Selling to middle market B2B customers is a challenge for many large, multinational companies. While midsize businesses are the core of their supplier base, when it comes to selling to them, larger businesses are less able. Unlocking the potential of these middle market customers can open up new avenues and options for growth during and after the current economic slowdown.
A media company we work with, for example, gets approximately 80% of its revenue and 10% of its revenues from the top 1,000 accounts – all affiliated multinational giants. Another 20% of revenue and nearly 5% of revenue from 10,000 small to medium customers. Among them, 3,000 midsize clients generated only 3% of the media company’s total sales — much less than you might expect given the media company’s success with other customers.
That is common and widespread across industries, with many large companies failing to achieve profitability from middle-market customers. As we work with clients from financial services to industrials to technology, we see two problems often that we describe as systemic.
The Problems – and Opportunities
The first problem is the failure to reach the market. Large companies earn less from the middle market than from its market share warrants. When we work with technology companies, for example, we often find that they get less than 20% of their revenue from middle-market companies – even though these businesses represent a third or more of their theoretically addressable market.
The second systemic problem is the failure to profit from mid-market sales. Time and time again, we see that multinational margins on sales to midsize companies are lower than on sales to large businesses (even though customers have more bargaining leverage) or small businesses ( although serving companies may take a lot of administrative time).
Yet the opportunity is huge: In the US alone, mid-market companies are buying more than $6 trillion a year of goods and services, according to Visa – an amount roughly equivalent to the purchasing power of the entire German economy. Not only is the middle market large, it is growing faster than large or small businesses, according to studies from National Center for the Middle Market, Dun and Bradstreet, and others appear regularly. Sellers with a large customer base in the middle market can grow with their clients.
The basic problem is that many multinationals do not have a complete strategy for selling to midsize companies, as they usually do for selling to business clients and small businesses. As a result, they tried to force their business model or their small business model on the middle market – and it didn’t work. When big companies put customers in the middle of the market, they find themselves making the same marketing move but getting different results. We also often see companies deprioritizing initiatives for mid-market sales because of their scale and size compared to enterprise sales.
Let’s describe what effective, profitable strategies look like. But first let’s talk about how the problem appears:
Misreading customer journeys
Middle market companies don’t shop the same way large companies do. They rarely have complete purchasing functions and have few expert buyers. For example, the finance departments of middle-market companies may not have specialized teams that buy and manage tax, treasury, and financial planning and analysis products. If your sales and service model is designed for specialists, you are likely to overwhelm or confuse your customer.
Misaligned product or service fit
Products designed for the needs of billion-dollar businesses are often too cumbersome and expensive for companies with $100 million in sales. Software programs for resource planning or customer relationship management, for example, are often inappropriate, while programs designed for small businesses – such as tax software – are too simple.
Deprioritized organization
Organizational issues within large multinationals that sell in the middle of the market in three ways. First is the internal sales organization. Large accounts have structure, a team, and defined roles. For example, they usually have a person whose job it is to connect a customer who needs support with the right resources. Middle market sales reps often handle these and other account management tasks themselves, taking time away from sales. (For small customers, most companies develop skin support functions that are often insufficient for the more complex needs of the middle market.)
Second, mid-market sales reps often have to wait in line – long in line – for help from subject matter experts in business units, such as technical specialists who can describe how to get the best in cloud-computing services. Access to SMEs is often a key factor in closing deals for complex B2B software and services.
Weak connections between the sales force and business units create problems in “hunting” (bringing in new customers) and “farming” (cultivating existing customers for up-selling and cross-selling, and to ensure their loyalty).
Lack of talent
If selling to the middle of the market is an afterthought in the organization, the salespeople themselves will become orphans in the organization. People in national-account teams see a career path; those selling to middle market companies do not. The result is a less motivated sales team that becomes a less capable one.
Additionally, mid-market sales teams are often understaffed (and therefore overworked) because the segment is not profitable enough. But the segment is not profitable enough because it is not sufficiently served, which creates a vicious circle that can only be broken through top-level intervention and a strategic decision to grow the middle market.
How to Sell in the Middle Market
What might such a strategy look like? In our work, we identify three distinct strategic approaches.
Unicorn hunter
Focus on fast growing middle market companies. In this approach, a seller looks to the middle market as the place to find companies that can feed it up to the major account business level, using simple segmentation based criteria. of income and growth.
For example, a data-security company we worked with struggled to sell its highly complex product to the middle market using an inside sales team (that is, via phone, email, etc. online channel). In addition, the economics do not justify deploying a direct sales team for the entire middle market. But the numbers work for a method where the sales and marketing teams of the company identify that there are many potential clients who are a) growing fast and b) likely to buy more products. Success is measured here by moving customers to the mid-level to enterprise level.
Segment specialist
Companies often create one big bucket in the middle of the market when in reality it is made up of a diverse group of companies with unique requirements. This highly segmented approach identifies specific mid-market segments and products: IT product of IT type of customer. The idea is to keep account managers and sales teams focused on identifying and serving smaller key customers in areas where the seller has a strongly differentiated product or service. .
Unlike the first strategy, which seeks to identify fast-growing customers, this strategy promotes entry into focused, even niche markets. Profit is the number one goal, not gross profit. This model works well in mature industries where the sales team is clear on who to target and where to focus growth. For example, one publisher we work with has clear and distinct segmentation criteria between enterprise and mid-market customers, as well as distinct and separate marketing strategies for each. In addition, the company provides clear career paths within each sales team to continue to develop and improve the capabilities of the teams.
Middle market optimizer
The first two strategies are about targeting specific customers and segments. This strategy targets the entire middle market, but ruthlessly and programmatically addresses operational efficiencies.
To reduce sales costs and service costs for customers in the middle of the market, start by organizing a separate sales team in the middle of the business development market and inside sales people. Equally important is standardizing product and service offerings and aligning the sales team’s processes with the buyer’s journey. Finally, ensure continued momentum by putting in place midmarket-specific metrics for success and prioritizing not just wins, but operational readiness to respond to unique needs and challenges.
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There is no one-size-fits-all solution when designing a go-to-market model for the middle customer segment, so choose the strategy that best fits your product line and competitive position, aligning it with the overall commercial and sales strategy. — and resist the temptation to drift back into an indifferent way.
Companies that customize their marketing approach and organizational capabilities to tap this market often realize rapid and dramatic results. The media company we work with has opted for a hybrid model that focuses on a targeted specialist approach while growing accounts within specific parameters. The result was a 5% increase in revenue within two quarters, as well as a 10 to 15% improvement in service efficiency.
For large, multinational companies, the middle market represents a huge, often untapped opportunity for profitable growth. Pivoting the organization and implementing a new model can be a challenge and often require change efforts, but the rewards can be compelling, in terms of profitable growth and operating costs and align.
