Which Sales Strategy Is Best For Your Startup?

TL;DR

This video compares the strategies of top down and bottoms up sales approaches for selling products to large organizations, highlighting the advantages and drawbacks of each.

Transcript

hi my name is Pete I'm a visiting group partner at Y combinator and formerly co-founder and CTO at optimizely today we're going to talk about two different ways to sell your products to large organizations Bottoms Up and top down this is versus selling to corporate Executives it was all Word of Mouth it had spread virally let's compare the two thin... Read More

Key Insights

• 💼 Top down sales is a sales strategy that starts with targeting decision-makers in large organizations. It involves identifying leads, validating their problems, going through bureaucratic procurement hoops, signing contracts, and offering support. It works well for products that appeal to executives, but can lead to one-off feature development and the need for an expensive enterprise sales team.
• 🤝 The biggest advantage of top down selling is that there is a playbook that usually works, as long as you know your customers and their problems. Executives make great customers with better retention metrics. However, the biggest downside is the cost of scaling a sales team, which creates a floor price for the product.
• 🎯 To build a top-down sales motion, start by defining your target customers and the people in those companies who have the problem you're solving. Find leads through warm introductions or cold emailing and make personalized emails. Use tools like LinkedIn, ZoomInfo, Hunter i/o, or LinkedIn Sales Navigator for contact information.
• 👤 Bottoms up sales, on the other hand, start with individual users adopting a self-serve product without direct contact with salespeople. It requires finding a cheap distribution channel, getting lots of users, and convincing companies to sign contracts for more features or bulk pricing.
• 🚀 Bottoms up sales work well for startups that solve pain points for individuals or small teams. The products need to be easy to adopt and have the potential to spread virally within organizations. It allows for efficient sales cycles and lower prices or increased margins when prospects are already using the product.
• 💡 One key insight is that bottoms up sales often require salespeople despite the perception that they're self-serve. Products like Slack employ sales teams, but the efficiency comes from waiting for adoption before reaching out. Viral product growth is difficult to achieve and often requires finding non-obvious marketing channels.
• ⚙️ Building a bottoms up sales motion involves talking to customers and often starting with cold calling. Friction in the product experience needs to be eliminated, and landing pages and onboarding processes should be crystal clear. Instrumentation and A/B testing can help identify and fix drop-off points in the funnel. Freemium pricing can also be effective, offering basic features for free and charging for collaboration features.
• 🏢 Ultimately, whether to pursue a top-down or bottoms-up sales strategy depends on whose problem the startup is solving. If individual contributors or small teams are the primary target, bottoms up may be more effective. If the pitch resonates most with executives, top down may be the better approach.

Questions & Answers

Q: What is the advantage of using top down sales?

The advantage of using top down sales is that it follows a proven Playbook, allowing startups to eventually find customers who will pay for their solution. Once an executive's attention is captured, they usually make great customers with high retention rates.

Q: What is the disadvantage of selling top down?

One major disadvantage of top down sales is the risk of getting pulled into building custom features for large customers, which can turn into consulting relationships. Additionally, scaling a top down sales motion requires building out an expensive enterprise sales team, creating a price floor for the product.

Q: How does bottoms up sales work?

Bottoms up sales involve starting with a self-serve product that individuals or small teams can adopt without the need for salespeople. The goal is to get a lot of users through a scalable distribution channel and then convince companies to sign contracts based on the successful adoption and usage of the product within their organization.

Q: What are the advantages of the bottoms up model?

The bottoms up model is highly efficient as it allows startups to acquire leads without significant effort. When prospects are already using the product, the sales cycle becomes more streamlined and efficient, enabling companies to lower their prices or increase their margins.

Q: Can bottoms up sales work without salespeople?

While bottoms up sales aim to minimize the need for salespeople, it is rare for a company to achieve viral product growth without employing salespeople. Successful bottoms up sales still require engaging with customers, eliminating friction in the product experience, and acquiring early users through various marketing channels.

Q: How does one decide between top down and bottoms up sales?

The choice between top down and bottoms up sales depends on the target customer and the problem being solved. If the pitch resonates more with individual contributors or small teams, the bottoms up approach is likely more suitable. On the other hand, if the pitch appeals to executives, top down sales is necessary. There is no definitive answer as both approaches have their merits.

Summary & Key Takeaways

• Top down sales involves targeting decision-makers in large organizations, identifying their problem, and convincing them to sign a contract, but it can lead to customization requests and requires building an expensive enterprise sales team.

• Bottoms up sales start with building a self-serve product that individuals or small teams can adopt, finding a cheap distribution channel, and then convincing companies to sign contracts based on the successful adoption of the product by their users.

• The choice between top down and bottoms up sales depends on the target customers and their needs, with no clear winner between the two approaches.