The latest data from Tackle’s recent State of Cloud Marketplaces survey shows software buyers are purchasing from Cloud Marketplaces more than ever, with no signs of slowing down. In fact, in 2021, 61% of buyers said they bought through one of the Cloud Marketplaces in the past year—a 39% increase over 2020. And 83% say they’re likely or extremely likely to do so in the future.
So why are some software sellers still reluctant to get on board?
Due to their relative youth, Cloud Marketplaces still have an intimidating aura of mystery, along with a host of myths and misperceptions that keep sellers away.
With Halloween approaching, it’s the perfect time to examine and dispel some of the lore spooking software sellers and to set the record straight. See how many you recognize.
Myth: Listing and selling on Cloud Marketplaces is too complex.
Many software sellers tend to unnecessarily overthink and over-complicate their Marketplace approach. Convinced they need fully automated, self-service transactions from day one, they spend months or much longer analyzing pricing models and engineering their listings. They consider every possible case, assuming the floodgates will open the moment their listing goes live. (Hint: They won’t.)
“When we first started out on Marketplace at my previous company [Armory], I way over-thought things,” said Kit Wetzler, vice president of sales at ShiftLeft. Wetzler recently joined a webinar with Tackle CRO Don Addington and fellow panelist Hillorie Farace Di Villaforesta, head of cloud alliances at Dataiku. “I tried to make things work as automatically as possible, and that took us at least a quarter and a half just to get our Marketplace listing up.”
That said, you will need a well-conceived strategy. “Think of Marketplace as a series of growth phases,” Don advised. Figure out what you are selling, who you are selling to, how they buy, and the rules of the Marketplace you’d like to start with.
Next, launch with the Minimum Viable Product (MVP)—the simplest listing you can produce that announces your presence and is transactable for your most common deal process. As you’ll see in our next myth, you don’t need to go all-in on self-service.
Myth: Marketplace is only for self-service purchases, not complex or enterprise deals.
Based on what we’ve seen at Tackle, the opposite is true. Most Marketplace deals now involve large, multi-product, Private Offer transactions with larger enterprises. Unlike self-service Public Offers, Private Offers allow sellers and buyers to select custom pricing, terms, and conditions.
Nearly 60% of Marketplace sellers expect to do more than half of their Marketplace business through Private Offers—21% of those anticipate using Private Offers exclusively. We expect Private Offers will soon become the primary method for closing enterprise deals through the Marketplaces.
Even if your price book includes dozens or hundreds of SKUs, you can engineer an MVP listing with one product as a Public Offer. When prospects inquire, you can promote additional products through a Private Offer.
Enterprises must also purchase via Cloud Marketplace to spend down their commitments with Cloud Providers. Our survey revealed that to be the number one reason why buyers buy on the Marketplace. “A lot of companies find themselves not quite growing into their commitment and having a gap between what they’ve actually spent and what they need to spend to keep their discount level in place,” said Kit.
Myth: My sales team won’t embrace Marketplace selling because of compensation concerns.
Marketplace compensation is a big issue. Each Marketplace charges a transaction fee, but not every software company handles these fees the same way. Companies need to decide: Is this a cost of doing business, or do we give our sales reps a lower margin?
Data shows a direct correlation between incentivizing sales teams and growing Marketplace revenue. Of those companies offering neutral compensation, 68% expect Cloud Marketplaces to account for up to a quarter of their revenue in 2022.
“Our field sales teams get 100% of revenue recognition in their compensation, and I’m so glad the management team understood the importance of that strategy,” said Hillorie. “It really helps the sales team get behind Marketplace and push deals to close.”
Myth: Marketplace is only relevant for reaching IT buyers.
Until recently this was true, but we’ve seen a shift in recent years. Marketplace buyers now increasingly represent business, marketing, and other non-technical applications.
Our State of Cloud Marketplaces Report confirmed as much, with 58% of survey respondents representing roles in marketing, sales, and operations saying they purchased software through a Cloud Marketplace in the last year, compared to 38% with those roles in our 2020 survey. All of them said they were likely or extremely likely to purchase this way again.
That’s why it’s important to define your target customer and learn where they spend their money. If they spend with the Cloud Providers, you have an opportunity to capture that wallet share regardless of their industry.
On the flipside, don’t assume that all technical buyers will be familiar with Cloud Marketplaces and how they work. “I’ve seen situations where we brought Marketplaces up to customers who had no idea what we were talking about,” said Kit. “Prepare your sales teams to do some educating if necessary.”
Myth: Cloud Providers aren’t interested in co-selling with us.
Marketplaces can connect you with new sellers, prospects, and possibilities. But co-selling with Cloud Providers is a journey you need to plan for.
The key is closing and promoting your first few wins to pique the Cloud Providers’ interest. After all, their sellers are bombarded constantly about third-party software transacted in the Marketplace. The more you can build success stories around specific verticals, use cases, and high-volume deals, the better.
Some Cloud Providers offer valuable incentives, like a joint customer case study or internal win wire piece, when you hit certain milestones. “Take the time and do some homework to learn about the different Cloud Provider programs, what tiers you need to hit to get a joint customer story or win wire, and related metrics for each Provider,” said Hillorie.
To find out the whole truth and nothing but the truth about selling successfully on the Cloud Marketplace, speak with the Tackle Marketplace Experts.