How the Sales Process Changes Over Time

The Sales Process Changes Over Time For all startups, customer acquisition costs are very high at the beginning and gradually fall over time. When a company is first established, reaching customers and closing deals takes considerable time and financial investment. As the business matures and scales, the cost of the sales process can decline significantly. Divide the sales process into three time horizons—short, medium, and long term—and use one or more sales approaches suited to each phase. 1. Short-term approach. In the short term, the company should focus on creating demand for its product and generating orders. Customer-development methods can help create a product customers need, but because the company and its product are new to them, you need to speak with customers directly to explain the company’s value proposition and what makes the product distinctive. Otherwise, the market will not recognize you or your product on its own. Direct conversations with prospective customers have another benefit: their feedback can help you iterate quickly and improve product features. By contrast, when products are sold through intermediaries such as distributors, it is harder for the company to do this. This is the demand-creation phase; it ends when demand for the product has been established. ★ Direct salespeople, also called business development representatives, are a resource well worth investing in at this stage. However, they are expensive, and it takes time for them to increase sales velocity. Good salespeople are difficult to retain, and it is hard to distinguish top performers from mediocre ones before hiring them. At this stage, you need excellent salespeople rather than people who will become valuable only after the company has gained more experience. Despite these challenges, direct salespeople may be the only—and best—option for a startup. (Robin’s note: In the early stage, the founder or CEO is the best, and perhaps the only, salesperson. If you do not want to get on the front line and sell your product, think seriously about whether you should start a company.) ★ Online sales methods—such as embedded selling, email, developer communities, social-media selling, and telemarketing—can reduce a company’s reliance on direct salespeople at this stage. Some products, especially web applications, can be promoted through free trials and user sign-ups, avoiding excessive dependence on salespeople. One benefit of this approach is that it can provide deeper customer insights than human sales channels can. 2. Medium-term approach. As word of mouth and distribution channels take shape, the focus shifts from creating demand to fulfilling orders. At this stage, the company should manage its customers, maintain existing customer relationships, and identify opportunities to sell them additional products. To serve geographically distant markets or a small number of customers with lower lifetime value, the company can use distributors or value-added distributors. This allows direct salespeople—the most expensive channel—to stay focused on the majority of customers with higher lifetime value. Distributors or value-added distributors can lower customer acquisition costs, but the company must give up some profit to them. Depending on the industry, the share of profit given up is generally 15% to 45%, and can sometimes be higher. Lower customer acquisition costs and the ability to use existing distribution channels to enter new markets quickly can partly offset lower unit profits. The company needs to use customer lifetime value to find ways to address the trade-off. 3. Long-term approach. The sales team’s focus is on fulfilling customer orders. The company no longer emphasizes demand creation, though it will continue to manage customers when needed. Long-term strategies often use the internet and similar channels. As competitors enter the market, the company should adjust its sales strategy to move successfully into this phase and achieve stable growth. #DisciplinedEntrepreneurship ---- Robin’s note: Short term: focus on creating demand for the product and generating orders. Medium term: shift the focus from demand creation to fulfilling orders. Long term: focus on fulfilling customer orders. The competitive environment changes over time, including through technological substitution and the entry of new competitors. Companies must respond accordingly and make time a friend rather than an enemy.