Should you invest in Product, Sales, or Marketing?

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Imagine the sales call…

When someone calls you to discuss a product you just signed up for, how do you feel? Depending upon where you are in your buyer’s journey, you might welcome the call, feel ambivalent, or be annoyed that the company called you at all (especially if you haven’t yet given them your phone number). What often happens is a mismatch between the relationship strength — the relationship between you and the company necessary for you to have a good experience with their product — and your goals. Likewise, the transaction cost — the effort required for you to experience the product enough to know whether you’re ready to buy — may also be fundamentally misplaced.

A great (first time or otherwise) product experience matches the relationship strength needed by the typical customer. How much help will the customer need from you to get what they need from your product? This product experience also matches the transaction cost that customer expects. Is it too much work for the customer to do the work they need to do, with or without your help? Answering these two questions helps you scope your investment in your product to focus on sales, marketing, or product efforts. Is the relationship effort and cost needed small — like when you try a free product that might not bring you immediate benefit — or is it quite high? You might be auditioning to solve a pivotal problem for a large business while working on a deadline. Continue reading “Should you invest in Product, Sales, or Marketing?”

What makes freemium pricing work?

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Should you give away your product for free? The concept of “freemium” — or providing a product offering that doesn’t cost the customer anything, and allows for the prospect of future upsell — has great success for products like Mailchimp, Dropbox, Evernote, and WordPress. The basic idea is that some number (perhaps as many as the high single digits, but more often 2-4%) of customers convert to paying, and as time goes by and the customer sticks
around, that likelihood to convert increases.

What makes freemium pricing work?

Obviously, the zero cost of a freemium product is attractive. One of the challenges inherent in free pricing is that the perception of value for a free product might also be zero unless a few things are present:

  • The product or service offers immediate value to a new customer;
  • There is very low or no sales “touch” required for customer success;
  • And there is one or more natural conversion points where the customer realizes that it’s time to “buy.”

Things that make people say, “That’s valuable!”

Customers think products are valuable when they solve an immediate problem, e.g. the problem that you had when you “hired that product to solve your problem.” Mailing a list that you already have; sharing a big file; keeping an always-on notepad; and writing a blog post are clear, uncomplicated problems for which solving a problem has instant value. Customers also perceive value when there is low effort to implement this solution, and when the exact thing they were trying to solve gets done.

So what should you do if you don’t provide immediate value to customers using your product or service? You can provide “scaffolding” by delivering a simple procedure that will solve an immediate problem. You can deliver Customer Wow. And you can also actively listen to find the items that customers find challenging – those are great candidates to improve as fast as possible.

It sells itself: the magic of “no-touch” selling

It’s easy to believe that with the magic of the Internet, products will sell themselves. And sometimes they do (it’s amazing when that happens.) Most of the time, however, there is some effort required to close a customer from prospect to sale. When customers help themselves; when there is a large enough user based to provide community help; and when there’s no great economic drag on your company to keep them as “freemium” users – it’s all good.

In my experience, the reality of this process falls somewhere in between the perfect situation where users try and buy themselves, and a fully supported scenario, where they are supported figuratively from “cradle-to-grave.” You can help yourself by identifying the attributes that mark currently successful customers (completed activities, speed and acceleration of adoption, and lots of questions to your support and sales team are often good indicators) and try to recreate those attributes in brand-new users. The best way to do that? “Dog-food” your customer experience by trying it yourself and identify the “cringe-list” of items so bad they would make a new customer prospect drop right out of your application.

When is it obvious for the buyer to upgrade?

Sometimes, it just makes sense to upgrade. Run out of space in your networked drive? Need to send to a larger email list? Want to post even more notes to your connected notepad? These are natural conversion points, and are well crafted ways to get you as a customer into the next tier of value for a company. The number of transactions you complete; the number of connected accounts for a complex product; and enough practice to know that you really want to use the product are all good ways to introduce (or gently suggest) a natural conversion point for a freemium product.

Except when life gets in the way, and you really meant to try that product but haven’t taken the time. Placing time limits on the free trial and starting to charge the customer are great ways to use the idea of loss aversion to force the customer to make a decision (“should I stay or should I go?”) You can also use account management and Customer Wow to make this process easier.

Freemium pricing works best on a product when as the customer you understand what you’re getting, you can get what you want without needing help from a sales or support team, and when you know the best time to upgrade (because it just feels right.) As a product team, if you don’t have these attributes immediately, you can create immediate value by providing steps for the 80% solution or “happy path.” You can lower the required touch by fixing the things that first time users most often criticize. And you can place a time limit on your trials (or just leave the customer alone in a semi-dormant state if it’s economically feasible.)

Do you think freemium works for most Internet products? Or is it an idea that really only fits a few, simple and well defined models of behavior that people already use?

You don’t need a business plan yet: 7 ideas for Customer Development

You’re thinking of starting a business? Hooray! Cool idea, and good luck. There are a few things that you can do to get started, and the first ought to be something counter-intuitive: don’t build your business plan. Yet.

The first thing you’ll need to do before you decide to really go for it is to figure out who your customers are and to learn more about what they need.

Then, try out your ideas on them.

Prepare a Pitch

What would someone like to know about your business in a very short piece of information? When someone says “What is ….” if you can respond with [my widget or service] is … and make it short, compelling, and interesting then you’ve gained their interest in having a larger conversation. Here are a few tips.

Go Practice

If you think your pitch is good right now and you’ve never delivered it before, you’re probably wrong. A great way to find the holes in your customer pitch is to tell about 40 people about your idea. You can use friends, family, or a coffee shop to get going. A particularly good place to do this is at an industry event or “speed networking” night.

Make a Survey Based on What You Learn

Now that you’ve tested your idea, make a survey (a short one will work better – people hate long surveys) and try to get answers to the 5-10 questions that will help you to move forward. There are great tools to help you to do this, including Google Docs, Wufoo and Survey Monkey. Get at least 30 people to answer your survey and you’ll be on your way to getting some actionable data.

Build an “Up and Stumbling” Prototype

When you think you have a better idea of what to build, go ahead and build a prototype – it doesn’t need to work but it does need to share the essence of your idea quickly (if you’re a business person, code in index cards or code in Powerpoint. If you’re a dev, build in whatever language you like that’s fast.) Balsamiq is a cool tool for this purpose, giving you enough information to show what you want to do, but not limiting you by creating an enormous prototyping framework.

Talk to Customers and Get Their Best 1 Piece of Feedback

People love to talk about your idea when you get a chance to ask them what they think. Because that feedback doesn’t always cost them anything, they might not focus on the one thing that matters to them about your product or service. So ask customers for their best 1 piece of feedback, not every piece of feedback they have – this will challenge them to refine their advice and you’ll have a better shot and finding out what really engages or bothers them about your idea.

Now, think about your Business Plan

Once you define your customer, pitch your idea, learn and build a prototype, and get some feedback, you’ll be a lot further along in the information you’ll need to build your business plan. Steve Blank lists some great tools for startups that will help you in this effort.

Your Pitch is Everything.

Ever start talking to someone about an idea that you hold dear to your heart, only to find that when you say it out loud it doesn’t come out *quite* the way you want? Your pitch is the difference between a million dollar idea and, just an idea.

I recently had the opportunity to do 100+ pitches in a day at a conference, and I heartily recommend the practice. No one *wants* to talk all day long about what you do (sure, it’s really exciting the first 5-10 times, but by the end of the day the first thing you want to do is not to craft the same pitch).

So here are a few tips to make your pitch memorable:
Understand the “What is my …” question and make it part of a 30 second pitch. You need to own this and pitch it cold out of a dead sleep. (As in “What is your product or service and why would I use it?”

Tailor the “What Is …” question to the audience at hand, understanding the problem that they have and why your product or service solves that problem. If you’re talking to software engineers — you’d better know how they think — and if you’re talking to business people in a specific field, you’d better know something about that field as well.

Finally, smile. Really. Smile. You’re supposed to be having fun. Once you get through the initial pitch to someone, now you can talk about the things that matter to them, and share your expert knowledge about your product or service in a way that really makes their day.

What’s been your experience and what tips do you have to make your pitch memorable and effective?

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