How to Develop the 2nd Product Your Startup Needs: A Sales Engine
This is Part 6/18 in the series “How to Build an Innovative New Product or Company” on the topic of building a sales and marketing machine to (a) find customers and (b) teach them how to buy your product
There are two reasons why startups fail:
- Too much focus on a technology and not enough on a buyer and user need
- Too much belief in the mantra, “if I build it, the world will beat a path to my door”
The “4 Steps to Develop a Strategy” codify a simple process that makes sure #1 should never be an issue. Codifying a failproof approach to #2 is trickier. How are you going to find your buyers? Do they know they have a problem? How are you going to educate them on it if not? Are they aware of your unique solution? How are you going to educate them on it if not?
In a startup, you’re either building or selling (or both)
In your first couple of years and while you are in your first 10–15 employees, everyone should be building your products and/or selling. Those two roles parallel the two reasons startups fail listed above. It’s also why your startup needs a second product — a sales engine.
Who are our potential customers? How do we categorize them? Do we want to prioritize some more than others?
Geoffrey Moore’s great book “Crossing the Chasm” helps us here. He shares how there are five types of people when it comes to technology adoption:
- They want to be the first to use a technology. They will forgive its flaws easily and evangelize the most innovative aspects. They like to tinker and play around with new things. They love Segways because of the technology; they’re not bothered that Segways can’t climb stairs and thus have limited use cases in the real world.
- How do you spot them? They are interested in the analytics and the technology much more than the business case (though they may appreciate others in their organization will need to see the business case).
- Want to alienate them? Tell them you already have a hundred customers using your product — they’ll lose interest and go look for something that is so cutting edge it hasn’t been so well discovered yet.
- They have a business problem they need solving and are willing to try unproven, but promising, new approaches in order to make major breakthroughs. They are dreamers and want to be seen as leaders in their field by tackling the biggest problems that they and their peers face. Market leaders who are also Innovators are the most powerful first customers: be willing to invest as deeply as you need to sign them up — their reference-ability is what will allow you to sign Pragmatists up later on.
- How do you spot them? They talk about a business problem they need solved and lament how there’s no solution out there yet to do it. They like that you have no competition because you so innovative.
- Want to alienate them? Talk about the technology/features/functions, but not the business problem.
Pragmatists (on the other side of the chasm)
- They want to be innovative but have lower tolerance for risk. They typically only talk to others in their industry; they are unlikely to value innovative ideas of someone that sits across industry boundaries.
- How do you spot them? They will ask for case studies, proof points, and referenceable clients. Thus, they can’t be among your first few customers — early adopters have to fill that role. They like to hear “industry standard” in your pitch. They want to see that market leaders are already using your product.
- Want to alienate them? Not being super buttoned up about what problem you solve, why others are using it today, why those clients love it, and leading them step-by-step through a well-known buying process. Telling them you are “state of the art”. Telling them you have no competitors; therefore, you should “invent” competitors if needed.
Conservatives and laggards
- We’ll merge these two groups into one because the message is the same: startups should avoid them. Spot them and move on as quickly as possible. Don’t spend time trying to sell to them unless you have 10%+ market share; doing so will simply frustrate both of you.
- How do you spot them? They will ask about your market share, how big you are, how stable you are, why they should use your product relative to doing nothing, how much support you offer, and they will continually question how simple the product and buying process really is.
- Want to alienate them? Be a startup; be unable to provide clear answers to the above questions.
For the most part, startups want to find and focus their time on Innovators and Early Adopters. Those are the buyers who are looking for the type of innovation you provide and they will be great testers and feedback partners. The “Chasm” that most startups fall into and fail to cross, the thesis of Moore’s book, is the step where you have to rebuild your messaging, marketing, sales, and support/service functions as you cross out of serving pure innovators to serving those on the other side of the chasm, who are an entirely different audience and have entirely different buying needs.
When we productize our approach to finding customers, we first need to know which category any prospective customer fits into. We need to know where we are in our lifecycle and thus, we need marketing, sales, messaging, and outreach materials that provide the right message to the right person.
Should we go after a broad customer base (e.g. international customers or people who use our product for two or more different purposes)? Or should we be focused?
Moore offers advice here too. When you are getting your first few customers and your first few million $ in revenue, you need to be focused. You need to serve customers who will be a reference for future customers — and you should keep a pool of customers (and prospects) as tightly constrained as needed such that all of your customers could be meaningful references to any other customer. In other words, don’t go international if an international customer would neither value a reference from, nor would later be helpful in providing a reference to, a local customer. Don’t go after or serve customers that use your product to solve problem Y when such a customer would neither value a reference from, nor would later be helpful in providing a reference to, any other customer who uses your product to solve problem X.
How to find potential sales leads
Here are some ideas that have worked for me:
- Establish an Advisory Council of Market Leaders and Visionaries. Get their feedback on the product and once they are excited enough about your direction, ask if they’d be willing to make introductions for you.
- Build a “refer a friend” function into your product.
- See what connections you have in LinkedIn to potential buyers; whom do you know who could make a customer connection? Offer a finder’s fee if introductions are hard to get.
- Invest time in thought leadership. Publish and share insights that buyers will pay attention to. Become a leader in the value pool you’re targeting.
- Used LinkedIn to find people who are in the right role and current organizations. Further filter based on where they used to work. If you’re trying to find innovators early on, it may help to find functional leaders who have moved industries — they can be more respected by their current executive teams as sources of innovative new ideas. Can you find potential buyers who moved into a new role in the past ninety days? They may be looking for opportunities to have an early impact (the downside is that they may also not know how to navigate the buying process in their new organization).
- If you have to send emails to someone cold (such as from an email list of from LinkedIn connections), send a short note in plain text, sharing credibility (e.g. customer impact) and asking for a referral to the right person in the company.
- If you happen to catch them by phone, ask “Did I catch you at a bad time?” “If you were me, how would you approach your organization?”
- Offer to go at risk. If your product is $100 and, in the early days, you don’t have the prior customer proof points, offer to sell it for $50 if they’ll put $50 in escrow. Then agree on an outcome (or process) measurement such that the escrow goes back to them or to you at the end depending on if the product was successful. This is better than offering a trial period — typically, buyers and users aren’t committed in a trial period.
- In my experience, it’s as much work to give a product away for free as it is to get someone to pay. And people tend to undervalue what they don’t pay for.
Aaron Ross, in his book “Predictable Revenue”, tells the story of how he led Salesforce.com’s initial $100 million of revenue growth. He offers a few words of advice about sales lead generation: that it shouldn’t be done by salespeople. Salespeople are among your most expensive resources; they should not be doing your most commoditized activity. Their Rolodexes will help in their first few weeks, but what you need is a sales lead generation process that creates leads for all salespeople and is not subject to their own abilities and capacity to do lead generation.
It can take a few months to get an inside sales-based lead generation engine going, but he recommends investing in one once it’s clear you have Product-Market Fit. Dedicate a full-time role to prospecting.
Prospecting should also help prune the list of qualified leads, not just create them. Are there warning flags that hint that a potential prospect is going to be a waste of time trying to follow up with? Ross gives example flags such as, “They just installed a ____ kind of system” or they are “Know-it-alls”.
Teach your customers how to buy from you
My experience has mostly been in B2B SaaS enterprise sales to health systems. Arguably the tools you need to be successful there may be overkill for B2C, non-enterprise sales, or sales in other industries.
One devilishly important lesson is the understanding that, simply because a prospective buyer likes and wants your product, that doesn’t mean they know how to get it. It’s up to you to find a sponsor and lead the sponsor through the steps. If you’ve sold your product to ten other customers, undoubtedly you know far more than any prospective buyer at the eleventh customer about how to run the process, how long it takes, the types of roles who need to be included, and what the pitfalls are likely to be. And, frankly, you probably have far more time and mindshare to give to the process of closing the deal than the busy executive on the other side.
What you need is a playbook that you and your sales team members (as your grow and hire them) should consistently use and rely on. The playbook reminds you where you are in each conversation and what the upcoming steps should be and it provides tools you can give to your counterpart to help them through the buying process.