generating sales quickly & cheaply

By Frank Demmler

In the last article, I discussed how important it is for an entrepreneur to REALLY know his market. In terms of investment, the investor’s perception of risk will be inversely proportional to his perception of your market expertise. 

In addition to the topics in the prior article, a litmus test of your expertise is your ability to capture the essence of your business in a SINGLE DECLARATIVE SENTENCE.

99 out of 100 first-time entrepreneurs will respond that that’s ridiculous, and impossible.  99 out of 100 entrepreneurs who have multiple starts up under their belts will admit that it’s a challenge, but can be done, and is one of the most important exercises that an early stage business can undertake.

This concept, with many variations, is frequently found in books and articles about entrepreneurship.  I call my particular flavor, The Declarative Imperative.

First Product Introduction

An early stage business often underestimates the cost of marketing its first product.  It often takes far more time, effort, and money than anticipated.  An early stage company with cash constraints must create sales revenue quickly.  Having an obvious and meaningful customer benefit, and being able to effectively communicate it, is essential to generating such sales.

The Declarative Imperative

An early stage company must be able to sell its product (or service) to a customer with one declarative sentence. The cost of selling increases dramatically with the length of a company's marketing message.

Customer Interaction

Interaction with potential customers for an early stage business falls into three general categories: philosophy, education, and sales.

Š      The philosopher says, "Let me convince you why our approach is correct, regardless of how you currently operate." 

Š      The educator, on the other hand, proposes to the potential customer, "Let me explain how my product or service works," often leaving it up to the customer to decide whether it has any applicability in his company. 

Š      The salesman, though, says, "Buy my product or service to solve your problem." 

Each approach may be appropriate under a given set of circumstances, but only the salesman is attempting to generate revenues.

Challenges & Responses

What are some of the challenges for a start up company presented by the Declarative Imperative?

Š      Is the basic benefit to a customer simple and clear?  While many subsidiary benefits may exist, is there an obvious one that cuts across all targeted customers?

Š      Can the benefit be quantified in a meaningful and effective way?  Examples are increased sales, reduced cost of sales, higher production output, and reduced operating costs, either directly or through specific productivity improvements.

Š      Can you identify a segment of your anticipated customers who will immediately react to your proposed benefits more strongly than others?  See the discussion of market niche in last week’s article.

This line of reasoning leads to several suggestions for first-time entrepreneurs:

Š      Focus your initial product design to deliver a few basic, important features and benefits to ease the sales burden.  Doing one thing that customers will immediately value is better than doing several things that complicates the message to your potential customers.

Š      Even with this conservative approach, you will still make mistakes. Do not over-commit to the initial product configuration (or service) or a single marketing/sales strategy until you have gotten clear market confirmation of each in terms of a growing revenue stream.

Š      If education appears to be unavoidable, devote a great deal of energy to creating and evaluating alternatives. Is there another way to “slice and dice” your market. Should you put the product on the back burner and use your technology to deliver a service? Should you mothball your company until the market catches up with you and your vision? 

Š      Above all else, be patient until you are convinced in your “heart of hearts” that the time is right.

Frank Demmler is Associate Teaching Professor of Entrepreneurship at the Donald H. Jones Center for Entrepreneurship at the Tepper School of Business at Carnegie Mellon University. Previously he was president & CEO of the Future Fund, general partner of the Pittsburgh Seed Fund, co-founder & investment advisor to the Western Pennsylvania Adventure Capital Fund, as well as vice president, venture development, for The Enterprise Corporation of Pittsburgh.