Today

1
High-Tech Sales and Close
What does it take to get a customer? Presented
by Kenneth P. Morse Senior Lecturer and Managing
Director MIT Entrepreneurship Center
One Amherst Street, E40-196 Cambridge, MA 02142
USA phone [phone] fax
1-617-253-8633 e-mail kenmorse_at_mit.edu
http//entrepreneurship.mit.edu
2
Desired Outcomes of Presentation

• You understand, and buy into, the critical role
  of sales in making startup companies successful.
• You understand how to calculate economic
  benefits, ROI, and value proposition.
• You begin calculating how to craft a divine
  elevator speech.

Proposed Outline

• Sales
• Marketing
• Elevator Pitches
• The Close

3
Proposed Outline

• Sales
• Marketing
• Elevator Pitches
• The Close

4
The Key Role of Sales in Start-up Companies

• Caveat This presentation focuses on
  business-to-business selling processes, which
  are
• High tech,
• High value,
• Highly rational,
• ROI-driven decisions,
• Not consumer selling, not impulse purchase, not
  B2CBS etc.

When you can measure what you are speaking about
and express it in numbers, you know something
about it When you can not measure it your
knowledge is meager and unsatisfactory. -Lord
Kelvin
5
Sales and the Selling Process

• We surveyed hundreds of high-tech CEOs, most of
  whom were engineers
• Achieving consistent sales results is the most
  difficult thing. Developing world-beating
  technology has always been easier for us.
• Marketing is something you imagine at home,
  alone, in the dark. Sales is something real,
  that you do with other people.
• Successful selling -- and building a
  customer-oriented, sales-driven culture -- is the
  single most important differentiator between
  highly successful start-up firms and those that
  go sideways.
• It all starts when somebody buys something from
  you and gives you money.
• Good selling is like charm without it, nothing
  else matters.

6
The Needs-Based Sales Process

• All I need to do is make the presentation and
  give the demo. The product is awesome itll blow
  them away. As soon as I get in the door and
  explain the technology, theyll buy.
• A definition of Sales
• Understanding Client Needs -- and Matching
  Products to Those Needs.
• It entails
• Needs Processing
• Identifying/Quantifying Current Pain
• Developing Latent Pain
• Clients rarely buy from you unless and until they
  feel they have a relationship with you and your
  company.
• Clients will feel they have a relationship with
  you only when they believe that you understand
  their needs, their situation, their vision, their
  constraints, their corporate goals, and their
  career goals.

7
Selling to Global Players

• Global Manufacturing Ltd (GML)
• (20,000 employees)
• Headquarters
• SM
• Finance - IT
• RD
• Engineering
• Manufacturing
• Regional Locations
• Sales offices
• RD Centers
• Engineering Centers
• Plants

• Young Start-up Corp (YSC)
• (20 people)
• Board (well connected VCs, Angels)
• A few clients
• CEO
• Sales guy
• Engineers

Selling effort must be focused on persons with
pain and/or persons with money. Most initiatives
should relate to the clients business drivers.
8
Selling to the Jury Top Down and Bottom Up

• GML YSC
• Business Unit Manager .. CEO/Sr. VP. Sales
• (signature authority 50-300K? if there is a
  budget....)
• Department Manager .. Sales Account
  Manager
• (signature authority 5-50K)
• Users/PHs ... Technical Account
  Manager
• The messages are matched to the
  perspective/motivations of the persons involved.
• Only when consensus is reached will they take it
  to the committee.
• The end game Which committee? Who sits on the
  committee? What are their motivations? When
  does it meet?
• What does it take to manage the selling process
  to a jury?
• In high tech the most successful account managers
  studied ? as undergrads.

9
Client Needs Processing

• Relate to business drivers and pain
• What are your objectives this year?
• How will you be measured this year?
• After the New Years holidays, when you look back
  on this year, how will you know if you have been
  successful?
• What keeps you awake at night?
• These questions are best asked by a peer who
  understands their business.
• I want to buy from someone like me
• German to German
• GOB to GOB, or MIT to MIT
• Bonding often means meals together
• Table manners
• Wine list
• Credible Commitment
• All nighters and other heroics
• Urge them to call you at home ( on your business
  card)

10
Meeting the Client

• Preparation
• AR/Website/other sources
• Reference checks/relationships
• Organization Chart
• Business Drivers
• Who has the power?
• Premeeting chit chat
• Introductions/positioning
• D.O.O.T.M.
• Stay on the game plan keep a checklist
• Asking questions vs. Making a presentation
• If the big guy leaves, what do you do?
• Who else do you meet today?
• Will you have lunch at the site?

Remember You only get one chance to make a good
first impression.
11
Building and Managing the Sales Force

• It starts at the top the CEO must be committed
  to selling, and to supporting the sales team
  internally. What happens if your CEO is not
  passionate about customer value?
• Best selling builds ten (10) year relationships
  never an ONS.
• Missionary selling -- changing the clients
  business processes -- is far more difficult than
  selling into a well-defined need
  (Facilitated order
  taking/3D salesman).
• Average sales guys abound Missionary Sales
  Persons and superb relationship managers are
  worth their weight in gold. They typically get
  paid more cash compensation than the CEO.
• Incentive Compensation
• 60 base, 40 bonus for sales account managers
  (SAMs)
• 90 base, 10 bonus for technical account
  managers (TAMs)
• Some Q-to-Q linkage
• Quota ranges 750K-2.0M
• OTE ranges 90K-250K varies f(quota)
• Some stock options, 4-5 year vesting
• Keep SAM and TAM linked together when possible.
• Avoid changing territory encourages higher
  investment long-term orientation.
• The best CEOs are thrilled when a SAM makes more
  money than they do.....

12
Proposed Outline

• Sales
• Marketing
• Elevator Pitches
• The Close

13
Marketing for High Tech Startups

• Usually when you ponder Marketing issues you
  think of the 4Ps addressing the 3Cs. The 5th
  P, positioning, should support, and be
  supported by, the 4Ps and 3Cs.

Product Price Place Promotion Customer Company Co
mpetition
definition, supporting services,
documentation how much, what structure (license,
currency, timing) distribution channels and sales
strategy communications strategy and
packaging market environment

• Todays discussion focuses on the unique
  challenges of applying these principles to new
  products being launched in as-yet unstructured
  channels. The value proposition is key.

14
Marketing for High Tech Startups
When you can measure what you are speaking about
and express it in numbers, you know something
about it When you can not measure it your
knowledge is meager and unsatisfactory. -Lord
Kelvin

• Quantify the benefits to understand customers
  economic benefit, you need to get in their heads
  (needs processing) and model the effect on
  their business of using your product.

Step 1
Step 2
Step 3
Understand how they are currently solving the
problem.
Understand how their work processes will change
by using your product.
Calculate the change. It must deliver payback.

• Bear in mind that the forces of evil which fight
  against innovation are rampant, devious, and
  well-organized.
• To justify the risk of change, and of being a
  small company, you must be at least 2X faster, 2X
  better, and 2X cheaper than the known
  alternatives.

15
Marketing for High Tech Startups

• Make vs. buy to understand the customers
  economic benefit, you also need to quantify how
  much it would cost for customers to build the
  solutions themselves.

• Examples of Customer Cost Components
• Hardware, software
• economic amortization
• scale efficiencies, etc.
• On-going maintenance (people costs)
• people required to manage new product
• synergies with other businesses
• Replacement cost when new versions are needed

16
Four Important Marketing Concepts for Start-ups

• Crossing The Chasm Making the shift from
  selling, initially, to lead users and early
  adoptors to capturing the mass market.
• Moores Law Performance for a certain cost
  doubles every 18-24 months.
• -the only thing that matters is if the
  exponential growth of your market is faster than
  the exponential decline in your prices.
• -George M.C. Fisher, CEO of Kodak
• Metcalfes Law The value of a product goes up
  exponentially with the number interconnections.
• Dominant Design The set of features in a
  product that, after a period of experimentation,
  becomes the way it is done.
• eg QWERTY typewriters, PC user-friendly GUI

17
Proposed Outline

• Sales
• Marketing
• Elevator Pitches
• The Close

18
Preparing Your Elevator Pitch

• You need to quantify the benefits To understand
  customers economic benefit, you need to get in
  their heads (needs processing) and model the
  positive effects on their business of using your
  new products and technologies
• Step 1 Understand how they are currently
  solving the problem.
• Step 2 Understand how their work processes will
  change by using your product.
• Step 3 Calculate the change You must deliver
  excellent payback.
• Bear in mind that the forces of evil in your
  customers organizations frequently fight hard
  against innovation. These evil forces are
  rampant, devious, and well-organized.
• You must be 2X faster, 2X better, and 2X cheaper
  than the known alternatives. That takes serious
  technology and IP.

19
Preparing Your Elevator Pitch

• Consider NIH. Set a trap for in-house
  competition.
• Calculate Make vs. buy. To understand the
  customers economic benefit, you also need to
  quantify how much it would cost for customers to
  try to build the solutions themselves.

• Examples of Customer Cost Components
• Hardware, software
• economic amortization
• scale efficiencies, etc.
• On-going maintenance (people costs)
• people required to manage new product
• synergies with other businesses
• Replacement cost when new versions are needed
• What is the cost of a missed opportunity?

20
Delivering Elevator Pitches Effectively

• 1. Convinces the target person to schedule a
  longer meeting with you, and be receptive to
  doing business with you and your company.
• 2. Empowers and enables the target person to
  convince other appropriate people to become
  interested in your company.
• 3. Demonstrates sincerity.
• 4. Communicates a sense of value, empathy, and
  urgency. Quantifies the value proposition
  clearly.
• Combines thorough Sales and Market Research.
• Requires no more than 1-2 minutes (55 seconds).

21
Proposed Outline

• Sales
• Marketing
• Elevator Pitches
• The Close

22
The Close

• The Closewinning the end game
• starts with careful planning, well before the
  first meeting with the client.
• ABC Always Be Closing
• Sales Call 101
• Approach
• Understand
• Presentations
• Trial Close
• Close

23
Build Credibility
The Approach gains and builds the clients
confidence and trust, and sets the stage for
building the business case and the close. Most
of our clients find that a significant portion of
their cost of goodssay 30-45...is that the
goods are sitting (unproductively) in storage
somewhere partially finished inventorygoods
warehousesdistribution centers Is this
similar to your situation? Are you under pressure
to reduce these costs? Is the problem getting
worse? Are your product life cycles becoming
shorter?
24
Your Prospects Point of View What Would They
Like to Know?

• 1. How can we (Adidas) compete better against
  Nike in logistics?
• Can we reduce the 8-10 months it takes nowand
  get from factory to retail shops in
• 8-10 days?
• and make design changes on the fly?
• 2. How can we avoid making shipping
• the wrong products,
• in the wrong colors,
• to the wrong stores?

25
The Approach

• Convince the client that your firm can deliver
  the value and has the expertise which meets the
  clients needs.
• Convince the client that their pain is urgent
  and requires action (with you).
• Your competition is developing a set of
  web-enabled solutions that could enable them to
  leapfrog ahead of you in terms of speed-to-market
  and customer satisfaction.
• Examples
• -
• -
• -

26
Stay on the Approach

• until you believe your prospect agrees that you
  and your company are a/the credible solution.
• Avoid superlatives and unquantified claims
• Wrong We are the best logistics people in the
  transportation business.
• Wrong (read your mission statement)
• Wrong (emphasize technology)
• Correct We were able to cut one of our clients
  (name) inventory carrying costs by 20-22. From
  what you have told me today, I believe we can
  accomplish a similar level of savings for
  youwithin 3-4 months.

27
Ready for the Close

• when the client believes your analysis is fair,
  complete, understandable, and can be explained to
  the powers that be (the jury)
• and when the client
• understands the options,
• agrees with the ranking criteria,
• believes the benefits can be measured, and
• understands the way forward.
• Different people arrive at the decision point in
  different
• ways, at different times. One of the best ways
  to
• know if the client is ready to close is
• to ask!

28
Preparing the Proposal and the Process

• The Jury
• Who are the 4-6 people who will make this
  decision?
• Who reports to whom? Who REALLY decides?
• What are their concerns
• that are on paper
• that are not articulated
• How would you like me to write up the proposal?
• With whom should I meet to discuss the details of
  our licensing terms (avoid the word contract)?
• What is the regular schedule of the meetings
  where our proposal needs to be discussed? What
  is/are the name/s of the people on the
  committee who will decide?

29
ClosingWhen They Hesitate

• FUD
• Restate Benefits
• Link money and value to time (urgency)
• Appeal to higher values
• Prove you are the low risk option
• Gently nudge (not a cultural thing)
• In Japan, China, Italy, Brazil, Germany, the UK,
  Canada, and Louisiana
• It is absolute hogwash that your clients do not
  want to be politely and professionally pushed.
• Whenever a salesman says the client does not want
  to be pushed, you should suspect that he/she is
  the problem, not the customer.