Thursday, June 07, 2007

Startup 101: Sell to Users

In the last few years, there has been a remarkable shift in how software is sold to businesses: by the time a salesperson is talking with a prospect, they are already a user! Numerous successful businesses do not have a single salesperson until there are a groundswell of customers that want to purchase their software at a relatively high pricepoint. Successful companies concentrate on getting users to use fully functional software for download or browser use and then upselling those users. This is a sharp contrast with the time consuming and expensive style of effectively selling incomplete software door to door to the Global 2000 and then fixing the software after the customer has bitten.

Following are the characteristics of a successful 21st century software business:

  • Self-Service Product - Software must be easy to install and a service must be easy to run from a browser. Anything that these products do that is already well known (ie, add a customer in CRM) must be brain-dead easy and intuitive for someone to use, since users have almost zero tolerance for software that make simple things hard. Your team should have the domain expertise to create a product that intuitively offers the major, well known features of your target domain. If your product does not meet these criteria, concentrate on fixing the product, not sales.

  • Downloads, Not Meetings - Use email campaigns, adsense, webinars, and limited telesales to drive downloads so that you create users, and then upsell those users. If a company has a product that users can not successfully use on their own, it is not a product yet. Setting up meetings or WebEx's with prospects to "sell" them your product is not selling, it is customer research, so hire a product manager instead of salespeople and again, concentrate on fixing the product, not sales.

  • Sell to Users - As numerous SaaS and open source companies have shown, it is easy to find users if you build the right product. If people are not using your product after already having tried it out, fix the product to the point where they want to pay you, don't waste cycles trying to convince them to buy software they already know doesn't work for them. If people are actively using your product but not paying, add some additional features that a subset will pay for and make sure that your product is suitable for an audience that actually occasionally pays for software. Again, concentrate on fixing the product to the point where users that would pay for it would use it, not sales.

  • Feed the Channel - Systems integrators follow the money. If you can feed them business with your product, they are as happy as clams. If you want them to use your product to drum up business on their own, they don't need you, although they will be happy to meet, do a Barney "I love you, you love me" press release, and be partners. They just won't get you any money - you have to feed _them_ business. So unless you are calling on a systems integrator with a prospect in tow, (again!) concentrate on fixing the product to get that prospect, not channel sales.

    Infrastructure software like ESB's (Mulesource) and CRM (Salesforce, SugarCRM) that used to be extremely high touch and expensive is now sold self-service at much lower pricepoints. Companies like Tealeaf that are solving extremely complicated problems such as replaying a customer's browser when they call a helpdesk can sell direct at a very high pricepoint.

    A startup needs to figure out whether it is selling direct at a high pricepoint or self-service at a low pricepoint and follow that playbook. Selling direct at a low pricepoint is a nonstarter, even if one day you expect to be able to raise the pricepoint. VC's are not interested in that business model and your competitors will be selling a similar solution self-service and will therefore have a more scalable business model.

    In summary: keep it simple. Make software that is sexy with major features are easy to use, get people to come and check it out, and then tweak it to the point where people want to pay for it. Software today is decidedly product focused rather than sales focused. This is great, since building excellent product quickly is the competitive advantage of a startup. As a wise board member I served with said, "IBM already has a sales force, don't compete with it."
  • 1 comment:

    Alice said...

    Treat prospective buyers the way you would expect to be treated if you were considering a purchase. Respond quickly to e-mail messages or phone calls from prospective buyers. Consider making reasonable counter offers when someone offers less than your asking price.

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