When deciding on your sales and marketing budgets, there are crucial factors that come into play. Some are particularly important, such as deal size, product complexity and competition intensity.
Knowing where to draw the line between sales and marketing is key because it influences a company’s growth. So in this article, I list and elaborate on some of the key factors related to that decision.
Before I jump into the article, here is the list of factors that impact the choice between an inbound vs outbound focus:
- average deal size
- product complexity
- level of competition
- go-to-market speed
- budget size
Regardless of where you are on the spectrum of these factors, your company will need both inbound and outbound sales channels. In this article, I am clarifying which will be the focus.
Let’s break them down one by one.
Average deal size
The average deal size is a great predictor of how much budget goes into marketing or sales. Low deal sizes require a marketing focus, whereas high deal sizes require a sales and account management focus. Here is an example to illustrate:
Example Inc. generates €100 per year per customer and Acme Inc. generates €1 Million per year per customer. Example Inc will need one million customers to generate €100 Million in revenue whereas Acme Inc. will need 100 customers to generate the same amount.
For Example Inc., trying to reach one million customers through sales would be inefficient. This is because 1-on-1 human interaction would either be low quality (outsourced to low-income countries) or machine-aided (no successful examples exist yet).
Better budget allocation would be to focus on marketing and create an easy sales and buyer journey. This will convert to sales and is scalable.
Low vs high deal size example: Hootsuite vs SAP
Exceptions – high deal sizes that are marketing focused: Slack and Trello
Complex products require a sales focus to explain the product to customers. Straightforward products can benefit from a marketing focused growth strategy.
The buyer wants a product that alleviates their pain-points and meets their expectations in the long run. The easier and faster they detect these in your sales channels or process the better it is.
In general, the simpler the product, the easier it will be for the buyer to evaluate the product-need fit. This can be further supported by simplifying the buying process. In that case, the potential buyer can progress through the discovery, evaluation and purchase stages on their own.
Complex or sophisticated products usually have many points in the buyer’s journey that need clarification. The buyer will want to contact an informed sales person to receive a more extensive explanation (sales-centric).
High vs low complexity example: Salesforce vs G-Suite
Level of competition
Low competition allows lower marketing budgets and frees up funds for sales. High competition markets require higher sales and marketing budgets across the board.
If competition is low in your market, then your marketing’s purpose is to explain your product and establish your brand. Therefore, sales should be your key revenue generator. The demand-supply dynamic is skewed in your favour so you can afford to keep marketing expenses proportionally lower.
If the competition in your marketplace is higher, then the marketing standards are higher. Everyone has to invest in it to stay relevant, increasing marketing budgets. In that case, brand awareness, product complexity, pricing and other factors define budget allocation for marketing and sales.
Companies wanting to reach the market faster have to use tactics which can be deployed, evaluated and iterated in short cadences. In cases where GTM speed needs to be high, it is best served by cold outreach.
Inbound/content marketing can take a while to deliver results and there is no assurance of an outcome. If you decide to go for it, you need to know who your market is and what their pains are. This tactic is valuable for companies with less GTM time constraints.
If you need to get established in a market quickly, then it is better to use outbound techniques. They will allow you to engage with your target market and collect important data on the needs and pains of it.
Budget size impacts its allocation in marketing or sales focused tactics. Businesses with large budgets can try many different tactics regardless of the cost. Other companies that have a clear-cut budget have to limit their spending and motivate it based on the potential ROI.
To choose the best marketing/sales strategy you can use the bullseye method. You chose three main strategies based on how likely they are to work for the company at their stage. Tip: to get ideas look at similar cases in other industries and mirror their tactics. This method helps you find ROI positive strategies that minimise spending.
In this post, I looked at the main factors impacting the focus of a company, whether it is outbound or inbound. Here are the main takeaways:
deal size – high, sales focus; low, marketing focus
product complexity – high, sales focus; low, marketing focus
level of competition – high, sales & marketing; low, sales & simple marketing
go-to-market speed – high, sales; low, sales & marketing
budget size – big, sales & marketing; small, sales
Each company needs a personalised approach because of its own combination of factors and limitations. Hopefully, this article has helped you understand outbound vs inbound and in which situations they may work best.