Most of my startup career I’ve been working with building and managing sales and marketing teams, and with Wrapp I had the exciting opportunity to be involved in scaling just these functions across the world into 18 different countries. Rather than focusing on what to do, in this post I want to share some important lessons learned from my years and highlight 4 sales strategies to be very cautious about, and ideally avoid all together.
1. Don’t underprice. In today’s environment, when external capital is relatively easy to come by, many companies have financial means to subsidize their product in order to acquire customers faster and more efficiently. There are many great reasons for this and plenty of awesome strategies to use 💰 to do so, but companies should be very cautious when it comes to setting a price and charging for their services. Pricing is tough and you should iterate on your pricing model, but if you expect the same customer will buy from you repeatedly (subscription, campaigns, etc.) make sure you don’t sell yourself short in the first transaction just to get the customer onboard. For these type of transactions anchoring your service at a certain price point early becomes essential (and the impact it has on your brand is tremendous and worthy of a separate post). The most important realization here is that lowering your prices is easy, but increasing them is dramatically much more difficult (think Uber Black to UberX [= success] vs Lyft to Lyft Plus [= failure]). At Wrapp we chose to discount our service heavily to some retailers who we considered as prominent brands, with the hope that the halo effect from working with them would make our sales process easier with other brands. That hypothesis turned out to work fairly well, BUT when it came time to start monetizing those subsidized high profile retailers, we had to work very hard (and failed with some) to get them into the black. And on the other extreme, with my first startup AdProfit, which had no external funding and no means to subsidize our product, we were forced to charge everyone market prices from day 1…and it worked just fine. It’s also worthwhile mentioning 2 other things when it comes to pricing. i) If you’re innovating you’re by default breaking new ground with your product. Depending on how close your innovation is to incumbents or other startup substitutes, you may be defining a new product category and thereby setting and anchoring the “reference price” for your type of products. And ii) if you operate in the b2b space, your counterpart whom you’re selling to have money to spend. Amongst consumer products, there can sometimes be a hurdles to pay and expectations are often that revenue is generated elsewhere (= ads most of the time), but enterprises are used to paying for their products and they are also much less price sensitive if they find products which solves their needs. The bottom line is, don’t push revenue into the distant future, don’t be afraid of charging for your product early and dare to charge your customer what you believe is the market price for your product.
2. Don’t oversell. Since you’re always working to refine your product and much of the vision may not yet have been built, a big part of the sales job is to tell your story and get people excited about the future of your company and the solutions you will provide. At the same time you have to solve some urgent need already today, otherwise you can’t get your product into the market. Because of this, it’s easy for us entrepreneurs to explain the power of the solution at scale and all the amazing things the user can do once we get there, and thereby overestimate the value the solution actually has today. This is a true finesse of startup sales. Get people excited about the big picture and longterm vision while clearly communicating what you provide today and set expectations accordingly. Getting the expectations right is critical to build a longterm trustworthy relationship with your users, which of course is the most important thing longterm for your business. With Wrapp we saw amazing growth in our consumer adoption metrics early on, and when meeting with retailers we often extrapolated that growth to give the retailer an indication where we would be shortly. We also chose to leverage campaign conversion stats from some of our best performing retailers (the outliers) when presenting case studies. This all resulted in certain expectations from the retailers about what volumes of customers and sales we could generate. And in case their campaign turned out to show lesser results we had to overcome disappointments of lower volumes than expected instead of celebrating actual results generated. This in turn meant some really hard work to rebuild trust between that retailer and Wrapp. (Side note: many times retailers’ success was determined by factors outside of our control such as the strength of the retailer’s brand in combination with attractiveness of the campaign offer.) So, be very careful not to oversell, set realistic expectations about your current solution, and navigate carefully around your bigger vision and what you actually deliver today.
3) Don’t chase the silver bullet. Selling anything is hard work. Selling a new product (which often solves problems previously not addressed) is often even harder. On top of this sales bandwidth is usually as a scarce resource for any startup. Because of this many entrepreneurs look into their market and tries to identify various potential partners who could elevate their sales to new dimensions. They chase a silver bullet hoping that if we land this one big partnership we will not have to worry about customers/users/revenue ourselves. It could be anything from a lifestyle app getting featured in the relevant magazines, to a developer tool being the recommended product at prominent engineering schools. This is a dangerous road to embark upon. I’m not saying that third party distribution partners like this is always a bad idea. Many times they are a great component of a broader sales and marketing plan. But you should never build a strategy based solely on someone else generating customers/users/revenue for you. The cycles of securing these kind of partnerships are often very long, and the actual results far beyond what you have hope. But most importantly you need to control your own faith, and you do this by being close to your market pushing your own product out there. Furthermore, there’s no one in the world who could sell your product better than yourselves. Even if you get access to large quantities of potential users through a distribution partner, you will be relying on that partner to present your product with the same passion, knowledge and focus as you would…which is unlikely. And by putting a layer in between your own sales and your customers, you risk of losing critical intelligence about your users and market which becomes essential for you as you iterate through the startup rollercoaster. With Wrapp we pursued multiple high profile partnerships with some of the biggest tech companies and retailer networks, reasoning that if we get this partnership locked down we will secure user growth and/or retailer acquisition. Most of these partnerships never became a reality and those who did yielded minor results. Basically we ended up spending a lot of time on “noise” instead of focusing on building an awesome product directly together with our users. There are no shortcuts to it and you need to control your own destiny by doing your own sales. Don’t get mesmerized by shiny objects out there, and don’t think any interesting partnership will replace sales for you. At its best it’s icing on the cake. Also, founders are by far the best sales resource to use in a foreseeable future of any startup…so get used to it and get out there and start selling.
4) Don’t be a cowboy. A general sentiment in the world of startups is to avoid management and enable all team members to independent decision-making. I’m a big believer in this approach, and this kind of enablement is one of the greatest benefits of working in startups. However, you should carefully balance this against a structured workflow and processes. Most startups start their sales with one of the founders being out there pushing their product into the market. At some point of time you hire more sales resources and start building a dedicated team (Note: as a founder you want to make sure you fully understand the full sales funnel, pitch, and KPI benchmarks before you try to scale the team). Since sales is a numbers game and size of the top of your funnel matters, it’s easy to be tempted to minimize structure and process and instead let the sales team simply go out into the market and stir up some dust with your corporate presentation…i.e. shooting from the hip as cowboys in the wild west. This is when your management style needs to lean in, in order to leverage the organization and get learn from the collective of the team. With Wrapp our sales team grew incredibly quickly across different parts of the world during our first 18 months, and since speed to market was critical for us we chose to provide a lightweight structure to our sales operations that primarily included a unified corporate presentation/pitch, CRM system and necessary legal agreements. Once we started trying to leverage synergies, best practices and market insights across our sales resources, it proved very difficult to manage and extract something useful. The business had evolved differently not only in each country but for each sales resource as well, and we saw our team members having built individual processes, tactics and strategies around how to sell Wrapp, how to use our CRM tool, how to leverage sales engineers, etc. Everyone had optimized their environment to the best of their knowledge, but without a structured holistic approach we didn’t manage to leverage the power of the group as much as we could have. The key here is to enable your team to think and make decisions freely, but carefully craft a structure and process where you continuously aggregate individual learnings and best practices and share and implement those back into the rest of the team. Modern management is not to lean back, cross your fingers and hope for the best, but it’s about creating a foundation for the individual together with the group to improve, succeed and win.