A partner strategy or channel strategy is essential for growing a business quickly and sustainably, because it helps create diversified revenue streams. However, channel strategies are also hard to get right, and the risk of conflicts grows as the business grows. We’re a SharpSpring agency partner, and I’ve been impressed with their partner strategy. They have a very focused target market, and an unusual approach to channel sales. I wanted to learn more about their strategy, so I reached out to Rick Carlson, the founder and CEO.
Turns out, SharpSpring’s partner approach is more than just a channel sales strategy—it drives every aspect of their business. They’ve chosen to focus on a very focused target market – digital marketing agencies. They’ve built their entire company around being the best option for that target market, enabling these agencies to resell the platform and deliver a host of services around it. And it’s working. Today, SharpSpring has over 1250 agency partners and nearly 6100 businesses using the platform.
During our interview, Rick and I talked about how they arrived on this customer focus and how it affects everything they do throughout the company. He talks about how this focus has made it easier to be heard above the noise and easier to close sales once a prospect agency learns about SharpSpring.
So now, let’s dive into the conversation.
Transcript for A Focused Target Market Delivers Outsized Results with Rick Carlson
Candyce: Thank you for joining me, Rick. It’s such a pleasure to talk with you. I’ve been looking forward to this conversation for some time.
Rick: Yeah. Thank you, Candyce. I appreciate the opportunity. It’s always fun to talk a little bit about SharpSpring and the market. Hopefully I’ll say at least one or two things that are interesting for your listeners, and thank you very much. I appreciate it.
Candyce: Awesome. Let’s start there. You’re in a crowded space, marketing automation. What made you decide to go into marketing automation, and how did you arrive at starting SharpSpring?
Rick: I’ve spent my career in sales and marketing. I started in sales and graduated into marketing. I’m not one of those people who blends those two disciplines together with any carelessness. They’re entirely different, but I do have experience in both. As I gravitated towards marketing and really learned the power of segmentation and so forth, I was in the internet security space, and was exposed to a competitor of ours, Marketo, and found what they were doing to be very interesting. This was pretty early on. They were extremely, I would say, email-centric.
In fact, if you think back many years ago, our industry was often referred to as email automation. Back then, Marketo was very email-centric, but I was really kind of blown away with the power and the promise of what they were attempting to do. They enabled a kind of real-time behavioral-based segmentation and highly personalized communication, which is kind of the holy grail for marketers. At the same time, I saw what I thought was an opportunity. They [Marketo] were very enterprise-focused. I think they remain pretty enterprise-focused. I believe they were…I wasn’t directly in charge of using their platform. I was really more exposed to it, but I think our company was spending $75,000 or something like that a year on Marketo.
I said, “You know what, this is a really neat platform and has got some great promise, but it’s the kind of thing that all businesses, even very small businesses, can use. It’s clearly the way things are heading. At the same time, there’s a lot of things that I would love for it to do as somebody who’s trying to solve problems for small business.” It needed a broader range of features and functionality.
I became excited enough in the promise of the technology that I decided to go after starting SharpSpring with the purpose in mind of bringing it in a more affordable, easy to use package that was accessible to all small businesses that would have a need for the services. So that’s what I set out to do with SharpSpring. Not long after that, we realized that digital marketing agencies were a really important factor, and I guess we’ll probably get into that, in terms of influencing and really implementing these tools. We ended up focusing a lot on digital marketing agencies as we grew our business.
Candyce: The channel model has been something that most of the marketing automation companies have struggled with. We were a Marketo partner actually early on. In 2009, I think we became a partner, or 2008. Channel conflict was a challenge for them. Then we looked into partnering with HubSpot, and again, there was a channel conflict issue that we really couldn’t overcome. How did you guys go about that? Did you know about those channel conflicts early on and figure out a way to address it differently?
Rick: Well, certainly we didn’t know about the channel conflicts with Marketo and HubSpot. We had no inside information there, but in my past, I had run channel organizations. I actually joined companies who had messed up their partner relationship. One of the companies who I won’t bother to name here that I went to work for had jumped back and forth, not in any malicious way, but just really trying to find what would work for the company. They went back and forth between a direct model and a partner model. They ended up alienating partners that would try to build their business around that company only to find that company competing with them on the next executive administration.
Long story short, I had a lot of experience with channels, done both good and bad. When we started to hone in on the digital marketing agency market, I really wanted to try something different. We started out with more of a traditional channel model. We mistakenly thought of digital agencies as a sales channel for our platform and a way to get our platform in the hands of the SMBs that these digital marketing agencies serve. In reality though, we settled on something that’s wildly different. We realized that the digital marketing agencies really didn’t think of themselves as resellers. We listened. We listened carefully. I was already very focused on not competing with agency partners.
To this day, we have kind of a squeaky-clean reputation in that regard, but what we really did that I think was fairly revolutionary is we decided to think about our agency partners not as a channel. Instead, we viewed our agency partners as our end customers. When you make that shift, it really enables you to put yourself in the shoes of your partners, in our case our digital marketing agencies, and build something that made sense for them; not just from a product perspective but from a business model perspective and pricing and terms and the whole bit. I’ll stop there, and we can certainly dive into more details on that.
Candyce: You mentioned that you guys have had a really clean record in not competing with the agencies. How have you done that?
Rick: First off, it’s just built into the entire business. I’d say 90% of our revenues roughly come from our agency partners and through our agency partners. We actually arrived at this model early on. Like a lot of startups, we were figuring out our go-to-market strategy. We were really thinking about how to not compete with the juggernauts. HubSpot and Marketo were just so well-funded and had a many year head start on us. We quickly realized that these digital marketing agencies out here were growing. They were influential, and they were more sophisticated. Our technology is pretty sophisticated for the average SMB, and it just seemed like a perfect fit.
We looked around and we realized that everybody else was kind of nodding to digital marketing agencies and maybe using them as a channel. We decided to kind of turn it on its head. When we made that choice, we started to get traction and realized that this was something that was going to be a cornerstone for our business. We built in every safeguard that we could think of in terms of the way we pay our salespeople, commissions and so forth, and the way we vet leads that come into our business, so that there’s very, very little chance that we bump into our agency partners.
We steer clear of offering services that agency partners would offer. We view ourselves as a tool that, when placed in the right hands of a digital marketing agency and married up with their skill set, know-how and experience, has the power to bring really excellent results to their clients. But we’re never going to be in a position where we offer those services. That gives us a complementary relationship with our agency partners where we provide them a powerful tool. But the tool is just that, a tool, being placed in their hands, with their experience being applied to it.
Candyce: So you’re leveraging the agencies also, I think, as Tier 1 Support, which I think is pretty smart, so that you never come between their relationship with their customer.
Rick: Yeah, that’s right. It’s probably a good time to get into more detail. I’ve made some kind of grandiose statements about not thinking of agencies as channel partners and turning things on their head. What we really did was decide that the agency was our end customer. When you make that decision, it allows you to think, “how do we best serve these guys?” If you’re going to serve an agency partner [or any focused target market], the last thing you want to do is stand between them and their customer.
What we do is we license our agency partners our platform. We don’t tell them what to charge their customers for the platform. They can give it away to their customers if they want. They can charge full retail. We have agencies that run the gamut between those two extremes, on a customer-by-customer basis. We have agency partners who have a fantastic relationship with one of their clients that’s on a great monthly retainer that has worked with them for years. They give that client SharpSpring. They’re able to do that, because we don’t set the price and we don’t have a direct relationship with the agency’s client.
It’s wildly different than working with anybody else who’s going to mandate what you charge for the platform. Also we want you to bill your client directly and have that direct relationship. Our agency partners think about the margin that they make on the license fee as, I think, a nice-to-have. But really our agency partners are more interested in the services that they’ve built around implementing marketing automation. They may mark it up or they may not in terms of the SharpSpring license they bring to their client. But really what marketing automation enables them to do is provide fantastic results for their clients, which also means billable hours and revenue for the agency.
It all works together very nicely. The eureka moment for us was thinking about our agency partners as our primary customers. I think “partner” is a term that’s overused these days. Partnership is kind of cliché and is thrown around. We want to be excellent partners to our agencies. We work very, very hard to enable them to build better, stronger businesses for themselves, and we grow right along with them. That’s just worked out fantastically well.
Candyce: I want to transition a little bit into how you marketed the business, because you’re in a crowded space. Marketo, HubSpot, and all these other organizations, plus the agencies themselves, have created what Mark Schaefer coined “content shock” a few years ago. There’s so much volume of content out there that it’s really difficult for a company, particularly in the marketing industry, to be heard above the noise.
Then in addition to that, we ran into the truth about companies like HubSpot and others. HubSpot’s not alone in this. But their lead generation efforts using their inbound marketing strategies were not actually the levers that were driving sales for their organizations. It really was sales-driven.
But they were creating a tremendous amount of marketing noise, so it’s hard to be heard. Can you talk about what you guys have done to be heard above all of that noise?
Rick: Sure. You’ve raised a couple of different issues. I do want to touch on the one that you mentioned in terms of … and this isn’t about HubSpot… but in terms of you mentioning that HubSpot is kind of a sales-driven organization, which is a little bit ironic. They are also credited with coining the term inbound marketing, so that would be a fun topic to discuss. But to answer your more direct question about how we kind of rose above the noise, what we did is we focused. That was also part of our digital marketing strategy. It’s a lot easier to focus on the 50 to 100,000 digital marketing agencies around the world. Those are the estimates that are thrown around fairly regularly.
It’s a lot easier to focus on those businesses and that vertical, not just with a message and with marketing, but with a product that actually serves this specific group in a more meaningful way. When I say focus, I’m talking about the entire company, not just marketing, but from a marketing perspective as well, it’s just much, much easier to focus on a specific group, a segment that you’ve got unique advantages with when you’re approaching them.
Again, going back to our business model, which is absolutely the most unique advantage that we have. We’re able to talk to these guys and rise above the noise. I think both HubSpot and Marketo both spend more than 100 million, maybe $150 million a year on sales and marketing at this point.
Rising above the noise continues to be a big challenge for SharpSpring. But what makes up for it is that once we do begin to talk to somebody, and they understand what we offer, it’s a no-brainer for them to sign up with us. Rising above the noise is always challenging, but I think you counteract that with a quality of product, a quality of offering, and a real focus on meeting the needs of a specific group rather than trying to be all things to all people.
Candyce: The way we first heard about you was that big mailing that you sent us, a FedEx box with root beer, which Phil loved, and the little root beer cozies, and a T-shirt. We had never heard of you before, but it worked.
Rick: Yeah, thank you for that. I did not know that that was the way we reached you. That was one of our most creative and most loved promotions. That’s exactly right. I should have thrown creativity into that mix as well. But we were only able to send you that package because we were focused already on digital marketing agencies like yours. That means we could spend a few more dollars to get your attention, and we could only do that because it was a narrow market that we were going after, and because we knew that if we got your attention, we had a high likelihood of winning you over with the actual product, business model, pricing, service and all the rest.
It all kind of blends together, right? I might have gotten the attention of some other vertical with something very similar, but if the needs of that vertical weren’t met in the same way, then that promotion wouldn’t have worked. We wouldn’t have been able to close enough business to afford a promotion like that moving forward. It’s all integrated, and it’s all dependent on one another, your marketing strategy and your product and your sales and service—all of it.
As marketers, we talk a lot about segmentation when it comes to messaging and the rest, but it really is beneficial for the entire business to think that way.
That’s great. I was unaware that we got you with the root beer campaign. For your listeners, we sent little T-shirts in there. It was kind of a complex thing. It’s pretty hard to describe on this podcast, but we had people putting their pets in these little T-shirts and shooting pictures of it and putting it up on social media and so forth. It was a lot of fun.
Candyce: There was a letter that accompanied it that described SharpSpring. You knew we were an agency. You knew who we were, and you made it clear in that letter that this was personal, this was for agencies, that you were focused on agencies. That vertical focus that you’re talking about is so crucial, and so many firms just don’t get it. That that focus on the customer needs to go through the entire organization. It’s interesting that you bring it to a close that way, because all of our podcasts so far have been on this subject that you’ve got to focus on the customer.
Rick: Well, it’s the number one thing. It seems so easy. It’s like the old axiom in the stock markets. It’s easy to make money. Buy low and sell high. Well, you know, focus on the customer, right? That sounds so easy, and yet in practice, it isn’t. Especially when you’re a startup and you’re really trying to get your bearings. You’re trying to understand your market and everything else. The thing that really served us well is that we picked our market; we figured out market fit; we began to see traction; we listened. We continue to listen. We’ve focused the entire company around a saying “we work with digital marketing agencies, and we’ve built our business around digital marketing agencies, and it affects everything that we do.”
“It affects everything that we do” is a really meaningful statement for us. That’s what it’s all about, so it’s good to hear that it’s resonating.
Candyce: It is. I think we should close now. We’ve run out of time, but thank you so much, Rick. This has been a great conversation, and I’m sure that it’s going to prove useful to some of our listeners.
Rick: Very enjoyable. Thank you so much for the opportunity.
Takeaways From This Session
My biggest takeaway from our conversation is the critical importance of choosing a small and very specific target customer and then focusing all your resources on serving this audience with excellence. This sound counter-intuitive, but focusing on a small target audience can actually deliver outsized results. Plus, you can do it with a relatively smaller investment in marketing and sales. SharpSpring is proving this to be true.
I hope you’ve enjoyed this episode. You can learn more about Rick and SharpSpring at SharpSpring.com. Or visit propelgrowth.com/trendspotters and scroll to episode 7. There, you’ll find a transcript and find links to Rick’s website and social profiles. While you’re there, check out our other episodes where we go into more detail about things like creating an ideal customer profile and developing a channel strategy. Join me in two weeks for our next talk.
For more information about Rick and SharpSpring, explore the links below: