CP6: Sales Process Optimization with Velocify – Podcast with Nick Hedges
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Martin: Hi, today we are here with Nick from Velocify. Hi Nick, who are you and what do you do?
Nick: Hi, very nice to meet you. Yes, I am Nick Hedges. I am the CEO and Head of Velocify, which is a software service company based in Los Angeles, California.
BUSINESS MODEL OF VELOCIFY
Martin: Great what does your business model look like? What type of value proposition are you offering?
Nick: Yes, thanks for asking. We are in the sales solution category. So what does that mean? Well, our software helps salespeople. It sits in a gap that exists between marketing automation and CRM. Marketing automation is really great at helping marketers generate leads and highly qualified leads at that. The CRM is really good at recording sales information, but the missing piece is what do the sales people actually do with leads when they are generated in marketing so that they have outcomes to record in the CRM.
That is where Velocify comes in. We, essentially, very simply, make sure that every lead that an organization generates goes to the best possible sale person who is going to have the best conversations, and the best interactions with the company they are talking with. Then we make sure that this sales person knows what they should be working on at any point in time. What is the most important activity that I can undertake right at this very moment and on which lead? So it prioritizes a sales person’s day to day in a way they can be incredibly effective at what they do and sort of the optimal process from the engagement perspective of every single lead that comes in and every single company that they want to prospect in to.
So that is our business model and luckily we find that there is an awful lot of sales teams whom almost every sales team needs help in this area. It’s been a good place to set up a business.
Martin: Great. Nick, I understand that you are helping companies (small business size) to work on their leads in an optimized way. Are you also helping them to create even more leads and how do you do that?
Nick: Yes, we do that to certain extent. If you look at our client base it runs across the gamut, from some relatively small businesses to some of the biggest companies in the US. Smaller installations probably a sales team would be I’m guessing around 3 to 4 people. Our largest installation is 3 to 4 thousand people on the sales team using our product. So within that, people are definitely using our product to be successful to the needs that are coming in, but they are also being successful using our product to do prospecting.
A big area currently within many sales teams is sales development. A group of individuals whose role is to take accounts with the company wants to get into. Companies inspire to sell to and then find the appropriate people within that organization to influence and convince that there is value in order to getting the sales done. One of the tools that we have is a social prospecting tool that enables you to discover who the right people are within an organization by looking at data that exists online at various different places. And then, we have the ability to really orchestrate the engagement strategy with these contacts so you are sending to them the right emails, you’re making the appropriate phone calls, and you have all of that data available so that you know a bit about that prospect. For instance, you know for sure what their sales manager is. You know what their telephone number is. You also know some of the things about how they have been interacting with your website, what they are doing online, whether they are tweeting on twitter, whether they are putting information on other social networks, etc. So that you got the basis of information for a productive conversation given that you are effectively cold-calling a lot of those prospects.
Martin: On your website I saw that you have a tiered pricing model on a per salesperson base so to speak. Do you also have something like a modular kind of pricing for different modules that you are offering to your client base?
Nick: We do it to a certain extent. Although what we try and do is we package our product in editions within bundles of functionality that we think people should have together. What we use to do probably for the first ten years of our existence that has only changed a year ago, we had pricing that was highly modular. In other words, it was a menu of things that you could add. We found that lead to a lot of dissatisfaction amongst our customers because every time they wanted a new feature there was an additional cost that they had to justify within their organization. We decided to go away from that to a more bundled product offering. What we found is that has increased customer satisfaction quite a lot, because they are not initially having to go back to whoever makes decisions about what the company spends to add new features. It also means that they use more of our products. The things that they won’t sign up for on day one that we know will be valuable to people. They are bundled into editions.
So, today we have simplified pricing. We have two product lines and within the product lines, there are free editions for each one of those. You have six options basically.
Martin: Okay, Nick with Velocify you are trying to help other sales organizations to close more leads. How is your sales pipeline working and what role is Velocify playing in this as well?
Nick: Yes, we obviously use our own products. What we try and do is be the archetypal sales organization that we can sight to our customers when we are recommending best practices. Everything we learn about sales in our thousands of consulting engagements when we increment our system at our clients we try and bring back to our sales organization.
We have a pretty sophisticated sales organization structure and we have a pretty sophisticated sales process. All of it relies on Velocify being the kind of glue between all the other systems. We have a field sales team that works on the biggest enterprise opportunities that we go after. We have a big inside sales team that works on slightly smaller deals and also goes sales development. The sales development department is fairly big as well which has folks to do cold-calling, prospecting, or whatever you want it to describe it as and lead response. In other words, making sure they call leads when they are generated as quickly as possible and in order to have a human qualifier whether that is going to be a good opportunity for a sales person to work or not.
As a consequence of having those things and having an optimized process, we have pretty outstanding conversion rates now within our sales team. What we also try to do within our sales organization is use what we call a sales laboratory. What I mean by that is there are huge numbers of different sale technologies that are being founded at the moment. What we try and do is have Velocify connected to as many of those different capabilities as possible, so that we can see how effective they are. So that way we can make appropriate recommendations to our customers as we are often being trusted by the sales leader about how they should put up their entire sales process that automatically what other technologies they should be using.
Martin: Nick, what do you think, what are the more efficient and effective customer acquisition channels?
Nick: The most efficient for sure is a referral. What I think is that a lot of people don’t realize is how important customer happiness is. If I was to give someone one tip about how to run a great company it would look after your customers. It sounds obvious, but if you really, really delight your customers and that is something we are very focused on at Velocify in a very deep way. Everyone will tell you: “Yes, we look after our customer”, but it is something that is deeply ingrained in the culture here. If you do that your revenue impact is really significant.
- One, because it becomes easier to expand within your existing customer base.
- Two, but probably more importantly, you will get referrals from your customer base of people that they know.
Those will be the best form of leads that you will ever get, because “A”, your customers probably already sold the person they are introducing to you. Two, it is going to be an appropriately use case because the customer understands the product well and they will affect that particular lead for you.
So referrals without a doubt are something we treat like gold at Velocify, because it’s just very high converting and it can be a great fit, loyal, and stay with us for a long time which is the perfect customer. I would say those are the best channels.
Martin: Nick, what would you say is the competitive advantage of Velocify over its competitors?
Nick: There are a couple of things and there is a lot of sales technologies out there. What the majority of them do is something very specific so they focus on just emailing for just sending contracts, or just being a dialer. As a consequence, a lot of sales leaders are left with this belief that they need a stack of technologies in order to undertake the job of sales and that is just not true.
Velocify and maybe one or two other companies are universal solutions. In other words, we have telephony, we have email, we have text, we also have all the components required to do things like sales process optimization. We also have the capabilities to reward and incent people in the appropriate way to get the right behaviors. Some people call it gamification, we actually call it rewardification at Velocify, because we approach gamification in a differentiated way than any other player out there.
I would say that the major benefit from our perspective is the universal solution where you don’t need a whole set of other capabilities.
Martin: When you think about scaling the company do you perceive some specific type of advantage of having economies of scale? For example, when I am thinking about really having most of the data and really putting some kind of machine learning on it so your recommendations for who should work a lead are becoming much more valuable. Do you think about your business like that?
Nick: For sure, as I said one of the key things that we do is to optimize the sales process for our customers. We have the benefit of having implemented our solution with over 5,000 sales organizations. We have seen not only how those sale organizations have approached the optimization of their sales process, but we have seen the outcomes. We have seen what works and what doesn’t work at a very kind of data granular way. We are able to use those learning’s to re-optimize the sales process of every customer that comes to us. That makes us incredibly effective in its just knowledge that you can’t gain overnight. There is billions and billions of transactions that have gone through our systems. So it is a very rich set of data.
I think we also have the benefit that unlike a lot of other companies we’re genuinely a platform that works extremely well for customers that sell to consumers and also for businesses that sell to businesses where really no one has the expertise and the knowledge of what the valuable learning’s for either side are. For instance, we know what is the most effective sales process for a company selling to consumers, but we also know aspect that businesses sell to businesses can learn from it and vice versa. A lot of proprietary knowledge and data that we have picked up over the years that seemed helpful.
I think there are other significant economies of scale as well, practically when you are selling to large businesses. Large businesses are typically looking at how robust your technology infrastructure is, how big the company is and how likely it will be in business for the next several years. Now that we have been around for 10 or 11 years that is something that is a lot easier when the company was 2 years old. That is something that entrepreneurs have to be very clever at navigating around if their ambition is to sell to large enterprises.
Martin: If there is something like a lock-in effect once an organization buys into your product and you learn where to send the lead to then there is something like a lock-in effect. Does this imply that in your sales process that in the beginning maybe you are offering 3 month free trial period to get this kind of knowledge and get more customers on board? Only start the pricing then or does you pricing from the first day onwards?
Nick: Though it is interesting, you are definitely very perceptive about our product in the stickiness of it. Some of the ways we think about it. However, we are not big fans off doing pilots for periods of time. The reason is this, our product is pretty transformational to a sales organization provided that they take it seriously up front. It is not a huge implementation, but it does require thought and effort from a sales organization that is putting it in place for us to bring the appropriate dates and technique, but for the sales organization think about the nuances of their organization that mean certain things within the sales process that should be different from any other company.
What we found is that if we offer free pilots there is no value in free. It means that the cooperation and interest level of the sale leaders that are implementing the solution as a lot less. They tend to be less effective than they should be during that pilot. We don’t really do that.
But what we do is what I call land and expand. It is a key part of our strategy. We know that we can get a team of five people within a large organization using our product and taking it seriously they will see huge gains and very quickly we will expand. An example of that is I met with a client last week. About a year ago they had just over a hundred people on our platform, which is not a big implementation, but it’s not a small one either. As it stands right now, they have been so successful with those folks that they have expanded to a contract to over 2,000 sales people on our platform. That has been say every month that we are adding another 100 sales people as they see the results with another third. Rather than doing pilots we love to do kind of prove our value and then expand out within an organization if we can do.
What you say about the stickiness of the product or lock-in as you put it is absolutely right. Once you have optimized your sales process and seen the results that the platform like Velocify gives you it’s something that you are not going to get rid of typically.
Martin: Great, one thing that I was wondering is about your pricing strategy. When I look at it on your website and your pitch on why a customer should sign up you stated something like, you will do twice the amount of leads or 188% more call time, or something like this. You only charge like higher double digit dollars, per month, per user. If I would be having a sales person and he was getting me twice as much revenue with your software I would expect a much higher monthly fee. The question from me would be, is your pricing really value based, is it based more like competitors in the market, or something like a cost approach?
Nick: It’s not cost approach really, but it is definitely market-based. When we tell and demonstrate the results that we anticipate our clients will get from our product based on what every other client achieves. There is a little bit of reluctance to fully believe that is going to be the case for our customers. The pricing that we offer is more based on how much they are paying for the CRM, the marketing automation system and so on. What we know typical budgets look like. When they implement our system and they get those results, the return on their investments as our pricing is astronomically positive for our clients. They tend to be very happy, but they have to see the results before they get there.
What we use to do interestingly enough, is a guarantee. We use to say if you don’t get X percent improvement in conversion and Y percent improvement in qualification we will give you your money back after 3 months. Now we still believe as we did then that there is no question they will get those results. The problem we found with the money back guarantee was not that we ever had to pay it back. There was not one instance of us paying it back, but trying to assess the baseline of information became very difficult. It slowed down the sales and led to a lot of time delay from getting customers on our platform in the first place. What I mean by this, that is, that they sent so many of the organizations that we dealt with simply didn’t know exactly what their qualification rate and conversion rate were on their leads. Without that, you can’t really demonstrate that you have improved things. It becomes much more of an intuitive. We will bring in more revenue than we have ever had, rather than specific percentage and improvement.
That probably dropped the guarantee, but philosophically I will tell people often, I guarantee that you will get these results. If you don’t give me a call and we will talk about it and I am willing to let you out of your contract, because I know that you are going to get the results that we have talked about.
Martin: What do you think while we are currently the biggest threats for Velocify?
Nick: Well, I think there is always a threat to the company that you don’t know about that is being built by some clever ambitious guys in someone’s back room right? I know there is always the threat that someone is going to innovate faster than we can. My challenge there is to make sure that we keep a startup mindset, however large, we grow. Anyway, that part requires continuously hiring new people with new ideas. It’s about structuring teams so they have autonomy. It’s about encouraging and rewarding new ideas even when they fail. It is tough to compete with early stage start-ups from an innovation perspective. That is something as an entrepreneur when eventually you come to do something new I will be more thoughtful about how I use that as my competitive advantage. How I really beat people by continuously being innovative rather than trying to beat them on the things that you can’t win on when you are a tiny company.
I would say that is one thing, I’d say the other threats are we sit between some big technologies. We sit in between marketing automation and customer relationship management, and generate a huge amount of value between the two. Given that we sit between two systems, it is not conceivable that marketing automation will become much more sophisticated about how they approach. What we do with CRM is trying to come up and do what we do. We feel that we have significant knowledge and significant data that neither of those two sides has. It would take them a long time to build it, but it’s not inconceivable that they could being single minded about trying to go after our market and that would be a threat.
I think one of the threats is that we are continuously thinking about what people refer to as the “war for talent”. We know that we have to be an incredibly employee friendly company somewhere people can really make a fantastic impact on their careers because at the end of the day a technology company dies the moment they are unable to hire the best people and retain them as well. A threat is always that there are technology companies out there with a lot of competition for the best people. Not continuing to be one of the best places to work would be a threat. It is something we invest a lot of time in. We were recognized by GlassDoor or we were recognized last year by GlassDoor as one of the top 25 companies in the country to work for etc. It would be a threat if we stopped being that because this business is all about people nothing else.
Martin: Nick, Velocify is based in Los Angeles and you have briefly touched on start-ups mainly coming from Silicon Valley. Do you perceive your location to be an advantage or a disadvantage and in what type of sense?
Nick: Both actually. I think it’s, first of all, Los Angeles isn’t in the middle of nowhere. Right, so it’s a big city and have a vibrant technology industry and people call it Silicon Beach. A lot of big technology companies and there is a lot of start-ups here. It is really quite different from what it used to be when I turned up 12 years ago when I turned up to Los Angeles.
It’s a good ecosystem. It’s not as expensive as Silicon Valley to live in, which is very appealing to people. We have a better lifestyle in terms of the weather is better, for sure. I will never tell people that Los Angles is a place that you get a lot more work balance because the reality is the fast growing technology companies do require an immense amount of effort and you are competing with companies from all around the world. You can’t come to a successful technology company expecting to be able to work a low number of hours etc. It is a wonderful place to live in Los Angeles when you are not at work. So we think we have those advantages in terms of attracting people. It’s close enough to Silicon Valley that raising money and those kind of things isn’t an issue.
But I’d say that the disadvantage of being here is that a lot of the very best engineers are based in Silicon Valley. Particularly when it comes to software as a service and enterprise software. Although we are changing that it’s still for a company that aspires to have the very best people in the industry working for them, we continuously trying to pull people down from Silicon Valley, which is more of a challenge than if we were based in Silicon Valley.
I’d say the final thing is Silicon Valley can be a bit of a communication bubble. If you want to be covered by certain technology graphs and so on, it is sometimes more of a challenge if you are not based in San Francisco or Silicon Valley, because those particular journalists tend to be a little bit more focused on their doorstep than anywhere else. That can be a little bit of a challenge with being a Los Angeles based company, but only at margins. We get quite a lot of interest in this because of what we are achieving despite our location.
ADVICE FROM NICK HEDGES
Martin: Nick, before you joined Velocify you started your own company. Now I would be very interested in your major learning’s over the years so what are the do’s and don’ts of starting and growing a company.
Nick: Yes, the first company that I founded was back at the end of the 90s, December ’99 I think when I started my first start-up. That was right at the peak of dot-com, literally at the peak. A couple of months later we had the dot com crash. But we persevered through it and 3 years later the company went public. The company is based in the UK so it worked out.
The things that I learned back then were hugely valuable for my role now at Velocify, because I knew very little when I first started.
The first thing that I found was that was you don’t need to be the most knowledgeable person about every aspect of business to be a successful entrepreneur. A lot of people that I met over the years, particularly, when I went to Harvard business school to do my MBA in between founding my first company and working at where I am now. A lot of people felt like they had to build up this long career of various different accomplishments and understand business inside out to be a successful entrepreneur. I founded my first endeavor when I was, I think I founded the company when I was like 25, that is really not the case. The most important thing is that you are determined and passionate about what you do. In fact in some ways the more you learn in business, the less effective you become as an entrepreneur because you see more obstacles. The beauty of being an entrepreneur is you have the passion and the determination that you don’t even see the obstacles. As a consequence, you run straight through them when other people would stop and ponder about them. That is something that I have taken with me throughout my career journey is -everything is possible. If someone is telling you there is an obstacle, just ignore it and run through because you will probably get to the other side.
I think the other thing I learned in my earliest tech start-up is to listen to my customer really carefully. So carefully that you are listening to the things that they are not saying. What I mean by that is, my first start-up would have been much more successful had we have sold one particular company. There was a multinational massive company that if we had signed up we would have really transformed the business. It was part of the business plan that we would sell this company and we never ended up doing that. We never ended up getting this particular organization as a customer of ours. Although I think we did a very good job of listening and meeting with that customer we didn’t quite listen carefully enough. We didn’t ask all the right question whether they would really do something’s because there were certain things they couldn’t disclose. To be more specific what my company did we were a platform for soft commodities. What we allowed was big companies and small companies to acquire things like tea, coffee, sugar, etc. at lower prices than they could get by going directly out into the market and using brokers and so on, which is what they had to do. What we found was we didn’t listen carefully. What we hadn’t really thought through was that the very biggest company in that market didn’t necessarily want to buy at the cheapest price. They wanted that they possibly could if that meant that everyone else could buy at that low price. The game for them was being able to buy at a price that was lower than anyone else could buy because when their economies of scale. We just didn’t think it through, because we didn’t ask the right questions. Nowadays, when we have the strategic initiative to go off to certain clients, I am incredibly focused on and spending time, really, truly, understanding where the value is for the customer. Brainstorming the things that they cannot tell us because it is inappropriate to tell us, but that we can figure out by other things that they told us. That was a big learning for us or a big learning for me in my first start-up.
Martin: Great, very interesting, Nick. Yes, thank you so much for sharing your insights and learning’s. Thank you very much for helping other sales organizations in becoming more effective. Thank you so much.
Nick: Your welcome. Very nice talking with you.
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