Provide services, not just products

In the last two weeks there were some discussions about (enterprise) software sales [1, 2] on hacker news. The main complaint is that software sales are often nontransparent, complicated and highly time consuming.

I think this comment sums the problem up:

As you imply, there are segments in every market. Of course there is a segment of companies with hundreds or even thousands of employees with gigantic budgets. These guys are going to do RFP’s and spend months evaluating the different payroll providers.

Then there is the segment of small guys lik me who have under 10 employees who frankly don’t need anything too complicated. You can say “I am only going to serve large enterprise customers through a complex sales process” and that’s completely fine with me. But don’t pretend to cater to my segment if you are not to adapt your model. —labaraka

The last sentences is probably the most important. Don’t pretend to serve a segment just to be “present” in this segment. If your sales process sucks for this segment then it’s better not to serve this segment at all.
Some big software companies tried to enter the SMB market but most failed. Why? I think that it is really hard to sell for 10-20 years products to big cooperations who want customized modules, pay for consultants and don’t care if a basic module costs $100k and then to try to reduce one’s product, make it easy and create a new sales process for said businesses.
The great thing about this is that there’s always a market for software for SMB even if there are big names out there. Salesforce is such an example. At the time there were big names like Microsoft, SAP or Oracle who fought over market shares for CRM systems but Salesforce decided to gather a different market – a market where people don’t have a multiple millions IT budget or even a IT staff.
But even Salesforce can’t serve the whole tail. Still, there are companies that are overwhelmed by Salesforce’s offer or don’t feel adequately served by them.

In conclusion, as a customer I want to know that somebody cares about my company or my segment. If you are just trying to be present in a segment without really caring, people will go to other companies that care. This will allow entrepreneurs to create companies for different niches that other companies don’t really care about. Care about your customers.

#94/111: Don’t Just Roll the Dice

What is it about?

Pricing is highly critical and an in-depth topic. Can such a short book fulfill your needs? We will see. Neil Davidson is also famous for hosting Business of Software.

What can I learn?

Know your market segment: People work with relatives. If your competitor’s products cost between $10 and $20, you have a hard time sell yours for $2000. The first thing is to learn about your market segment. How high are competitor’s prices and why are they what they are. Learn about your customers. For example, software that cost less than $10 will be easily bought by nearly anybody. If your software costs more than $50 some personal customers may get nervous. If you product costs more than $1000 your customer probably needs to talk to his superior. Even $1, $999 vs. $1000 can make a huge difference! Ideally, you should know about this by customer development.

Think about presentation: Pricing is not just about setting a price. It’s also about product presentation, e.g. bundling. Do you sell other software? Which alternatives are there? Maybe you could sell with an complementary product? There are lots of different possibilities. Generally, selling just one product will produce a higher price.

Test, Test, Test: The most important thing, like expected, is testing your pricing. The best way to do so is by features. Take a look at software from 37signals or Microsoft. They got different product packages. For small and large businesses or personal users. You should avoid to charge different prices for the same product. This can really annoy users. One idea is that you sell your product for $x but display $x resp. $(x+y) as price. If enough users were willing to buy for $(x+y) you can increase your price and use this event as a nice marketing tool.

Conclusion

Firstly, you can read Don’t Just Roll the Dice for free! I liked the book, however it is just 80 pages or so. I think it got some nice ideas and is more to get a overview over the topic than really learning about it. You will find lots of articles on pricing on sites like Hacker News. In conclusion, great book for learning the basics but later you should look for other resources.

#20/111: Delivering Happiness

What is it about?

This book is half autobiography by Tony Hsieh and half company history of Zappos. Tony Hsieh communicates what is important in his life and how Zappos reached its extraordinary customer focus.

Key points?

Be happy: Happiness is the key. E.g. Tony Hsieh quit Microsoft, after selling LinkExchange, although this move lost him $8 million. He did it, because he wasn’t happy. He recognized over the years that the most important thing in his life is being happy.

Build a culture: Zappos is famous for its core values. The people at Zappos act according to the core values and they only hire people who fit into this culture. This allows Zappos to deliver constantly remarkable results. Without a culture a company converts rapidly to a faceless corp.

Don’t outsource your core competencies: In their first years the management of Zappos decided to outsource their logistics. This lead to undesirable results in the whole process of buying shoes. Therefore, they decided to run their own warehouse that executes according to their culture.

WOW people: WOWing people is one of Zappos’ core values because people will remind it, they will love your company and probably recommend it to their friends. Even if it’s something small like faster delivery, people will be astonished that your company don’t act like every company.

Conclusion

Although Tony Hsieh has an impressive vita, he never acted arrogantly. He embodies the core values of Zappos and so does the book. It is very well written, got some funny anecdotes and shows how a great company is built over 10 years.

Stamina and Simplicity

Yesterday, I’ve read an other chapter of Founders at Work. It was chapter 8 about Evan Williams founder of blogger.com, later twitter.
The story of blogger.com was really tough, especially after all employees and his co-founder left the startup because they didn’t have any money anymore. But Evan stayed and kept up the server and the service. In 2001 Evan started adding some paid-services for blogger. And two years later Google acquired Blogger.com.

“Simplicity is powerful.” – Evan Williams

He showed this with both blogger and twitter.
I think these are powerful ways of doing things: stamina and simplicity. Often it don’t have to be complex. Complexity has some bad side effects. I think everyone who had worked on a bigger project, source code or organization knows this.

“Il semble que la perfection soit atteinte non quand il n’y a plus rien à ajouter, mais quand il n’y a plus rien à retrancher.” -Antoine de Saint-Exupéry

Translation: “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.” -Antoine de Saint-Exupéry

This could be a way to get simple and great (business) ideas. Take your first sketch. Try to make it simpler. If it will remain too complex, maybe you can’t put it into practice. Then try another idea or think harder to make your old one simpler.

There are several pros of simple ideas.

Your idea isn’t so prone to small changes
You can manage it without 90 people in administration
More people will understand (and use) it
The chance to survive is higher

“Must I be an inventor?”

The idea is not that important. Google did not invent search engines. Apple did not invent mobile mp3 players. Microsoft did not invent operating systems. So you should/must be an innovator.

Google said “Hey, search engines are great, but the results suck. We need a better search algorithm.”
Apple said “Hey, mp3 players are great, but they are not stylish and easy to use, make them look cool and easy to use.”
Microsoft said “Hey, IBM is looking for a new operation system for their new personal computer, we know where to buy one.” Oops, bad example.