What I Learned from a CEO Who was a Huckster

Discussion in 'Articles & Tutorials' started by CynthiaK, Nov 12, 2012.

  1. CynthiaK

    CynthiaK
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    I used to work for a start-up CEO, whose background was consumer sales and he was a real huckster. He was not the founder of the company, but came after the proof-of-concept stage. He knew an immense about consumers’ behaviors, how to read them and how to tailor a sales pitch to their emotional side. And while we didn’t get along on a personal level, we both recognized and appreciated each other talents and skills in the workplace. Here is some huckster wisdom.
    On Pricing

    If you solve someone’s problem, no matter how high the price, the customer will think the product was well worth it. But if you don’t solve someone’s problem, then no matter how much or how little the price, the customer will think the product was a rip-off.
    My former software company (before the huckster) had a customer that licensed our software and then paid a very hefty sum to have it customized for them. While most will say that one-off’s are not the way to go, if someone is willing to pay an absurd amount for it, then it’s not a bad deal. Five years later, this company was acquired for a large valuation. At the closing party, the founder came up to me and told me that when he first met me that he thought our price was ridiculously excessive, but in retrospect, we were well worth it because the acquisition hinged upon that customization. Our price had to have irked him in order for him to mention this five years later. The huckster CEO was right.
    On B2B versus B2C

    Business-to-business deals are based upon empirical analysis: what’s the return on the investment, what’s the price to performance ratio, and so on. But business-to-consumer deals are based upon emotions. Discover what the consumer wants and desires, and create a way for the consumer to obtain it.
    If you are selling car stereos and that young man wants a sound system that can blast him into lower earth orbit, then develop a business model with a payment system where the customer can get what he wants. If you’re a plastic surgeon performing elective procedures, use one of those physician credit services where patients can go on the installment plan. The average consumer isn’t going to write a check for $2,000 or $20,000 to purchase something, but they will pay $300 per month. For high ticket items, 85% of purchases are paid on some sort of installment plan. For low ticket items, it’s the opposite. For Internet sites offering micro payments, where pricing is $5 per month or an annual payment of $40, 85% of users opt for the annual payment.
    On Investors and Funding Strategy

    Funding is just another type of sales. As in any sales process, you need to know the profile of who is the customer. In this case, a profile of the ideal investor is useful. The huckster would always seek out the single or inexperienced investor, or a new investment firm on their first fund. Why? In his opinion, they did far less due diligence than the institutional investors. He was always able to raise between $2 and $5 million, and then he’s transition over to debt instruments for raising capital. After 5 start-ups, he felt it was important to keep control of the company for as long as possible in order to carry out his plans.
    Likewise, entrepreneurs need to realize that investors and investment firms also have profiles of the ideal founder. Many of them, particularly those of the Y-Combinator type, target the 20-something crowd. Many of the tier1, older, well-established venture capitalists look for either PhD’s or executive management backgrounds. Keep in mind that while employers are subject to equal employment and opportunity regulations, investors are not.
    On Hiring Sales

    Sales people are not the same. Business-to-business and business-to-consumers are different. You can’t interchange most sales people. B2B tend to wean the customer and build relationships because of long sales cycles and big deals. In comparison, B2C sales are more likely to have very short sales cycles. The customer makes a decision in one or two contact points. Sales people have anchor points, a price range where they are most comfortable and efficient at selling. A B2C sales person that can close deals at $1,000 will be ineffective at B2C sales of $50,000 or more.
    On Why Skilled Workers Don’t Belong in Sales

    If you are selling software, don’t put a programmer in sales. They should support sales, but don’t make them negotiate a deal. If you are selling health care products, don’t hire a nurse to sell. If you are selling education products, don’t hire a teacher to sell. The personalities of a technical skilled individual and a sales person are opposite ends of the spectrum.
    When you send in a team of people on a sales call, the least trusted by the customer will always be the person in the official sales role. The customer trusts the engineer, the programmer, or developer the most.
    On Why Sales and Customer Service Don’t Mix

    Sales people tend to be assertive. The more compensation is based upon commission and the less on base salary, the more aggressive and the better at selling. Many sales people like the thrill of the hunt. Closing the deal is like winning the trophy. Once the deal is closed, they’re done. Don’t ask them to support the customer afterwards. They don’t have the caring or nurturing personality, or the calm disposition. Many start-ups try to have their sales people do customer support as well, and it leads to disaster.
    On Why Sales and Other Staff My Not Mix Well Either

    Sales people are extroverts and aggressive. Sales is a pay-for-performance position and performance is individualized. Engineering, accounting, and other office staff tend to be introverts and far more passive. Development is collaborative and more group oriented performance. Put the two in a start-up and you may have to manage some personality conflicts in a small organization.
    In fact, sales people don’t get along with each other. Since sales is about individual performance, sales people often consider other sales people in the organization to be in direct competition with them. This can cause conflicts within an organization too.
    Caution – Sales People Sell Everyone

    Sales doesn’t stop with the customer. Sales people will try to sell you on them. It’s best to just measure performance based on actual receipts brought into the company. Ignore the excuses as to why they couldn’t close the deal or the forever optimistic view that tomorrow will be better.
    Honest Abe?

    He firmly believed and used to his advantage, the concept that verbal commitments and verbal statements are meaningless. He knew he could claim something that the prospects would rarely bother to research or thoroughly check out what he stated, and he could always respond later that they simply misinterpreted his words. He was not Honest Abe and disclosure was never full and open.
    What I learned a long time ago is I don’t have to personally like a person in order to work with them or appreciate their talents and insights.
     
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  2. KScott55

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    Wow that is a lot of great information. Thanks for taking the time to post this!
     
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  3. CynthiaK

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  4. Mike Brown

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    What a great article! Thank you for sharing. I don't often come across information that is so well informed, accurate and straight to the point. I really like the idea about targeting new or inexperienced investors, this is something only a great business mind would think of. Most people targeting investors would be spending too much time worrying about their pitch to even consider who they should target for the best chance of investment.

    Thanks!
     

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