Ronin Blog

I’m a software guy, not a historian, but I do know that software, historically, was once sold by guy and gals in business suits to other guys and gals in even fancier business suits.

It should come as no surprise, however, that the game has changed since, in that software is now more often sold by guys and gals in tee-shirts and shorts to people of all sorts. While in most cases, not much has changed for the Business-to-Enterprise (large company) sales-cycle, the landscape of selling software is dramatically different for software businesses selling to the world at-large via the web.

The guys at MailChimp describe themselves accurately in these terms:

MailChimp is a do-it-yourself email marketing service for ‘the Google generation.’

While I’m not sure how effective or well-received this description is to potential customers (who hate to be categorized), it tells me that they know exactly to whom they are selling their services. Although, I prefer to call this crowd the “DIY Generation”.

The Google Generation or the DIY Generation is not so much a traditional generation as it is the demographic that is experiencing gradual increases in accessibility of software to the average user. This is a demographic characterized by a willingness to get things done via a computer and a general understanding of how to do-it-yourself when it comes to solving problems via new techniques. This carries over to their receptiveness to purchasing software applications as a means to some end. No salesmen needed.

This transformation and the increased count of this crowd has made selling software to consumers, startups, and small businesses viable as a business. But, it’s important to have an understanding of what they are looking for when it comes time to craft a sales and marketing strategy to capitalize on this market. There are a few key subtle things to look out for, besides the obvious things that every one running a business on the web now understands (have good SEO/link-strategy, etc.).

Comparison shopping happens. Have strong marketing and branding.

When every competitor and their prices are a simple search engine query away, comparison shopping simply has no barriers. Couple this with the fact that the average DIY user tends to be more tech-savvy (and thus recognizes what he or she is looking for in a software application) and you’ve got customers that are often armed with alternatives.

You can fight this battle anyway you want, whether it’s by outdoing your competitors feature-by-feature or by underdoing them a la 37signals, but it is imperative that you have an answer to the question, “Why you and not competitor X?” Even if no one ever asks you this question straight up, you are implicitly answering it each time a visitor hits your website and make that 10 second evaluation of your product and features. Make sure your unique approach to solving the problem or other competitive strengths are visible and in full-display. This can be sometimes hard to grasp and unintuitive, especially for products that don’t have advantages that are easy to pitch as one-liner advantages. In some cases, even the pricing of the product is a differentiating message.

Work hard on the marketing on your site. Remember that it is very possible that your site home page could be the most used “feature”. Design and implement with thought, just as you would with any other feature in your software.

Oddly enough, in selling software to this DIY generation, branding plays an even more important role than it has traditionally. In the traditional sales cycle, you could strategically outsell the big-name competitors with a decent salesman/sales-pitch, in the new software sales cycle, your reputation is your heavy-hitter sales guy. This is probably why companies selling to this crowd are generally very protective of their customer service reputations and tend to leverage a devoted community.

Communicate with your users. Email can be a sales person.

One of the earliest models of selling DIY software was shareware, which usually came with a 30-day trial. This model works. In fact, even with the web being all the rage, there are plenty of software vendors doing it tried-and-true way. What isn’t often recognized is that the 30-day part is just as important as the free trial part of that model. While the free trial got users to get comfortable with a software application, the 30-day part provided a nice reminder, a communication channel of sorts, that the user should purchase the application if they were satisfied.

The point here is that it’s important to be in communication with your customers because it’s vital that you give your software every chance to be remembered. Utilize email for this. Make email a sales person for you by being in communication with your users. In a freemium model, this can lead to conversions for all sorts of reasons (new users who forgot to give the app a try after registering, old users who come back, existing users who decide to upgrade). In any model, this can be an opportunity to teach users about new features, announce new versions and upsell upgrades, plug-ins, services, and packages. (And of course, in return, you should comply with standard email rules/laws like CAN-SPAM, just like when a sales person should know when to stop bothering a cold lead.)

Very few products just sell themselves, especially when it comes to software. In fact, a purchasing decision might have nothing to do with whether or not a potential customer liked your application. For example, in a freemium model, there are many hundreds of reasons why a perfectly satisfied user does not end up converting into a paid customer, including simply forgetting to continue to use your software altogether, or never really finding the time to incorporate your software into their everyday workflow. Being in communication helps mitigate lost users.

It’s OK to be niche. In fact it’s probably good.

If you think about the typical discovery process, the DIY user probably learned about your application through some method involving a need that you address specifically. Unless we’re talking about the iPhone games market, it’s very rare that a user stumbles across your app and decides to purchase it on a whim. We’re not in the fashion industry - it’s just not that simple here.

It’s more likely that they had a specific need that needed to be addressed, and in search of a solution, they found your software site or application. This can be from something as direct as a Google search for keywords you’ve bought or something as indirect as tweeting for a recommendation on Twitter.

Specific needs are often addressed not by a general product, but by a niche product. No one ever has a problem finding Photoshop when they want to buy it. But, they will look for niche products like Photoshop filters or a web-based photoshop alternatives. This is when being niche gives you sales leverage - you could be the only provider (or the only dominant provider) that sells specifically what that user-base wants.

Simplicity sells, but selling isn’t simple. Measure everything.

Simplicity is a feature. It is something you sell to your users, especially DIY users who have no incentive to spend hours learning your system inside and out. Simplicity is king in a market where the lowest barrier-to-trial and lowest barrier-to-use often means the lowest barrier-to-sales. However, simplicity is user-facing and that should be where it ends.

Under the hood, it’s important to remember not to get carried away with over-simplifying everything, especially your business process. Good business processes should be advanced, well thought-out and, for lack of a better term, complex. Measure everything. Iterate on everything. This is especially true for sales. Don’t avoid A/B testing sales pitches because they’re too complicated to implement. Don’t avoid implementing complicated site analytics because it ruins some holy simplicity.

At the end of the day, simplicity is an abstraction you provide to your users. Any given users will probably only need any one simple feature. But you must be able to understand all sorts of users with all sorts of requirements. You’ll need access to all the numbers to analyze all of the possibilities. Don’t shy away from the complicated because you’re caught up with keeping your business simple.

It’s about being better.

At the end of the day, there’s no getting around the fact that the DIY generation knows what they want, and there are no shortcuts in selling to this demographic.

They’re looking for specific solutions to specific problems; they’re likely to go with brands they recognize through word of mouth; they have ample access to your competitors; they are hard to quantify and understand en masse; and they want it all in a simple package. When you put it in those terms, the task of selling to this group seems downright dire. And yet, the reality is this is good.

You don’t need a large sales force to sell to this crowd. You don’t need to play politics. You don’t need expense accounts. You don’t need a big-wig attitude. You just need a small team that believes in delivering a great product to a very savvy audience.

You need to be better and recognizably so. In some respects, this is a meritocracy and I (and Ronin) wouldn’t have it any other way.

The recent trend of new businesses moving towards software or, more specifically, the web, seems to lead more and more would-be entrepreneurs into falling victim to the myth that building a solid product is necessary and sufficient for success. Some would go so far as to believe that cool technology alone does the trick. Many from-thesis-to-market product failures demonstrate the naiveté of current entrepreneurial thinking. All to often, we are led to believe that awesome products sell themselves.

Conversely, the other end of the spectrum finds no shortage of MBA’s looking for “code-monkeys” to implement their visions. The mode of thought here centers around the million-dollar idea, from which execution supposedly willingly falls into place. Here we are led to the believe that awesome ideas lead to awesome products that sell themselves.

The code-monkey and MBA both fall prey to the instant-noodle brand of business development: “1) idea 2) build 3) ??? 4) profit.” Battles are fought over whose position is more important, the tech guy or the biz guy. Techies are all too-often devoted to proving themselves to be in no need of the MBA types, while the business minded are just a lost looking for hired guns to prototype a lost cause. Lost in all this back and forth is the unerring truth that none of it matters.

For centuries on end, entrepreneurship as been defined outside the lines of technology. Look up “define: entrepreneur” on Google and the common theme that arises in each definition is the word “risk”. Not “new hot technology”. Not “brand new business idea”. While it can never hurt to have new hot technology that powers a brand new business idea, it is neither necessary nor sufficient to get a business off the ground.

The age old fact of entrepreneurship is that there is so much more to “risk” than the product and its development costs. Establishing or building your market, generating or growing revenue, finding distribution channels, building a sales pipeline, hiring the best talent, and all the other caveats that come with building a business are just as important as product development. A true entrepreneur must wear all these hats, not just the product one. A recent blog entry by Tony Wright talks about the product guy vs. business guy with the conclusion that a good product entrepreneur should grow into a business role. While I agree, I would have to say a great entrepreneur can never take off either hat.

Be a business that sells a product, not a product that happens to be a business. Be an entrepreneur that builds business, not a product person that happens to be an entrepreneur.

I came across a great article by Cameron Herold guest blogging at Tim Ferriss’s fourdayworkweek.com blog. He writes:

Regardless of whether or not you believe you will ride an emotional rollercoaster running a business, you will. You have two fundamental choices: you can hold on and scream, or you can wave your hands in the air and have some fun.

Also, you’ll find Marc Andresson’s precious nugget of wisdom being quoted as well:

First and foremost, a start-up puts you on an emotional rollercoaster unlike anything you have ever experienced. You flip rapidly from day-to-day – one where you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again. Over and over and over. And I’m talking about what happens to stable entrepreneurs. There is so much uncertainty and so much risk around practically everything you are doing. The level of stress that you’re under generally will magnify things incredible highs and unbelievable lows at whiplash speed and huge magnitude. Sound like fun?

I can’t stress enough how important it is to recognize and respect the awesome force that is human psychology as it comes into play during the hectic start-up phase of a company. More often than not, however, setting the right expectations and being informed about your particular industry means you can flatten the so-called “Transition Curve”.

The problem I find with today’s entrepreneurs is that the optimism is often too overbearing. Perhaps it’s the romanticism with which we surround the notion of a “start-up”. Perhaps it’s because people are starting their own companies at younger and younger ages. Perhaps it’s because a lot of tech start-ups are headed by folks who know more about cool technologies than running actual businesses. More likely, it could be because VC money is (or at least was) too readily invested. Whatever it is, the right expectations are not being set to counter-act what Cameron refers to as the “Uninformed Optimism” phase of start ups.

My advice, for what it’s worth, is that you should find something you’re passionate about, persist at it, and do your research.

I ran into this little gem today: Golden Rules for Making Money by P. T. Barnum (1880). It just proves nothing changes when it comes to the fundamentals of making money. However, these days, there’s an extra word, instead of “Making Money”, it’s now “Making Money Online”. Just ask David Heinemeier Hansson, he was even compelled to give a talk on the subject.

Well let’s see what the new-age twists are on these Golden Rules. What changes to P.T. Barnum’s rules when we apply web 2.0 logic to it? Half-seriously, I call it Golden Rules for Making Money 2.0 (web entrepreneur edition).

1. Don’t mistake your vocation -> Hackers should code, designers should draw stuff in Photoshop, and Businessmen should sell and give VC pitches.
2. Select the right location -> Move to the valley. Or at least be in India or China.
3. Avoid Debt -> Splurge on someone else’s dime. Get VC money.
4. Persevere -> “Startups rarely die in mid keystroke. So keep typing!”
5. Whatever you do, do it with all your might -> Stick with Ruby.
6. Depend on your own personal exertions -> Take as few partners as possible. More sweat equity.
7. Use the best tools -> Stick with Rails.
8. Don’t get above your business -> Release early, iterate often.
9. Learn something useful -> Learn Scala or Erlang on the side.
10. Let hope predominate but be not too visionary -> Do something small …
11. Do not scatter your powers -> … and do it well.
12. Be systematic -> Switch to 4 day work weeks.
13. Read the newspapers -> Read Blogs.
14. Beware of “outside operations” -> Don’t blow your exit money on another venture. See rule 3.
15. Don’t endorse without security -> VCs: invest in people with previous exits.
16. Advertise your business -> Use Google Adwords.
17. Be polite and kind to your customers -> Offer email and phone support.
18. Be charitable -> Open source parts of your code.
19. Don’t blab -> Get IP. Enforce it.
20. Preserve your integrity -> Don’t comment spam or SEO spam to get traffic.

See? It’s basically the same thing nearly 130 years later.