Best Practices from the Front Lines: Thought Leadership with Mark Fidelman

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Guest Post by: Maria Pergolino

Marketing automation has the ability to benefit almost every B2B company and industry, but are there benefits specific to open source companies? In our newest B2B marketing thought leadership interview, Mark Fidelman is the EVP of Sales at MindTouch and author of "Open Source Best Practices 2009" talks about open source success and using marketing automation to achieve it.

What aspects of the buying cycle are most important to open source companies?

The entire buying cycle is important. Most open source companies are starting to understand their sales funnel better and are educating their customers throughout the buying cycle. We look at it as more of a learning process and less of a sales approach. We know that not every user trying our products and solutions will become commercial customers, but by being open and providing educational content, our users can self select based on need. 

What characteristics of the open source community are a good fit for marketing automation?

Because the commercial open source community deals with heavy volumes of web traffic, most open source companies require precise user segmentation to better understand who and how to prioritize and target. Sophisticated marketing automation tools are needed to aid marketing and sales throughout the entire lead nurturing process. Without marketing automation, figuring out the right users to contact is extremely difficult. With marketing automation, I can create compelling content that attracts the ideal user and guides them through a predetermined path. Then, at the right time, sales people are alerted to engage with the prospect. Because marketing automation tools track the activity of every visitor, the salesperson has a dossier of the prospect and is better able to communicate in context with the prospect’s specific need.     

Why is the commercial open source business model successful?

There are at least three reasons for the success of the commercial open source model.  

  1. The most important aspect of any open source company is high levels of participation by its surrounding community. Open source companies need a vibrant community of commercial and non-commercial customers to advance and innovate the code base plus contribute to their financial success.   
  2. User adoption of commercial open source company products is significantly higher due to the free community versions of the product/solution. Enough value is given to the community of users to adopt the product, while commercial customers buy add-ons and services that provide significant, if not mission-critical, value.
  3. By its very nature of being open source, community- and partner- developed product extensions help deliver additional value above and beyond the original code. These extensions enable customers to further customize the product to suit their needs, further extending the user base and providing additional opportunities for open source companies to sell commercial solutions or licenses. 

What prompted you to launch the Open Source Success Best Practices 2009 survey?

As a community, we share best practices amongst ourselves, but they needed to be codified and shared beyond our local peer groups. 

Somewhat unique among open source companies is the transparency and help MindTouch was given in conducting the survey.  We owe the open source community a debt of gratitude for their generous participation.   

What is the Open Source Success Formula?

It is best explained on our blog, but the Open Source Success Formula is a method followed by the majority of survey respondents knowingly or unknowingly:

D x CR x ASP = $$ (or € £)

The formula can be broken down as follows:

  1. D = Distribution (total number of downloads, subscriptions, etc.)
  2. CR = Conversion Rate (meaning: percentage of the Distribution that develops into paid customers)
  3. ASP = Average Sales Price
  4. $$ = Revenue

It’s important to note that the formula can be expanded to include other factors, but it is the primary driver for most open source companies. 

Why is it important to improve Conversion Rates?

Conversion rates are a key set of metrics that illustrate how successful commercial open source companies are converting their community users to commercial customers. Looking closely at conversion rates, the primary success factors are:

  1. How well is the product / solution differentiated from your free or community edition (this can include services)
  2. How well is the product / solution differentiated from your competitor’s solution
  3. How mission critical is the product / solution (in our research this was the number one indicator of how successful an open source company is at that point in time)
  4. Marketing and sales effectiveness (how well are they communicating #1 – #3 above?)

Marketing automation is a primary ingredient in item 4, but it also helps communicate the value of #1 – #3 at the appropriate time and to the appropriate audience. 

How can a solution like Marketo impact conversion rates?

It’s critical to understand how and why an open source user converts to a commercial customer. Solutions like Marketo help us identify the steps users are taking to become commercial customers. Then, through reverse engineering, we build our web site to optimize the path our prospects take to become commercial customers.   

Because we understand the behavior of our commercial prospects, we deliver the optimal value and benefit information through Marketo to prospective customers at the right time in the right sequence. That’s powerful differentiation and why solutions like Marketo are important.

What can other industries learn from the open source community?

There is much to learn from the companies we interviewed. The primary benefits of commercial open source are high adoption rates, passionate communities and the crowd sourcing of code and product extensions. Let me offer a few best practices; 

First, since the commercial open source business model offers lower barriers to entry to using and evaluating products, consider offering a limited, free offering that provides enough value to be useful, but is not mission critical to your prospect’s business.   

Second, become your industry’s knowledge leader. Blog, create videos, and host webinars about the industry as well as how your solution addresses business pain. The industry angle will attract prospects to your web site that normally wouldn’t visit. 

Lastly, become more transparent. Counter-intuitive to most organizations, but open source has taught us that by providing open user forums, bug tracking and roadmaps, prospective customers enthusiastically respond. In fact, the more transparent the company, the easier a customer can self select your solution on their terms and within their own timeframe. Benefits include shortened sales cycles and a dramatic reduction in cost of sales.

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