Early-Stage Startups: Your Demo Is Killing Precious Leads …
This was written more as scratch notes to explain to someone, but I hope this can be relevant to you, too.
Please note that this was written for folks targeting mid-market and enterprise, a bit less relevant for small businesses.
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Leads are an incredibly precious resource in the early days (obvious); however, they are often mistreated, albeit unintentionally.
Image Note: Each lead bucket represents buyer maturity levels (i.e., how well-defined their buying process is), which are determined by the intensity of the problem (Y-axis: Urgency), and internal education/understanding of the problem, i.e., implications if not solved (X-axis: Buyer Awareness OR Problem Awarness).
Most early-stage startups, especially those targeting up-market deals (i.e.,mid-market/enterprise), have limited inbound leads (i.e., those that fall into Buckets A and B) in the early days, requiring outbound efforts. Over 50% of outbound leads typically fall into Bucket C initially. With the right sales skills (i.e., hires) and education, Bucket C leads can be converted into Bucket B. The dotted line in the image represents this proverbial “chasm” of sorts …
Important: A demo alone will never move a lead from Bucket C into Bucket B. Many precious leads are lost when startups try to demo too soon without first helping the prospect understand the implications of solving their problem today. At the highest level, helping them understand how their problem is growing/widening every day, if not solved …
The current sales talent gap is that most reps have not been trained on the importance and understanding of turning a non-customer today into a consumer tomorrow. For example, a lead might acknowledge a problem but not feel compelled to address it immediately. This gap makes hiring inside sales reps, who typically handle inbound leads and demos (i.e., transactional-level support), highly risky for startups targeting larger customers and deal values.
Hint for converting a mid-market/enterprise non-consumer into a consumer: It should involve a visionary (i.e., founder in early days), but if not, a consultative seller. You must empower. This means pointing out symptoms, giving them a different lens/perspective to view, helping them prioritize/rank, and giving them actionable ways to measure or manually manage this problem and set up the case and proof to solve it internally, i.e., create a plan to budget a line item for in the following year OR find a way to take from the existing budget. You need to understand the problem better than they do and sell the importance/plan to their team (and eventually broader org, post land) BEFORE they buy a tool.
Another secondary takeaway or benefit of spending time on the often-overlooked Bucket C leads is that (as mentioned above) many outbound leads will fall here. AND, it is this bucket where you can often generate a higher average contract value than inbound leads in buckets A or B (reasons listed below).
Side-note: Let's face it, outbound gets a bad rep regarding the effort/lift required OR poor experience handing it over to most junior hires before it's been figured out, leading to a doughnut, BUT many tend to forget the effort/time it takes to close an outbound lead should be built into contract value and why it's best reserved for mid-market and enterprise…
You select who you target: larger, well-resourced companies (obvious).
Inside reps often resort to discounting to close inbound leads quickly, whereas with outbound leads, there is more dedication to understanding needs, etc.
Inbound leads may be too late to engage as you're simply a checkbox in their due diligence/buying process as they compare vendors — i.e. someone else educated them
Ironically, the best place to build a relationship with a lead is when they agree it's worth solving in the near future (Bucket C) — you can sell them on solving the problem before they start looking for a solution, which makes you invaluable. They are the most vulnerable here regarding intel shared and insights you collect, thus arming you to sell better than anyone else and setting the stage for larger, strategic budgeted line items.
Of course, inbound and outbound motions are critical for startups, but don't sleep on the outbound motion OR overlook the importance of Bucket C leads — they are your pipeline and $MM revenue over the next few quarters.
