Frictionless Sales (continued)

As you know, I am enamored by frictionless sales.  Frictionless sales means reducing the pain for customers to adopt and use a service/product and consequently reducing the cost of sales and marketing to get a customer and generate revenue.  As I mention in an earlier post, "The less friction you have in your sales and delivery model, the easier it is to scale. The easier it is to scale the faster and more efficiently you can grow." The lowest friction sale can be a user clicking on a web page and the content owner getting paid for it.  The highest friction sale is spending lots of money on marketing and trade shows and having a large, direct sales force of expensive reps pounding the pavement for months trying to close a large deal with an enterprise customer.  Follow that with a 3 month implementation process to get the customer happy.  There are various grades of friction between these two extreme points like open source business models, software as a service, and reseller/OEM-type models as other forms of packaging and delivering a product/service.  And of course, each of these models requires a different methodology and way of marketing and selling to a customer.  Ultimately what you want is sales leverage where every $1 you spend on sales and marketing equals multiples of that in terms of revenue.  Jonathan Schwartz has a great post on why Sun went open source and why free does not mean less revenue but more revenue.

Opening up the Solaris Enterprise System, and giving it away for free, lowers the barrier to finding those opportunities. Free software creates volumes that lead the demand for deployments - which generate license and support revenues just as they did before the products were free. Free software grows revenue opportunities.

Opening up Solaris and giving it away for free has led to the single largest wave of adoption Solaris has ever seen - some 3.4 million licenses since February this year (most on HP, curiously). It's been combined with the single largest expansion in its revenue base. I believe the same will apply to the Java Enterprise System, its identity management and business integration suites specifically. Why?

Because no Fortune 2000 customer on earth is going to run the heart of their enterprise with products that don't have someone's home number on the other end. And no developer or developing nation, presented with an equivalent or better free and open source product, is going to opt for a proprietary alternative.

Those two points are the market's reality. And having reviewed them today at length at a customer conference, with some of the largest telecommunications customers on earth, I only heard the strongest agreement. They all, after all, are prolific distributors of free handsets.

Betting against FOSS is like betting against gravity. And free software doesn't mean no revenue, it means no barriers to revenue. Just ask your carrier.

To further add to his point, just because it is free does not mean it is frictionless.  It has to be easy to install and easy to use.  In addition, free can be time based or feature-based.  What free means is lowering the barrier for a customer to use and love your product.  It means more qualified leads and a shorter sales cycle.  It means a lower cost of doing business-lower sales and marketing and lower implementation cost.  It means a more capital-efficient business.  The great news is that when the more established vendors like Sun jump on this bandwagon and educate their customers, it only further legitimizes this way of doing business for many a startup.

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This post was written by who has written 358 posts on BeyondVC.

5 Responses to “Frictionless Sales (continued)”

  1. Daniel Nerezov Dec 8, 2005 at 11:04 am #

    I think the arguments here are very sound.

    Great post Ed! I will implement your advice when we launch our entreprise product.

  2. Charlie Crystle Dec 8, 2005 at 7:28 pm #

    Value perception matters, too, and any model with free needs to have some low-friction way to monetize. We’ve adopted a “first one’s free” model and our base has shot up dramatically, with the knowledge we’ll roll out our subecription-based web services in January. But we know that some prospects didn’t buy because they perceived the software as less valuable because of free. I’m fascinated by free, and obsessed with removing sales obstacles and friction in the sales process. It depends on the market of course, but value perception can be eroded if free isn’t handled properly. I do disagree with one point: it doesn’t necessarily mean shorter sales cycles or lower cost of sales. Our sales cycles have remained steady since we started the program. And, interestingly, our sales jumped.

  3. jordy Dec 9, 2005 at 7:21 pm #

    I think that one of the biggest reasons to use open source software is its capability of providing a *frictionless future*. It’s not just about getting people to use your software now (although that’s extremely important), but being able to assure them that they won’t be locked in to a proprietary solution. A frictionless future means avoiding vendor lock in.

  4. Justin Sullivan Dec 11, 2005 at 9:50 pm #

    I think you make an interesting point about the most friction-filled sales model being the traditional enterprise sales approach of hiring a sales force for big dollars, generating leads from trade shows, etc.

    Back in the day, I sold for EMC, which had (and continues to have) the most aggressive, go-for-the-throat sales culture out there, and it works. The interesting thing is that so many startups trying to sell into the enterprise take the same high-friction approach. I’ve worked with 2 startups (both with CEOs who had a pretty darn good pedigree) and neither could understand that you can’t out-EMC EMC.

    When you’re trying to sell a six-figure solution to an enterprise, there is no way to avoid friction…but paying a good sales guy a $100k base to cold call accounts is definitely not the answer, and neither is having a know-nothing telemarketer pounding the pavement for you.

  5. Rich Mar 23, 2006 at 4:52 pm #

    I prefere to calculate my profit taking world known prices into consideration.

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