5 Ways To Address The 'Build Versus Buy' Question

When a prospect says something like, "well, at this point, our decision really comes down to build versus buy", don't fear, you've already won most of the battle. Your prospect has recognized that they need a product like yours and that they have to act. Getting a prospect to act -- and act quickly -- is the hardest part of selling innovation.

That said, you still have to address the issue.

I've always believed that the best way to address this concern isn't to give an opinion or a pitch; instead, the best approach is to give the prospect some topical things to consider as they look to make a decision. You're an expert in this area, you know lots of stuff that they don't. Help them think it through.

Here are five things you can encourage them to consider.

1. Specialization -- the world is complicated, companies need to focus on what they do well. Your prospect is good at their business and you're good at your business. Is it worth it for them to deviate from what they do well to try doing what you do well? Could that energy and those resources be better utilized on their core business? As Peter Drucker said, "do what you do best, and outsource the rest."

2. Unintended costs -- project and product managers know that when they begin a new project they don't know what they don't know. There are always unintended costs, requirements, hurdles and delays that come up when pursuing a new venture. It can be helpful to lay out, based on your own experience, what some of those unintended costs might be as your prospect sets out on building it themselves. Give examples. Highlight some of the things you've learned yourself.

3. Leverage with vendors -- because your prospect would be building the product for just one client (themselves) there are no economies of scale and little leverage with vendors. The costs could be far greater than they might think. List some vendors where this might apply.

4. Risk --  in my experience, when a company is considering building something themselves, they generally don't believe that the thing that they're looking to build is all that important. They'd admit that they might not do it as well as an expert but, "what's the big deal?" It's worth having a few ideas about what might make it a big deal if your prospect doesn't build it well; e.g. "if you don't want to be very high quality in this area, that's ok, but here are some potential consequences."

5. Experience -- over the last few years I've interviewed lots of consultants at top consulting firms. I always push them on describing why they're valuable. That is, how do they justify going into a business that they know nothing about to people there what to do?  The answer is the same every time: "experience". They've worked on similar problems with similar companies in similar industries. They've been through it before. The same thing exists in 'build versus buy'. If you're really good at what you do, it's generally not because you hit a few home runs, it's usually because you've done all of the little things over the years, learned some tough lessons and iterated to make the product better. Your prospect is going to have to go through that pain too. Is it worth it?

As Drucker says in the quote above, if a project deviates from a company's core mission, it's generally best to outsource it. Pushing a prospect to consider these five things not only positions you as a thoughtful expert but it also helps screen out clients that aren't a good fit.

That said, be sincerely open to the fact that building might be the right thing for your prospect. So don't "tell" them, help "guide" them. If after considering each of these factors your prospect still decides to build it themselves, that's a good outcome. It truly is. It means that they don't value the uniqueness of your mission or product offering and likely won't make a great partner down the road. There's nothing wrong with that.

When a prospect is considering build versus buy, raise the five issues above. You'll typically find that the way your prospect addresses these concerns will either help them see your value more clearly or will help you screen out a partner that isn't a great fit.

Presenting To Large Groups Is A Bad Idea

No matter how much research, planning and preparation you do prior to a presentation, you should know going into the meeting that the presentation you've prepared is wrong. It's going to miss the mark. No matter what you do, it won't be perfect. It can be good. It can be great. But it won't be perfect. The reason for this is that you can't get inside of the mind of your listeners to understand the precise things you need to show and say and do to get them to fully understand and support your message. It's just not possible. You don't know your listener that well.

The way to deal with this challenge is simple: don't present.

Instead of presenting, have a conversation. You can have an agenda and slides and talking points and a message you want to get across, but you have to be ready to abandon it completely as you chat with and get a reaction from your listener.

Given this, it's important that you turn the presentation into a conversation right off the bat. The best way I know to do this is to start the conversation with something provocative. For example, "we think that the way that you run this aspect of your business is completely unacceptable". Another way is to point out one of the features of your product that is most controversial and generates the most questions.

Whatever it is, find a way to get them interested and engaged. You have to make it into a conversation because if you're the only one talking you're going to be slowly become more and more off the mark. Having a dialogue ensures that you're talking about things that matter to your prospect in a context that is relevant to your prospect.

That said, of course this is much, much easier to do when you're doing a presentation to one or two people. It's much harder to execute when you're presenting to a large group -- in fact, it's impossible. You can't possibly have a productive conversation with 10 people at the same time. No matter how well you present, some number of people are going to leave frustrated that you didn't answer their questions or that you didn't talk about things that were relevant to them in their context.

So try not to find yourself in a situation where you're presenting to a large group -- anything more than 2 people is generally bad. But if you can't avoid it, I recommend starting the meeting by asking the group what they know about the topic you're about to discuss. Then go around the room and ask people to point out hesitations or concerns they have about the topic you're about to present. This is a great way to get some insight into what matters to people and what's on each person's mind.

If possible, do this again at the end of the meeting. And then ask the group who are the best one or two people to work with on next steps and setup a follow-up meeting with that person immediately. Remember, you were off the mark, you need to get that person to be your champion and get you back on track.

But again, whenever you can, try to reduce the number of people in the room when you're making a presentation, this may require you to do multiple meetings, and may drag things on, but when you're trying to influence people to innovate, the fewer minds you have in the room, the higher your chance of a successful presentation conversation.

Selling Innovation & The Challenger Sale

When you go to market with an innovative product the good news and bad news quickly become obvious. The good news is that, depending on how novel your product is, there’s generally little (if any) competition.

The bad news is that your buyer doesn’t need what you’re selling.

Your buyer has been running their business just fine without your product. They’re busy. They generally don’t want to think about something that isn’t already on their radar.

Trucking companies need tires. Building developers need concrete. Apartment buildings need insurance. Of course selling that stuff is never easy, but buyers have budgets, buying processes and an understood need for those products. If you do the things that good sellers do -- present well, build relationships, follow-up promptly, address concerns, be responsive -- by the end of the year you’ll sell some tires.

But when you’re selling innovation -- that is, selling something that your buyer has never bought and doesn't know they need -- you can do all of the things that good sellers do and still end up selling nothing. Literally nothing. Zero.

This is why the notion of the Challenger Sale is so important. To sell innovation the seller has to challenge the buyer.

• Challenge what business they’re in
• Challenge their buying process
• Challenge their future state
• Challenge their goals
• Challenge their understanding of their own market and where their market is heading
• Challenge how they think of themselves against the competition
• Challenge who their customer is and what that customer wants

A buyer has a point of view on their work that satisfies them, that makes them comfortable. And that point of view, up until now, doesn't include your product. To win, you have to break that point of view and shift the context so that they see a future where your product is a must have. Successful innovation selling is a function of a seller's ability to change the context and point of view of the buyer.

Your Product Doesn't Sell Itself

Blake Masters posted his notes from a class that Peter Thiel taught at Stanford a while back. The class was focused on distribution for startups and the notes are awesome, awesome, awesome. I've been meaning to write about them for a while. They're a must read for start-up sales & marketing professionals. The whole thing is great but the piece I want to talk about today is where he points out that the idea that a product can sell itself is a complete myth.

Given all of the focus on product lately – particularly in the consumer internet space – you might be surprised to hear this from Peter Thiel. But he’s spot-on. Here are the key paragraphs:

People say it all the time: this product is so good that it sells itself. This is almost never true. These people are lying, either to themselves, to others, or both. But why do they lie? The straightforward answer is that they are trying to convince other people that their product is, in fact, good.  They do not want to say “our product is so bad that it takes the best salespeople in the world to convince people to buy it.” So one should always evaluate such claims carefully. Is it an empirical fact that product x sells itself? Or is that a sales pitch?

The truth is that selling things—whether we’re talking about advertising, mass marketing, cookie-cutter sales, or complex sales—is not a purely rational enterprise. It is not just about perfect information sharing, where you simply provide prospective customers with all the relevant information that they then use to make dispassionate, rational decisions. There is much stranger stuff at work here.

To emphasize his point, he uses this framework:

Consider the quadrants:

Product sells itself, no sales effort. Does not exist. Product needs selling, no sales effort. You have no revenue. Product needs selling, strong sales piece. This is a sales-driven company. Product sells itself, strong sales piece. This is ideal.

If you believe that your product is so great that it can sell itself you’re either delusional or your aspirations aren't nearly high enough – and it’s great to see a hugely successful, product-driven investor make that point.

Sell The Concept Before You Show The Data

The other day I wrote about how I believe that salespeople should go easy on the data in their initial sales presentation. I feel this way because 1.) I think the right approach is to sell people on your product's concept first and then back it up with data and 2.) in that initial meeting most people aren't going to take your data seriously -- they don't trust you yet and they know that data can be manipulated to tell any story you want. Seth Godin recently wrote a two sentence post titled, Belief is more powerful than proof. This is really what I'm trying to say. That is, get your prospects to believe what you're saying -- to "buy" your concept -- and then back it up with proof.

For example, if you try to tell people that fewer and fewer people are using the internet, no matter how much proof you show, nobody is going to believe you. It doesn't make sense. They won't believe it.

But, if you tell people that mobile is the fastest growing internet access channel, due to increased Wi-fi access, the growing prominence of the "mobile-only" user, increased processing speeds, etc., people will believe you. They'll buy the concept. It makes sense.

Only after you've confirmed that your story and your concept make sense to the prospect should you show them the data (data that validates and drives home the point). Something like the chart below. Concept first, data second.

5 Sales Presentation Tips

Here are 5 somewhat random things to consider when giving a sales presentation to a group of people that you're meeting for the first time. 1.  Take their guard down. I don't believe in "always be closing." I believe in "always be leaving." Be clear and open about the fact that it's very likely that the solution you have is not right for your audience (depending on your close rate, it's probably not). This is not emotional, you're simply there to determine whether or not there's a fit. If at any moment you determine that this prospect is not a good fit for your solution you should be ready to politely pack up and leave. You want your prospect leaning forward to learn more, not leaning back trying to avoid a pushy salesperson.

2.  Give credit to the competition. Never, ever bad mouth your competitors. Whatever you say they won't believe you. Compliment your competitors but differentiate yourself by explaining what they do better than you and what you do better than them. In fact, I don't believe that you have competitors. You may be trying to solve the same problem, but I guarantee you're going about it differently. Carve out that niche. Don't say you're better, say you're different. And help craft a framework for the audience on how they should think about the different solutions.

3. Go easy on the data. They don't know you and they don't trust you and most people are smart enough to know that data can be manipulated to tell any story you want. Sell them on the concept. Appeal to their logic or their compassion. Get into the data in follow-up meetings once you've built up some credibility.

4. At least once tell them something your product doesn't do well. Be humble. There's nothing wrong with product flaws. There is something wrong with salespeople that don't recognize that their product has them. You're not selling features anyway, you're selling a concept and a potential business impact. You'll gain credibility and generate a more honest discussion by admitting your weaknesses.

5. Be interesting. Most of the stuff that the people in the room are going to do for the rest of their day is likely to be somewhat boring. Raise the bar and be compelling. Challenge the audience's thinking. This actually isn't that hard and it's much more fun. I don't say this out loud, but when I'm about to start presenting, here's what I'm thinking: "I know you're busy and you're expecting a boring presentation, so I'm going to keep this short, efficient, interesting and provocative. I'm going to make you think about something that you don't think about that much but I think about all the time. And at the end you very likely may not buy this product but I guarantee you'll be glad you spent this hour with me."

As I'm writing this I'm thinking of more and more tips. I'll post more of these soon.

B2B Pricing & Malcolm Gladwell's New Book

Last Sunday night on a late plane ride back to New York I finished reading Malcolm Gladwell’s new book, David and Goliath. It’s not his best work, but it's still thought provoking and worth the time.

The cliff notes version of the book is that it turns out that David wasn't such an underdog after all. He was actually at a huge advantage in his battle with Goliath because he was able to change the rules of the game. Lots of underdogs win by changing the rules of the game so that they become the favorite. To prove his point, Gladwell discusses the civil rights movement, World War II, middle school basketball and many other examples. It's an interesting concept and a pretty good read.

Anyway, as part of his argument, he spends a lot of time talking about the difference between linear curves and U-curves. He argues that there are some things that correlate and may seem like they should sit on a linear curve, but in reality they sit on a U-curve.

Perhaps the most interesting and classic example that Gladwell uses is the correlation between class size and test scores. You might think that the class size/test score graph would be linear -- as class size increases (the X-axis), test scores go down (the Y-axis). That's the conventional thinking.

But it turns out that's not true. The reality is that when class size gets really small, studies have shown that test scores actually begin to decrease again. When there isn’t a range of opinions and when the teacher is too focused on one student, the quality of education goes down. Students benefit from the energy and discussion that comes with having lots of other students in the class. So the correlation between test scores and class size really looks more like a U-curve. Test scores are optimal when the class is around 25 students. Too big is bad and too small is bad.

This is also true of crime and punishment. Many believe that as the severity of punishment increases, the amount of crime goes down. But studies have found that there’s a U-curve effect here as well. As punishment becomes more and more severe for smaller crimes, citizens begin to believe that the system isn't fair. That it’s us against them. And they commit more crimes as a result. So you obviously don't want punishment to be too lenient, but you also don't want it to be too strict. Like a lot of things, eliminating crime isn't simple. It isn't linear.

The corollary back to the story of David and Goliath is that you can't improve education simply by adding more teachers and reducing class size and you can't reduce crime by simply making punishment more severe. With complex problems, brute force doesn't always win.

With the U-curve in mind, I've been thinking a bit about price increases and how they impact client relationships. Traditionally, companies like to have modest annual price increases of, say, 2% to 5% per year. Companies like these small increases because they reduce the risk of putting a large strain on their client relationships or losing clients all together. And generally, due to inflation and other factors, clients usually find these increases acceptable.

But as you begin to raise the annual price increase more and more you'll generally see clients resist more and more; 2% is acceptable,15% is not. Like the examples above, on the surface, it seems that the correlation between price increases and client resistance should be graphed on a linear curve. As the price goes up (the Y-axis), so does resistance from clients (the X-axis). Keep your price increases low and your clients will be happy.

But I don't think this is true either. As price increases, client resistance certainly increases, but only to a certain degree. At some point, say 10% and up, in order for the increase to make sense there has to be a substantial and fundamental product change. A 20% increase isn't caused by inflation, increased labor costs, or a greedy salesperson. The increase is happening because there's a substantial change in the product and the product's value. As a result, clients should be much more accepting of this change and client resistance will start to go back down -- creating a U-curve. If the increase is sold and communicated properly, clients will begin to recognize that they're buying a much different product, or at least a much more valuable one. They'll understand that the rules have changed. In fact, I'd argue that at some point most clients would welcome these large but less frequent increases more than they would the small, annoying increases that don't show a corresponding increase in product value.

Increasing price is a requirement of any sustainable long term B2B relationship. And like most things, it's not simple. It's not linear. So when considering a strategic approach to pricing, companies should consider the U-curve and not rely on small, inflation-based annual increases that barely impact revenue. They should cancel those increases. That energy is better spent finding ways to change the rules -- to completely rethink product function, value and positioning. To make a splash. To delight rather than satisfy.

In short, the lesson of the U-curve is actually pretty simple. Don't avoid client resistance by keeping price increases small, modest and frequent; get clients behind them by making them big, bold and rare.

What To Do When A Prospect Goes Dark

The CEO of a startup that I’ve been doing some consulting for wrote to me with the following question about a prospect that went dark. I know this is a challenge that comes up for a lot of people so I thought I’d post my response here. Here was the question:

I have a question for you. If a lead that you've been pursuing / developing for like over 6 months goes unresponsive to two emails, what do you do? In most instances where the development time has been that long, usually someone has said "yes" or "no" or "not now" but this is the first time of just radio silence.

Thoughts? And one backdrop to this is that our point person that we were working with for the 6 months left for a new job, we were handed off to another person that we had met with maybe for the last 3 months but in a different division.

My answer:

Your question is a good one. This is always a challenge. A few thoughts:

1. One approach could be to just get the person on the phone live. Block out some time during the day and just call the person (though I know it's hard to get people live these days). If you reach them, be clear that you're not pushing things -- that you just thought you'd call to check in to see where things stand as you're trying to prioritize projects for next year, etc. You want to gauge if there's still some interest.

2. If you reach out again by email, look for the 'no'. That is, do not reach out with the purpose of moving the conversation forward; reach out with the purpose of finding out what's going on. If it's a no that's great because you can put your energy in another direction. It’s hard to say no to salespeople, make it easy for them. something like "hi, sorry to reach out again, we're in the process of prioritizing projects for next year -- assume I shouldn't include you on that list? Please confirm when you get a moment. Thanks so much."

3. Another alternative would just be to back off. Remember nobody wants to date the guy that keeps calling and texting begging them to go out. Keep that credibility, you have better things to do than reach out to them. Perhapsgive it a couple months and reach out when you have a real update -- new clients, new funding, product improvements, etc. and setup a meeting to give them an update on what some of their competitors are doing, etc.

4. Finally, you'd know better if it's appropriate but you can always reach out to others in the organization. Just to validate that you're talking to the right person. There may be other groups interested in the product -- you can always try to go up to more senior execs. But if you do be careful to position that conversation as broader than the initial one you had (a CEO level conversation as opposed to simply a business unit conversation).

I don't know the situation well enough to accurately pick the right approach but I hope some of that is helpful.

When Selling A B2C Marketplace, Worry About The C, Not The B

A traditional tactic for enterprise salespeople is to be very focused on their prospect’s business – their strategic priorities, their competitors, what keeps them up at night, how they’re growing, etc. But when you're selling a marketplace the focus should be less on the prospect’s business and more on the consumer. Some examples of these businesses include:

• Yelp
• Etsy
• Open Table
• WorkMarket
• Expedia
• Skillshare
• Amazon Marketplace

These businesses are selling their marketplace. They're really just a middleman between a business and a set of (hopefully) engaged consumers.

It's important for Open Table’s restaurant salespeople to understand their prospect’s business, but it’s much more important for them to understand the consumer. What do they want to eat, when do they want to eat, what kind of experience do they want, how do they want to be marketed to, etc. And most importantly, why is Open Table going to be their destination when they look for a restaurant?

Your customer’s know their business better than you do. There’s not much you can tell them that they don’t already know. But they very likely don't understand the consumer as well as you do. So when you’re selling a marketplace, don’t bore them by trying to be an expert on their business, educate them by being an expert on the consumer.

5 Tips For Emailing CEOs

Over the years I’ve developed an approach for emailing C-level executives that has worked well for me. I thought I’d share some of that approach here. Here are 5 somewhat tactical tips:

1. Emails should be as short as Tweets. Write emails like you’re writing a Tweet. I think Outlook and Gmail should add a feature that shows a countdown from 400 for every character that you type – and if you go over 400 characters it won’t let you send the email. Unless absolutely necessary, keep your emails short enough to be read on an iPhone without scrolling.

2. Don’t worry about grammar and formalities. Marketers write perfect emails, people that do big deals don’t. Write short and quick and to the point. Here’s an example of what I mean.

Bad email: "Hi John, I’m writing to setup some time with you on Wednesday or Thursday of this week. I am participating in our company's board presentation this week and we are trying to lock down a couple of pieces of information about our potential partnership. I know that you are extremely busy, but It would be greatly appreciated if you could spare a few minutes so that we can discuss the details of our partnership. Please let me know the best way to setup a call. Kind Regards."

Better email: "Hi John, have 5 mins to chat this week? Have a board meeting coming up and need to get on the same page on two quick things. Thx."

3. Don't be afraid to resend. If you don't hear back, give it a few days. If you still don't hear back, take the initial email and forward it to the CEO and say something like, "Hi John, hope all is well. Following up on the below. Thx."

4. Make it easy to reply. If you have multiple asks in the email, separate them into multiple emails. Let them handle each email/task individually. Don’t let one task get stuck because the CEO doesn’t want to respond to the other.

5. Be their equal. Most important, write like you’re writing to a peer. Don’t be deferential. You are on equal levels. You both have something that can help the other – act like it. As I wrote a while back, don't be a salesperson.

My Interview With Yesware

Last week Jessica Stillman, a freelance writer for the Yesware Blog, contacted me to do an interview on the topic of CRM compliance. See the full interview here. One of the fundamental challenges with CRM compliance is that sales reps often don't understand why managers need them to do lots of data entry because they don’t know what managers are actually doing with the data.  The main point I made in the interview was that managers should be much more transparent on this. Not only should they show their reps how they use the data to manage their business and make good decisions and communicate what’s happening on the ground up to the board and executive team, managers should take it a step further. They should actually allow their reps present directly to the executives and/or board using reports that pull their own individual data from the CRM system.

I found that doing this is extremely empowering to reps and dramatically reduces the friction that comes from low CRM compliance.  If you find this topic interesting, I recommend checking out the full post.

Spreading Innovation

There’s a long but good Atul Gawande article in this week’s New Yorker worth reading that’s relevant to what many of us are trying to do -- spread innovation and change minds. He writes about why some new innovations spread quickly and others don’t.  Talks about the fact that doctors adopted anesthesia really quickly but it took them years and years to begin sterilizing operating rooms (arguably a more important innovation).

Talks about the critical importance of the human factor in spreading innovation – and how a simple treatment for Cholera (a mix of sugar, salt and water) never spread in Bangladesh until human beings went out on foot and sold it, door to door.  Also uses a more relevant analogy:

This is something that salespeople understand well. I once asked a pharmaceutical rep how he persuaded doctors—who are notoriously stubborn—to adopt a new medicine. Evidence is not remotely enough, he said, however strong a case you may have. You must also apply “the rule of seven touches.” Personally “touch” the doctors seven times, and they will come to know you; if they know you, they might trust you; and, if they trust you, they will change. That’s why he stocked doctors’ closets with free drug samples in person. Then he could poke his head around the corner and ask, “So how did your daughter Debbie’s soccer game go?” Eventually, this can become “Have you seen this study on our new drug? How about giving it a try?” As the rep had recognized, human interaction is the key force in overcoming resistance and speeding change.