Mid-Market Sales Strategies (Hint: They're Not Like Enterprise)
We’ve worked with many suppliers throughout our careers, and all of them have one thing in common - they all know how to serve the enterprise market really well. One thing many are trying to improve upon, however, is their approach to the mid-market. Here’s an overview of the ways enterprise and mid-markets are different, and strategies for gaining access to the mid-market effectively.
How Do Suppliers Serve the Enterprise Market?
Most suppliers primarily serve the enterprise market with their direct sales teams, then allocate tons of additional resources to support this crucial market segment. Think systems engineers, support personnel, services teams, integration teams, customer success teams, and others. People sometimes joke about the enterprise customer model as making a 16-legged sales call, or needing a bus so the whole team can travel to the customer.
All kidding aside, approaching the enterprise segment with a direct team of sales, technical, support, services personnel makes sense since this group of customers represents the largest revenue per company opportunity. This can be a profitable model since these companies typically buy millions of dollars of software, services, or solutions.
Additionally, securing business at a Fortune 500 account gives you credibility and a powerful reference. Everyone wants the big name logos on their “Our Customers” slide, and lots of competitive battles are fought in this space.
Differences in Enterprise vs. Mid-Market
While it makes complete sense to cover an enterprise customer with a full-on direct sales team from both an economic and a relationship perspective, the economics simply don’t work as you move downstream to the mid-market.
With fewer employees, a mid-market customer will simply not have the buying volume as a larger customer. This has implications beyond the initial sale - fewer systems to update, fewer add-on services, and fewer hardware and software dollars.
The sales motion is different between mid-market and enterprise. In the enterprise, there is a share of wallet motion (how to secure the largest share of the customer’s budget). The mid-market motion is much more transactional.
Complicating this is the fact that a mid-size customer usually doesn’t think of themselves as mid-market. They have the same needs as larger companies in terms of productivity, competitiveness, and growth. They don’t want to be talked down to or treated as second class just because they aren’t a Fortune 500 company. And they expect the same level of care, support, information, and productivity as a larger company.
The only catch is that this isn’t financially feasible for suppliers.
All of this makes the mid-market a challenging market to reach. That’s why when suppliers build their Go-To-Market strategy for the mid-sized customers, they will typically look to partners to help them cover this segment.
To be sure, this is a critical segment to reach. There are thousands of small and mid-sized companies as compared to just hundreds of enterprise accounts. The mid-market buying power in aggregate is most often larger than in the enterprise segment.
Done right, this can be a profitable segment to serve and powerful segment to capture. And, when you consider that in the past 20 years “Nearly half of the companies that were Dow components back then are no longer in the Dow,” you just never know which mid-sized company you might be propelling to the top of the charts.
Who is the Mid-Market?
Each supplier may define the Small, Mid, and Large/Enterprise segments differently, but here are two analyst models that are broadly referenced and adopted:
Gartner defines Small and Midsize businesses (SMB) in terms of both number of employees as well as revenues. Under their framework, a small business has fewer than 100 employees and/or less than $50M in revenue, midsize companies have between 100 - 999 and between $50 - $1B in revenue; and companies with more employees and revenue would be considered a large or enterprise account.
IDC also considers small business those with between 10 - 99 employees and mid-market as 100 - 999. They segment mid-market into two: medium sized companies are those with 100 - 499 employees, and large businesses have between 500 - 999 employees. Their February 2018 report forecasts that SMBs will spend over $600B, with over two thirds of that figure coming from the mid-market. This is not a figure any supplier can afford to ignore.
How To Approach The Mid-Market Segment
We’ve seen several companies make mistakes with the mid-market. Here’s how you can avoid the two most common ones:
Treating the mid-market as one homogenous group.
Expecting all partners to jump at this opportunity.
Avoiding these common pitfalls requires a willingness to put in the time and effort to get down to details. Here’s how to do it.
Understand your Mid-Size Customers
Different suppliers categorize the middle market differently. The ones that paint the entire mid-market with a single brush are generally the least successful. On the other hand, the ones that do a level of sub-segmentation are the most successful in reaching this segment.
Why is it important to go through a sub-segmentation exercise? Just like with any other customer you are trying to reach, you need to approach the mid-size customer with relevant solutions and messages.
We saw some companies create software solutions for the mid-market that required a minimum of 1000 employees. The pricing was in line with this quantity. This was a miss right off the bat. If your solutions do not specifically offer the features they need, or if they are priced incorrectly, the mid-sized customer will assume you don’t understand their nuances. They’ll seek another vendor.
Likewise, if your marketing messaging is geared for enterprise customers, a mid-sized company will not find it relevant or compelling. Again, they will assume you don’t really want to reach them since you’re not talking to them in language they want to hear.
What are the right sub-segments for you?
That depends on your solutions. We’ve seen some vendors create segments based on size (Small-Mid, Mid-Mid, Large-Mid), geography (countries, regions, or states), vertical markets (e.g., manufacturing, healthcare, retail), and horizontal solutions (e.g., security, data analytics, reporting).
Size is perhaps the most important segmentation criteria to focus on in your messaging. We’ve seen vendors break mid-market into 2 to 6 smaller segments. The right structure for you will depend upon your solution. The bottom line is to target your solution specifically to the mid-sized customer with value messages that are exactly relevant to them.
You wouldn’t market the same way to a 100 person law firm as to a 500 person retail company or to a 1000 person health center, yet all of these could be considered mid-market.
Again, each customer wants to feel that they will be well served by you, so break them down into segments and refine specific messaging for each group.
Understand Your Partners
In addition to taking a deep level of understanding to the market, you also need to look at your current and prospective partners. Just like with suppliers, not all partners can be profitable serving this segment - their cost of sales might be too high or their marketing sophistication might not be at the necessary level.
You need to be prepared to roll up your sleeves and dive into the economics to make sure the partner understands the cost to serve this market, and their ability to succeed there.
Working with channel partners that understand the needs and expectations of the mid-market is key to meeting their needs and keeping them satisfied.
Putting it all together
Once you know the sweet spot for your solution (geography, vertical, horizontal, and/or size), you can look at a map to figure out where you have coverage and where you have gaps.
Understanding this “white space” will tell you exactly where you need to go out to recruit partners, and what your ideal partner profile looks like. Once that’s determined and you recruit the best partners for your goals, you can begin onboarding.
The mid-market is an exciting place. With technology as a great democratizer, mid-sized companies can truly compete anywhere, anytime, with anyone, and hold their own.
These business owners are making huge contributions to the US economy and to their local areas. Each one I’ve met with is passionate about their organization, product, or service; as well as their outlook for growth. There’s nothing more exciting than to be a partner in helping them achieve success.
This article was originally published in August 2018 and has been updated.