How Not To Sell Software in 2012
al3x.net
al3x.net
And how well's that working for them?
• All of the revenue for the thousands of vendors in the Apple App Store together for 2011: $3.6 billion
• Oracle's revenue alone for 2011: $36 billion
Notice that decimal point there? There's a reason it's in a different place. I don't like the enterprise sales process – being on either side of it, and I have to be on both at times. But the reason I'll do it is because our customers demand it and folks at that level, when a deal closes, pay enough to make it worth it.
It's the same on payment methods, actually. We got dragged, grudgingly, by our enterprise customers to allow paying by purchase order / ACH because that's how their purchasing departments expect to do things. It's not like we were going to tell them, "no".
Yeah. How about because Oracle is a 30 year old business, whereas the Apple App Store is a one year old new market that came out of thin air? What's the non Apple App Store Mac software sales revenue for the same time the Apple App Store is in operation? That'a fairer comparison.
Also, how would the Apple App Store revenue be if they followed the Oracle sales process --call us to give you a price, etc? That would also be an interesting number.
But the reason I'll do it is because our customers demand it and folks at that level, when a deal closes, pay enough to make it worth it.
ie: la la la la, it's how it always been done, we don't need to look at the process, la la la la la, talk to the hand.
Nobody is suggesting that the app store should sell software the way that Oracle does. In fact, the point was exactly the opposite: that there's a reason that software is sold differently in different price ranges. And the reason for that is that customers expect it that way.
Some vendors may be bold enough to tell their customers to get bent and that if they want to buy their software they have to do it the way the vendor tells them to. Most of them will go out of business as a result. Ignoring your customers is rarely a good way to sell to them.
What usually happens is that we see segmentation that's pretty close to what's described in the original post: non-enterprise software is sold via a transparent process and aims for scale by selling to small and medium sized customers. The transparency is a business requirement: you can't invest $10000 of a salesperson's salary into selling something for $99/month. Enterprise sales run with enterprise processes because enterprise customers demand that it work that way. The point here is that these processes aren't ordained by vendors, but by customers, and the economics around the deal size.
For vendors that are focused on the enterprise, usually, they're not super concerned about losing the folks on the low end (just like SMB product sales aren't worried about losing enterprise customers). Usually the folks that are frustrated are because they're in one category and trying to buy from the other.
I think that software developers that eat, sleep, drink, breathe the Apple / mobile world need to be careful not to let this define their worldview of the software market. As big as the Apple / mobile market is, it's still just a small piece of the overall pie.
> And how well's that working for them?
Although I think the premise is wrong, but Al3x has a lot of valid points. There's a huge gulf between app store apps and enterprise products like Oracle. There are still a lot of companies in the B2B market that don't put pricing on their sites - even when their products aren't that expensive. Worse yet, some don't show any viable means of buying their product on the web site - not just "plans and pricing" but no clear "how to buy", etc. The visitor is expected to divine that they need to call the company. When I see a site like that I assume that it's a "if you don't want to contact us, you can't afford us" filter.
They seem to violate all good landing page optimization guidelines, yet they are multi-million dollar businesses. Are they leaving money on the table by not optimizing their landing pages? Or did the customers learn to expect that kind of websites and already know they just have to call? In this case, would they be put off by a more modern approach?
In other words, can the B2C approach be applied to B2B without alienating potential customers? (Some companies do, check HubSpot).
But as an upside, you can often start using the software before the sales process finishes. Which is a fantastic end run around the 'approved' > 'negotiated' > 'purchased' process which can take forever at large companies.
If you sell to the Fortune 500 or government, a procurement officer does the purchase. The procurement guy's purpose in life is to extract discounts. With government, it's even worse, as you have GSA and State contracts with published price lists.
There's also legal complications. If a vendor gives a discount to one government entity, all government entities qualify for that price by law.
I'd rather that $1M revenue was split down into something more like 200 sales of $5K.
To date it hasn't been very common for software to live in that niche, but it certainly can.
Also, it might be a lot harder to grow your business from 1 to N $1M buyers, whereas it might be comparatively easier to grow from 100K people paying $10 to 10M paying $10 or, say, 10M paying $10, 10K paying $1k, etc.
For the most part they aren't, and primary because clients want sales calls and knowledgeable sales people to tell them about their product. Clients don't want to spend 2 weeks looking at a company's website to decide if a Oracle IT solution is right for them, a good sales person will explain what the client wants to know in a fraction of the time (though a good website is paramount to getting the lead in the first place) and act as an unpaid consultant. Later when the company decides to upgrade or change its service, a meeting with the same sale person gives the client a better idea of what option is best for them.
Never mind the fact that both companies walk away with a good deal. I see no fault with the way B2B sales currently operate.
There's no software priced between $1000 and $75,000. I'll tell
you why. The minute you charge more than $1000 you need to get
serious corporate signoffs. You need a line item in their
budget. You need purchasing managers and CEO approval and
competitive bids and paperwork. So you need to send a
salesperson out to the customer to do PowerPoint, with his
airfare, golf course memberships, and $19.95 porn movies at the
Ritz Carlton. And with all this, the cost of making one
successful sale is going to average about $50,000. If you're
sending salespeople out to customers and charging less than
$75,000, you're losing money.
The joke of it is, big companies protect themselves so well
against the risk of buying something expensive that they
actually drive up the cost of the expensive stuff, from $1000
to $75000, which mostly goes towards the cost of jumping all
the hurdles that they set up to insure that no purchase can
possibly go wrong.
The second paragraph is the key. Alex, these people aren’t trying to piss you off, they’re being driven by what BigCo wants from them. BigCo won’t let a manager try some software and declare that it meets their needs. BigCo demands that vendors respond to RFPs and RFQs, and if one vendor puts no-nonsense pricing on their web site, all of their competitors will undercut them by a penny or so and they won’t get any sales.
I could go on, but Joel has made the point: These annoying vendors have evolved to sell to those annoying customers. It isn’t the vendors that need to go extinct, it’s BigCo. BigCo buys cloud services in 2012 the way it bought time sharing in 1972, so the vendors are still using 1972 sales processes in 2012.
* Visual Studio 2010 Ultimate
* vSphere datacenter edition
* TestComplete from SmartBear
* > 3 perforce licences
While Apple recently modified their bundles and lowered the prices for Final Cut Pro and Logic, they were both within this range and did more or less what Alex described.
[1] http://www.wolframalpha.com/input/?i=%28average+price+of+gas...
Today, I was looking at UBS in South-East Asia..... A basic system may be a bit below $2k, but a functional system is probably about $4-5k.
Also a basic functional system of Sage ERP for smaller businesses is often well above $10k and below $50k
http://www.wolframalpha.com/input/?i=core+inflation+from+200...
Core inflation is also a poor choice.
My housing costs are fixed, so the variation that I see is in the things that core inflation excludes.
Although there are annual licences sold within this range (nearly all of our contracts are). Companies grok SaaS, whereas they probably wouldn'y have in 2004.
We do all of his wrongs, but we don't sell to small companies.
I have no real experience with big companies. Could you educate me on a few points? In particular, it strikes me as odd that these would be any different from consumer to small company to big company:
Don’t hide your pricing behind a sales process
Do people shopping for solutions for big companies not have any idea what their budget is? I understand there are always details to work out in the sales process on deals like these, but it seems to me that immediately knowing that your product costs five times what I'm supposed to spend would save your sales people some time.
Don’t make me read a whitepaper in order to get essential information about your product. Put it on your website. In HTML.
A web page with a URL that isn't a mile long seems like about the easiest way there could be to read about a product and share what you've read with other people in your company. Why would you not do this in 2012?
Don’t make it hard for me to talk to a technical person at your company about the nitty gritty details of how your product works.
I know a lot of times, technical people aren't the ones making the buying decisions, but is it rare for them to be involved? It seems like some easily accessible technical information could really speed things up when the purchasing guy asks the tech guy "will this actually work for us?", or is that not how things are done?
I can think of sensible reasons people would violate the author's other demands when smaller companies aren't the target market, but these seem universal. Since I might some day make things I want to sell to bigger companies, I'd really like to understand what I'm missing.
It's more akin to buying a house. You've got to find one of many that satisfies your unique needs. You've got due diligence to do. You've got negotiations. You've got an entire purchasing process to follow that is externally imposed. You may have renovations to make before you can move in and need estimates on that.
A website can cover generalities, but the reality is that enterprise products are big, complicated, and (generally) are not purchased by technical people, although technical people may be involved in part of the review process or requirements analysis.
The only process more complicated is selling to the government.
1. I want to see prices when I browse listings. This is fairly normal in real estate, even though prices end up being somewhat negotiable. Why not in enterprise software?
2. I want a decent amount of information before I even pick up the phone or write an email. If you were listing houses for sale, it would be foolish not to include some photos, the location, the size and number of rooms, etc.... I don't want this information in a mixture of PDFs, MS Office files, flash animations and such. I want HTML pages that are easy to read, copy data from and email to others.
3. If I'm buying a house, I probably want to see such things as inspection reports and maintenance records. These things should be fairly easy for me to get even if they're not on the public website.
Someone explained to me that one reason companies selling enterprise software are so eager to get someone on the phone to sales rather than browsing the website is that they then feel they have something invested in the process and are less likely to back out[0]. Having always been the nerdy type, this idea was very foreign to me, but it seems to be true from what I know of the average person. I also learned from an early age how to recognize and respond appropriately to salespeople trying to use emotional and psychological tricks to manipulate me. I sometimes have an unreasonable expectation that others will do the same.
[0]This is a variation of the sunk cost fallacy.
I said: >>We do all of his wrongs, but we don't sell to small companies.
I should have said "some" not "all", however you have chosen three examples of things that we do indeed do "wrong"...
Background: we are a 6 person company with 100 clients selling to entities with 10's of employees to 1000's of employees i.e. we don't sell to large entities. We mostly charge per user per annum (plus initial setup costs of up to one years fees - cashflow needed for longer sales cycles). The company was bootstrapped, and is profitable (in the real sense of the word - not ramen profitable).
> Don’t hide your pricing behind a sales process
Our clients have a budget, and that budget varies by an order of magnitude. I think this is normal for larger entities. e.g. a government department may pay 10 times more than a company with tight margins, like a retail client. We removed pricing so that we could vary our prices according to the client. Variable costs are mostly covered by our initial setup fees, so increase in price goes straight to bottom line. Not signalling pricing was a good move.
> Don’t make me read a whitepaper in order to get essential information about your product. Put it on your website. In HTML.
We have some information on the web site, and some in PDF's. Due to variation in the client base we are careful how we disseminate much information E.g. don't advertise a feature that is confusing to some clients, or a feature that is too expensive to configure for a cheap/small client.
> Don’t make it hard for me to talk to a technical person at your company about the nitty gritty details of how your product works.
Probably doesn't apply since our sales people are technically competent. Most customers are not technical people, so shouldn't be interrupting developers. When judged appropriate, customers do have access to any of our staff.
---
Perhaps another useful way to think of it is that many of his rules apply when your target market is more than say 10000 clients? Or maybe they apply in a highly competitive market?
Re Joel's article: Maybe it is a false dichotomy between small and large sales (although as a very broad approximation it may be a useful idea). I believe there are a huge number of SME/medium sized companies with a variety of sales processes where cost of sale is somewhere between $0 to $50k i.e. the stated $50k minimum hurdle doesn't exist. Sales in that range may be your sweet spot, depending upon what you are selling.
- Site-wide MS Office licenses
- Site-wide Adobe licenses (around 3000 a pop, I believe, so that's a LOT of licenses before you hit 75,000)
- SAP Business One
- or another ERP package aimed at small to medium sized business (AFAS comes to mind, but I'm sure there are others)
- MS SQL Server
- Supported Magento installations
... etc
Seriously though: many of those software licenses are still below say $5000 per license/head/..., and they are very standardized run of the mill software. The article still holds: if you're running a dev shop on MS technology, you won't need manager approval and a sales process to buy Visual Studio or MS SQL, and the same goes for MS Office or Adobe products in a design company.
After a certain price point (say 10,000 for CAD packages and the like, where you're actually paying for some seriously specialized and advanced software) it's no longer about the software, it's about the customization. That's what those overpriced sales people come to talk to you about. Not only that, but once they're done you'll get and army of project managers and senior devs that come to visit you to figure out exactly what it is you need and by the time these people are done and all their salaries are paid, yes, you'll have paid somewhere upwards of 75,000 dollars but it's not a piece of software you've bought, it's custom development tailoring a specific package to your exact (hopefully) needs.
But in real enterprises, I don't have a credit card. I don't even have authority to purchase. (There is a whole department named "procurement" for that.) But I need to see "sales decks", do webinars, talk to salesmen trying to understand my needs and saying yes to every question I ask, download trial versions, spec out requirements, do a business case, write up a recommendation to management, and figure out how complex software with lots of optional modules fits within our existing environment. It could take months to make a purchase decision on some software. In the past year, my current client has paid to fly me 500 miles away (a few times actually) to talk to salespeople face to face to get product demos and talk strategy before the ink is signed on the purchase order. These decisions are not easy nor quick nor cheap.
I understand the frustration in this post. I respect this model doesn't work at smaller scales. The current model is not perfect at larger scales. But $50,000 a year software doesn't get sold by credit card online nor through "app stores". Any company that tried to switch away from the old model and follow the new model at that level would fail, I believe.
As an example of just how ridiculous it gets, we recently drafted an RFP for a solution for licensing our custom-made software to our customers and had a vendor come in with their solution. When it came time to discuss pricing, their response was "we charge based on the amount of revenue you'll be getting from the software...so just tell us how much money you're going to make from your software and we'll get a quote over to you." Of course we told them to take a hike, but not before speaking with their other large customers who actually agreed to this model. It's frustrating to be sure, but also completely expected at the enterprise level.
Did you know that HBO prices it's channel lineup to the CableCo's at 50% of whatever they sell it for -or- $minimum_price_per_subscriber.
Enterprise software is a whole different game and blog posts like these dont fully capture the wide range of customers in the enterprise space OR the WIDELY varying levels of technical acumen that they possess. YOU might be able to take an executable and integrate it into your systems just fine, but the IT-shop at the local car dealership down the road probably doesn't. They'll happily pay for the handholding.
I guess I just find it amusing when a startup gets frustrated by the software business. If you think their sales process is cumbersome or opaque, that's probably a clue that you're not their target customer.
Enterprise software is a different game because that asumption no longer applies. Instead ypu have software that a lot is riding on, and it must be matched to the business.
Stoney silence in pricing discussions my side is the way to get to a price that's worth talking about, months can elapse though, it's tiresome.
I assume that the software will be paid for by PO but if anyone here has a different view, I'd like to hear from you.
One interesting thing you'll notice is Amex is much preferred at higher credit card levels (e.g. $3K vs. $1K). If you plan on pricing your product above $1K and want to use credit cards, make sure you support AMEX.
Current employer (<50 employees) has us use our personal cards and get reimbursed. Anything over a few hundred is going on a PO.
I really think if it was about price and quality, you could get through a sourcing effort in a week or two. Show me what ya got, tell me how much you are charging.
Full Disclosure: I hate my job.
EDIT: I love my job.. mostly because I got to install an app for my team that increases productivity WITHOUT:
-Requesting a dev server build
-Requesting a test server build
-Getting permission to use an open source tool
-Getting persmission to run said tool on "non-standard language" (PHP)
-Explaining why I'm installing a tool for which one already exists for our usecase (the enterprise solution sucks)
-Getting a prod server build
But enterprises work best when you have those parts that you hate in play.
I agree with the first part -- always ask people for permission, probably by kicking them a sweetener (e.g. "1 month email course on X"). I have data that I cannot show you which is in you-could-run-your-company-on-just-this-trick violent disagreement with the second point here. If you don't like email, cool, but email is worth serious money in B2B software sales. (So are salespeople, by the way, even at pricepoints lower than you'd think would warrant a salesman. Think "4 figure LTV." + )
Also, at the risk of stating the obvious, every email-deleting-salesmanship-hating engineer in the world could drop dead of a heart attack tomorrow and neither buyers or sellers of enterprise software would notice until several months later when trying to figure out why the sales engineers stopped submitting expense reports.
+ Addendum: Joel Spolsky's famous Camels and Rubber Duckies article talks about there being basically two price points for sales now, but a combination of a better delivery mechanisms - SaaS - and better sales procedures/technologies opens up a bunch of very interesting options in the middle for something between BCC $30 "Every email from a customer is a wonderful opportunity to fix that from happening ever again" and steak-dinners-and-Powerpoint-decks enterprise sales for $75k+.
I have some amount of knowledge about this these days, since I help my clients implement it. If you're interested in hearing more, say so, I'll try to blog it (some day when I get out from a mountain of work and email).
What's the advantage of being spammed for a month vs. having the entire month's course on an HTML page that I can peruse at my leisure and at my own pace? Or am I misunderstanding what an e-mail course is?
The advantages to the software purchaser:
1) You're a busy guy. If we critically hit you with a wall of text right now, you'll bookmark it and never get back to it. If you're honest with yourself, you know this, because you've got a backlog of things to read four miles long already. What's your RSS reader look like? Instapaper? I rest my case. So maybe giving you the highlights in a digestable format is a value add for you.
2) This is not a decision that is going to be made an instant -- there is an entire decisionmaking cycle, including research and shopping the solution you pick to your colleagues and experimenting and you get the general drift, which is likely going to take you real-life weeks. Your expertise on the problem area is currently "Not all that much" since you're only beginning the data gathering process. We can meet you where you are with the lesson for today, and when you're vastly more informed in two weeks (because learning this topic is, after all, your job) we'll send you more advanced information. Sure, we could drop everything we know on you right now, but you're not ready for it and reading it linearly will not make you ready for it.
3) Given that we're both businessmen here, we can both appreciate that we choose from mutually acceptable options, not all possible options. The software company has a lot of stuff available on the web pages for free, but if you want exactly the benefit this course is promising to you, then as a quid pro quo we would like your email address and permission to contact you. You, being a honest businessman just like us, are perfectly free to decline this offer, but if your counteroffer is "Give me all the goodies and I'll get back to you", our answer is "Not interested, thanks."
The advantages to the software company:
See above. No, really, the advantage is not "Score! We get to spam the heck out of Pavel!" We have copious data to prove that the statistical aggregate purchaser is overwhelmingly more likely to consume six emails in a month than he is to actually read a 20,000 word web page. We have surveyed buyers of enterprise software -- we know that many of them do not know what they want right now. We have had our sales reps talk to people, and we know that many of them expect to get handheld through this entire process. The email course gives the market exactly what it wants: information in a digestable, actionable format which will accomplish the goal of educating them and lead to measurable increases of qualified leads asking us to buy our software (or otherwise take the next step in the dance).
Eh, I was going to address your reply point-by-point, but then I realized it was kind of dumb - all of my replies were just my opinions and preferences. To sum it up, though, if I'm really interested in a technology, I'd rather choose when I get to read about it - if I don't have the information in front of me, I'll read the information provided by your competitor, and if I have to choose fast, I'm probably going to go with the devil whose brochures I've read, instead of the one whose I haven't.
He doesn't know a thing about you in particular and doesn't care, because he needs to get it right for most of his customers. Not every single one of his customers. If you don't accept these facts about email marketing, as annoying as the situation may be, you are an outlier.
I probably am. That said, why not offer both options?
So he's able to "measure" how many people don't buy from his company because they make it too difficult to evaluate their products? That sounds like a highly marketable skill in itself.
We're thinking of launching our 'enterprise product' in a SaaS format, so yes, I, for one, would very much be interested in free consulting^W^W a blog post about it.
There are also pretty obvious economic reasons why companies with 5-figure customer LTVs might avoid credit card billing. There are services that work well with metered billing, but many others in which customers will demand flat licensing.
I can also absolutely see why Github would would to keep a pretty tight handle on who's trialing what is in effect a packaged-up version of one of the most important software sites on the Internet. We're a FI customer. Incidentally, on the scale of "enterprisey" sales processes, they were an absolute dream to work with.
You will not go to the Oracle app store and it will not have a database of all the large corporate IPs in the world with which it can reverse engineer your available funds and likely chain of purchase decision, and it will not then just put up a few million dollar for that year figure that you can click and instantly pay with your credit card.
Strippers must be witnessed, steaks must be consumed, conferences must be attended, rounds of golf must be played, lip service must be paid to ridiculous conceptual bugaboos, the purchasing bureaucracy must be reverse engineered, the chaff must be sorted from the wheat, starched collars must be preened, ignorant men in suits must be consulted as if their opinion had worth. And this is of course only the parodied incomplete summary of the entire horrifying affair.
Oracle and their ilk are feasting on elephants. Some would even fairly say mammoths; they are big, fat and move very slowly. The entire idea that a strategy could be formulated, evaluated, shopped for signatures to the relevant parties, signed off on by the law department, agreed to and generally made in the amount of time it takes to make a purchase with the paradigm offered as an example in this scenario is likely terrifying if not utterly extraterrestrial to them.
our current sales cycle includes a lot of the negatives that you point out. however, we're up front with our pricing while our competitors aren't.
we actually created a product that did nearly exactly what you said. we didn't get nearly as many customers with that method. people would sign up (sometimes) and when they did, they tended not to pay once their 30 day free trial was up. our conversion rates sucked. we ended up canceling that product and removing it from our site after 8 months.
when we have a webinar with a sales call, our closure rates increase dramatically. customers tend not to pay by credit card even when given the option.
i actually think you're 100% right for many, many products. but i don't think it'd work in my boring b2b industry.
edit: we probably didn't do enough experimentation on the small product as we should have, so i take some of the blame for that.
i think the single biggest contributor to our success has been the fact that we are in close contact with our customers.
if we lose a sale, we have the opportunity to learn why we lost. during a webinar, we hear the reactions of customers. with RFP's we get a list of the features they want.
when we win, we stay close to them during implementation. we learn what works/what doesn't work with our products.
based upon this feedback, we're able to constantly refine our products and messaging to what our customers want.
we started with a product guy who could pump out code (me), and a phenomenal sales guy. the two of us essentially built the initial business.
we never took any funding.
the most surprising thing is how long it takes to build a solid product. how long it takes to get momentum. everything just takes a lot longer than you'd expect. it's also a funny thing. once you've achieved a small amount of success (and mine is small), people start thinking you actually know what you're talking about. in my experience - apart from geniuses like jobs, gates, musk, etc - there's nothing that separates you from me. it just takes time, dedication and hard work.
edit: most people find us. we also have business associates who resell to their customer base and customers sometimes give us nice referrals.
advice: b2b is great because people actually pay for shit. lots of b2b software is just awful, i think you can differentiate by providing an excellent product. it'll stand out and give you a solid niche.
i'd also say that you should not give your software away for free in b2b. but you should give it to a trial set of customers initially who can help you work out the kinks. stay close to the customers, they can help guide you and tell you where they look for software like what you're selling.
online advertising works great. use landing pages, a/b test them. all the things that you probably already know, just put them into practice. they exist because they work.
but check out other directory listings. www.capterra.com is HUGE for us. our conversion rates there are about 12% (!!!!). organic conversion rates are about 2.5%. which is much more reasonable. but we spend a lot of $$$$ with them.
edit: a conversion for us is a lead.
I have interest in B2B more than B2C occasionally but don't really have a lot of domain knowledge. Would you happen to know a few general tricks how or where to get such knowledge?
in my case, my father and family friend approached me and asked if i could build something. our co-founder said "all the software in this (hr technology) industry sucked". can i build xyz? over a long period of time, i did.
so my general trick would be - find people who are in completely opposite industries as you are right now. doing totally different, non-technical work. often times they're consultants that are reselling other companies products. and they know - since they've been implementing products and speaking to customers on a daily basis - where the customer pain points are.
hope that helps. it only happened for me once, so it's hard to replicate, but i hope you get the chance.
but...i was in college and my salary requirements were low. the sales guy? my dad who had another job at the time (sales at: apple, sun microsystems, hitachi datasystems, etc).
i think that's not a bad bootstrapping model though. if you're both employed, you can both take commission and built it part time until you can jump ship and do it full time.
but the question i hear you saying is - "where am i gonna find a sales guy?" you and i are techies at heart and probably have mostly techie (non sales type) friends.
like everything else, sales isn't a great mystery but it's good to find an experienced person. couple ways to find people, and i had a recruiter recently give me some advice that i'll pass on to you.
linkedin is the new recruitment tool. start looking for some sales guys that already work for companies that have the kind of sales guys you want, and get a hold of them (not sure if you need a premium linkedin for that or not). there's also professional networking events around, but i find that those tend to be about measure whose dick is bigger versus making meaningful relationships.
which city are you in? look up startup networking stuff. i hear all the time about people who want to find a technical co-founder. annoyingly large amounts. and on projects i usually wouldn't invest any time in.
I've got a product that I have developed in the evenings that could be beneficial to the startups in the area. I work a fulltime as a Rails engineer, so I can only make a few contacts a night.
Thanks for the advice, I sincerely appreciate it.
The only thing I'd add (more in relation to the comments above) - I think people are too quick to discourage a direct sales model for bootstrap B2B companies with products in the $1K to $5K range. If each sale generates long-term recurring revenue, if you can visit several customers per city, and if initial sales tend to lead to word-of-mouth sales later, direct sales can be a great way to get started.
You can do it on the cheap compared to a big-time enterprise salesperson. Its an investment. You learn a lot, you build relationships, and you begin to develop the momentum that the comment above discusses.
Practically everyone buying software for mobile or from Apple? In the rest of the world almost no desktop software is selling through app stores, one click or otherwise.
Products that are more expensive tend to also be more involved. A lot of times, the sales team needs to understand how the customer is going to use the product and help them get it up and running. HubSpot is probably a good example of this. From my understanding, the way they nailed their retention problem back in the day was to go through extensive training / onboarding with each customer.
Simply leaving customers to their own devices on a complicated product is quite often horrible for conversions, which is a wasted opportunity for the vendor and inconveniences a potentially customer that might have otherwise been perfectly happy with the product after learning how it works.
1) Open source
2) Get in a consultation with you to see what needs to be changed
3) Submit a proposal.
4) Engage in further discussion to ensure we stay useful. Some degree of included support is good to do that.
I have been told over and over that we charge too much for the SE Asian market, but once they start comparing what they get for the money (focus on delivering value) that goes out the window.
Here's the logic re: Alex's points:
1. Requiring a sales call helps qualify real leads.
2. Lack of trialing the software is in part due to wanting to have a conversation with you.
3. Hiding your pricing is simply the way to have a conversation and to qualify leads. It makes price discrimination also possible. Think about selling a startup vs. IBM.
4. Whitepapers are just old school. It's useful for when lower-tier decision makers need to present something.
5. Newsletters are simply a way to be in the conversation with your company prior to when you buy--constantly.
6. Larger organizations sub-divide their resources into people who can do X or Y. Where X sometimes primes the customer for Y. It's not done to the customer's benefit, but rather to the organizations.
7. Old school.
8. Well, the truth is, cold calling can work even though it has a fairly low conversion rate. You have to start somewhere.
I am not saying we do any of this at Mixpanel necessarily, but it's the simple logic of enterprise.
Getting my hands on one commercial library for testing was like pulling teeth.
1. Register for download which requires filling in loads of company information before being given access to a download.
2. Download the trial library (Only allowed to download either windows 32 bit, windows 64 bit, linux 32 bit or linux 64 bit..want more than one? tough)
3. (Wait 2 days) Sales guy sends me licence file (Forwarding the Salesforce "You have a new lead!" email no less which really annoyed me, "I am not a lead, I am a free man!") and I start testing the library
4. Find out the company I downloaded the library from (You can only download from their US based, English site) had partners in my (Non-English speaking) country so I got the sales guy speaking to me in a different language than what I expected (or wanted).
5. Asked to be put in touch with an English speaker because I had some technical questions.
6. (wait 1 days) Get an English speaker, ask some questions, get told they will be passed to technical guys
7. (wait 2 days) Get replies.
8. Ask about how I get the different library versions. Get told I have to re-do the ENTIRE process from step 1 just to get a different version of the library due to "Legal reasons".
So, it took 2 days just to get my hands on the library for testing and being told that I have to jump through more hoops just to get different versions.
Compare with the open source library:
1. go to sourceforge and download the library for any OS and start playing with it in about...oooh, 5 minutes.
2. Want to try a the library on a different OS? another 5 minutes.
3. Questions sent to the developer answered slightly faster due to not having to go through sales guy (although to be honest this was not a huge difference in response time).
The hassle of getting my hands on the commercial library soured me on the whole idea of using that company. If just getting an evaluation license is such an arse I do not see us having a happy relationship with the company had we bought the license.
--
On a side-note. I recently had to bug fusion-io because they had their webinars behind a registration wall. Really? You put your marketing information behind a closed door? I am researching your technology and I don't want to have to sign up to yet another site just to see some information.(Although to be fair they fixed this quite quickly after I had a moan at them on twitter)
But, then again, I'm thinking more in terms of "companies who are willing to host their own software, want 'best of breed' solutions, have extensive integration requirements," etc. Sure Google Docs is fine for plenty of firms, but there are firms who want an DMS that integrates with Active Directory, ties into their workflow / approval systems, etc.
I guess the point is that "enterprise software" covers a pretty broad swathe of scenarios and situations...
If they think they are, there is an astronomically high chance something will be wrong. And you know who takes the blame for that? The company with the logo on the software that doesn't work right. That and the guy who did it wrong. The argument scales as the software and customer does, but it's still a truth. Unless your software is dead simple, if you give people enough rope they will cause problems. That prevents the company from more opportunities, makes the customer's life difficult, etc.
The solution to this is to be hands on as much as possible before things are implemented. Properly done, it's mutually beneficial spent time. It would be logical to compare the complexity of the product solution (see steps above) to the amount of pre-sales steps required.
Disclosure: Pre-sales engineer for big software/hardware
Test.
It'd probably be best to serve a company to be able to test whether or not it serves you best to force customers into a hand held sales process or let everything remain DIY.
I've created a ton of self serve from the get go.
For example: In one thing, we have so many tire kickers startup their site and do their thing, but then we find out, that they completely screw up how to even get started. It might be we just haven't figured out how to design it better. But we've been designing it and iterating on it for years. It's simply something that's a bit hard to understand until someone explains it in words. And since people tend to hate reading and skip the manual, without knowing what's going on, they screw up, and think the product doesn't work. So the solution to that might just be "lets force them into a process so we can make sure they have the best startup experience possible, and we'll be more successful with more sales". That could very well be an outcome. But you never know unless you split test that sales/conversion process.
I can only add that managers at BigCo want to cover their ass first and only then do the job. And how you gonna cover your ass when you 'try before you buy'?
http://www.spacex.com/falcon1.php#launch_and_placement
Want placement on that rocket? 10.9 million regardless of who you are. From there, if you're a serious customer they'll begin the onboarding process. I love it.
SpaceX offers open and fixed pricing that is the same for all customers, including a best price guarantee. Modest discounts are available for contractually committed, multi-launch purchases. Falcon 1 is the world’s lowest cost per flight to orbit of a production rocket. Falcon 1 Price: $10.9M Current plans are for payloads that would fly on Falcon 1 to be served by flights on the Falcon 9, utilizing excess capacity. This is a very cost-effective solution for small satellite launch needs.
So.. if you commit to using SpaceX more than once, you can negotiate a discount. If you are prepared to use a different launch vehicle, you get a discount. They offer a best price guarantee, so you can play them off against another company.
It's nice they have a list price, but to me that sounds exactly like the list price for Oracle: only suckers pay what is listed.
This blog post should be titled "How Not to Sell Software to Alex Payne".
- Edit for typos
They'll change their minds when they become an enterprise.
Listen: we don't do things that way because we like layers of bureaucracy, and long, tedious meetings.
Well, some of us don't.
Enterprise customers and vendors operate that way because it's the easiest, most painless way to get stuff done.
If it wasn't, we wouldn't do it that way.
or
"How Not to Sell Software [to Small Companies] in 2012."
The Enterprise software sales process is about navigating big businesses' procurement processes, and helping the buyer build a business case that the enterprise will accept.
I'm going through this pain myself. I work for a startup, and some of the vendors we are talking to are clearly geared up to sell 'Enterprise' software to 'Enterprises'.
But I'm CTO of a small startup, and I just want to know what the damn software does, and how much it costs. There's no procurement process, probably not much of a (detailed) business case. I need to buy or build something, and I need to know how much it will cost to buy.
What I do think the writer is correct about, is that software selling is moving towards a self-service/appstore model (not that I see Enterprise software sales disappearing very quickly) and eventually the Internet is likely to disrupt it like many other industries.
All that said, I also found the Enterprise Software sales model really painful when I worked for an Enterprise level business ("Hello IBM, can I buy a database from you?" "Yes, please meet with our sales team of 24 people as a first step")
http://steveblank.com/2011/08/05/bonfire-of-the-vanities/
I work in the semiconductor industry which is rife with webinars, field sales/apps engineers, etc. I hate it, but in some ways it's a wacky industry where you have a garden variety of customers ranging from grad students wanting free samples for a science project, to Apple/Dell wanting to cut your margins to nothing while lying that their volumes will be huge when they're also just testing out a science project.
You end up with a problem where you don't know how much effort your apps engineers will have to spend working with a customer and whether their time was worth working with them. So you end up with negotiators called sales people/field engineers. In theory it works unless those negotiators are bent on extracting as many commissions as possible, and/or don't walk into the right markets.
Now the company I worked for had a policy to only obtain computery things through a supplier, which would be a local vendor or shop selling this software. The trick is, nobody does that for some random software on the interwebs that's only $50. The purchasing process itself also cost something like $700 for any individual invoice.
So two minions and a purchasing manager set off on a journey to find a supplier for this software, with my boss, my office manager, and me constantly nagging them, as it was urgent. After two weeks they came back and said it was sadly impossible to buy this software. We ended up shipping our software late due to the delay, and buying the tool from Amazon, expensing it as a book.
Moral of the story: the old BigCos indeed force this behaviour out of suppliers.
Given that, I'm not sure why I should pay too much attention to the rest of the post. I'd rather take advice from people who successfully sell a lot of software or otherwise have experience in buying it.
> Practically everyone who’s paying for software is doing so through an app store
This is a very myopic view, though unsurprising given the previous disclaimer.
Besides the enterprise "shrink-wrapped" software market (see wheels commment), there's also a huge market for custom software.
1) Don't ask me why/when/where/how I will use my brand-new software
2) Don't force me to "try" other software just because I bought one
3) Don't force me to give you informations that are not strictly correlated with the purchase
Part of the problem Alex is seeing (and I've seen) is that the startup/small business segment just isn't that big, and vendors are usually fine with ignoring it and losing out on revenue. I do a lot of stuff on the side and have tried to buy licenses for some enterprise products, and even mid-sized vendors aren't really interested in talking to me. Large vendors like Oracle and IBM are heavily optimized toward selling to big businesses who need a purchasing process to take months and aren't as sensitive to price. The App Store model is 99%+ consumer-oriented.
Unfortunately, a lot of startups and small Enterprise vendors end up recruiting sales and marketing people who have been successful at larger vendors, so the same practices get implemented.
I blame this mostly on purchasing practices that are largely centered around managers mitigating risk. The risk they are most interested in mitigating is the risk that they'll get fired for making (or approving) a bad purchasing decision. Vendors are happy to play along, since it usually means they can make more money out of the deal.
If you're product targets early stage companies and doesn't cost 5+ figures monthly, and you sell software this way, then, yes, you're doing something wrong.
Wasn't open source the first mover here? apt has been around for.. 13 years?
This is to solve the problem that when I stumble upon a service that has a trial period, I have a strong urge to see what it's like, but am afraid that I will forget about the service for n-1 days, when I will get an email telling me that the trial has ended and I haven't gotten around to explore it fully.
Say, for example, I want to try out a project management suite. If I have a split trial period, I can explore the features and overall feel of the product for myself on a day and then prepare my workmates to use it in a test project, and only start the second part of the period when we are ready.
Has anyone thought deeper about the advantages and disadvantages of this?
That's the biggest reason it's still done this way. I think.
> Heck, even free/open software people have an app > store these days
Little off the cuff remarks can expose ignorance quickly. Not something you want to do when trying to convince your readers of a more complex point.
It also makes the reader wonder what else you just threw in there because it sounded kinda right and you maybe heard it somewhere.
If you couldn't get that little thing right, I have so much less trust when I get to a part of the post that I don't know as much about.
The joke is, quite a few enterprise vendors will ask you to sign some sort of NDA before they'll even show you a demo. And of course you'll pay before ever having tried the software. "Trials" – are you mad?
I am personally in 100% agreement that it should be App Store simple but reality proves more complicated than that. It is disappointing but not surprising.
I wrote about 'The Other App Store' (organic search) on similar lines - http://blog.roveb.com/post/12003627967/the-other-app-store
Don’t require that I waste my time on a sales call – or, worse, in a “webinar” – before I can give you my money. Instead, provide all the information I need about your product on your website.
We'd love to. The truth is it is the customers who ask for demonstrations, walk-thoughs and tours of the software. I spent weeks training to learn how this software works, who it is a good fit for and who it is not a good fit for. It's simply not realistic to think every product can be explained on a website and comprehended without misconceptions. Also, a robust software suite has many, many user needs. Creating a web site which is custom tailored to each need type is a very high permutation.
Don’t make it hard for me to try your software. If I can’t play with a trial version or sandbox immediately, I’m moving on.
Don't assume you know how to use it and can make an adequate evaluation in that 2 - 10 minutes you will spend on the trial version. Also, the purchaser is often not the same person as the user. I want them on the phone as well to make sure they have the need and skills to utilize what I have to sell. If you buy something that is a poor fit, I may have your money now but you will bury me with support and complaints later on. That's not worth it.
Don’t hide your pricing behind a sales process, and don’t play pricing games. I can find and talk to your other customers basically instantly in order to determine what they paid for your product and if they’re getting the value they expected from it. I will do this. So just put the price of what you’re selling on your site and skip the games.
How much is a website? Just tell me how much it costs to build a web site and skip the games. /snark. How much is a house? It depends on if you are talking about an outhouse or the White House. I don't know what kind house you want when you are looking at our site. Also, if you could teach everyone to do that competitive research you claim to be able to do, I would appreciate it. If all customers could become as educated as you claim you can become before buying my stuff, I'd be printing money.
Don’t make me read a whitepaper in order to get essential information about your product. Put it on your website. In HTML. Not in a PDF, not in Flash, not in Silverlight or ActiveX or whatever. What your product does, on your website, in HTML.
That's just a way to collect your contact info to follow up. It is a poor method. I am in sales and I am not giving anyone my contact info for a white paper either. But if you are getting something of value from me, I want something from you.
Don’t automatically sign me up for a newsletter about your company or product when I give you my contact information. Ideally, don’t request my contact information at all until I’m giving you money.
If you went through the white paper form mentioned above, you probably never read the text next to the submit button saying "okay to contact me". Businesses should not use this method, consumers should not patronize it.
Don’t make it hard for me to talk to a technical person at your company about the nitty gritty details of how your product works. If you don’t provide a forum for those discussions, someone else will, and you won’t control it.
Sure, you can speak with my development folks. You and everyone else who wants to know how we built what we built before spending a single dollar with us. Also, don’t assume that your sales person doesn’t know. Ask them. If they can’t answer your question, they should be able to find the answer quickly. If they can't, you just learned you shouldn't buy their product. Move on.
Don’t make it hard for me to pay for your product. I have a credit card. I also have a PayPal account, a Google payments account, and an Amazon payments account. Any of those are fine (although PayPal is not ideal). Any other billing process is not.
If I charge $10,000 for something, I'm not going to give PayPal a cut of that as well. Also, you having access to those payment methods doesn't mean you have the authority to use them. I've been burned by that quite a bit.
This should go without saying, but don’t cold call or spam me. If your product is good and meets my needs, I promise that I’ll find out about it.
This is just a pollyanna way of looking at it. Spam is wrong, nothing to debate with on that. But yes, I will cold call you if I identify you as someone who may need what I have. If you don't want my product, don't ask me to call later, don't refer me to the intern to while away the hours with pointless questions. Just say no, you are not interested. I will listen and be happy to move on to the next customer.
It is hard to optimize for _both_ kinds of customers, but it is certainly not impossible.
If you assume that he's correct about the demographic changes and the consumer tastes, do you think he'll be right about the benefits of the Enterprise Sales Process evaporating over the next 5-15 years? I think that's a good bet.
Making the buying process time consuming significantly reduces the value proposition for those who are time constrained.
You have to talk to a sales person. Then watch a webinar. Then take TRAINING?!?!!
Just to maybe get a demo.