Tis the season for budget planning, revenue forecasting, and campaign planning. My work with B2B revenue executives this year has helped me develop a hypothesis about how folks are approaching their go-to-market (GTM) strategy. The savvy ask one critical question: n
How will average deal size impact my Go-to-Market strategy?
Why is this such an important question? Why does deal size matter so much? As it turns out, deal-size impacts nearly every aspect of how a business’s revenue machine should run. B2B average deal sizes above or below $25,000 require different GTM strategies to be successful so without taking into consideration deal-size, businesses can end up choosing a misaligned GTM strategy that can have a profound impact on their success.
By definition, deal size refers to the individual opportunity that your business is trying to win. If you are a SaaS business, deal size could be the Average Selling Price (ASP) or Annual Contract Value (ACV).
To hone in further on the importance of deal size and its impact on a business’s GTM strategy, small deals (<$25K) need to move fast! These deals require what I call Volume and Velocity (V&V) strategy. With this strategy, our tried and true funnels hold up. We generate broad awareness and boat-loads of leads/MQLs. We nurture and engage those leads and then we help sales convert those leads into lucrative paying customers. If we’re successful, we should win about 1% of those customers.
Large deals (>$25K) are much more complex and slower moving. This is where Account-Based Marketing (ABM) really shines. Yes, you can potentially use ABM to target large volumes of customers, but in my experience, most marketers struggle when applying ABM to too many accounts. With ABM, we use a targeted account approach to identify key high-value accounts that match our ideal customer profile (ICP). If we’re successful, we should win about 11% of those customers.
Whether you choose V&V or ABM, how would you decide which strategy is right for your business? To facilitate this question, I’m reminded of a fun internet question that is often posed to celebrities that asks “Would you rather fight 100 duck-sized horses or a horse-sized duck? There of course is no right answer. And, much like in marketing, a V&V strategy (100 duck sized horses) can work to grow your business and ABM (one horse-sized duck) could also be the right strategy. The primary difference comes down to average deal size.
To drive home this point, let’s take a look at some of the differences between the two strategies:
As the above chart demonstrates, the GTM strategy is aligned to the deal size and the tactics follow respectively.
Sales and marketing executives intuitively know that their GTM strategy needs to reflect their average deal size. Unfortunately, some often select a set of tactics that don’t align to their strategy. For example, SEO is a powerful and often required marketing tactic in V&V and it does so by publishing search-friendly content. This is an effective strategy for pursuing deal sizes <$25K.
On the other spectrum, V&V strategy often fails to be effective when targeting key strategic accounts >$25K. There are of course exceptions to this rule, but if you’re focused on optimizing your SEO and your deals are >$25K, it’s worth pausing and asking how effective your tactic will be towards reaching these accounts. In this scenario, shifting your approach to an ABM model with tactics that most correlate with the deal size would be the most optimal decision. How successful your business will be in 2021 hinges on these types of marketing decisions.
As you turn your attention to 2021, how will average deal size impact your Go-to-Market strategy? Do your business tactics match the strategy you’ve selected?