Startups: Why Your Software Is Not Selling

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Startups: Why Your Software Is Not Selling

 


As a regular reader of a number of online forums regarding software and startups, one question that seems to constantly recur is that of early sales (or lack thereof) for a software startup.  Startup founders are constantly asking the community to review their product offering and/or website and help them figure out why the sales of their new product are lower than their “conservative” estimates.
Given the prevalence of this particular question, I thought I’d make an attempt at answering this through a hypothetical interview with one of these startup founders.
Hopefully, parts of this will resonate with you and be of some value.  The intent is to capture the likely causes of low software sales by way of the questions being asked during the mock conversation.  Note:  I usually don’t talk about myself in the third-person, but I didn’t know how else to approach it.
Warning:  I take some extreme and often comedic positions in the example purely for illustrative purposes.  Some of these would be even funnier if it weren’t for the fact that I’ve actually heard variations of these founder arguments in my past experience.

Why Isn’t My Software Selling?  


Founder
:  I’ve launched my new software product and sales are just not what I had expected them to be.  I can’t figure out why, because we’re doing everything right.

Dharmesh: 
Well, the first cause might be that nobody knows that you or your product exists.  It’s hard to make sales when nobody knows about you.

Founder: 
No, that’s not it.  We’re getting thousands and thousands of hits on our website a day.  We’re buying Google AdWords and have a high hit rate on key phrases related to our business.  We’ve got a really popular business blog that a bunch of relevant sites are linking to.  No question that people know we’re out here.

Dharmesh: 
Ok, then it’s possible that your website visitors are simply not understanding what it is you’re offering.  If they don’t know how you can help them, they’re likely to just leave.

Founder: 
No, I don’t think that’s it either.  Our message is crystal clear.  We had a high-powered marketing firm help us craft the content and we’ve got that part down cold.  Besides, one of our founders has an MBA from Harvard and crafting clear and clever marketing messages is his specialty.  I have no doubt that our prospects have a clear picture of what we do.

Dharmesh: 
Well, if prospects understand what you do, then maybe they just don’t care.  Perhaps you’re not solving an important enough problem that people care about.  Perhaps your product is just a “nice to have” and as such, there’s just nothing that will compel people to part with their money.

Founder: 
No, no, no.  That’s not it at all.  Our product is revolutionary and unique.  It helps people lose weight,  contributes to lasting world peace and makes our customers ten times more attractive to the opposite sex.  There is no question that the product is highly valuable to our potential customers – and they know it!.

Dharmesh: 
Ok, let’s stipulate that you indeed solve an important problem and that your product has tangible value.  Perhaps, your prospects are not quite sure how your product works and that it will actually work in their particular situation and solve their particular problem.  Perhaps they don’t believe your claims.

Founder: 
Boy, you’re really slow, aren’t you?  Not sure what makes your startup blog all that popular, because you clearly don’t have much of a clue.  The fact is, that we have an easy to download trial of our software so that prospective customers can figure out exactly what the product does and see it’s benefits without having to pay any money.  In fact, we don’t even ask for an email address to download the software.  It’s risk free!

Dharmesh: 
Hnmmm…. My apologies for not noticing that great big “Free Trial” button on your website.  Not sure how I missed that.  But, it’s important to remember that even though the trial itself is free, there is still some cost to the prospect because they have to invest their precious time in order to try out your software.  Maybe they’re just impatient and don’t want to invest the time.

Founder: 
Nice try, but the fact is that we offer to send all of our trial users a free, limited edition T-shirt.  This is a force so powerful that about 99% of our site visitors end up downloading a trial version of our software.  Our problem is not that people aren’t trying the software, it’s that they’re not buying it.

Dharmesh: 
Perhaps there’s something wrong with your pricing and it’s sending the wrong signal to your potential customers.

Founder: 
I don’t think so.  We’ve spent a lot of time determining the optimal price for our product.  We even read a bunch of blog articles on the topic (though not yours, because you’re clearly delusional in your stance that startups should generally charge more, not less for their products).  Fact is, we’ve got a price that ends in 95 (as in 149.95), as has been proven to be successful pricing strategy and a huge improvement over the “99” that was so prevalent in the 80s and 90s.  Further, our price not only ends in 95, it even begins with 95 for twice the effect.  Our price is $95.95!  What could be better?  This is also considerably lower than our competition even though we have a better product.

Dharmesh: 
Um, ok, let’s put pricing aside for a minute – we’ll just agree to disagree.  Maybe the prospects are concerned because you’re a startup and you have no credibility.  Perhaps they don’t want to take the risk that you’ll go bankrupt next month and thereby lose any investment of time and money they put into learning and using your product.  Lots of people are used to buying from big companies like Microsoft, and won’t give the time of day to a startup (once they have their free T-shirt).

Founder: 
Have you even looked at our website?  Did you not notice in our press release section that we’ve raised over $10 million of venture capital from top-tier firms?  What more credibility can there be than that?  Given the low costs of web hosting, we can run for 50 years and never have to shutdown our web service to customers.

Dharmesh: 
I’m just stumped then.  I’m baffled because most of the startups I’ve talked to have one or more of the issues we’ve discussed, but it seems that you’re just in a league of your own.  Guess I’m just not smart enough to help you.

Founder: 
Figures. 

--end of contrived conversation---

Hope you enjoyed that.  Though this is clearly a bit tongue-in-cheek, I think the concepts are important.  Though I’m not doing much more than stating the obvious (regular readers already know that I have an uncanny knack for the obvious), if you’re anything like me, you need to be smacked on the head with the obvious every now and then.
 
Possible Reasons Why Your Software Isn’t Selling 
  1. Lack of visibility:  Nobody knows who you are.
  2. Lack of leads:  Not enough people you can convert to customers.
  3. Value Unclear:  Prospects can’t figure out what it is you actually do for them.
  4. Value Clear, But Not Compelling:  Prospects know what you do, but couldn’t care less.
  5. Trials Too Difficult:  You’ve made it too hard for prospects to try your product – and few will buy without trying.
  6. Competing On Price:  Startups need to differentiate, but on something other than price.  You’re trying to compete on price.
  7. No Credibility:  Prospects have no reason to believe you will be around in 6 months.
  8. Too Hard To Buy:  You’ve somehow managed to convince a prospect to buy, but the buying process itself is too difficult.
  9. Client Risk Greater Than Zero:  Your customers are having to absorb some level of risk (e.g.:  You don’t have a money-back guarantee, you have long-term contracts, etc.).

What have I missed?  Which of the above do you think are the most common problems startups face?
 
 
 
 
 

Posted by Dharmesh Shah on Mon, Jun 12, 2006

COMMENTS

One key message is that the reasons are rarely in "Sales" as a "department" only. Of course "departmental thinking" should not exist in a startup.

This is where we should link back to your recent Managemen Team post: a typical over-funded statup will hire a VP Sales with a "pedigre" and will keep on firing/hiring them until they run out of funds.

A good founder will handpick team-mates that will have the "integrated thinking" and will resolve the above, mostly cross-functional issues togther. They will likely not be "world-class" VP's of anything, since those tend to be too silo'd ...

posted on Monday, June 12, 2006 at 10:34 AM by


In our case it's simple. We're developers with some - I think - smart ideas, packaged into good products. But we're clearly lacking in the sales/distribution/marketing area. We've simply been unable to find the right distribution partners for our software products... End of story, back in consulting business :-(

Nice blog!

posted on Monday, June 12, 2006 at 11:29 AM by Axel


hey i would comment but you dont even give any link love back for people using their valuable time to add a comment to your blog.

great post though!!!

- Seeking linked comments in Seattle

posted on Monday, June 12, 2006 at 5:48 PM by Linklove please


Linklove, why don't you tell us what you'd talk about in your comment if you were leaving comments in the first place :-)

posted on Monday, June 12, 2006 at 5:59 PM by


Very nice. The story format works like a charm. I don't think I will forget any of the obvious reasons why sales can go wrong any soon.

posted on Monday, June 12, 2006 at 6:24 PM by RC


Valuable thing... I am noting this into my diary :)
thanks for post.

posted on Tuesday, June 13, 2006 at 8:16 AM by <a href:"usmanahmad.wordpress.com">Usman Ahmad</a>


I'm not certain if it's the same person who writes these blogs, but whoever they are capture beautifully the key issues startups experience.

About halfway through your commentaries, I get this smile on my face ... that "You're Dead On!" sort of smile.

Nice work - keep 'em coming. But don't get too cocky and self-important ... ! Some of the people commenting have very valid points ...

posted on Tuesday, June 13, 2006 at 9:41 AM by Chris


Chris: Not to worry, I don't know enough to become cocky and self-important. Besides, if it has happened yet, it's not likely to occur.

Glad you enjoyed the article. I have found that the comments to my articles in aggregate (or sometimes even just one) are better than the article itself. I simply like to start the conversation.

posted on Tuesday, June 13, 2006 at 9:46 AM by


The biggest problem I see is that they've created a product for themselves not for their customers. Thus they have a market potential of 1. All of your hypothetical interviewee's responses are about things that matter to him, but I could give less than a hoot whether or not he raised X amount from Y VC or has a Harvard MBA on staff or prices his product with 95's. All I care about is whether his software solves my problem.

posted on Tuesday, June 13, 2006 at 10:04 AM by anon


Very nice story.

My guess is that everybody is perfectly happy with the trial version and it does not expire. This could be the story of ZIP.com.

posted on Thursday, June 15, 2006 at 2:25 PM by Steven Schulman


You never asked the "founder" if his product was worth a darn. It could be a truly wonderful product with a laughable user interface. As a developer, I see a lot of software that is great and simple to use if you're the developer that built it.

posted on Thursday, June 15, 2006 at 2:56 PM by Scott Petersen


Sounds like the founder is tone deaf.

He needs to ponder the old Pogo cartoon saying...."We have met the enemy and he is us."

posted on Friday, June 16, 2006 at 3:28 PM by jimbo


Excellent and entertaining approach. What you've missed is the followup. Offering a free trial without asking for the downloader's e-mail is no better than giving out free t-shirts. The startup should be asking for the downloader's e-mail (and preferably a telephone number ) so that they can follow up. A personal phone call or e-mail asking "have you used the trial software? did you know that it really can cure world hunger?" is the first step to a sale.

posted on Monday, June 19, 2006 at 11:34 AM by Helene


Interesting read. I have just set up a blog site which contains worked examples on exactly how to prepare your software and start selling online. Hope people will find it useful!  
 
 
 
<a>http://www.sell-software-online-free.com

posted on Sunday, March 08, 2009 at 6:11 AM by Misco


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