Risky Doesn’t Sell

Lately, a lot of entrepreneurs I’ve met can’t understand why their startup can’t sell their product to corporate customers.

Their product is so much better than the current solution in the market; potential customers must be cheap or stupid if they’re not buying it.

Problem is that’s not how your potential customers see it. They’re scared of what might go wrong. While your product might solve many problems/pain points or cost less, potential customers are going to concentrate on risk. Of course you don’t think it’s a risky purchase, but they do.

Executives at large companies don’t think like VCs. They are much more concerned with the potential risk of going with a startup than the upside. It’s a lot easier to get fired for trying an unproven product than for maintaining the status quo.

Reducing risk is essential to reducing friction in sales.

You have to remember that your customer only has so much money and man-hours at its disposal. It’s a difficult sell if your product requires a lot of resources or a complex integration- potential clients are going to be a lot less inclined to pull resources from proven methods to experiment with an untested product.

If it’s easy to implement and requires few resources, then there’s less risk. Customers can experiment and, if successful, they can increase their budget. Retargeting startup TellApart is an excellent example of a company that makes it easy for potential customers to test-run its product.

TellApart charges e-commerce sites for a percentage of additional sales to customers they help reacquire by analyzing clients’ customer data and then running display ads targeting high value customers. The service is relatively effortless to turn on, and if it doesn’t work, you don’t pay for it.

With little potential downside, TellApart successfully makes trying their service a low risk proposition to their e-commerce clients. This gives the company the ability to unseat incumbent providers.

Many of Tellapart’s customers have told me that they started with small initial budgets that increased quickly. TellApart isn’t risky and that, combined with a solid product, helps it sell.

Startups that reduce risk increase their chance of getting the deal done.--JB