.

Our Advice:

Identify innovative ways to shorten implementations from 12 months to 12 weeks — or even further. Think in terms of repeatable templates and avoid customization as much as possible.

Consider where you can deploy partners instead of your own internal professional services team for implementation. This will not only generate revenue and margin for your partners, but it will also free up your internal team to move upstream to more complex engagements.

When you deploy partners as your implementation team, create a customer satisfaction rating system to measure a customer’s implementation experience. Set clear rules of engagement to clearly communicate where you will lead, and where will partners be responsible to manage the engagement.

5. Channel Partners

Most suppliers cannot afford to scale their direct model down into the mid-market segment. The economics simply won’t scale. This is where your channel partners come in. Partners can be an effective route to market to reach the mid-sized customer and play the role of your off-payroll sales and business development teams.

This particular company had channel partners, but didn’t have a clear program or a set of criteria to know which were primed to sell into the mid-market segment.

Our Advice:

Understand the profile of a successful mid-market partner. Keep in mind that there are both objective AND subjective criteria to consider. Make it easy for customers and your internal team to know who your authorized and certified partners are.

Create and communicate clear rules of engagement for the mid-market: How will you work together with channel partners? Who will lead at which stages of the sales process?

Establish clear expectations with your partners regarding business development, and measure (and report) progress in this critical area. Let them know what tools, resources, and insights you will provide (e.g., market intelligence, demand generation, etc.) to help them succeed.

Build a solid channel enablement plan in each of the three tracks to enable your partners in the mid-market:

Business Track: How to sell, position, message

Presales Track: How to configure and demo

Technical Track: How to deliver, implement and support

As you build your mid-market strategy, continuously ask yourself if you have “right-sized” all aspects and interactions: your solution; your sales process; pricing; the procurement process; the implementation costs, timeframe, and resources required. Be introspective about your current go-to-market and selling motion in this paradoxical segment. Invest in your partners so they can represent you as well as any “badged employee” can. And then celebrate your successes in this exciting segment.

For further reading on the mid-market:

From Deloitte: 2019 mid-market technology trends report

From SMB Group: Medium Business Top Technology Challenges

From Gilroy Associates: 6 Mistakes To Avoid When Selling to the Mid-Market

From Gilroy Associates: Mid-Market Sales Strategies (Hint: They’re Not Like Enterprise)

You can find out more about this partnership and the services we’ll offer together here: https://cloudpro.services/cp-ga-alliance

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