Sure, it’s theoretically possible to create bug-free high-tech products.  That is, products that seem “bug-free” to the user when they:

• are used exactly as intended by their creator
• are used by users who are only looking for a common and strict subset of the product’s prescribed functionality
• are always used in the same, well-known environment
• are intuitive or their use is completely understood by the user

But is it commercially feasible to make them bug-free?  Can you keep up with the market when differentiation is virtually unsustainable, if even achievable, while trying to discover and repair 100% of the potential failures in a complex product?  I can’t imagine how this would work.

A guy who came to work for me once had just come out of a software development gig at NASA.  At the time, NASA believed that an experienced engineer could produce only 3 lines of fully-debugged code per day.  It’d be difficult to find commercial success without thousands of developers at that rate.  Even that didn’t prevent NASA from plowing the 1999 Mars Climate Orbiter deep into the surface of the Red Planet as a result of a screw up that had one team working in English units and another working in metric ones.

Of course, the discussion of whether or not the creation of bug-free products can or should happen is a big one.  One which I neither have the capability no inclination to address in this post.  What I want to talk about, though, is the sales impact of bugs.  Bugs found by customers during key evaluation and decision-making moments create the biggest barrier to effective selling there is.  When the customer finds problems with your product while making a decision to purchase, renew, upgrade or simply add more to what they’ve purchased preciously, the sales person not only loses their ability to hold the line on sales terms, but they may get caught in a quagmire of having to deal with the bugs instead of closing up the deal and moving on to a new customer, virtually killing sales productivity.

So, even if we accept the fact that most high-tech products are bound to have some bugs, it’s critical for any company doing development to at least make the product appear bug free and limit the chances of the user finding bugs at critical times or in critical places - the most important of those being during the sales cycle.

Yeah, yeah, yeah, you purists out there don’t like thinking about it this way, although from a corporate standpoint, it may the biggest issue.  You’re saying that it’s about the technology, the product, the elegance of the solution.  That’s all nice, but if you plan on making money with your product, it better have great curb appeal.  And, there’s nothing quite like your baby failing miserably during an eval to get your customer to search for a competing solution quickly.

Think about a spreadsheet that shows off one, single math flaw in testing.  Will the customer ever trust it again?  What about the blood pressure monitor that reads 50 points too low once in a while or a GPS receiver that loses it’s satellite connection intermittently (perhaps while guiding a cruise missile?).  These bugs create unrecoverable sales issues.  Pack it up and head back to the office because that customer will never write you a check.

I’m not saying here that your product can be crap once the user has paid for it.  When the user encounters problems, which they inevitably will do after purchase, you need to support the hell out of them and get the bugs addressed as quickly as possible.  My point is simply that in terms of priorities, eliminating bugs that are likely to be found during the sales process is a higher priority.

Thus, it’s critical that after making sure that your product does all the important stuff you claim it does, you wring out sales prevention issues as a top priority before delivering it to customers.  It’s not hard to do, but it does take extra effort in terms of preparation and fortitude to prevent the knee-jerk reaction of shipping a product as soon as it meets the most basic quality criteria.  Here are the minimum steps required to make sure that the product helps sales, not hinders them.

• First, eat your own dog food.  Use the “completed” product exactly like the customer will use it during the evaluation.  Think about the mistakes they’ll make along the way and how they will deviate from the prescribed route and flow of how the product is supposed to be used.  Build an environment in which your product can be regression tested the way the user will try to break it and pound it to death.
• Then, if you have customer support or field engineering people, use them to route out problems.  These people are the closest to the customer, so they usually have a better sense for how the product will be used than the engineering team.  The idea is not complete and thorough testing, the idea is to find all the problems that new user will likely hit as they ramp up quickly.  Key areas to test are not only functional errors, but speed and capacity.  During this period, these employees should rule - don’t let anxious engineering or marketing people wave them off.  If they say it’s a problem, it likely is one.
• Then and only then, beta test it at your most friendly existing customers (if there are no existing customers, have your employees on site when the prospective customer is trying it out).  Ask them to involve novices who don’t have a preconceived notion for how the product should be used.  Love them and care for them.  Make their effort worth their while - give them free product or another gift of some real, perceived value in return for the efforts.
• Don’t forget to use Sales 101.  Understand what’s important to the customer and how they plan on testing the product.  If there are known issues that are in the process of being resolved, disclose them and ask the customer to test these areas at a later date.  Set clear expectations about what the new product is supposed to do and how it’s supposed to do it.  If the customer expects something that they don’t get, there will be a problem.
• Finally, as new customers run into problems, jump all over them fast.  If the problems aren’t too severe, you can blow them away with your support.  Sometimes, great support will overcome some of the issues that occur when bugs are encountered.

Remember, there are always bugs.  There are the ones you find and the ones you don’t (some of these being later discovered by your customers).  The more effort you put into loading up the first category, the easier it will be to sell your product (duh).  Once a customer has adopted your product, it’s much easier to make them happy and to work around issues they encounter.  You’ll never get the opportunity to to this, though, if they haven’t become a customer in the first place.

Popularity: 27% [?]

Incentives differ from rewards in that they are known up front.  While a reward is granted to recognize an action or achievement that has already taken place, the goal of an incentive is to induce behavior that results in such an action or achievement.  In this way, an incentive works like a carrot, motivating an individual or a group to achieve a desired objective.  That is, if it’s done right.

Sales as a function and sales people as individuals tend to be driven by ego and, therefore, competition and recognition.  Not that people in other corporate roles aren’t competitive or don’t like to be recognized; it’s just that for sales people, competition and blatant recognition is implicit and somewhat necessary in their jobs and, likely, a big part of their psyche.  In this way, incentives which both create competition and recognize achievement, are great tools to drive a sales force in a particular direction.  If you can find that thing that everyone wants, sales people will compete for it and move in the desired direction.  Winning drives ego, which further drives competition.

Sometimes, a great incentive is as simple as bragging rights.  In one of my companies that had a larger direct sales force (many territories throughout the world with hierarchy within each territory), we gave a trophy to the territory that had the most bookings each year and one to the territory most over quota.  Very simple, but hugely motivating.  It was a blast to see the winning team encircle the trophy for a group picture AND see how many of the sales people in the winning territory hung that picture on their office walls.  In a sense, it was even better seeing the losing territories vow to win the trophy in the next year.

Sales clubs (often called President’s Clubs or Chairman’s Clubs or similar), a junket to recognize the top sales performers each year, are more complex and expensive, but are huge.  Those who go get their egos stroked and truly feel rewarded.  They commit to themselves (and their spouses who also enjoy the lavish reward) that they will earn the reward again the following year.  Those that don’t make the cut usually have their competitive juices boil over and recommit themselves to earning a seat at the table in the next go-around.

Like any apparently good thing, you can take this type of structure too far.  I did this a few years back when my company at the time, Viewlogic Systems, was doing very well.  We were routinely ahead of plan, the stock price was moving northward, we had several industry-leading products and everyone was happy.  In our exuberance to motivate the sales team even further, we put in place an additional incentive - the number one sales person, in terms of software bookings for the year, would drive away with a new Porsche.  We had pictures of a Carrera on everything.  On sales training materials, on compensation plans, at sales meetings and, of course, all over the internal sales web site.  Sales people bought Matchbox Porsches to keep on their desks.  The incentive did everything it was put in place to do - it motivated the people and gave them another big rallying point in competing to be number one.

There was just one little problem.  We put a small failsafe into the deal.  To win, you had to not only have the highest bookings in the world, but you had to be a certain percentage over your quota.  At the beginning, this seemed like a no-brainer.  Come the end of the period though, this was the undoing of similar incentives current and future.

The problem was that no one achieved the percentage over quota required to win.  So, I was stuck.  Should I give the car to the person with the highest bookings even though they didn’t meet the other criteria, or should I stick by the book and not give the car to anyone.  As amazingly stupid as it seems to me today, I chose to do the latter - no one got the car.  I squirm in my seat thinking about what a moron I was.  By not rewarding someone with the car, I killed most of the motivational potential of such an incentive for years to come.  I likely took with it the motivational component of many other incentives in place as well.  I stuck a rusty nail into the balloon and it exploded.  I’m such an idiot.

The real mistake was setting up the incentive wrong.  here’s what I learned:

1. Make sure someone’s going to get the incentive - set it up so that there is nothing that can ever prevent the awarding of the incentive put in place.  That means all criteria for the award need to be relative, not absolute.  Once it’s in place, you’re committed to awarding it to someone, otherwise the incentive won’t work the next time around.
2. If you’re uncomfortable with the cost, size or significance of the incentive, don’t do it - incentives, sales incentives in particular, are playing into the hands of people who are already naturally competitive and are desirous of any public recognition.  They don’t have to be big.  Sure, it’s nice when they can be, but you just don’t need to go overboard to get the desired effect.
3. Make sure that the metrics that are used to measure achievement are really, really clear and easy to understand - if every eligible sales person for an incentive needs to build a spreadsheet to calculate where they stand, you have a problem.  Not only should the metrics be clear and simple, but every person should be able to figure out where they stand in comparison to their “competition” on a fairly regular basis.  This simplicity and comparison is what keeps the motivation effect going.

I’m sure that I’ve missed a few hundred other potential mistakes in implementing this basic management tool.  Please tell me you’ve seen someone who’s made an even more moronic move than me.  Do you have other stories?  Lessons?  Here’s your place to vent, reveal, blame or even confess . . .

[Note 1: Rewards can have a subtle incentive effect when given publicly.  People generally assume that similar actions or efforts will be recognized in the future if they perform or deliver in a similar fashion.  In this way, rewards work as a carrot as well in some cases.]

[Note 2: Be careful when applying incentives like those mentioned here to groups other than Sales.  Sales people become sales people because of their unique skills and, more importantly, the way they think and handle the emotional roller coaster that is part and parcel to selling.  Not all people are the same and, as such, incentives like these may backfire if applied to them.]

Popularity: 21% [?]

One of the greatest challenges in direct sales is having your customer commit time to listening to your pitch.  Good direct sales people work hard to eliminate any and all barriers to such a commitment because even the most compelling pitch won’t get you anywhere if it’s not heard.

One tool for getting an audience to hear you out early in the selling process is bringing the story to them.  Instead of asking a potential customer to take time out of their busy day to travel to a meeting, eliminate any time or effort barriers - buy them lunch at their office.  Pick up some pizzas, have sandwiches delivered or order from the prospect’s cafeteria.  Free food is a surprisingly strong draw and will make it much easier to get a foot in the door.

Even better, have the prospective customer arrange a conference room and also invite the prospect’s colleagues along for free food in exchange for 45-60 minutes of listening about a cool new offering from an interesting vendor.  This way, of course, you’ll get more people involved and increase your chances that someone will latch onto your message and become a champion of it.  The implicit commitment made by each attendee goes a long way and the even larger commitment by the organizer of the meeting will help develop some ownership of the process in the prospect as well as to help establish a partnership between you and he/she.

In selling, those early audiences are difficult.  Early commitment is even harder.  Removing barriers of effort and time while establishing an early relationship with prospective customers can help you get both.  Easy access to free food is a great way of making this happen with benefits that far exceed your cost or effort.

Popularity: 13% [?]

One of the problems that many young companies and new CEOs encounter is dealing with the cultural differences between a company’s various functional groups as the organization grows.  Different roles require different philosophies, attitudes and methods.  Sometimes, a person in one group has a difficult time understanding the actions of a person in another.  Left unexplained, this situation can create a rift between people who often need to work closely in order for the company to perform at it’s best.

Nowhere is this more apparent than in the substantial gap between how, say, an engineering or operations group is run and how a direct sales group functions on a day-to-day basis.  This video, titled “A Few Good Expenses” says it all pretty well, I thought.

YouTube video link: http://www.youtube.com/watch?v=0OTgb3KO7QM

Popularity: 9% [?]

A friend and cohort at Carbon Design Systems, Scott Seaton, made the following comment on my post Selling - How to Make the Best Out of a Second Place Finish.  I think it’s important enough to warrant its own post:

“The interesting point is that there is a bigger picture to the positioning yourself as a strong #2 beyond business and significant others.  It applies to life!  From the time you’re a young kid thru your adult years you’re building a personal and professional brand of one.  You could say that positioning yourself as strong #2 is about taking the long term view when you make decisions.  If we always did that throughout the personal and business aspects of life, then it would be hard to imagine not being more successful.”

Scott is an ace sales person and manager.  In full disclosure, he taught me the point about the value of second place and what to do about it almost 20 years ago.  It’s been a true breakthrough for me as a businessperson.  Scott’s point here drives home the fact that this is not just a good business strategy.  It’s also a good life strategy.  Too many people just quit and move on instead of taking advantage of the work they’ve done and the position they’re in.

So you came in second place.  So what?  What can you learn from the experience and how can you move from second to first?  It’s easier than you might think.

Excellent point, Scott.  Thanks.

Popularity: 9% [?]

Dharmesh Shah, fellow member of Feedburner’s My Way network, has a terrific post titled Selling Software: Why Free Trials Aren’t on his OnStartups blog.  In the post, Dharmesh makes excellent points about how free trials are far from a zero-cost decision from the customer’s standpoint.  He also points out that the success of a free trial depends on the developer putting extra work into both the product and its support.  Thus, the word, free, is a misnomer for both sides of the table.

In my experience, I have also found that free trials or, free products for that matter, are often perceived to have value equivalent to what was paid for them - nada.  Most people have a deep-seated belief that you get what you pay for and will often not invest the time or energy into making the implementation of a product successful if they did not pay for it. 

This is not to say that free trials or products are bad.  It just means that to make such a distribution device successful, you need to think of what your end-goal is - upgrades, add-on services, unseating the competition, seeding the market, or whatever.  The “free” part needs to be a piece of a much bigger strategy - one which includes making the customer successful with the “free” trial or product and a path to eventually getting revenue from that customer.  You’re just not going to make it up in volume.

Check it out.

tags: free+trial

Popularity: 16% [?]

If you sell something – a product, a service, yourself, whatever – there are inevitably going to be times when you lose to a competitor, your customer finds an alternative solution to his/her problem or he/she simply decides to do nothing.  When your selling process doesn’t involve much direct contact with your customer (selling indirectly through dealers, distributors or VARs or directly via the Web) it’s difficult to determine if you’ve lost a deal because you were never interactively engaged in closing one.  If you sell directly, though, the painful reality of the loss is not only immediately experienced, but is completely actionable.

More often than not, when a direct salesperson loses a deal, they quickly move onto the next deal, licking their wounds and fretting over the time they wasted on the lost sale.  When they do this, they pass up on a huge opportunity for future sales to that “lost” customer.  This opportunity presents itself because of a variety of reasons, but the two primary ones are:

• People are uncomfortable saying “no” and, for the most part, feel bad about telling you that you lost to the competition.  When this happens, they are easily convinced into doing something for you in return for your acceptance of their rejection.
• The honeymoon is over once the sale is closed.  The support and focus offered by the winning company will decline and problems with the product/service will be uncovered.  The customer will almost assuredly question if they made the right choice during this period.

Aside from the hard-ass purchasing agents that you may have to deal with in closing a sale once in a while, buyers of your products or services are generally reasonable people that have trouble dishing out rejection.  Even if it’s not outwardly apparent, most people struggle with it.  So, when they tell you that you’ve lost on your bid to sell to them, they will likely be open to granting any reasonable request that you make in order to allay the bad feelings they have about conveying the negative news they’ve just delivered.

Of course, the request has to be reasonable, but you should feel comfortable asking for their evaluation documentation, final decision criteria, access to the person or team that made the decision, even phone numbers of high-level executives in the company that might have only heard about the final decision as opposed to being involved in making it.  The goal of what you get should be to positively set you up for the next time around.  By using the opportunity you gained by losing the sale, you can get access to information and people that will help you form a relationship that you can base future sales on.

While you are using your recently created leverage to build a solid and positive relationship with your newest best friend – your lost customer – your competition will likely be struggling to meet all the promises made during the selling process.  During this time, you should be using the good will you have developed to lock-in you role as the clear alternative to the winner of the initial sale.  If you work the situation well, you may get some strong advocates inside the customer to start to lean your way and eventually, may set up another opportunity for you to sell your wares to them again.

None of this effort need get in the way of working other deals at the same time.  It’s surprising how little time it takes to leverage your loss.  In fact, the opportunities are actually put on the table by the customer.  All you have to do is take advantage of them.  A few phone calls, several emails and a lunch or two and you’re well on your way.  The trick is that you have to keep after it.  As it is with any selling process, no news is almost always bad news.  Keep the lines of communication open and active and you’ll be amazed at how far you’ll get.

Two important factors to consider in your effort to be your lost customer’s best alternative are whether or not they are an experienced buyer of the type of solution that you and your competitors offer and, if they have been a user of a particular product or service for a long period of time.  If, for example, they are buying a solution in your space for the nth time, they are likely to have developed some expertise in the area and will be relatively knowledgeable about their own needs and how the offered products and services are differentiated.  A similar situation exists when they have used one competing product/service for a long period of time.  They will be experts in that product/service and will have developed internal processes around it.  In both these cases, making yourself the best alternative is still valuable, but it is less likely that you will replace the chosen solution in the short-term.  As such, you should balance your efforts in these accounts with the likelihood that you can make headway in them.

Good salespeople never pass up on the opportunity to capitalize on a loss – a second (even third, fourth or fifth) place finish.  Since they’ve already done most of the selling work required, the effort in a loss is to build a strong relationship so they are the first people contacted when the customer runs into problems with their first choice.  Since a reasonably high percentage of first sales fail, the salesperson positioned as the likely alternative often finds themselves in the position of losing the battle, but winning the war.

Popularity: 11% [?]

Any reasonable direct selling process involves establishing a specific set of milestones to help track how far along a prospect is on the path to making a purchase.  These usually include one or more of the following steps:

• Lead found/created
• Opportunity qualified
• Prospect visited/contacted
• Product demonstrated/Eval in the hands of the prospect
• Follow-up contact
• Product selected
• Prospect has requisite financial approvals
• Paperwork completed
• Prospect invoiced
• PO/cash in hand

Of course, these steps are specific to what is being sold and what process is used, but steps similar to these can be readily mapped to most direct sales processes.  In my view, keeping accurate track of where a prospect is using a tracking process like this, or with milestones that better suit your business, is absolutely critical.  Tracking the process with detail is very important for new companies because gathering data about how the product is sold and adopted is critical to future planning and to adjusting the business moving forward.  As your business matures, using such a process helps you characterise your sales efforts further, ultimately giving you a more accurate means for predicting your bookings, revenue and cash flow.

It’s easy, though, for this data to be misused or overused.  I often see sales organisations map these steps into percentages like this, below, where the right column represents the percentage of completion of the sale.

On a superficial level, there’s nothing wrong with this.  It simplifies where the company is in the process of closing a sale by mapping the sales progress to a single number that everyone can understand.  “We’re 80% along the way to closing a deal with customer X”  is much easier to understand than, “customer X has his internal financial approvals so we should close soon.”

The problem is that sometimes this simple number morphs into something that it wasn’t intended to be – the probability that the deal will close.  80% along the path to closing is different than having an 80% chance of closing.  Even worse, the percentage of completion of the sales process is often used to mathematically calculate the likely booking amount for a particular deal.  Say, for example, a prospect has selected your product as the one he/she wants and is getting ready to invest $50K.  With the mapping above, you might say that the prospect is 70% along the path to closing.  Through the magic of weighted average forecasting you would take the percentage of the sales stage, multiply it by the $50K the prospect is willing to spend and come up with a $35K forecast for that prospect ($50K X 70%).

When stated this way, it sounds absurd that anyone would do this, but it’s done all the time.  I frequently sit in board meetings where the Sales VP presents a list of potential customers, their sales stage percentage (from a table similar to that above), the projected bookings from a sale to a particular prospect and a forecast that is the result of multiplying the sales stage percentage by the projected bookings.  These numbers are them summed to come up with the quarterly forecast.

Among the myriad of problems that this process presents is that sales just don’t work this way.  They are far more binary-like events than the stages of the sales process would indicate.  Even at the 80% level, there is fallout.  One deal falling out at the 80% level can invalidate the entire forecast, depending on its size.  Just as likely, a deal at 20% can come in quickly, similarly invalidating the forecast.  Since forecast accuracy is critical, especially in small companies, using a weighted average forecasting methodology is fundamentally flawed.

There are simply too many factors involved to accurately boil down sales forecasting into simple equations.  A good, experienced sales person has a gut feel for where a prospect is and the likelihood that he/she will make a buying decision in a given period of time.  While a sales stage percentage is a reasonable benchmark for where a prospect stands and is an absolutely critical tool for junior sales people, it is not nearly accurate enough to base the progress of a company on. 

Sales people need to be close to their prospects, knowing who the key decision-makers are with a thorough understanding of the purchasing process in the account.  Once they have this, they will be able to estimate what deals will come in for how much during any given period with far more accuracy than a simple weighted averaging forecasting tool does.  As always, good management and loads of wisdom trump virtually any tool that can be created.

Popularity: 21% [?]

Inevitably, after each fiscal quarter, a couple (or few, or many, or most) of the companies I work with inform me that their sales results for the quarter were below expectations. By itself, of course, this is usually not a catastrophe (although it sometimes can be) and leads to some reflection about what went wrong. What drives me completely nuts, though, is when numbers are missed after the company had been forecasting higher numbers during the quarter. I go total berserk when those higher numbers were still being forecast late in the quarter – sometimes until the last day. It’s not only when numbers miss on the low side that makes me upset. Sometimes, even when numbers miss on the high side I find cause for concern.

To me, forecasting accuracy is the single most important measure of the quality of a sales team. And, thus, is a reflection of the CEO’s ability to manage the sales process and sales team.

Being able to accurately predict bookings and, more importantly, collections in a small business is absolutely critical to maximizing a company’s opportunities and growth. The more accurate the prediction of income,
the better spending can be aligned and the more efficiently the capital gained from the sale of equity or absorption of debt can be utilized. Why sell more of the company or take on more debt than is needed?

Aside from the financial issues, there are very few things that can hurt morale in a company more than
missing a couple of quarters back-to-back. It’s quickly seen as a sign of weakness in the product, company or
market and makes employees question what they are doing and how many hours of their lives they are pouring into the enterprise. Doing what you say you’re going to do, and sometimes doing better, makes everyone feel like they’re dedicating their efforts to a worthy cause.

Companies have sales plans, of course, which are generally set up a year ahead of time. A year is a very long time for a small company and accurately establishing sales predictions that far ahead of time is virtually impossible to do correctly. Forecasting, on the other hand, while often done for longer periods, generally is studied for the current or next quarter. This shorter term look at sales should be far more accurate than the longer term sales plan.

Forecasting for small companies without much of a pipeline is difficult. In this case, if a deal drops out of the forecast, it’s not likely to be replaced by another deal that comes in ahead of schedule. When companies are small, closing those all-important first key deals should be the main focus of the sales force. After those initial deals are closed, however, the focus should change to increasing the size of the pipeline in order to create a stable and predictable revenue/bookings/cash stream.

There is no excuse for a company with an established sales team (direct or indirect) to miss the numbers
it predicted just a couple of months earlier by any significant amount. This means high or low. If the numbers are high (not including bluebird deals that were never in the pipeline), then spending wasn’t optimized and growth through increased spending could happen sooner. If the miss is low, then the company potentially spent more than it should have and may run into cash problems earlier than planned.

There should be enough visibility into the deals in the pipeline and enough of an understanding of the sales cycle to be able to determine which deals are going to come in during a quarter and which deals aren’t. Certainly, as the company gets further into its quarter, the more accurate the forecast for that quarter should become. With this logic, one should assume that the forecast one week before the end of the quarter should be basically right on. It’s shocking to me how often that it’s not.

The CEO and VP Sales need to be held responsible for the accuracy of the forecast. In my experience, they are often either judged on their sales achievement with respect to their plan only or, even more often, with respect to some abstract level of sales that seems right for the maturity of the company in its’ particular market. This is not sufficient. Accuracy of forecast is an indication of how close the CEO and Sales VP monitor the pulse of the business. It demonstrates how well the two understand the customer, the sales cycle and the market. Without a detailed understanding of these, there is little chance that the company will be successful. Therefore, it needs to be one of the key and, at certain stages of the company, the primary key factor in judging the success of company management.

The way to make this work, of course, is through compensation plans, making sure the company is tracking
the right metrics and always asking good questions. I’ll talk about some of this stuff in the future in a post about compensation plans and unintended consequences.

Popularity: 11% [?]