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Selling to the Midmarket – Achieving Greater Success
Many people ignore midsize companies but the vendors in the know are pursuing them aggressively. Are you? However, few understand the needs and challenges required to engage or sell to the midmarket, – and hence few are successful selling to the midmarket. Here are some useful facts and insights that could help you achieve greater success selling to the midmarket:
Most vendors aspire to sell to the Fortune 1000 BUT there are only 1000 of those companies, and the competition is fierce. While it is tedious and perhaps risky to sell to the startups and small companies (high cost of sales), the midmarket is 1/3rd the economy, offers more targets (a few hundred thousand), much less risk, higher profit margins and 'supplier stickiness'.
Midmarket companies – with revenues between $10 million and $500 million – comprise about 3% of all companies in the United States and yet provide about a 1/3rd of the jobs and account for about 1/3rd of the non-governmental GDP in the country. The American midmarket has more revenues than Germany and Mexico combined. They tend to hire locally, stay with their vendors longer and generally provide higher margins than larger or smaller companies. You need to have a bunch of these companies as your customers. Many people have woken up to this fact but many are still largely unsuccessful. Why?
1. The terms midmarket or middle market or midsize were really coined by vendors to these companies. They couldn’t classify them as small or large companies and so came up with a new segment! I have personally spoken to several hundred ‘midmarket’ CEOs (across the United States, Germany and India), and NOT A SINGLE CEO referred to his/her company as being midmarket! Are you defining your ‘midmarket’ correctly?
2. The self-identity of companies is not predominantly driven by their relative size. A $50 million company may think it is big if most of their competitors are smaller; similarly, I’ve run into a $6B company that thought they were midsized because their largest competitor had $80B in revenues. Are your targets ‘midmarket’?
3. Different vendors in different industries have different definitions – and should - of the midmarket. For example, if you are Dell or Microsoft, the annual revenues are less important than the number of employees because Microsoft and Dell want to get a PC and related software to each employee. On the other hand, if you are a call center company, you care neither about the employee count nor the revenues, rather about the number of call center seats. A strategy consultant charging $400/hour won’t bother with companies below a certain amount of revenues and growth rate. Each of their definitions of small, medium or large varies. And, that’s how it is supposed to be. Don’t use somebody else’s definition - come up with one that makes sense for what you sell. Do you have your own definition of the ‘midmarket’ segment that is right for you?
4. These companies identify with their industry, geography, ownership, specific products they make, etc., but not their relative size. I usually hear
- “We’re a plastics company” (industry);
- “We’re a family-owned company” (ownership);
- “We’re a Chicagoland company” (geography);
- “We’re a high-tech company” (industry);
- “We’re a services company” (type of products/services offered); and so on.
I’ve never heard a CEO lead with “We’re a midmarket company”; that’s the way vendors see them, but not the companies themselves. So, if you are looking to create a list, you won’t find an easy list of ‘midmarket companies’ – you need to come up with a definition that makes sense for your business first. The overarching insight here is that there are ‘many midmarkets' and they go by many names that do not include 'midmarket'. Do you know what the ‘midmarkets’ you are trying to reach call themselves?
5. Large company sales people are used to selling to large companies, usually involving long complex sales cycles and big ticket prices. In a midsize company, there may be one decision-maker but multiple influencers (people who can inform the decision-maker or say ‘no’) and much smaller ticket prices. Do you 'sell right' to such a target? Do you have the right pricing, revenue targets and the right sales people to sell into your ‘midmarket’?
6. Sales people know their own products or services well. But the midmarket buyer is concerned about is his/her business problem. Do you know the typical problems of midmarket companies? Remember, there is no monolithic midmarket. The challenges and needs of midsize companies vary depending on the ownership, growth rate, industry, etc. Would it be useful if you knew the range of typical challenges and needs of a particular company you are about to call on? Could that help you engage the prospect from a position of ‘knowing’ their issues rather than just peddling your products/services? How do you know the typical needs and challenges of a midsize company you are about to call on?
7. How do you communicate with the midmarket segment you are targeting? Social media may be big with large companies and consumers but midsize companies are slow to embrace these technologies. And, only certain people within these companies are lead users of social media. For example, if you are a trying to reach the business owner in mature industries, typically run by 50 and 60 something year olds (boomers) they are generally not first-movers when it comes to new technologies and won’t be on Twitter, Facebook, Instagram or even LinkedIn. They prefer direct mail for communications. And, when it comes to finding vendors, they are more likely to seek referrals from their peers, accountant, long-time consultants, golf buddies, fellow Rotarians or a friend. The big exception I’ve seen is in a few industries like high-tech and the services sector where people are very comfortable (and used to) searching on the internet and leveraging social media (where it makes sense). Are you using the right mediums to reach your ‘midmarket’?
The ‘midmarket’ goes by many names among the midsize companies. The Midmarket Institute constantly speaks to midmarket CEOs and experts. We have answers and insights to the questions we have posited. If you would like to expand your influence in the midmarket, let’s have a conversation.
- Ram V. Iyer