David Cummings on Startups

Category: Sales and Marketing

  • Answering the Competitive Differentiation Question

    An unidentified seller in an unknown location....
    Image via Wikipedia

    One of the most common questions I get when talking to someone who is familiar with one of our competitors is “How are you guys different from xyz?” Naturally, as with most industries, there are a multitude of competitors out there, most of which we never compete against. Here are a few approaches to the competitive differentiation question:

    • Focus on target company size, industries, and verticals (e.g. SMB vs enterprise or healthcare vs financial services)
    • Address specific product functionality and use cases (e.g. feature X vs feature Y)
    • Talk about customer acquisition (sales) and service approaches (e.g. insides sales vs field sales)
    • Articulate the different corporate cultures, fundraising, and other strategies

    The most important thing to do with the competitive differentiation question is to answer it concisely and clearly. Too often when I ask others that question I get a long answer that doesn’t leave a memorable hook in my mind. Keep it short, simple, and memorable.

    What else? What other recommendations do you have for competitive differentiation questions?

  • Packaging the Same Product into Multiple Products

    FINANCIAL SERVICES CENTRE
    Image by infomatique via Flickr

    One strategy startups should consider is packaging the same product into multiple products. There are three common ways this is accomplished:

    • Segment the same product into different editions where features or usage rates are changed (e.g. group, professional, enterprise, and ultimate editions)
    • Apply an industry specific name to the product (e.g. technology, healthcare, financial services, etc)
    • Make the platform (same code base) divided into separate, but related products, available independently or combined a la carte (e.g. marketing suite, sales suite, and support suite)

    Most often, one size does not fit all and buyers like to buy when a company speaks their own language. My recommendation is to consider ways to package the same product into multiple products.

  • Focus on Enterprise or SMB Accounts

    Street at SMB
    Image via Wikipedia

    For B2B technology startups one of the first questions they need to answer is whether or not they are going to focus on larger enterprise businesses or small-to-medium sized (SMB) companies. It is too difficult to service both enterprises and SMB with few companies ever successful at both. Companies like salesforce.com started almost exclusively with SMBs but now hunt large enterprises as well, and they are a rare exception.

    Here are some things to think through when considering a focus on enterprise or SMB accounts:

    • Enterprise products are typically much more expensive and require a larger amount spent on customer acquisition
    • SMB products are typically cheaper and sold through a self-service or inside sales model
    • Enterprise deals often involve long sales cycles and RFPs with SMB deals being shorter
    • Enterprise focus can be better with missionary product sales where the prospect has to be educated and closed as the sales cycle is more complex
    • SMB focus can be better when the enterprise segment has more advanced and entrenched competitors

    There’s no right or wrong answer for focusing on enterprise or SMB accounts but it’s important to acknowledge the difference and pick one battle.

    What else? What other ways do you differentiate enterprise and SMB focus?

  • Salesforce.com Dreamforce 2010 Wrap-up

    Salesforce.com put on another impressive Dreamforce show this week at the Moscone Center in downtown San Francisco. We’ve been doing the show now for three years and it continues to grow fast. Last year had 17,000 attendees and this year there were 30,000. That’s impressive growth, especially at scale. Some of the key takeways from the show for me include:

    • The cloud is becoming more and more pervasive with salesforce.com leading the way
    • Salesforce.com Chatter is now freemium whereby companies can use it for free and then pay a premium if they need more advanced functionality. I think Chatter is nice but won’t be the game changer that transforms salesforce.com, as they claim it will.
    • Salesforce.com launched database.com as a database-in-the-cloud service (side note: imagine how expensive that domain name was — I’m guessing at least $1 million). I don’t think database.com will be successful as long as the per user pricing model remains. The other big challenge it has is lack of drivers and code to make it work seamlessly in popular languages like PHP, Ruby, and Python.
    • Salesforce.com bought Heroku for upwards of $250 million and finally has a credible strategy to significantly expand beyond their traditional user base and per seat pricing. It’s going to take many years to see if this acquisition was worthwhile but my guess is that if they can get the corporate culture alignment right it’ll prove to be brilliant.

    Salesforce.com is one of the best sales and marketing machines in the world and the show didn’t disappoint.

  • Thoughts on salesforce.com on the Flight to Dreamforce

    Image representing Salesforce as depicted in C...
    Image via CrunchBase

    This blog posts comes from 30,000 feet in the air courtesy of free WiFi for the holidays from Google Chrome on Delta. Right now, I’m flying to San Francisco for my third consecutive annual salesforce.com conference known as Dreamforce. As one of our main partners and the leader of the SaaS industry, I pay close attention to salesforce.com. Dreamforce never disappoints.

    Here are a few thoughts on salesforce.com:

    • They are a brilliant sales and marketing machine with reportedly 50% of their employees in sales (which represents thousands of people).
    • They were the first SaaS company to reach $1 billion in recurring revenue.
    • They are extremely focused on selling seats of their software, with sales reps and support reps being the majority of their users. Because there’s typically a 10-to-1 relationship between sales reps and marketing people, and they want to sell seats, salesforce.com has stayed out of the marketing automation market.
    • They have a great product but the real value comes from the AppExchange eco-system of other products that integrate with their API. This creates a network effect resulting in exponentially more value.
    • They have been promoting “no software” as their mantra for years now, which is brilliant to position SaaS against traditional installed apps. Yes, they sell software.

    Every year the salesforce.com CEO gives a keynote presentation announcing their results as well new features or products to much fanfare. Last year they introduced Chatter to allow companies to run an internal Facebook-like community. It’ll be interesting to see what they announce this year. Stay tuned for an update later in the week.

  • Spray and Pray to Find Potential Customers

    He spent too much time squawking about how his...
    Image by wildphotons via Flickr

    Testing a thesis and iterating quickly is one of the central tenants of lean startups. One of the ideas that lean startups should also employ is reaching out to many different potential types of customers while they build the product with feedback from a core group. Spraying and praying, based on educated guesses, isn’t employed as much as I would have expected.

    The idea is pretty simple. Take the core value proposition of the product, with feedback from the potential prospects who’ve helped guide development, and start reaching out to other groups that might be a good fit. Ideas to try include:

    • Related industries/verticals
    • Different job titles within those industries
    • Factors like revenue size, number of employees, and geography

    The idea is to pick out chunks of 25 contacts, pulled from LinkedIn/Jigsaw, in each potential area and start talking to people. Over time, patterns and fruitful opportunities will emerge. Once momentum has been achieved in an area, double down on it and maximize the value.

    What else? What are some other ways to find potential customers?

  • What’s your Net Promoter Score?

    Several years ago a friend of mine gave me the book The Ultimate Question as a colleague of his at Bain had written it. After reading the book we immediately started to implement it as part of our quarterly client check-in calls. The Ultimate Question, according to the book’s author Fred Reichheld, is as follows:

    Would you recommend this product/service to a friend or colleague?

    The theory is that it isn’t whether or not a customer is happy but rather how likely they are to rave about you to others. Too often people will say they are satisfied when they are indifferent or don’t actually care. The most profitable and successful companies, like Apple and Google, have the most rapid fans.

    Calculating the net promoter score is fairly easy (see this online calculator). Ask customers to answer The Ultimate Question on a scale of 0-10 with 10 being the highest. Once you have the scores, categorize the responses into promoters (9-10), passives (7-8), and detractors (0-6). To determine the score, take the percentage of promoters and subtract the percentage of detractors (the percentage that are passives are ignored). That’s it. Companies that score above 75 are considered excellent, and yes some companies have negative scores.

    My recommendation is to consider using net promoter score as way to measure how successful your company is with your customers.

  • What to Look for in a Web Marketer

    As you might have guessed I’m a huge fan of web marketing. There’s so much opportunity online between search engine optimization, pay per click ads, lead nurturing, webinars, social media, etc. The challenge, naturally, is that the competition and complexity is fierce. Finding a good web marketer is hard. Here’s what I look for in a web marketing employee or consultant:

    • Ability to clearly articulate their current employer/client’s web marketing results (results, not activities!), what’s working, what isn’t working, and how it has changed over the past six months
    • Preferred strategy for generating and nurturing leads online including PPC, email marketing, white papers, sponsorships, etc
    • Personal blog or other online writing experience (e.g. should have at least a dozen posts)
    • Personal Facebook and Twitter account, and for the Twitter account it should have at least 50 tweets (it’s important for a web marketer to be adventurous and experiment with different tools)
    • Experience with common tools like Google AdWords, Google Analytics, email marketing systems, marketing automation products, etc
    • Good feel for analytics driven marketing including return on investment, trends over time, funnel analysis, and hard numbers

    Web marketing is easy. Results are hard. My recommendation is to focus on web marketers that can demonstrate results. Absent availability of that, hire for fit plus aptitude and train on the job.

    What else? What other aspects do you look for in a web marketer?

  • Cold Call Ratios

    Supply and demand market curves
    Image via Wikipedia

    One of the more under appreciated sales techniques is cold calls. Yes, with marketing automation and inbound marketing there are great ways to tap into existing market demand, but often times in a startup there’s a mercenary aspect where market demand must be created. Enter cold calls.

    As you would expect, cold calling is a numbers game. For our small but fast-growing market, our numbers look something like the following, assuming four weeks with 20 business days per month:

    • A list of 333 companies that fit the ideal customer profile with three contacts at each company (1,000 contacts total found using LinkedIn and Jigsaw.com)
    • 50 calls per day, 2,000 calls per month, every contact called twice per month
    • 10 conversations per day
    • 1 voicemail and send one email per contact per month
    • 1 demo per day

    This might seem daunting at first but it you assume 12.5 calls per hour, that’s four hours of calling a day. Add in one hour a day for the web demo and that still leaves three more hours for other work, follow-ups, planning, etc. My recommendation is to consider cold calling as part of your sales and marketing strategy.

    What else? What are some other cold call ratios?

  • The 5 Main Marketing Areas for Startups

    Social Media Life - Workstation

    All too often, startups I meet with don’t have a good grasp on their marketing strategy, more precisely, their customer acquisition strategy. The most common response to the marketing strategy question is search engine optimization (SEO), which almost never plays out as an exclusive strategy due to the competitiveness of the industry. On a simple level there are only a few areas startups should focus to build awareness and generate leads. Here are the top five marketing areas for startups:

    • Word of mouth – where prospects and customers tell their friends and colleagues about the product (notice I didn’t say viral marketing, as so few products are truly viral)
    • Pay-per-click – yes, Google AdWords are terribly expensive, but they are also effective especially with more targeted phrases (e.g. buying competitors’ names is a great tactic for low volume, high quality leads)
    • Search engine optimization – SEO does work but needs to have a 6-12 month horizon and tons of content (e.g. publishing 1-2 blog posts a week indefinitely)
    • Cold calls – now, people generally associate cold calls with sales reps, but cold calls are also a great way to build product awareness in a marketing fashion and should be done by most startups
    • Social media – yes, people are making money off social media by monitoring industry terms and competitors’ names, then tactfully joining the conversation

    My recommendation is to employ all of these areas as part of a marketing strategy and focus in on the ones performing the best.

    What else? What are some other marketing areas for startups?