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What Goes Into Crafting a Marketplace Deal

If you’re just starting out in Cloud Marketplace or still trying to understand how to pivot your sales strategy toward it, you might be asking yourself: “Do I need a new sales approach for Marketplace?”

And the answer is sort of. You don’t need to throw everything you know about selling to your customers out the window, but there are special Marketplace considerations to think about when crafting deals to go through Marketplace. 

We work with companies every day to help them align their Marketplace pricing and strategies to current direct deals as much as possible, but different Marketplace mechanics may alter your process a bit. For example, Private Offers and Private Plans help you leverage Marketplace commitments and partnerships, but there can be many moving parts and nuances. 

You also have to consider that in Marketplace sales, you’re taking the game to a new venue, so it’s critical to empower your sales team to identify the right types of deals for Marketplace and ensure they can guide buyers down the path of least resistance. 

Today we’ll explore the factors that influence Marketplace deals and what they mean for your game plan. 

First, identify the type of Marketplace buyer

Cloud Marketplaces are still in the somewhat early stages of adoption, though the trend is growing rapidly. Flexera found that 59% of enterprises say cloud usage will exceed prior plans due to the COVID-19 pandemic. This means that your buyers may be more open to Marketplace (MP) conversations now than they would have been earlier in the year.

Nonetheless, buyers will vary in Marketplace adoption. Generally, the lower the level of Cloud Provider usage or Marketplace familiarity, the greater the resistance in conversations. 

By grouping buyers into three “Marketplace maturity” categories, we can identify buying patterns that help you as a seller understand how best to work with your buyer. Here’s how we break it down visually:

Deal Type Departmental Cloud Newly Strategic Cloud Cloud Mature
Marketplace Maturity Cloud familiar Cloud strategic Cloud committed
Marketplace Resistance High Medium Low
Conversation Qualifier Do you have a strategic relationship with a Cloud Provider? Who owns your strategic Cloud Provider relationship? Do you have an Enterprise Discount Program (EDP) to use commitments against?
Have you sourced through Marketplaces in the past?
Game Plan Educate on benefits of Marketplace Gather intelligence from Cloud Provider reps Leverage commitments for expanded
or multi-year deals

Type 1 – Departmental Cloud

The first Marketplace buyer type is the “departmental cloud.” This organization uses some Cloud services, but only within a single department. Their Cloud alignment with a particular provider isn’t formal, and there’s no centralized management.

Maturity: Cloud Familiar

Level of Marketplace Resistance: High, here’s why: 

  1. This buyer still needs some education about how to purchase through Marketplace and how it can benefit them
  2. Depending on the role of your buyer within the organization, your contact may not know the right person to go to to ask about their Cloud Provider relationship 

Conversation Qualifier: “Do you have a strategic relationship with a Cloud Provider?”

How this impacts your strategy

If you want to move a type 1 buyer through Marketplace, you need to come prepared to educate them on the mechanics and buyer benefits of Marketplace. Start your conversations early in the sales cycle by asking if they have a relationship with a Cloud Provider (CP), and when they inevitably ask why, you can start to educate them on the benefits of leveraging existing Cloud commitments for their department’s needs and/or how deals sourced through Marketplace tend to move faster because they wouldn’t have to fully onboard you as a vendor—they would just pay for your software as a line item on an existing bill.

Type 2 – Newly Strategic Cloud

The second type of Cloud buyer is aligned with a Cloud Provider, and ownership of the Cloud relationship typically falls under an Infrastructure lead or CIO. They may be still somewhat new to Cloud, and adoption has focused on infrastructure up until now, but they see it as a broader strategic move. 

Maturity: Cloud Strategic

Level of Marketplace Resistance: Medium, here’s why: 

  1. There can be a larger variance of maturity for buyers in this group, but more than likely they are just getting their feet wet with a larger, more strategic relationship with the Cloud Provider. 
  2. Depending on your buyer and the size or makeup of the organization, it may not be easy for your buyer to track down who owns their CP relationship.

Conversation Qualifier: “Who owns your Cloud Provider relationship?”

How this impacts your game plan

When you approach a type 2 buyer, you want to encourage communication between your buyer and the person or department that owns the Cloud Provider relationship, but be cognizant not to let this stall you for too long; if it takes much longer to open up these lines of communication than it would to move forward direct, use your best judgment. With type 2 buyers, you can begin to partner with CP reps to gather intel about the organization, leverage the existing Cloud relationship, and communicate with stakeholders. 

Type 3 – Cloud Mature

Cloud Mature buyers, the third type, are using CP in multiple ways. They have committed spend and contracts with their preferred CP, and there’s typically a sourcing role, aware of all Cloud products consumed. This is great news for you as a seller because it means deals can move much quicker through procurement.

Maturity: Cloud Committed

Level of Marketplace Resistance: Low, here’s why: 

  1. This buyer already has deep roots into their Cloud Provider(s), understands the incentives of Marketplace, and likely has a sourcing role who can help streamline the purchase process.

Conversation Qualifier: “Do you have an Enterprise Discount Program (EDP) with your Cloud Provider to use commitments against?” or “Have you sourced software through Marketplace in the past?”

How this impacts your game plan

Type 3 buyers are well versed in Marketplaces, so you’ll work with them to determine how they can best use Cloud commitments to their advantage. For new customers, talk about the ease of billing and getting set up as a vendor via Marketplace. It’s also a great time to educate the buyer about Private Offers and how this accelerates the pathway to doing new deals. For renewals, speak to the buyer about using their Cloud budget for multi-year deals or needed expansion. 

Second, assess the Marketplace deal size

In addition to classifying customers by their buyer type and Cloud maturity stage, you can also categorize MP deal sizes. 

Small

Small MP deals are typically departmental purchases that are sub-$100,000 and can apply to any buyer type. It’s useful to employ the Marketplace for these transactions as part of a “land and expand” strategy. First, you complete a small initial agreement on the MP. Then, you can grow the account over time. 

Medium

Medium deals are in the $100,000-$500,000 range, depending on the organization. For example, a sub-$500,000 deal for an enterprise customer is still small enough to happen quickly through the MP. These types of transactions are likely for Newly Strategic and Cloud Mature buyer types. 

Large

These deals are in the $500,000 and above range. When an organization has a dedicated budget with a Cloud Provider, you can help them meet commitments with an expanded offer. Because of their dedicated budget, you can work with the buyer to craft a custom deal that fits their needs and burns down their Enterprise Discount Program (EDP). 

Then, combine what you’ve learned

Understanding the buyer type and deal size give you insights, but on their own they’re simply two loose pieces of a puzzle. When you combine what you know about these two factors you gain a greater context about how to proceed. 

 Deal Size Departmental Cloud Newly Strategic Cloud Cloud Mature
Sub-$100,000 deal Small deal, but has plenty of room to grow & move quickly Use Marketplace to land and expand at this level Use Private Offers or Plans to expedite billing and contracts
$100,000-$500,000 deal Medium deal, budding strategic relationship Leverage CP reps to gather intel & initiate co-sell Focus on EDP burn down and use Private deals to customize terms
$500,000+ deal Large deal, deeper relationship with vendor Discuss EDPs and simplification of contracts and vendor onboarding Craft a multi-year commitment

Here’s how you can successfully go about crafting a Marketplace deal for each of the nine scenarios. 

Departmental Cloud + small deal: Use Marketplace to land and expand with smaller deals. Educate the buyer on the benefits of Marketplace, and start with a small deal to get them comfortable. They may not be receptive or it may take time for them to track down the right parties, but the education you do know can pay off down the line. 

Departmental Cloud + medium deal: Medium deals with a departmental cloud shop indicate that the company has some trust and buy-in on your product and in Marketplace, opening the opportunity for a more strategic relationship.

Departmental Cloud + large deal: This buyer likely won’t be ready for a Marketplace purchase of this size, but it doesn’t hurt to open the path. Begin Marketplace discussions early, but be prepared to sell directly. And remember to come back to the Marketplace discussion when it comes time for renewal. 

Newly Strategic Cloud + small deal: Use Marketplace to land and expand at this level. As your relationship and trust grows and as your buyer becomes more mature with their Cloud strategy, you can grow the account. 

Newly Strategic Cloud + medium deal: Register the opportunity via Marketplace to gather intel and co-sell with Cloud Provider reps. Your co-sell teams can make a great impact on this buyer and offer incentives on both sides. They also get paid on commission for deals they help move through MP, so they are almost always willing to assist. 

Newly Strategic Cloud + large deal: Guide conversations to potential Enterprise Discount Program, and create a Private Offer or Plan with custom terms. You can talk about how Marketplace simplifies contracts and limits the amount of time it takes to procure and onboard a new vendor when that vendor can roll up under their Cloud bill. 

Cloud Mature + small deal: Create a Private Offer or Private Plan to expedite the sales process and make contracts and billing simple. Know that, as with any smaller deal size (but especially with those high on the Cloud Maturity curve), “land and expand” is a great way to build relationships you can grow over time. 

Cloud Mature + medium deal: Discuss tailored pricing, terms, and discounts to increase deal size or contract length while helping them burn down their EDP. Don’t forget that the faster they can bring you in as a vendor, the quicker they can get started with your product and see its value (and Marketplace offers the fastest channel for that today).  

Cloud Mature + large deal: This buyer is fully bought in on your product and is invested in their Cloud partnership. Craft a multi-year via Private Offer or Private Plan to burn down their Cloud commitments, and make renewals simple. 

And there you have it. There’s just about everything we know about selling through Marketplace across a variety of companies, deal sizes, and Cloud maturities. These perhaps the most important factors to consider as you build, refine, and execute your Marketplace plays.

If you want to sell on Marketplace successfully, it’s essential to start conversations about the channel early in the sales cycle, regardless of buyer type or deal size to give your Marketplace program the best chance of survival. Your sales team should partner with Cloud Provider reps to learn more about prospects, sell together, and strengthen the strategic relationship.  

Want to learn more about getting your Marketplace strategies up and running? Check out our Marketplace Roadmap to understand positioning, people, and the KPIs to pay attention to.  

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