As a startup, does the sales and distribution strategy bring lasting success, or is it quality of product?
According to an Award-winning Vancouver-based angel investor Boris Wertz:
“On one end of the spectrum, many startups think that great products sell themselves, while the other camp argues that it’s the channel and monetization that define a company’s success,” writes Wertz. “The simple answer to the question is you need both.”
A recent study shows that over 17% of startups fail because of poor products and the top reason for startups failing is creating a product no one needs.
But don’t be fooled into thinking that means it’s much more important to focus energy into creating products than it is to invest effort into sales.
Remember that sales fuel your company and keep it alive. In fact, one study shows that 53% of customer loyalty is driven by the sales experience. This goes to show how important it is to have a great sales team for your startup.
To be successful, a startup company needs a top-notch product, and an effective distribution and sales strategy.
However, there are a few nuances you should consider:
1. Startups are often more successful when the founders are product-driven
New products are launched every day and millions of dollars are spent developing them. Some are sales-driven and created by sales founders; others are product-driven and created by product experts.
What is a product-driven startup?
A product-driven company focuses on what their product brings to the table, striving to continuously improve it and ensuring customers get full value from it. They believe that a great product most often sells itself.
Product-driven companies are mostly dominated by product related teams, such as engineering, user experience, and product experts. Product-driven leadership has a background in product management rather than sales.
Steve Jobs is an example of a successful product-driven founder. He built a company focused entirely on delivering the best possible product to customers. Apple was largely operated on the “build it and they’ll come strategy” — they created the iPod even before the market knew they actually needed it.
Another great example of a successful product-driven founder is Elon Musk. He spends over 80% of his time with his designers and engineering team developing next-generation products.
I can’t agree with Wertz enough on this “It’s typically much easier to add sales expertize to a product-driven organization than it is to add product focus to a sales-driven start-up.”
These successful product-driven companies carefully incorporated sales-driven business ideas to their companies over time.
When you have a great product behind you, it’s easier to attract customers. Besides, a company can hire a senior sales executive to refine their sales and distribution strategy. On the flip side, a great product requires great leadership and the right product mindset. It’s not easy to add that to a sales-driven startup.
2. Sales-driven companies can turn into service organizations
A sales-driven startup focuses on what sells, or attracts attention, rather than what works and provides real long-term value to customers. Sales-driven companies are often aggressive in maximizing short-term return on investment and this mindset can shape product decisions a great deal.
Every startup needs sales. As mentioned earlier, it’s the fuel that keeps your startup alive. Of course, you’ll go out of business if you don’t have enough sales to keep up.
However, one of the major drawbacks of a sales driven company is that they lack resources to service their customers beyond the initial sales.
Every salesman knows this: In most organizations, salespeople work under immense pressure. You have to make a sale.
You either meet your quota or nothing. With that mindset, it can lead salespeople to exaggerate their product’s value and, at the end of the day, you end up losing customers after they first do business with your company.
Sales-centric organizations don’t really bother much about why a customer leaves their business because they’re not ready to address it. All they need is a new customer that is willing to pay.
Saying all this doesn’t mean that sales-driven organizations are bad, moreover, companies like Oracle which is essentially a sales-driven company, have seen a lot of successes.
The potential is there for sales-driven companies to eventually become service companies by creating and incorporating all the features users expect to get from their product.
According to David Baga, who worked with Oracle for over 6 years, here are the tips to consider if you want to achieve a long-term success in a sales-driven startup:
i). Listen to your customers first: Always look out for ways to meet your customers’ expectations—bearing in mind that customers pay more for better customer service.
Sam Walton, founder of WalMart, started his retail business in rural America. He was aware that people living in suburban areas needed goods in greater quantities as they had larger families, or had their own small businesses to keep running. Walton listened to customers and now it is the most powerful, largest brick and mortar retailer in the world. Such is the power of listening to your customers.
ii). Aim for results: Take surveys, find out why customers leave and try to improve. Do all you can to deliver results and bring satisfaction to your customers. Feedback from customers, whether positive or negative, is helpful in making important decisions. Feedback helps in analyzing processes and therefore improving customer service and productivity.
iii). Your values should be shared: Let every employee be aware of your company’s values and how they are implemented, too.
iv). Put more emphasis on training your employees: Invest in training your employees to ensure they’ll treat your customers well. Training sessions will develop the understanding and skills needed, and ultimately help towards achieving business goals.
3. The consumerization of IT is putting more emphasis on product
New technologies emerge in the market all the time. Users are becoming increasingly interested in what products can offer at the workplace to help improve productivity.
A study by IDG in 2014 shows that LinkedIn, Skype and other services are the cloud tools most used by employees (90%), followed by file sharing or collaboration tools (79%).
With the consumer apps ecosystem becoming more diverse, businesses and IT teams will need to adapt their approaches to how employees do business.
Give employees the flexibility to work with tools that empower them. But also keep security, administration, and mobile device management in mind.
“Don’t start a company unless it’s an obsession and something you love. If you have an exit strategy, it’s not an obsession.”
To really see success in your startup, don’t choose between being sales-driven or product-driven.