Monday, May 10, 2004

Closing the Gap, Part 2

Summary: In the exciting conclusion to our last episode, Eric describes an alternative to hiring a sales guy.

Last month we introduced a concept that I call "the gap":

Product -------------------------------- Customer

This gap is the distance between the prospective customer and your product. As long as it continues to exist, your customer has less software and you have less money. In order for the sale to occur, this gap must be closed. Until that happens, the gap represents all of the issues and obstacles that are preventing the customer from making the purchase.

As Chief Sales Geek in your ISV, it is your responsibility to figure out how this gap is going to get closed. You have exactly two ways to do it:

• Move your product to the right.
• Move your customer to the left.

Last month, we talked about "proactive sales", or "moving your customer to the left". This month, we will talk about the other way of closing the gap: moving your product to the right.

Responsive Sales

In Part 1 of this two-part column, I claim that most small ISVs do not need a sales guy and should not use the proactive sales approach. This month, I describe an alternative approach. Instead of proactive sales, we will talk about "responsive sales". Let us first highlight the differences between these two models:

• In proactive sales, the sales guy is in charge. He initiates contact with prospective customers. He tells them about the product. He answers all their questions. He stays in regular contact. He provides all the energy and all the momentum. Eventually, he convinces the customer to make a purchase. He receives money from the customer and delivers the product.
• In responsive sales, the customer is in charge. He initiates contact with your company only if and when he wants to do so. He hears about your product from a friend or an ad or a weblog. He reads everything he can find about your product and its features. He contacts your company to ask questions. He makes his decision at whatever pace makes sense for him and his organization. Eventually, he decides to make a purchase. He contacts your company to exchange money for product.

These contrasting descriptions may actually make responsive sales seem unappealing to you. After all, do we really want to trust the customer to handle all these important tasks?

Yes we do.

I acknowledge that responsive sales can be scary. It feels like we are delegating a critical project to somebody we don't know and have probably never even met.

But a reward lies behind this risk. The truth is that customers like being trusted. They like making their decisions without pressure from a sales guy. They like to be in charge.

For all these reasons, responsive sales works very well, as long as we hold up our end of the deal. We have to be responsive. Yes, we are letting the customer be in charge, but we are not powerless.

In fact, we will be quite busy indeed. It is our job to make the whole process as easy as possible for customers. They will choose to cross the gap. We will move our product to the right so the gap will be easier for them to cross.

To succeed in responsive sales, there are seven things we must do:

1. Make Sure Customers Know About Your Product

Customers cannot buy your product if they have never heard of it. Those of you that find this statement to be insightful will be similarly enlightened to learn that the sky is blue.

Seriously, I know I'm stating the obvious here, but awareness of your product is a pretty important precondition, especially for responsive sales. If the customer never contacts you, then you cannot be responsive. If you don't have a way of letting people know your product exists, then you may not need to read the remainder of this article. Responsive sales won't work for you until you start getting some awareness built up.

Still, we should remind ourselves that building awareness is the task of marketing, not sales. Specifically, this is part of a subcategory called marketing communications, or "marcomm" for short. A full treatment of marcomm is well beyond the scope of this article. For now, I want to mention three quick items:

Be careful with advertising

Q: What's the difference between buying magazine ads and setting dollar bills on fire?

A: Flaming cash actually produces a benefit, since it generates heat.

This joke is excerpted from the beginning of an article I wrote last year about advertising for small ISVs. The rest of the article goes on to say that I am only half joking. Advertising is scary and dangerous. You can spend lots of cash and have no idea where it went.

I am not saying small ISVs should never advertise. Rather, I am saying that you should be very careful. If you have any reservations, just wait. Tell their sales guy to call you again in six months.

Try a tradeshow

Among the traditional marcomm activities, tradeshows are my favorite. Remember the old joke about pizza and sex? A tradeshow falls into the same category: When it's bad, it's still pretty good. Even at the worst show I ever attended, I learned a few things and met some interesting people. If your market segment has any good tradeshows, consider being an exhibitor.

SourceGear will be an exhibitor next month at TechEd in San Diego. Since we're currently finalizing preparations for the show, I plan to use the occasion as an excuse to devote next month's column to the topic of exhibiting at a tradeshow. Stay tuned!

Develop "in the open"

Traditional marcomm has its place, but there are new approaches. With the ubiquity of the Internet today, one of the best ways to build awareness of your product is to develop it "in the open". In other words, using a combination of weblogs, public discussions, and preview downloads, let your prospective customers watch and talk with you as you make your software. Think of yourself as a chef in a Chinese restaurant, your customers watching as you stir-fry their shrimp and peapods.

Start out with a weblog--an open journal of your development progress. Every so often, post an update of how your application is progressing.

At some point, your application will be ready to demo for prospective customers. Release a public preview for download. Make sure you provide a mailing list or a Web-based forum so you can receive their feedback.

Developing software takes time. Doing it "in the open" can be a great way of using that time to build awareness as you go.

2. Make Sure Your Product Is Something Customers Want

Pardon me for again stating the obvious, but this fact remains: If you're not selling something that people want, your gap is enormous.

A good proactive sales guy can overcome this problem. The tactics for selling things that nobody wants are very well understood. How many people would buy rustproofing for their new car if they had to specifically ask for it?

In the responsive sales approach, you have basically no hope of selling a product that is not fundamentally appealing. It is therefore extremely important that you do your homework and convince yourself that you are building a product that will be desirable. This is the other half of marketing.

Choose your position

If you have read anything at all about classical marketing, you have probably heard the word "positioning" at least once. Basically, positioning is the process of figure out how your target market will perceive your product. How do you want your product to be known? To what other products will yours be compared? Answering these questions is a critical step toward ensuring that your product is something people want.

Choose your competition

Avoiding competition is perhaps the most common way of ending up with a product nobody wants. You need competition. By avoiding competition, you are simultaneously avoiding customers. Your product concept is validated by the presence of other ISVs who are profitably selling something similar. If there is nothing on the market that resembles your product, be afraid.

Develop "in the open"

You've got that déjà vu feeling right now, don't you?

Yes, I already made this point about developing "in the open", but now I'm making it again for a different reason. Developing in the open is not just a great way of building awareness. It is also a way of measuring how much people care.

For example, let us suppose that you choose to develop in the open, releasing lots of information and preview downloads very early in your development cycle. You make appropriate announcements in the right newsgroups and forums. However, very few people come to get the download. Hardly anyone posts to your mailing list. Nobody gives you any feedback.

The bad news is that you may be developing an application that nobody wants. The good news is that you find out a lot earlier by developing in the open. You have time to adjust the feature set. You may even decide to cut your losses and kill the project. Either way, you are better off getting the bad news earlier instead of waiting until the application ships.

3. Make Sure They Can Afford Your Product

The price of your product affects the size of the gap.

When writing about the subject of pricing, it is far more fashionable to claim that pricing should be higher, not lower. The basic idea is that you are making a statement with the price you choose. When you set the price of your product high, you are telling the world that you think your product is very valuable. This tends to make your product more highly desired.

Some purchasers actually prefer to buy higher-priced products. At the moment, I can use myself as an example. I am currently training to walk a half-marathon. It is important that I have really good shoes. I should probably go to one of those fancy stores where they analyze a videotape of your stride and help you select the perfect shoe. But I'm always in too much of a hurry, so I have simpler approach. I only buy shoes if they are of a strong brand and cost at least $85 per pair. This approach is low tech, but it is simple, and it works for me.

Some people buy software the same way I buy shoes. Buying the most expensive product is a convenient shortcut for the shopper who doesn't have time to research everything thoroughly.

A higher price point can be attractive to customers who are seeking either prestige or exceptional quality. However, lower pricing has its advantages, too. The fact is that many of your prospective customers have a budget. If your price is higher than their limit, the gap might as well be infinite.

A few months ago, my company lowered the price of our version control product (SourceGear Vault). At its original price, Vault was already one of the least expensive tools in its market segment. With the new pricing, all of the comparable competing products are several times our price. We knew this was a big risk. Some customers will automatically assume that a competing product which costs seven times more must certainly be seven times better than ours.

So far, the risk is paying off. We made this decision because we believed that the gap was simply too large for many customers to cross. Apparently we were right. Our total revenue has been significantly higher since the price change.

4. Offer a Full-Featured Demo Download

Every small ISV today should give its customers an opportunity to try before they buy. It is officially now absurd to do otherwise. Customers will come to your Web site and expect to find a demo download.

There are several opportunities here to make things easy for your customer. Don't miss out on any of the following:

Make the download easy to find

You probably think your download is easy to find. After all, you know right where it is, right?

Don't assume. Grab a stranger (don't actually grab them) and ask them to visit your Web site and find the demo download. Watch them search and see how long it takes.

Make the download full-featured

The best demo download is the product itself. Every SourceGear product has only one binary available for download. The demo version is exactly the same binary as the full product. Every feature is enabled, but only for 30 days. To make a purchase, the customer simply enters a serial number and does not have to reinstall.

Polish your installer

Your demo download is your opportunity to make a positive first impression. It is indescribably important that your demo "just works". If anything goes wrong, your customer will probably just lose interest and you will have lost the chance to be responsive.

Let the customer remain anonymous

The hyperlink to your demo download should link directly to the actual binaries. Don't make users fill out a form and give their contact information. This is responsive sales and the users are in charge. Let them decide when they want to make themselves known to you, if at all.

5. Answer the Customers' Questions

I am a big believer in the importance of giving excellent technical support. When your customers have problems, you need to stop and help them. Furthermore, I believe that happy customers are the responsibility of every employee in a small ISV.

At SourceGear, every developer is involved with helping customers. We do have "level 1" tech support people whose full-time responsibility is helping our customers. But when level 1 either overflows or escalates a problem, every developer is available to help with "level 2". Our customers like the fact that when they have a problem, they can talk to the person who actually wrote the code.

With very few exceptions, everyone on your staff should be prepared to stop what they are doing and help a customer when needed. An important key to the responsive sales model is that you have to treat your prospective customers exactly the same way.

6. Provide a Place for Community

Prospective customers want the ability to talk to current customers about you and your product. This concept may seem scary. After all, what if some of your customers are disappointed with your product in some way? Do you really want prospective customers talking with people who might say negative things?

Yes, you do. This is responsive sales, and the customer is in charge. Not only should you let your prospects talk to your customers, you should provide them a place to do it.

I wish more vendors would do this. Last year, I bought a Chevy Avalanche from a dealer in my area. Think how nice it would be if my sales guy had made arrangements for me to speak with his past customers!

Before finalizing my decision, he escorts me to a special waiting room, and there I find everybody who has ever purchased an Avalanche from this particular sales guy. Immediately I start asking questions: How do you like the truck? Does water leak into the back? Should I upgrade to the bigger engine? What about this sales guy, is he a jerk? Has he ever lied to you?

Regardless of the answers I get, one thing is clear: This sales guy has impressed me. He is unafraid of his past choices. He believes in the quality of his product and in the level of customer service he provides. He has nothing to hide.

Obviously it's just not feasible for my Chevy dealer to offer this kind of benefit, but it's downright simple for a small ISV.

SourceGear provides a Web-based forum where our customers and prospects can talk to us and to each other. Users of this site are free to express their opinions. When a customer gripes about us (SourceGear), or our products, we don't dismiss the comment.

Prospective customers often visit the site and ask questions from other users. If one of our current customers gripes about us, then we probably deserved it. Instead of trying to impede the truth, we instead try to fix the problem.

Sometimes this approach isn't much fun at all, but it provides a nice feedback mechanism which forces us to constantly improve our product and keep our customers happy. Prospective customers can see this.

7. Make It Easy to Buy Over the Web

The final step in closing the gap is the moment when someone gives you money and you give that person software. Just like every other step, the customer is in charge, but it is your job to make everything easy for them.

There are several different ways to get an online storefront. You can find lots of companies offering to host a store for you. There are also a number of software packages that you can buy. I lack the experience to recommend any of these options because we (SourceGear) have always written our own online store software.

One of the reasons we wrote our own store is because it gives us completely control over the experience of our user. We are always trying to make it easier for people to buy our product. We want our online store to immediately generate serial numbers and e-mail them to customers.

Whatever approach you choose, the following suggestions may help you in your quest to keep things simple:

Don't make customers login

The last thing your customer needs is yet another username and password to remember.

Does your online store really need to create a user account for everybody who makes a purchase? Probably not.

Can't you just take their money and give them software? Probably.

You don't need a shopping cart

I think Amazon too heavily influences the expectations for online shopping. In my opinion, Amazon has a really incredible shopping cart system. It is extremely powerful, and yet it feels extremely simple.

So we convince ourselves that our online store needs to be as cool as Amazon's, but that just isn't true. Amazon truly is an online store. The shopping cart metaphor makes sense. The Amazon store is immensely large and contains a staggering number of products. It's a pleasant place. It only makes sense that we would want to leisurely wander around the store, selecting various products as we go, stopping at the checkout line on our way out to pay the bill.

Your small ISV simply doesn't function on that kind of scale. You are more like a hot dog stand than a store. You sell only a few products; perhaps only one. Your customer has no interest in leisurely walking around and browsing the vastness of your product offerings. They came to buy a hot dog and they don't understand why you expect them to place it in a big shopping cart and walk halfway down the block to go pay for it.

I speak from experience and mistakes. Until recently, the SourceGear online sales system was an extremely poor clone of Amazon. In a major rewrite, we eliminated the shopping cart and simplified the entire ordering process to a single form. Everything is much simpler now.

Give customers the product right away

It's fine if you need to ship some sort of physical object to your customers. However, don't make them wait for the media or documentation before they can get started. Immediately after the user places an order, let the user download the bits and start using it right away.

Even better, give serial numbers to the users to simply activate the demo(s) they are already using.

But We Can't Do It This Way!

Why not?

I know that lots of people are going to disagree with me on the opinions in this article. Trusting the customer is scary. If you don't like what I've written here, then at least give serious consideration to the following:

Have I not described exactly how you want to be treated when you are the customer?

If so, then shouldn't you be treating your customers the same way?

Why not?

We're Not Perfect

At every seminary and religious school, preachers are taught to "preach above themselves". After all, pastors are just people. They have problems just like the rest of us. It takes a lot of audacity to stand up before a congregation every Sunday and talk about how to live a better life. If perfection were a requirement for the job, then the pulpit would always be empty.

I face a similar problem in my writings, but especially in this article. Several times here I have used my own company as an example, but we are very far from perfect. Our demo doesn't always just work. Our online store has quirks. Sometimes we are too slow in responding to technical support. Just like every sermon I have ever heard in church, I preach to myself, and Monday morning I will try and do better.

For most small ISVs, responsive sales are the way to close the gap. Let the customer be in charge, but make the gap easy to cross by moving your product as close to them as possible.

Eric Sink is the non-legendary founder of SourceGear, a developer tools ISV located in Illinois. Three weeks ago, Eric hit a 9-iron 160 yards. He's still gloating about it. Eric's weblog is at http://software.ericsink.com/.

This article originally appeared on the MSDN website.