How to Sell a Products

Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel is is a good book. He offers new ways of thinking about innovation. Peter’s philosophy is that innovation starts by learning to ask questions that lead you to find value in Sales. Below is an excerpt from the book:

How to Sell a ProductsZero to One.jpg

Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true. No matter how strong your product—even if it easily fits into already established habits and anybody who tries it likes it immediately—you must still support it with a strong distribution plan.

Two metrics set the limits for effective distribution. The total net profit that you earn on average over the course of your relationship with a customer (Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC). In general, the higher the price of your product, the more you have to spend to make a sale—and the more it makes sense to spend it. Distribution methods can be plotted on a continuum:

Personal Sales

Most sales are not particularly complex: average deal sizes might range between $10,000 and $100,000, and usually the CEO won’t have to do all the selling himself. The challenge here isn’t about how to make any particular sale, but how to establish a process by which a sales team of modest size can move the product to a wide audience.

In 2008, Box had a good way for companies to store their data safely and accessibly in the cloud. But people didn’t know they needed such a thing—cloud computing hadn’t caught on yet. That summer, Blake was hired as Box’s third salesperson to help change that. Starting with small groups of users who had the most acute file sharing problems, Box’s sales reps built relationships with more and more users in each client company. In 2009, Blake sold a small Box account to the Stanford Sleep Clinic, where researchers needed an easy, secure way to store experimental data logs. Today the university offers a Stanford-branded Box account to every one of its students and faculty members, and Stanford Hospital runs on Box. If it had started off by trying to sell the president of the university on an enterprise-wide solution, Box would have sold nothing. A complex sales approach would have made Box a forgotten startup failure; instead, personal sales made it a multibillion-dollar business.

Sometimes the product itself is a kind of distribution. ZocDoc is a Founders Fund portfolio company that helps people find and book medical appointments online. The company charges doctors a few hundred dollars per month to be included in its network. With an average deal size of just a few thousand dollars, ZocDoc needs lots of salespeople—so many that they have an internal recruiting team to do nothing but hire more. But making personal sales to doctors doesn’t just bring in revenue; by adding doctors to the network, salespeople make the product more valuable to consumers (and more consumer users increases its appeal to doctors). More than 5 million people already use the service each month, and if it can continue to scale its network to include a majority of practitioners, it will become a fundamental utility for the U.S. health care industry.

 

Selling to Non-Customers

Your company needs to sell more than its product. You must also sell your company to employees and investors. There is a “human resources” version of the lie that great products sell themselves: “This company is so good that people will be clamoring to join it.” And there’s a fundraising version too: “This company is so great that investors will be banging down our door to invest.” Clamor and frenzy are very real, but they rarely happen without calculated recruiting and pitching beneath the surface.

Selling your company to the media is a necessary part of selling it to everyone else. Nerds who instinctively mistrust the media often make the mistake of trying to ignore it. But just as you can never expect people to buy a superior product merely on its obvious merits without any distribution strategy, you should never assume that people will admire your company without a public relations strategy. Even if your particular product doesn’t need media exposure to acquire customers because you have a viral distribution strategy, the press can help attract investors and employees. Any prospective employee worth hiring will do his own diligence; what he finds or doesn’t find when he googles you will be critical to the success of your company.

 

Everybody Sells

Nerds might wish that distribution could be ignored and salesmen banished to another planet. All of us want to believe that we make up our own minds, that sales doesn’t work on us. But it’s not true. Everybody has a product to sell—no matter whether you’re an employee, a founder, or an investor. It’s true even if your company consists of just you and your computer. Look around. If you don’t see any salespeople, you’re the salesperson.

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