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As a startup, does the sales and distribution strategy bring lasting success, or is it quality of product?
According to award-winning Vancouver-based angel investor Boris Wertz, there are two opinions:
“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.”
Actually, a recent study shows that over 17 percent 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 percent of customer loyalty is driven by the sales experience. This goes to show it's equally important to have a great sales team for your startup.
So, to be successful, a startup company needs a top-notch product, and an effective distribution and sales strategy.
But, there are a few nuances you should consider:
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.
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 percent of his time with his designers and engineering team developing next-generation products.
These successful product-driven companies carefully incorporated sales-driven business ideas to their companies over time.
I can’t agree with Wertz enough on this: “It’s typically much easier to add sales expertise to a product-driven organization than it is to add product focus to a sales-driven start-up.”
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.
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 salesperson knows this: In most organizations, salespeople work under immense pressure. You just have to make the sale or else. That mindset 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.
But, 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 inherently ineffective. Companies like Oracle, which is essentially a sales-driven company, have seen a lot of success. 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 six years, here are the tips to consider if you want to achieve a long-term success in a sales-driven startup:
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 percent), followed by file sharing or collaboration tools (79 percent).
With the consumer apps ecosystem becoming more diverse, businesses and IT teams will need to adapt their approaches to how employees do business. And that favors a product-driven approach.
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.