If you’re close to finalizing your Marketplace strategy or recently got listed in one or more of the major Cloud Marketplaces (AWS, Azure, GCP), one important item to start thinking about is how to set your KPIs and track success for this new channel.
Naturally, some teams may want to transfer the same measurements they hold for direct sales over to the Marketplace. When this happens, you may end up focusing on the wrong KPIs, which can lead to misaligned expectations. Today we’re going to cover how to think about Marketplace KPIs, as well as what you should be tracking to ensure rapid adoption and expansion of your Marketplace business.
Executive alignment is key
Business runs more smoothly when goals and desired outcomes have been jointly established and agreed upon, and the same goes for selling via the Marketplace.
The C-Suite must embrace Marketplace as a strategy. Adjusting to driving deals through Marketplaces comes with a learning curve, and the transition won’t be smooth if everyone is not on board. If the C-Suite still needs some convincing about why this is a viable channel, here are four reasons software companies embrace Cloud Marketplaces and use them to accelerate revenue.
Another important aspect of executive alignment is ensuring Sales and the C-Suite agree on goals and the criticality of Marketplace as a defacto channel. Having a shared view of what success means and how to track it at each stage is vital. And demonstrating support by incentivizing Marketplace business and celebrating Marketplace wins in the early days will pay big dividends – more on that later.
Resist setting unrealistic goals
One of the most common (and understandable) traps that new Marketplace sellers fall into is setting unrealistic goals and initially focusing on the wrong metrics.
For example, you may be tempted to focus on net-new logos. While customer acquisition is essential, gaining momentum on the Marketplace can take some time. By comparing net new logos in your first six months in Marketplaces versus net new logos over the same time with your direct sales channel (where you’ve had the sales motion down pat for a while), you may get discouraged and think of Marketplace as a failed experiment.
However, you’re just at a different point in the adoption curve, and tracking the number of customers acquired in the early stages of building your program can lead to disappointment and obscure the impact of some very important Marketplace benefits.
3 KPIs for new Marketplace teams
So, simply tallying your number of new customers in the first six months on the Marketplace isn’t necessarily a one size fits all strategy. Now what? There are still three KPIs you can track to convey the value of Marketplace to the C-Suite and the broader organization.
Larger overall deal size
There’s something potentially working in your favor when you’re selling via the Cloud Marketplaces—commitments. If your buyer has a certain level of commitment they need to hit with their Cloud provider, you may be able to secure bigger contracts.
A common scenario amongst many Marketplace sellers is to leverage dedicated cloud spend or budget to expand contract value at the time of renewal. Marketplace experts and Tackle customer, New Relic, has made extensive use of this benefit and has routinely been able to increase contract size and term, just by taking their renewals through Marketplace.
Companies with existing budgets dedicated to Cloud providers are more likely to increase their deal size or to agree to multi-year contracts. Instead of looking at net-new logos, compare deal sizes through legacy channels versus Marketplace. You may be able to show that, on average, your deals made through Marketplace are more substantial.
“We’ve got a great partnership with AWS. It cuts the sales cycle down when we use the AWS marketplace by almost 50%.” – Geroge Kurtz, Crowdstrike CEO
Existing contracts and budgets generally mean that deals can be completed faster via the Marketplace. While deal volume can take a few cycles to steadily increase, a good metric to track is how fast your Marketplace deals are closing (Average Sales Cycle) versus your direct deals.
For example, imagine you were working on a deal that typically would have been pushed to the next quarter to complete because onboarding your company as a new vendor was too time-consuming for your buyer’s vendor management team. In the Marketplace, though, you were able to close a similar deal in Q1 given the existing Cloud Provider relationship your buyer had. Being able to complete contracts faster via the Marketplace is a significant advantage and offers an easily trackable metric. Every software organization on the planet is looking for faster cycles. Marketplace delivers.
Tackle customer Sisense has seen a 20% acceleration in their sales cycle on AWS Marketplace transactions, speeding up the time to value for both Sisense and its customer.
Less time in negotiation and vendor management
Administrative overhead and vendor management can take up a lot of time. However, simply skipping the need to create a new billing entity for your company alone can save your buyer a lot of time. By embracing the Marketplace as a distribution vehicle and becoming an extension of the contract that the Cloud Provider already has with a buyer, you can often improve deal velocity.
At Tackle, we do around 95% of our deals through one of the Cloud Marketplaces. 80% of our deals involve no contract negotiation at all. The deals we do directly with our customers take 2-3x longer and involve a lot more overhead in the form of human capital (legal, finance, et. al). Each Marketplace offers a set of standardized, best practices-based agreement terms, which provide for simple and fast contract execution and cover the majority of buyer concerns. Of course, you can always negotiate specific T’s and C’s and terms, but Marketplace provides a means to skip all of that headache.
Build social proof now for easier future sales
While the KPIs you use to gauge success in the first six months of using the Marketplace may take some internal discussion and alignment, here’s how to build social proof so that you can complete more Marketplace transactions in the future.
Refine stories for your three key personas. There are three parties involved in a Marketplace sale—the Seller, the Buyer, and the Cloud Provider. For each of these personas, you need to develop the value prop story that you can use as fuel to drive support for this increasingly critical channel.
- For Sellers, highlight why Marketplace is important for your sales organization. Think bigger, faster, easier deals and the natural uplift you can get from aligning with the Cloud Giants. Also, don’t dismiss the need to stay competitively relevant and ahead of (or on par with) your peers
- For Buyers, define why buyers want to buy this way and the benefits of buying via the Marketplace. What are the benefits for them that you can use in discussions?
- For Cloud Providers, make it easy for them to understand the value of your product. By educating your Cloud provider Sales and Partner teams, you can work together to accelerate co-sell activity
Build the internal case for Marketplace selling
Have you had a few Marketplace wins? Share them with your organization. Once you have deals that are larger or happen faster, you’re going to catch the attention of the C-suite, Finance, Marketing, and other team members. Creating an internal “billboard” for your Marketplace success will help demonstrate the value of this new channel to the rest of the organization and help you generate further interest and activity.
Selling software via the Cloud Marketplaces represents a great opportunity for software companies at all stages of maturity. As you get started on your journey, though, it’s important to set realistic expectations for your performance based on your Marketplace maturity. Rather than counting completed deals or total revenue in the first six months, instead analyze deal size, speed, and ease.
Frequently asked questions (FAQs)
What are the best KPIs for Cloud Marketplace teams?
Three of the best KPIs to track Cloud Marketplace success include: 1) Tracking overall deal size; 2) Tracking how long it takes to close deals; and 3) Tracking time spent in negotiation and vendor management.
What should I avoid when setting Cloud Marketplace KPIs?
When setting Cloud Marketplace KPIs, avoid setting unrealistic expectations. For many, this is a new channel, and it takes time to get the ball rolling. In addition, you may be tempted to focus on the wrong KPIs, such as those for direct channels (like logo acquisition.) Instead, we recommend focusing on the three KPIs listed in this blog.
Want to learn more about developing your Cloud Marketplace sales strategy? Setup time to talk to the Tackle team.