VERY Early Stage Tech Sales & Marketing

There is a lot of different stuff written about sales and marketing, and even more specifically, tech sales & marketing. Much of it is very good. Some is awful. What I think is an under-covered and under-appreciated aspect of sales and marketing activities is the earliest stages of a technology company’s existence.

In fact, these early days are so important. Not to mention, SO different from other stages of a software or hardware company’s development. Because of this, I believe it can be dangerous to follow the “conventional wisdom” more applicable to later-stage situations. Here are 5 important aspects I recommend that every early-stage technology CEO focus on in their initial sales and marketing efforts:

The tech prospect’s psychographic profile

Most marketing lead development programs categorize prospects by their “demographic” profile. For example, “Middle-aged, director of accounting in an Oil & Gas company with $5000 budgetary authority”. This is, of course, a very useful segmentation. But especially in the early days of a tech company, it is not in itself adequate. It is also very important to categorize prospects by their “psychographic” profile. A psychographic profile defines how a prospective buyer actually BEHAVES. Rather than what they look like from the outside (demographics).

So let’s go back to our simple example for a moment. The demographic profile of a “Middle-aged director of accounting in an Oil & Gas company with $5000 budgetary authority”. Many individuals might fit this profile. Thus, they appear to be all the same from a demographic perspective. You ought to be able to market and sell to them in the same fashion, right? But in fact, among any two of these demographically equivalent prospects, their purchasing proclivities could be extremely different. Even diametrically opposite. This is the weakness of using strict demographic segmentation in your marketing and sales efforts. This is particularly flawed in the very early stage of a company’s life. I’d note that this is as applicable to a B2B SaaS company as to a high-volume consumer hardware company.

The Technology Adoption Life Cycle

The concept of a psychographic profile came to marketing theory as part of the Technology Adoption Life Cycle, which many of you may be familiar with. Interestingly, the original use of this concept was developed for agriculture and home economics. One of the original developers of the TALC theory, Everett Rogers, then generalized the theory to other markets. This theory is based upon the diffusion of innovation adoption over a classic bell curve. It has 5 categories of adopters (buyers):

1. innovators
2. early adopters
3. early mainstream
4. late mainstream
5. laggards

Others have suggested variations of the theory. Notably in the technology business, Geoffrey Moore (in his book Crossing the Chasm) suggested that for disruptive product innovations, there is a gap (chasm). This chasm sits between the first two groups (innovators and early adopters) and the early mainstream.

Whether you are familiar with this theory or not, it is very important in understanding our topic of VERY early sales and marketing, for several reasons:

4 reasons the Technology Adoption Life Cycle is so important

1. To understand how your expected addressable market actually SHRINKS in the very early stage, as I’m discussing in this article. Studies have shown that in technology markets, only 2.5% of the total addressable market are typically innovators and just 13.5% can be categorized as early adopters. This means that as you embark on your initial sales and marketing activities, the total number of customers that realistically might buy from you at this early stage is just 16% of what you believe to be your full market size.
2. The technology market cycle concept can be extremely valuable when utilized correctly. But I find that in actual practice, it isn’t used much at all. Again, most target prospect lists are drawn up demographically. This may be out of ignorance, or it may just be a practical matter. It’s much easier to categorize prospects from afar demographically than on a psychographic basis. But certainly, an awareness of the attributes of those who are realistic targets at this stage (innovators/early adopters) should be instructive to the tenor and types of marketing approaches used in the early days.
3. A great way to find those innovators/early adopters is for them to “self-identify”. That means have them come to you. As opposed to relying on outbound activities seeking the proverbial “needle in a haystack”. This can be done most efficiently using inbound marketing techniques, which provide the slant that these “market makers” are looking for. Innovators have an innate need to “be first” in finding and adopting new technologies and products. Early adopters are also looking for these bleeding-edge products and services. Albeit driven by different motivations than the innovators. These early adopters are the smart folks using new, innovative products to gain an early lead or edge in their market. Although driven by different internal stimuli, both categories can be found lurking around highly technical organizations and reading technology-oriented publications. So continue your outbound activities, but supplement them with a robust inbound marketing program.
4. I find that psychographic profiling should and could be very useful, but it is rarely used in the sales process. Once you’ve engaged with a prospect, if you ask the right questions and listen carefully to the answers, you now have the data to categorize that prospect into one of the TALC buckets. Say you’re in the very early stage with a disruptive product. If the prospect you’re calling on profiles outside of the innovator/early adopter categories, move on! Don’t waste time actively selling to this prospect. Put them in a nurturing campaign, because at this stage, they are non-buyers. I believe that every sales process should include steps to categorize prospects by psychographic profile, from the very earliest stage of sales engagement.

Normal tech sales & marketing metrics don’t apply

I generally believe strongly in benchmarking your company vs. the competition. Comparing your company to like-sized companies in the same general market space, etc., is a great idea. However, when you’re talking about a startup software or hardware company at the very earliest stage, caution alarms start going off for me. In fact, be very careful looking at metrics such as sales or marketing expense as a percentage of total revenue, or the average length of a sales cycle, for example. I believe that looking at “averages” is likely completely misleading in these earliest days.

You don’t tend to see many operational statistics published specifically for these early-stage companies. With good reason. Things change very quickly at this stage, so it’s very hard to pick a “point in time” where comparisons make sense. Trying to compare your company’s expenditures or performance to another bucket of startups that are at very different stages of development can be dangerous. And lead you to very wrong conclusions. It’s also not a great idea to compare your company to your buddy’s. One isn’t a good sample size statistically, and the chances of the other company’s situation being similar enough to provide a useful comparison are slim.

This can be uncomfortable

I realize that it can be really uncomfortable for a startup tech CEO to spend 50% of his revenues on marketing. Or that his average sales cycle in the early days was over a year! Especially for the prototypical technical founding CEO with little marketing or sales background. But these things happen in startups because you’re still finding your way. I’m not telling you to avoid being self-reflective about your situation or saying you shouldn’t try to improve it. This is essential! But don’t get bogged down by what happened to some other company at this stage. Every startup journey is pretty unique. The best metric to use for critical activities at this stage is whatever it takes.

What should the early-stage tech marketing vs. sales mix look like?

Again, there is a natural tendency to use some industry metrics to decide what your sales/market mix ratio should look like. Don’t do it. Just as in the paragraph above, I caution you against judging the SIZE of your metrics vs. some industry norm. The sales/marketing mix really has nothing to do with industry norms. It depends primarily upon your BUSINESS MODEL, which frankly, isn’t always fully baked at this point.

The biggest question to ask is, “Is my business model more sales-driven or more marketing-driven”? You should be able to get a sense of this by looking at other factors of your offering. For example, price point, product complexity, direct vs. channel, interoperability, etc. In general, less expensive and less complex situations should usually be marketing-driven. More expensive and complex products are often more sales-driven. But almost every situation is unique, and there is a lot of gray in between the two extremes.

Sometimes you have to play around with your sales & marketing model/mix before you find the right balance. Place minor bets to find your way. Try out marketing programs on a pilot basis before committing big budgets to them. Hire one sales rep rather than five at once. Finding the right sales and marketing mix is often more of a journey than a point-in-time decision.

Don’t hire a large sales force – or maybe any at this early stage – YET.

Another mistake I often see is startups ramping up a sales force way too early. Now sales is a critical function of any business, so how could you staff up this function “too early”? But in technology businesses in particular, an awful lot has to be done right “upstream” in the value-creation process within your company. This has to happen to enable the typical software or hardware sales guy a chance of success.

If founders can’t close initial sales, lower-level hired hands (employee sales reps or channel partners) almost certainly won’t be able to either. I believe that in the very beginning, the founders need to lead the early sales calls. And have success. Hiring some poor sales rep and sending him/her out to make the very first sale rarely works. Except in rare cases, even the most technical founders with no sales experience (and often no desire to get any) should participate in these early calls. This is important for a couple of reasons:

1. The early calls often require a lot of technical hand-holding and maybe even product modifications for success. It really helps to have the key technical product folks involved to raise the chances of success
2. It provides the founder who doesn’t come from a sales or marketing background (technical, financial, legal, HR, or even outside of the tech industry entirely) with a realistic picture of what the soon-to-be-hired sales force will be up against, based on the product he/she has produced

Don’t get me wrong, often your founding team has a senior executive with an “outside focus” on markets and customers. Such as a VP-Sales or VP-Marketing (although hiring one may not be the right thing to do – yet). If you have such an individual, they should be out front in this effort. If you don’t have anyone with an outside focus on your team, it suggests a whole other set of potential issues. But at this stage, it’s “all hands on deck”. Anyone on the founding team who can raise the odds of early sales success should be involved.

This often requires a team approach, rather than a single individual. The most important thing that can come of these early sales calls is nailing down a winning value proposition and a repeatable sales process.  This information can be used to train the sales force that you’re itching to hire, at a later date. This phase also begins the building of a reference list of key early customers (see below). To summarize, my rule of thumb for VERY early stage sales: nobody can sell like the founders.

The early-stage tech company’s customer reference list

Lastly, one of the most important goals for your early-stage sales and marketing efforts should be building a reference or testimonial list. You’re aiming for a customer reference list if you’re selling “big-ticket” items. If your product is more of the low-cost, buy-it-off-the-website type, it’s really more important to get testimonials of early customers to put on your website and in other marketing materials.

In either case, the goal is to establish market credibility with those innovators and early adopters. You can then use it to jump that critical and difficult chasm into the much larger early mainstream segment of the market. This is where the real money will start to be made.

Again, the metrics don’t matter when building these early sales wins that you hope to turn into reference customers. All hands on deck, no expense spared. Because if you can’t be successful here–no matter the resources expended– you’ll likely have no chance to move on to the next phase of your company’s development. If you can’t develop a customer reference list, you will fail. Maybe quickly, maybe slowly, but the result really isn’t in doubt. So go all out and do what it takes to build this list. There are too many potential tactics to examine here, but here are a couple of my favorites to accelerate this activity:

Two favorite reference list tactics

• Start with a free beta program. It can be helpful to get a customer “hooked’ on your product at this early stage by starting with no cost to them (as well as giving them an avenue to affect the product direction). Give them a deep “beta” discount and ask if they’d be willing to serve as a reference. In my experience, the folks who are excited enough about your product to participate in your beta program represent an excellent pool of folks who may willingly sing its praises as a reference to other prospects down the road.
• When hassled by early prospects on price: say yes! The important thing is to make a sale at this stage and build that customer list. Not maximizing revenue or profit. But instead of simply capitulating on price, negotiate that lower price in return for the prospect of allowing you to publish a case study based on their experience. Or use their name publicly in your marketing activities and serve as a reference customer.

Those are my thoughts on the most important considerations for successful early-stage tech sales & marketing. What does your list look like? Post a comment with your own criteria, or ask a question about a point that you’d like clarification on.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or subscribe to the Morettini on Management Newsletter hosted by LinkedIn. Contact Phil directly at info@pjmconsult.com