Costs of sales, being seen and outsourcing
I’m writing this entry in Berlin where we have a booth at the DIA’s 7th Electronic Document Management Conference. Its one of those typical conferences where everyone is tied up in the conference hall and only venture forth in the coffee breaks. So you are either bored or inundated. Well, as inundated as you can be with just over 100 real delegates (ie excluding the vendors). Those of you who read my views on European shows in July’s entry may be wondering why we are attending. Good question.
Once again, it makes an interesting comparison. The cost of doing the US equivalent of this conference is about the same if all costs including travel costs, etc are considered. Yet the US conference attracts over 500 delegates! So my previous observation that European shows typically attract only 20% the number of delegates of the US equivalent is validated yet again. So, why are we here? Is it, to quote Samuel Johnson, the triumph of hope over experience? Not entirely.
Keeping the cost of sales at a sensible level is always a battle. Its not just marketing decisions such as which conferences to attend – it’s also travel decisions and sales time which need to be considered. At what stage do you visit a prospective client? Do you ever visit a prospective client? Is it an entirely remote transaction? Some are. I’ve never met some of my clients.
The internet and the whole concept of online meetings have made a real impact on the economics of the sales cycle. We are currently giving up to three remote presentations/demos a week. This allows us to get ‘in front’ of prospective clients for a fraction of the cost of a standard onsite presentation/demo. However, the problem is, of course, that you are not actually ‘in front’ of the prospective client. You are just a voice down the phone line. Therefore it is important to get ‘face-to-face’ time and attending conferences is one way of achieving this. It provides the opportunity to meet people face-to-face. Existing clients, prospective clients and partners are all in the frame. So, even if the conference is not a success in terms of new leads, it is necessary to see and be seen.
Sales costs can typically be up to 60% of a software company’s cost base. Therefore containing sales cost is imperative. It is, of course, a false economy if the result is a significant loss of sales. Getting the balance right is crucial. Unless we are in the vicinity of a prospective client’s site, when the incremental cost of the visit is minimal, we will initially aim to promote ourselves through remote presentations/demos.
Part of the equation is, of course, the fact that the US dollar is extremely weak at the moment. The £ is the highest it has been against the US$ for over 14 years and it’s heading for $2 per pound. This makes the cost of exhibiting and marketing in the USA appear relatively cheap but the corollary is that it has nasty impact on our revenue which is primarily in US$ - every $ of revenue is bringing in less pounds. Our cost base is primarily in UK£. There is nothing we can do but grin and bear it, keep our cost base tight, and hope that the sunlit uplands of a return to the days of a strong $ are not too far away.
So when it comes to the need to increase our testing resource, keeping a lid on costs is a key consideration. Thus we decided to look at outsourcing the testing. It’s not a particularly onerous requirement. It simply needs someone to physically run our test scripts against the software which is on our test servers. The only real infrastructure requirements are a PC with a broadband connection. When outsourcing comes to the fore, India comes to mind. However, as I have personal connections in Malaysia it also seemed sensible to consider Malaysia.
So we followed the classic approach and developed a requirements document. We were certainly not planning to go ‘big bang’ and were interested in obtaining one or two additional testers for a month or so as we built up to our next release. Our view was that, if the initial trial worked out, we would then build upon the requirement.
Well, it’s been an experience. Our mistake, if we made one, was to post the requirement on a free offshore outsourcing buyer’s portal. Not only do we seem to have every sourcing company in the world interested, we have been subjected to every type of sales approach the world has to offer.
Now, let’s be clear here, some people/organizations have been highly professional and impressive. However, others have left a bit to be desired. Let us look at some of the examples which would probably feature in any ‘how not to sell’ course:
One email from a sales guy started with: “I had a detailed discussion with our Head - Testing Team, and to my surprise he's interested in pursuing this opportunity.” Well that inspires confidence doesn’t it?
Clearly, there are some who passionately believe that launching into a long winded sales pitch is the best way to get their message across - even when they have been told that ‘now is not a good time’. When I call prospective clients only to find they are in a meeting, I do not take it as the ideal opportunity to launch into my full sales spiel – not that I have a full sales spiel. So, here’s a hint chaps – when a prospective client says ‘now is not a good time’, it’s your cue to say ‘Sorry, I’ll get back to you’ and then send them an email. I really didn’t like being rude so apologies to the guy who was in full flow when I put the phone down. In my defense I had just said ‘I’m sorry I’m in a meeting and now is not a good time’. Conversely, of course, if a prospective client calls you it’s always a good time!
Having mentioned in this post the need to contain costs, I have some sympathy with those wanting to use Skype-out or equivalent VOIP services to contain the cost of phone calls. However, the quality is simply not good enough and, while we use Skype every day for internal use, I would never use it in a client contact situation due to the drop outs, delays and the times it goes ‘wobbly’. Trust me, a full flow sales spiel delivered down a bad VOIP connection is not the way to sell your services.
Others clearly wanted us to outsource our entire development effort - ignoring the fact that we had gone to the trouble of creating a statement of requirements. Yes, we know the requirement is small. Please don’t try and talk us up – just tell us that it’s too small for you and leave us in peace!
Others clearly believe that it’s not the quality of the response but the quantity. Oh dear! What is even sadder is that somewhere in the quantity may well be quality but it’s well hidden.
At the end of the day, there is nothing like a succinct email which addresses the requirement, states the ballpark cost and attaches basic back-up material. I’m pleased to say that it looks like we have found a testing resource with which to move forward and experiment with outsourcing some of our testing – watch this space!
Once again, it makes an interesting comparison. The cost of doing the US equivalent of this conference is about the same if all costs including travel costs, etc are considered. Yet the US conference attracts over 500 delegates! So my previous observation that European shows typically attract only 20% the number of delegates of the US equivalent is validated yet again. So, why are we here? Is it, to quote Samuel Johnson, the triumph of hope over experience? Not entirely.
Keeping the cost of sales at a sensible level is always a battle. Its not just marketing decisions such as which conferences to attend – it’s also travel decisions and sales time which need to be considered. At what stage do you visit a prospective client? Do you ever visit a prospective client? Is it an entirely remote transaction? Some are. I’ve never met some of my clients.
The internet and the whole concept of online meetings have made a real impact on the economics of the sales cycle. We are currently giving up to three remote presentations/demos a week. This allows us to get ‘in front’ of prospective clients for a fraction of the cost of a standard onsite presentation/demo. However, the problem is, of course, that you are not actually ‘in front’ of the prospective client. You are just a voice down the phone line. Therefore it is important to get ‘face-to-face’ time and attending conferences is one way of achieving this. It provides the opportunity to meet people face-to-face. Existing clients, prospective clients and partners are all in the frame. So, even if the conference is not a success in terms of new leads, it is necessary to see and be seen.
Sales costs can typically be up to 60% of a software company’s cost base. Therefore containing sales cost is imperative. It is, of course, a false economy if the result is a significant loss of sales. Getting the balance right is crucial. Unless we are in the vicinity of a prospective client’s site, when the incremental cost of the visit is minimal, we will initially aim to promote ourselves through remote presentations/demos.
Part of the equation is, of course, the fact that the US dollar is extremely weak at the moment. The £ is the highest it has been against the US$ for over 14 years and it’s heading for $2 per pound. This makes the cost of exhibiting and marketing in the USA appear relatively cheap but the corollary is that it has nasty impact on our revenue which is primarily in US$ - every $ of revenue is bringing in less pounds. Our cost base is primarily in UK£. There is nothing we can do but grin and bear it, keep our cost base tight, and hope that the sunlit uplands of a return to the days of a strong $ are not too far away.
So when it comes to the need to increase our testing resource, keeping a lid on costs is a key consideration. Thus we decided to look at outsourcing the testing. It’s not a particularly onerous requirement. It simply needs someone to physically run our test scripts against the software which is on our test servers. The only real infrastructure requirements are a PC with a broadband connection. When outsourcing comes to the fore, India comes to mind. However, as I have personal connections in Malaysia it also seemed sensible to consider Malaysia.
So we followed the classic approach and developed a requirements document. We were certainly not planning to go ‘big bang’ and were interested in obtaining one or two additional testers for a month or so as we built up to our next release. Our view was that, if the initial trial worked out, we would then build upon the requirement.
Well, it’s been an experience. Our mistake, if we made one, was to post the requirement on a free offshore outsourcing buyer’s portal. Not only do we seem to have every sourcing company in the world interested, we have been subjected to every type of sales approach the world has to offer.
Now, let’s be clear here, some people/organizations have been highly professional and impressive. However, others have left a bit to be desired. Let us look at some of the examples which would probably feature in any ‘how not to sell’ course:
One email from a sales guy started with: “I had a detailed discussion with our Head - Testing Team, and to my surprise he's interested in pursuing this opportunity.” Well that inspires confidence doesn’t it?
Clearly, there are some who passionately believe that launching into a long winded sales pitch is the best way to get their message across - even when they have been told that ‘now is not a good time’. When I call prospective clients only to find they are in a meeting, I do not take it as the ideal opportunity to launch into my full sales spiel – not that I have a full sales spiel. So, here’s a hint chaps – when a prospective client says ‘now is not a good time’, it’s your cue to say ‘Sorry, I’ll get back to you’ and then send them an email. I really didn’t like being rude so apologies to the guy who was in full flow when I put the phone down. In my defense I had just said ‘I’m sorry I’m in a meeting and now is not a good time’. Conversely, of course, if a prospective client calls you it’s always a good time!
Having mentioned in this post the need to contain costs, I have some sympathy with those wanting to use Skype-out or equivalent VOIP services to contain the cost of phone calls. However, the quality is simply not good enough and, while we use Skype every day for internal use, I would never use it in a client contact situation due to the drop outs, delays and the times it goes ‘wobbly’. Trust me, a full flow sales spiel delivered down a bad VOIP connection is not the way to sell your services.
Others clearly wanted us to outsource our entire development effort - ignoring the fact that we had gone to the trouble of creating a statement of requirements. Yes, we know the requirement is small. Please don’t try and talk us up – just tell us that it’s too small for you and leave us in peace!
Others clearly believe that it’s not the quality of the response but the quantity. Oh dear! What is even sadder is that somewhere in the quantity may well be quality but it’s well hidden.
At the end of the day, there is nothing like a succinct email which addresses the requirement, states the ballpark cost and attaches basic back-up material. I’m pleased to say that it looks like we have found a testing resource with which to move forward and experiment with outsourcing some of our testing – watch this space!
posted by David Cornwell, PleaseTech Ltd at 8:36 PM
0 comments
