Seven Ways to Drive New Logo Growth Through Annual Planning
In today’s environment with an equal focus on profits, companies must find ways to drive efficiency in acquiring new logos.
In 2022–2023, technology spending growth has slowed, and technology companies have seen slower growth. This caused organizations to refocus their management efforts on profitability vs. the ‘growth at all costs’ mantra. In addition to significant cost-cutting measures, most technology companies refocused their efforts on driving the most efficient sales motions: minimizing churn and maximizing sales toward the install base. As sales and marketing organizations design their 2024 go-to-market (GTM) strategy, new acquisition growth (new logos) is once again becoming a priority. New acquisition growth often takes the most effort and resources. In today’s environment with an equal focus on profits, companies must find ways to drive efficiency in acquiring new logos.
Alexander Group curated seven ways that sales organizations can drive new logo growth through the annual planning process.
There are three primary ways that sales organizations can drive new logo growth through sales coverage design. These changes vary based on the level of investment, as well as the degree of disruption. However, each modification increases the focus on new logos.
1) Investing in Additional Business Development Reps (BDRs) with Skills in Digital Tools, Analytics and AI
Sales organizations can increase new logos by adding additional BDRs. These reps are usually lower-cost resources that can create scale when reaching out to potential customers or contacts. The ratio of sellers to BDRs is typically 4–6 sellers per BDR. These reps are most effective in attacking prospects with medium sales cycles (3-9 months) in unpenetrated markets. To balance the cost of additional BDRs, management should also focus on the quality and skills of their reps to ensure they are as productive as possible. A new type of BDR is emerging, one that can use the latest tools and analytics to drive more focused outreach. Companies utilizing this lever must update their hiring practices.
2) Creating New ‘Business Development’ Roles Focused on Opening Up New Markets or Functions
When organizations struggle to land new accounts, especially in the top end of the market, it could be driven by market saturation or misalignment between the seller talent profile and hunting motions. To deal with this situation, organizations will identify a named list of ‘target whales.’ These accounts will be pulled out of the general pool and given their own assigned territory. Each territory will be assigned to an experienced business development seller with the sole goal of landing and expanding these accounts. These accounts will often use a direct competitor and will involve competitor displacement. Sales compensation plans must reflect the reality of a longer, lumpier sales cycle. Smaller lands must be incentivized to support a territory foothold. A general benefit of deploying a few Enterprise target account lists is better alignment of seller talent profile to customer motion, as well as improved focus on very high-value accounts.
3) Bifurcating Hunters and Farmer Sales Motions
Bifurcating hunters and farmers (or increasing the ratio of hunters to farmers) is a common way that sales organizations increase focus on new logos. However, significant coverage changes can lead to downstream strategic implications (i.e., territory design, compensation design, etc.). Bifurcating hunters and farmers is most effective when a sales organization has a large install base and it’s hard to get mindshare on potential new customers. Creating separate hunter and farmer teams has significant change management implications for existing sales incumbents. One way to effectively deal with the change is to maintain a traditional hunter/farmer seller, but have territories aligned in two groups—>75% new (<25% existing) or <25% new (>75 existing).
Territories and Deployment
There are two primary ways that sales organizations can drive new logo growth with territory design.
4) Developing Greenfield Territories
Greenfield territories consist of mostly prospective customers. In fact, 67% of XaaS companies deploy greenfield territories. These territories are usually geographically based and could encompass a down market segment or an entirely new market. Sellers can grow a book of business by keeping some or all of the accounts that they close. Greenfield territories are an important management lever that highlights the value of new accounts but does not create the same level of disruption as coverage changes. It is also easier to flex up or down the number of accounts assigned to a seller without creating substantial disruption in the organization.
5) Investing in Verticalized Teams and Territories
As organizations expand to new industries, one of the quickest ways to gain a foothold is through the creation of verticalized territories and sales teams. These teams focus on developing vertical use cases and building a following of new clients. Once the organization establishes itself as a player in that vertical, the sales motion typically transitions from ‘new logo acquisition’ to ‘land-expand-renew.’ Once this happens, the vertical sellers function like the rest of the organization—working themselves out of a specialist job. Regardless, verticalized territories can be an important tool during annual planning.
There are two primary ways that sales organizations can drive new logo growth through the use of sales compensation.
6) New Logo Specific Sales Compensation Measure
New logo specific measures are typically only relevant for hybrid sellers that cover both the ‘land’ and ‘expand’ phases of the sales process. New logo specific measures drive focus by assigning ‘at-risk pay.’ However, only 5% of sales organizations have new logo specific measures for their sellers. This is likely due to sellers’ competing priorities, as well as the difficulty in goal setting. Sales compensation should drive focus on the most important outcomes of the seller, but not at the expense of overcomplicating the job. New logo specific measures should be used when organizations can accurately set goals and when landing new accounts is the top priority.
7) New Logo Sales Compensation Modifiers or Bonuses
A more common method to drive new logos with sales compensation is with modifiers or flat bonuses. This type of mechanic signals to the sales force that new logos are important but reduces the administrative complexity with goal setting or having a standalone measure. In fact, 80% of companies that utilize sales compensation to reinforce new logo sales use some type of modifier or flat bonus. It is important to weigh the costs vs. benefits of including a new logo modifier or a flat bonus within the sales compensation plan.
As sales organizations continue through their annual planning process, it is important to set revenue strategies that drive new logos and long-term growth. Many different options exist with varying levels of disruption and investment. Each organization should select the course that best aligns with its strategic vision.