What’s a Rolodex, Grandpa?
Salesforce.com has disrupted the marketing industry by digitizing customer relationship management functions for small and medium sized business. And in doing so, grown to a $6.5B business, with 67% CAGR since 2001.
Company: Salesforce.com (CRM)
Austin Davis
Word Count: 785
Imagine a company with multiple offices around the world. Each office houses “cube farms” with hundreds of cramped desks, and sales reps crunched over their computers, “dialing for dollars” many hours a day. They have a paper list of 1000’s of names, phone numbers, and potentially email lists, and as they make their outbound calls, repeat the same generic speech to try to convince their B2B prospects to show interest in what they’re selling. A boss casually strolls over to rep’s desk and asks if he could get a summary on leads and opportunities for product X, in region Y, and how has that trended over the past 18months. The rep defeatedly gets up and walks into the even larger file storage room, where miles of file cabinets are stored which hold customer and lead records, which will take hours to sift through.
Although somewhat dramatized, that is a view into a world where enterprise Customer Relationship Management (CRM) software doesn’t exist. Enter Salesforce.com (SFDC), who has come to digitally transform the way companies manage their sales processes. Founded in 1999, SFDC developed its first CRM solutions for B2B commercial applications, and has built a portfolio of products featuring cloud hosting, process automation, content marketing management, and others1. CRM software did exist prior; however, only in a point solution, customer owned/hosted medium. SFDC has digitized the space, coming to offer cloud-enabled services so customers can host all their data in the cloud, share with their global business, ensure backup for safe-keeping, and other valued activities 1.
Why is CRM so important? Although more reasons than fit here, we can simply consider the world of client A’s “Existing” vs. “New” customers. For “Existing” customers, retention and relationship management are key, so Client A can maintain a solid base of sticky, healthy recurring revenue. Through industry surveys, it’s believed ~66% of legacy customers leave for reasons other than location change, bankruptcy, or move to a competitor. Speculatively put, customers leave then because they simply feel ignored or are not receiving the service level desired 2. For “New” customers, it’s all about widening and converting the sales funnel to grow sales. This requires significant investment in time, headcount, and strategic tools to both 1) interact/generate the most leads, and 2) convert them to sales. The sales process has shifted to where customers are now more than 60% of the way through the purchasing cycle, so they are more informed, and less interested in spending unproductive time with sales reps 3. Thus, inbound marketing and digital content strategies have become the focus of many firms to attract those leads and convert those in their ‘sandbox’ who are more likely than cold leads.
For many years, smaller firms simply didn’t have the scale to dedicate large efforts to marketing and CRM, and the ones who did, saw unfortunately low RoI on spend. With these new digitized automation products, firms at any size could now compete with their enormous competitors by operating a sales team making just as many outbound distributions (i.e., email campaigns) as their competitors. Or, they could focus their attention on the customer information side, becoming as ‘smart’ as possible on any given lead, thus translating to much higher likelihood of conversion. They also could now transition their marketing models from ‘outbound’ to ‘inbound’, realizing an estimated 3x improvement on every dollar spent on content marketing efforts rather than traditional outbound 4. The reason for this extra low cost, is that SFDC offers its products through a Software as a service (SaaS) model, where customers pay cheap, monthly rates hosted on SFDC’s cloud servers 5.
This inexpensive digital model has disrupted both B2B and B2C verticals, growing SFDC from $5MM (2001) to $6.5B today 1. It has allowed for serious growth within the software and technology space, and allowed small and medium size businesses to focus on their core products and innovation, rather than costly CRM tools and sales/marketing tactics. SFDC can do more however. First, social media. Even in the B2B space, over 41% of a LinkedIN survey audience believe it’s effective in marketing 6. And this at relatively low cost – 81% found increased traffic occurred with only 6 hours/week invested in social media marketing 7. Innovating on products which can track and retain social media activity, linking to other/existing CRM prospect data, could help customers continue to increase conversion ratios, as well as monitor content marketing and digital campaigns. Secondly, integration and “working in the cloud” is another important opportunity. It’s extremely time consuming to operate huge databases, constantly up/downloading csv files. Providing more nimble platforms for working directly and integrating to existing business tools would allow for even more efficiency, particularly as businesses scale.
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Citations:
1 Reference for Business, “History of salesforce.com, Inc.”, http://www.referenceforbusiness.com/history2/84/salesforce-com-Inc.html , accessed November, 2016.
2 SuperOffice, “4 reasons why your CRM system is your most valuable asset!”, http://www.superoffice.com/blog/4-reasons-why-your-crm-system-is-your-most-valuable-asset/ , accessed November 2016.
3 HubSpot, “No Sale Left Behind: Sell More, Better, Faster With Inbound Sales”, http://blog.hubspot.com/marketing/how-to-do-inbound-sales-slideshare-hspr#sm.00001gv36xv4nke1txzfj3jaoe4b7, accessed November 2016.
4 Jumplead, “Why Inbound Marketing? Statistics on Inbound vs. Outbound Marketing”, https://blog.jumplead.com/2013/11/29/why-inbound-marketing-statistics-on-inbound-vs-outbound-marketing/, accessed November 2016.
5 Salesforce.com, “Salesforce.com Annual Report 10-K 2016”, http://s1.q4cdn.com/454432842/files/doc_financials/2015/Annual%20Report/Updated/Salesforce-FY-2015-Annual-Report-forweb_v001_n0jhq9.pdf , accessed November 2016.
6 LinkedIN Slideshare, “Content Marketing Spotlight Report”, http://www.slideshare.net/hschulze/b2b-content-marketing-report-40688285, accessed November 2016.
7 Social Media Examiner, “2015 SOCIAL MEDIA MARKETING INDUSTRY REPORT”, https://www.socialmediaexaminer.com/SocialMediaMarketingIndustryReport2015.pdf , accessed November 2016.
Hi Austin! Thanks for the post. It was an interesting read since I’ve seen salesforce.com be used by a sales team firsthand and agree that it is a huge improvement in terms of enabling better CRM. It will be interesting to see going forward how salesforce.com stays abreast of evolving technologies and positions itself to be integrated into company workflows that will be more and more dependent on technology.
Good article. I agree with the points, however, one question arises as Salesforce grows so fast. For businesses which have moved large amounts of their processes offshore, is the usability and integration of Salesforce’s products a concern? For example, US companies which have moved much of their IT and support systems offshore, will these CRM products be able to be used across borders and cross functionally? I know language translation (termed “internationalization”) can sometimes be a tricky hurdle when it comes to software operating and support, so could this be a problem for Salesforce as they move away from SMBs into bigger, more global companies? See the link below which describes internationalization and localization issues. (https://www.w3.org/International/questions/qa-i18n )
Great post. By introducing the SaaS business model, Salesforce changed the way companies purchase enterprise software. Instead of purchasing new software every few years, companies can pay a subscription fee and get the latest release. IT spends less time installing the software, as it simply needs to give an employee a login. Perhaps it should not be surprising that most enterprise software companies adopt a SaaS model, including long-standing companies such as Microsoft (Office365) and Adobe (Creative Cloud and Document Cloud, formerly known as EchoSign).
You make a great observation that Salesforce has been particularly beneficial for small- and medium-sized companies; they previously lacked the resources to implement a proper CRM but for a recurring fee can use the Salesforce cloud. I would add, more generally, that all companies benefit from having their CRM in the cloud, given the nature of sales. Before Salesforce, one issue with CRM was that it was never up-to-date for all the people using it. Traveling salespeople could not update their colleagues on the status of a sales opportunity until they returned to their home office. Salesforce eliminates the version control issues that could arise. It also makes complex sales deals occur more easily, particularly if multiple people are having conversations with separate leads within an organization.
I also agree with your point about expanding beyond CRM, and Salesforce’s acquisitions of ExactTarget and Pardot suggest that they are heading in this direction. Given that marketing’s responsibility is to generate leads for sales to close, it seems natural that Salesforce would move “up funnel”. As marketing becomes more digital, more of this information can be fed into the Salesforce cloud, which includes, as you suggested, social media. It will be interesting to see to which degree Salesforce is able to move into this space on its own, especially given that another big move by the company was introducing a platform for other developers to build on top of the Salesforce cloud, which has led to the creation of entirely new companies such as Marketo and Eloqua.
Very accurate description of how SFDC changed the way companies operate.
In my former job, I was fortunate enough to see that, as we move ahead, the new challenge SFDC is considering tackling the IoT revolution.
By leveraging the internet of things (dubbed the SFDC IoT Cloud), SFDC offers storing and analyzing real-time data, and then integrating it with the company’s core customer relationship management product, hence making its data more valuable (think all kinds of connected devices, mobile apps, and websites).
I wonder if Salesforce can provide social media sites a SaaS product that LinkedIN, Facebook, and Twitter haven’t already invested in? I know LinkedIN has a very sophisticated analytics platform, which it sells to headhunters at a premium. I can see other digital sites such as Amazon & Alibaba receiving a lot of benefit from Salesforce’s analytics breakdown and how marketing strategies are panning out, I am just skeptical whether social media will receive the same additional value (84% of Facebook’s revenues are from advertising- I would assume they already have an advanced analytics solution to monitor advertising effectiveness).
great article though Austin! Go Cubs! 😉
-Sarah Yu