Product or Sales Company – Why Choose?
According to conventional wisdom, there are two kinds of companies: sales companies and product companies.
Sales companies bring in revenue the old-fashioned way, with salespeople. The products tend to be complicated and expensive. The deal cycles are long. The customers need hand-holding and education.
Product companies are the opposite. Their price points are relatively low. They drive sales through marketing, advertising and free trials. They strive to make the user experience “delightful” and create products that sell themselves (a polite way of saying “without needing to pay sales commissions”)
Everyone wants to be a product company these days. Even B2B software companies, which have traditionally employed fleets of well-paid salespeople, get their cues from masters of customer experience like Apple and Amazon. They worry about making the user experience clean and intuitive. They launch SaaS products that customers can spin up with their credit card. They obsessively monitor user metrics to figure out what’s working, and what’s not.
Who can blame them? Atlassian went all the way to IPO without salespeople. “I think we can get away without having a sales team in any kind of traditional way probably forever,” said Slack’s CEO. Product companies feel like the future.
But I don’t think it’s that simple. In my view, every company needs to be a product company, and every company needs to be a sales company. They’re two different disciplines. Businesses tend one way or the other, but they can’t reach their full potential without mastering both.
What product-led companies can learn from sales-led companies
The knock against sales-led companies is that because their products are pushed by salespeople, the product itself doesn’t need to be as good. The assumption is, if it takes all this human power to make the sale, it must not be intuitive. It must be hard to set up. It must take a long time to deploy.
There’s more than a grain of truth in that stereotype, as anyone knows who has tried to use a CRM or ERP solution from one of Silicon Valley’s B2B mega-corps.
But sales-led companies have insight into their customers that product-led companies don’t.
In a sales-led culture, growth and bookings are going to come from larger deals, where humans are interacting with other humans and they’re doing things like identifying ROI, justifying business expenses, creating initiatives and tying the product to those initiatives.
Those are factors that go into big buying decisions that just don’t show up in user metrics or digital feedback loops. When you’re selling to a small team that’s paying $50/month, they might not mean so much. But they mean a lot when you’re trying to close a $700K deal that needs sign-off from the CIO and the CFO — let alone all the other stakeholders who can squash a contract.
Put yourself in the shoes of someone who can help you close a 6 or 7-figure contract. You’re already asking them to go out on a limb, to become your advocate, to vouch for you. Are you really going to get inside that person’s head with a survey? First of all, people are reluctant to respond to surveys if there’s nothing in it for them (and there usually isn’t). Second, they tend to fill them out in a rush, so the information is suspect. Third, is someone going to tell you what’s going to make them give you $700K? You, a faceless brand they’ve never met and have no reason to trust? The question answers itself. To get that kind of insight, you need to work for it, person to person. There’s still no digital marketing tool that can do that the way a salesperson can.
To some extent, product-led companies naturally transition to a sales-led model as their deal size grows. The digital marketing and freemium trials that worked for them as a $5M/year startup don’t get them the growth they need as a relatively mature, mid-market corporation. Piling up $5K wins all day makes your logo slide look great, less so your bottom line. That’s especially true once you go public, when analysts want to see you closing those big, company-wide deals, and don’t hesitate to punish you if you don’t.
I would argue that product-led companies need to invest in their go-to-market team even earlier, around the same time they hire their first engineer.
I recently sat down with a second time CEO of a successful, fast-growing AI analytics company, who hired his first salesperson at a point where they didn’t have a real product, just wireframes. He reasoned that he needed to know not just what was useful to customers, but what they would pay real money for. He figured if he could get to the root of that question before his competitors, he would outpace them in the market as well. He thought–and I agree–that he would get to that answer faster by having a salesperson talk to 50 prospects than by monitoring 1000 customers noodling around on a freemium version.
It’s a less radical idea than it sounds. even the most hyped product-led B2B software companies were never as down on traditional sales as their messaging made them seen. Slack makes 99% of its revenue from 1% of its customer base, and has a hefty sales team to close enterprise deals. And as the CEO of Atlassian, Jay Simons acknowledges, “low-touch doesn’t mean no touch.” In an article originally headlined, “How Atlassian built a $20 billion dollar company with no sales team,” (it’s been changed since), Simons is careful to note that while Atlassian might not have salespeople as such, they have plenty of staff on-hand to help customers get up and running.
And who are those staffers he’s talking about? Presales engineers, also known as sales engineers, or solution consultants. Usually part of the sales organization, they work alongside customers putting together pilots and demos, and are often the people who know the customer best. Some (like me) would say that they often have more to do with closing deals than the salespeople themselves.
Presales is basically your product manager in the field, working to convince the customer that the product is capable, and to figure out what it will take to get them to buy. Account executives (or for hardcore product-led companies like Atlassian, word-of-mouth and a freemium product) are going to get you in the door, but the pushing and the prodding to understand the customer’s real needs will come from Presales.
The moral? It’s never too early to hire sales and presales executives, as long as you’re clear what you’re trying to accomplish.
What sales-led companies can learn from product-led companies
On the flip side, sales-led companies have plenty to learn from product-led organizations. Product-led companies don’t have salespeople talking to customers every day. Instead, they rely on deep analytics to understand what customers are doing, what they’re not doing, and what aspects of the product need to be improved.
Though as we’ve seen, digital feedback can only tell you so much, sales-led businesses suffer from a lack of analytics.
There’s a cost to driving decisions based on input from Sales. Salespeople are incentivized to make their numbers, full stop, and sales-led companies will go where sales leads them. Usually that’s toward whatever big deal is in the hopper, whether it’s General Motors or Symantec or Georgia Telecom. They’ll tell the prospect, “Whatever you need us to do, we’ll build it and make it work for you.”
As a result, the product gets pulled toward whatever company Sales happens to be talking to at the moment. While that may help the company hit its numbers for the quarter, it isn’t necessarily the best strategy long-term. It’s the opposite of the product-led approach, which aims to create products that everyone finds delightful and essential. Sales-led companies often wind up tuning their product for one company that they may or may not even land. The result is a product with a long time to value, that needs a big army of consultants to get it to work.
Sales-led companies need to take a lesson from their product-led peers by feeding information from the field into a process driven more by metrics than anecdotes.
Here again, the Presales team can play a crucial role. Because Presales has one foot in Sales and another in Product, it’s ideally positioned to translate what Sales is hearing on the street into metrics the business can use to make reasoned decisions.
Most companies are exquisitely well-tuned to their customers’ gripes. What they don’t do a great job of is saying, “Do we build the 10 things Coca Cola wants or do we do this other thing over here?” Those decisions are influenced by little more than gut feel and intense pressure from the Sales team. There’s no data that says, What are the things that our competitors are slamming us against? What is the marketing doing? How much money do these opportunities really tie to? Multimillion-dollar decisions are made on basically emotional grounds.
What they need is an unbiased view of the world that explains what the demands of the market really are, and what decisions are most likely to yield the most revenue. That should be one of the core responsibilities of Presales. Putting together demos is just the way they get their intelligence. Their real strategic value is to rationalize everything Sales is hearing, so the business isn’t flying blind when it comes to the question of whether they should do 10 things specifically for Coca-Cola or 5 things that would make the product better for everyone.
Part of this shift is technological. Most Presales don’t have software for compiling, storing and distributing these metrics (and full disclosure, that’s part of what Vivun provides). Part of it is cultural. The company needs to buy into the idea that the roadmap needs to strike a balance between short-term revenue opportunities, long-term innovation, and a factor I think of as “extreme serviceability,” the ‘one-minute wow’ that shows how the product can deliver some near-immediate benefit once a customer turns it on. It immediately shifts from the conversation from “Why should I bother” to “How can we make this happen”? Presales is in the best position to balance those considerations, but a sales-led organization has to commit to hearing what Presales has to say. Otherwise Sales will always be the loudest voice and the squeakiest wheel.
Sales-led companies have deep intelligence about the customer. Product-led companies have metrics about user behavior, and a way to turn them into decisions. Successful companies need both. The real difference isn’t between product companies and sales companies. It’s between companies that can make smart decisions and those that can’t. Personal relationships and hard numbers are important, but in my view the companies that bring them together most effectively will be the ones that make best use of their Presales team.