Growth Hacking Free Trials: Time to Wow! is the key to success

This article is part of a series titled “The Art & Science of Growth Hacking” that will be published over time. My thanks to Gail Goodman, the founder and CEO of Constant Contact for introducing me to this concept.

Free trials and freemium products are two of the best ways to sell your product. They help the buyer address key concerns such as:

  • Will this actually work in my particular situation?
  • Will I get enough value to make the effort of using it worthwhile?

For a buyer, being able to get this level of proof is far better than having to trust what a web site or sales person has told them. Think about how you buy a car. How important is it to you to test drive the car before you part with tens of thousands of dollars?

Free trials (and freemium) also have another huge benefit for SaaS and consumer internet companies: the buyer does most of the work of selling themselves. If you have read any of my previous posts on the importance of CAC (Cost to Acquire a Customer), this can be a very powerful way to reduce CAC.

What is Wow!

Wow! is the moment in a free trial where your buyer suddenly sees the benefit they get from using your product, and says to themselves “Wow! This is great!”.  It’s also the moment where you have converted them into a fan who is likely to buy.

If you’re going to use free trial (or freemium) as a key part of sales funnel, it pays to understand exactly where in the free trial experience your buyer says “Wow!”. Then you will want to focus on the following set of questions:

  • How long does it takes to get to Wow!? (Time to Wow!)
    • Can we shorten the number of steps required to get to Wow!
  • What is the drop out rate of trial users on their way to Wow!?
    • Which step in the process has the highest drop out rate?
    • Why are users failing at that step, and can this be addressed?
  • Is the Wow! moment clear and strong enough?
    • What is the Wow! to Work Ratio?
  • Are different buyers interested in seeing different Wow! moments? (This is often the case in a product that has several modules.)
  • Are we providing the buyer with clear guidance on how to get to Wow!?

Let’s look at these in a bit more detail:

Identify Wow! for your buyer

Do you know what is Wow! for your product/service? It’s not always that obvious, and may require some thought. One way to figure this out is to demonstrate your product to a series of buyers in person, and ask them to tell you what was the moment when they got excited, and why.

Sometimes Wow! may be less about generating excitement, and more about providing them with the proof points needed to feel comfortable making a purchase. But If there is no point in the demo where anyone gets excited, I would recommend going back to the drawing board to design a feature that will clearly delight your buyer. This could take the form of a really easy way to do something that today requires a lot of effort. Or it could take the form of a graphical representation of their data that suddenly gives them new insight. etc.

With some products, it can vary for different buyer types. We’ll address that later in the section on “Different Wow! moments for different buyers”.

Sometimes the initial Wow! moment will get them excited, but to fully complete the trial to the point where they are ready to purchase, there may be additional features they need to see. We need to identify these and make sure that they are easy to get to in the trial.

Time and Work required get to Wow!

Now that we understand the importance of Wow!, we’re going to want to work on reducing the time and effort it takes for the buyer to get to that moment. One of the most valuable things you can do is diagram out those steps, as your free trial is like a micro-funnel where where people starting the free trial will drop off at different stages.

As an example, Imagine that you are working at LinkedIn in the early days, and you are designing the flow for a trial for a sales rep:

image

 

I cannot over-stress the importance of this diagram. I love working on startup funnels helping entrepreneurs improve them. And typically the the first thing I do is draw out the steps in the funnel with them. It’s surprising how often it takes a bit time and work for them to layout these steps. Everyone starts off sure that they know the steps, but when it comes time to draw them, there is often discussion required and redrawing as different people add their views. Then once the steps are up on the whiteboard, something magical happens: without me prompting, they start to realize how they can improve the funnel. The diagram acts as a strong catalyst for creative brainstorming. Ideally the diagram should stay up all the time on a large whiteboard because of this effect.

Now that we have the diagram, we can see how many steps it takes to get to Wow!, which is a catalyst for thinking about how to reduce those steps. We’re also going to want to understand the how well this micro-funnel is working, which means instrumenting the application to gather some metrics.

Instrumentation and Metrics

There are two metrics that we need to understand how buyers are engaging with the trial, and where they are dropping off: Flow (number of users at each stage) and Conversion Rate. We need those for each step in the trial, as well as for the overall trial.

image

As you see above, the best way to look at these metrics is with a graph that shows how things are evolving over time.

(We may also want to measure engagement with the trial, as well as the business outcomes that the user is experiencing. For more on this topic, see Manage Customer Success to Reduce Churn.)

Blockage Points

image

It’s highly likely that there will be places in the funnel where you’re seeing a lower conversion rate than you’d hoped for. Going back to the LinkedIn theoretical example, there are two places in this flow where the metrics indicate issues:

image

 

I have developed a simple methodology for looking at these blockage points that helps trigger brainstorming on how to fix the problems. It involves looking at the two factors that stop people from moving through a particular step: Friction and Concerns, and the one thing that can pull them through a hard step: Motivation / Incentives. Using the ‘Import Contacts’ step in the LinkedIn trial as an example, let’s look at the friction and concerns in this step:

image

If we look at the original LinkedIn step for Importing Contacts for users of Outlook and Exchange, it involved downloading and installing an app to grab your contacts out of Outlook and send the back to LinkedIn:

image

 

As you might imagine, there is a ton of friction involved in getting a user to download and install an app. And in many companies, Windows would be locked down to prevent users from accidentally installing malware. So to  get them through that step, we need to remove the friction. One way you might imagine doing this would be to simply ask the user for their Exchange login credentials, and then connect directly to Exchange to grab those contacts. However, while that removes the friction, it creates a new concern: “if you have the password for Exchange, you could read my emails, and I have lots of private and confidential emails”.

image

So we have to address that concern. This might best be done by putting up a message as part of the dialog box to assure the user that you are storing their credentials in a highly secure fashion, and that no-one will never look at their emails.

image

(Note: this is the real LinkedIn screen – so the incorrect wording in the sentence is their mistake.)

 

But in the new era of Smartphones, we could take this a step further: on iOS and Android, they will have already connected their phones to Exchange, and those contacts will be sitting on the phone. So all that is needed is to ask them to install LinkedIn on their smartphone and connect it to Contacts. That is pretty low friction, and eliminates the concern completely.

A Different Example

To give another illustration, TribeHR, a SaaS human resources application started off by requiring their trial users to import their own data into the system. That turned out to be a high friction step. They solved the issue by providing a set of sample data that the trial user could play with, to see how things worked before going through the effort of importing their own data.

Studying Motivations – Behavioral Economics

If there is no way to remove the friction, or fully address the concerns, we need to look at the other side of the equation: what are the users incentives, or motivations to pull them through doing the step regardless of the friction or concerns. If there is a big prize for them when they complete the step, they will have adequate motivation. Think of yourself as a Behavioral Economist, looking at how human behavior is impacted by incentives. Ask yourself, is the Wow! powerful and exciting enough to pull them through the work you are asking them to do. Brian Halligan, the CEO of HubSpot has a great way of asking this: “Is your Wow! to work ratio high enough?”

 

image

 

If you know the end result of the trial is something of great value to the user, you may want to provide them with a message like “You’re almost there. This is the last step before you get to see the finished dashboard”, and include a small picture of what a typical finished dashboard looks like. This can improve the motivation of the user to get through that last step.

Re-think the process and put Wow! first

In the above LinkedIn example, there might be an even smarter way to go about this free trial: instead of asking the user to sign up, and fill out a profile, why not simply give them access to the Search report that will give them the Wow! moment before they sign up? Most marketers hate to do this, as they are desperate to capture at least the users email address. But if you A/B test this against the other approach, you can find out clearly if you get a higher number of completed sign ups with the new process versus the old. My bet is that this approach will lead to a higher overall conversion rate.

image

Think about how many bad sign up forms you have abandoned trying to get access to some system.

If you really have to get some information before a trial, keep the fields to a minimum, and get the rest of the information later, after the user has gone through the Wow! moment and seen some value.

Guiding your users to Wow!

One of the best ways to improve the free trial experience is to provide the user with a guided experience, where the product leads them through the steps. (There are SaaS tools out there that make it easy to add this to your application.) Also providing a “% completed” graphic acts as a gamification-type motivator to complete all the steps. Don’t forget to also offer a way out of the guided experience for those who want to look at the product in their own way.

Different Wow! moments for different buyers

Think about a product like LinkedIn. It has many different kinds of users: recruiters, sales people, individuals wanting to get hired, etc.  For each of these, what it takes to get them to say Wow! will be different. Make sure you know the Wow! moment for each of your key persona, and don’t forget to diagram the flow of steps needed to get there.

In this situation, it can be useful to provide the user with an easy way to identify themselves at the beginning of the trial, and then lead them through a different guided experience.

Using In-App messages and emails to increase Trial Conversion Rates

After the initial guided tour, the user may have several more days in which they experiment with the software. In these situations, your hardest problem is to get them to come back to the trial to re-engage. One of the proven ways to solve this is to send them emails that remind them to come back. The more personalized information these emails contain, the better the chances are for success.

For those that do come back, you may see them doing a few things right, but missing out on some of the other things that you know are key strengths in your product. In these situations it can be a good idea to use in-app messages such as: “You might want to try out the XYZ module which provides the following business benefits. Watch this video for a guided tour.”

The key to building this kind of intelligent and personalized interaction is tracking app usage on an individual user basis.  Many of the Customer Success apps like Gainsight, Totango, etc. provide this kind of tracking.

Using a Customer Success Team to increase Trial Conversion Rates

Another key technique worth testing is to use a customer success person to connect with customers (either by email or phone) to help guide them through the trial. Even though this adds considerably to the cost of customer acquisition, the improvement in conversion rates can make it worthwhile in many cases. This is easy to figure out using A/B testing to see the comparative increase in conversion rates justifies the cost.

For the person doing these calls, tracking customers usage of the app will tell you which customers need help, and what kind of help.

If you are going to use this technique, it is very important that the buyer does not think that this person is a sales rep. There is a strong built in resistance to talking with sales people at this stage of the buying process. That’s why you see names for these people like Guides, Sherpas, etc.

Here’s another useful tip: a good way for a customer success person to open a conversation with a customer is to ask them “What was the business objective you were hoping to achieve using this software?” Sometimes the answer to this question is not what you’d expect, and it allows the customer success person to figure out how to best demonstrate that the product can fulfill their specific needs. With this question, the customer is effectively telling you what Wow! looks like for them.

Triggering Creative Brainstorming

Many times I have found that simply writing down the friction, concerns and motivations for any broken step, will trigger the right brainstorming to solve the problem. It focuses the attention directly on where the problem lies. For more on how to use this technique, see this article: Optimizing your Customer Acquisition Funnel.

Conclusion and more on Growth Hacking…

Hopefully the above methodology will help you with growth hacking your free trials. If other readers have experiences that are helpful in this discussion, I would love to have you add your thoughts in the comments section below.

As I mentioned at the start, this is one of a series of articles on Growth Hacking that I will be publishing. Growth Hacking has become extremely popular with tech startups recently. Although the term is new, many of us have been practicing the concepts involved for years. Some believe that Growth Hacking is simply a new term for marketing. Others believe it is the job of the Product Manager. My own view is that Growth Hacking is about breaking down the silos between marketers, product managers,and developers to maximize the flow of leads and the conversion rate of those leads. It is also about using data at every step to understand what is going on, and sometimes incorporates new skills such as viral marketing, and data science.

image

If you are interested in learning more, sign up to receive emails when future articles are published.

Be Sociable, Share!

About 

hubspot-cta-2
  • http://trilloclass.com/ chrispa

    at the risk of a bad pun, wow! – great post!

    Do you recommend structuring your free trial length around the ‘wow’ moment? For example, if I have a 3 week trial, but can get my prospects to wow in 3-5 days, should I consider reducing my trial length?

  • http://www.forentrepreneurs.com David Skok

    In some situations there is more work needed to fully convince the buyer after the Wow! moment, which could require a longer trial. But if you think that they have all the information they need to figure out if the system works well enough to buy in that time, I would try shortening the trial period to two weeks, then to one week, and measure your conversion rates for all of those. Then pick the option that has the highest conversion rate. Best, David

  • http://www.dougjq.com/ Douglas Quattrochi

    I like the idea of diagramming the process. Very helpful article, as always. Thank you!

  • http://trilloclass.com/ chrispa

    Thanks – makes sense, and definitely something to test. I appreciate the reply!

  • Ross

    Great post! The diagram is great – it forces so much clarity. If you’re good enough to find the WOW moment – you should look to turbocharge it with a discount to sign up immediately at that point. Its tougher to implement, but it can act like liquid plumber in your funnel and preclude any exits further down. Obviously, you need to do some cost/benefit analysis on this, but its worth adding I think. Keep up the great posts!

  • http://sixteenventures.com Lincoln Murphy

    I look at Free Trial length as simply a marketing gimmick; it has to be long-enough to make the prospect think they’ll have time to fully evaluate my solution, but still give them some book-ends on it.

    Too many SaaS and software vendors buy into the free trial length themselves… if they’re not converting enough people on a 30-day trial, it has to be the fact that “we’re giving them too much time” … and when they reduce the time to 14 days – for example – a strange thing happens; the vendor often works HARDER to convert the prospect because they have less time.

    It’s not the trial length that matters… it’s how hard the vendor works to convert – or worked to design a process that converts – prospects into customers.

    No matter how long your Free Trial is, you should always work to convert prospects to customers as quickly as possible. I have a client that took their average conversion time on a 30-day free trial from 42 days (yes +12 days after the trial expired) to 3 days.

    And they did that by combining the “Wow!” moment thinking presented in this post with my Common Conversion Activities (CCA) metrics. Meaning, the Free Trial was designed to get them to complete a set of activities – CCAs – that most people that become paying customers also do (this generally extends across several Wow moments).

    And when they complete the CCAs, we make them an offer to become a paying customer. Simple. On average, that now occurs on day 3 days of the Free Trial, even though “technically” there are still 27 days left in the trial.

    That’s just how I look at things, though.

  • http://sixteenventures.com Lincoln Murphy

    We’ve tested lots of different ways to “turbocharge” this process, as you say.

    Discounts are one, but I’d be careful about immediately going there, and here’s why.

    Done correctly, you may not need to offer a discount. If someone has reached that “Wow” moment (or completed the Common Conversion Activities – CCAs – as I call them) they are invested… they’re bought in to a certain extent. If you simply ask for the full-price sale at this point you are probably pretty likely to get it.

    Unfortunately, most SaaS vendors – I think it’s safe to say most – do not ask for the sale at this point – or ever – during a Free Trial. If they do, it’s after the trial expires.

    Don’t be like most SaaS vendors.

    Now, obviously there are a lot of factors at play here so your mileage may vary, but the logic is sound.

    And if you do offer a discount, again, understanding that they’re “bought in” through their actions, resources, time, energy, emotions, etc. (everything but money at this point), instead of a discount offer on the plan they originally signed-up for, offer them a discount on a the next-highest plan… that’s how you use discounts to *grow* LTV rather than shrink it to fast-track a sale.

  • http://thelifester.com/ Ritu Ashrafi

    Awesome article and EXTREMELY helpful. Took me a bit too long to read it but happy that it was all on one page. Thanks David.

  • http://www.forentrepreneurs.com David Skok

    Lincoln – great advice! Thanks for adding. Sounds like you’ve had some valuable experiences where you have helped SaaS vendors ask for the order during the trial and seen success?

  • Eric Schurr

    This post is great and I sent it to my entire marketing team. Most marketers intuitively want to reduce friction and concerns, but they don’t have a method for analyzing it. The simple approach described in this post provides that framework. It also touches upon a common topic of debate with sales teams: how much data do you capture about the prospect and when. I’ve often tried to persuade sales teams to let the marketing team gather a minimum of information at the outset of a “free thing” so we can cast a wide net initially and refine it later, but most sales teams insist on more information up front because they need it to route the lead to the right rep or qualify the opp. All of this is part of a longer topic about how much info to gather and when (another blog post, David?).

  • http://www.forentrepreneurs.com David Skok

    Lincoln, I 100% agree with your advice below. It’s clearly an important additional element to this article that should have been part of the original. Thanks for adding.
    As you point out, the key here is designing a process that clearly addresses all the elements that are needed to get the customer satisfied that the product works. This is likely to take some experimentation, with the customer success reps communication with the customer helping to figure out when you have this right.
    In your experience, is it best to have a salesperson calling to ask for the order, as opposed to the customer success person?
    (If you’ve written about this on your blog, please add the link to those posts.)

  • http://www.forentrepreneurs.com David Skok

    Great point Eric. There is a lot of tension always around this topic. I fall strongly in the same camp as you for the initial contact with a prospect, i.e. cast the widest net possible. Then if you have an expensive resource like a sales person later in the process where you have to worry about cost of them spending their time on unqualified leads, marketing needs to find a way to develop enough of a relationship with each lead so they can collect more information to qualify them better before handing over to sales. Sometimes this is best done by having an inbound lead qualifying person that talks to each customer to learn if they meet the criteria that sales will accept from marketing. As I believe most readers will know this is typically called a Marketing Qualified Lead, or MQL for short. And the qualification criteria are usually budget, authority and need, and timing, sometimes referred to as BANT.

  • http://www.getamity.com Paul Philp

    David,

    Excellent post. I am sending it to all our customers with strong recommendation. I love the ‘Work to Wow’ ratio. The diagramming approach is a powerful and practical version of the ‘journey mapping’ technique from Customer Experience Management. Much more accessible for busy SaaS executives.

    The strategies for delivering that Wow! experience will vary with product complexity, business model and value proposition. Of course, the product is always the best salesperson (as long as it asks for the sales – Lincoln). With the possible exception of Box and Dropbox levels of scale, we have found that part of the Wow! experience also comes from adding person-to-person communication early in the process. “I can trust these people” is part of the experience when there is any level of complexity. Establishing a mutual focus on the customer’s desired outcome can make the difference.

    The trick is doing this at scale without driving your CAC too high. We will need better tactics than drip campaigns and pre-canned messages over time.

    Paul

  • http://www.channeltivity.com JasonDJacobs

    Great article as always David. One of the things that has helped us increase free trial conversions significanlty is putting off the shelf analytics and live chat into our application. We can observe behavior, measure engagement and be there to answer questions and steer them to the WOW.

  • http://www.forentrepreneurs.com David Skok

    Thanks for your input Paul. Always helpful and value-added.

  • http://www.forentrepreneurs.com David Skok

    Jason, Thanks for the tip about Live Chat. Of course that makes sense!

  • Kim

    I agree with chrispa. Wow! This isn’t your average post. Subscribing now :)
    Question…you mentioned in the “Guiding your customers to Wow!” section that “There are SaaS tools out there that make it easy to add this to your application.”

    Would you mind recommending a few?

  • http://sixteenventures.com Lincoln Murphy

    And you bring up a great point… we’re unlikely to get any of this perfect out of the gate.

    My goal, however, is to make sure we get it as right as possible, and I do this by focusing on the customer journey throughout the process and understanding 1) what a successful Free Trial actually looks like for them and 2) what actions they need to take to become sufficiently invested that converting to a paying customer is the most logical next step.

    As for who should reach out and ask for the sale, it totally depends.

    But that’s not a cop out – it really does depend, especially since most companies implementing Customer Success initiatives are doing so in organizations with established structures, silos, and attitudes.

    I happen to think that sales should bring in new customers, Customer Success should be responsible for ownership of the customer after the deal is closed (with a nice, warm, and orchestrated hand-off), including implementation, on-boarding, and expansion (up-sell, cross-sell, etc.).

    I also believe Sales should be compensated fully only upon a clearly defined on-boarding/engagement metric (rather than just closed sales/bookings), upon which Customer Success is also compensated/rewarded as that incentives everyone to work toward the same goal.

    I’ve seen companies where Sales folks were also “Account Reps” and “owned” implementation, but were compensated only on closed deals… so they spent their time hunting new deals while the pipeline of customers to implement kept getting longer. They got paid, but the company couldn’t recognize revenue from those customers and of course, the customers couldn’t recognize – or realize – value from the product they already paid or contracted for.

    That all said, I go into some detail on the organizational issues with creating that demarcation point between Sales and Customer Success – and why for practical reasons, what I just described isn’t always possible – due to the legacy issues present in existing companies. I think as more early-stage startups build organizations around Customer Success – rather than tacking it onto existing companies – these “best practices” will be more easily leveraged and, obviously, will evolve in ways we just can’t foresee at this point.

    http://sixteenventures.com/customer-success-definition

    Thanks for providing an awesome catalyst and forum for these discussions, David.

  • http://sixteenventures.com Lincoln Murphy

    A lot of folks mistake friction or artificial barriers like requiring lots of information up-front as some type of “qualification” process, but that’s not reality. Often, it just keeps out those that don’t have time to mess around or are turned off by too many questions up-front… and those people may be very qualified.

    I often have to remind SaaS companies I work with – self-service and those with high-touch sales processes – that we need to work on ways to get more people INTO your sales funnel, not keep them out.

    And since we can do so much off of even just an email address, we should reduce the amount of information required to get started and build the prospect profile over time.

    To David’s point, about MQLs, the power of just an email address in 2014 is amazing.

    We can take that email address, pull in personal info from external data sources, then backfill company information based off that, and even pull in other 3rd party information that helps paint a better picture of their company in the context of our product. For instance, I could pull in other software they use, their website statistics, their competitors, any M&A/legal activity with the company or their competition, etc.

    Then I could that new “lead” against an internal scoring process, like an Ideal Customer definition to see how they stack up.

    And I could continue building the profile based on their actions and activity on the marketing site & in the Free Trial, as well as from communicating directly with the prospect through in-app messaging/chat, email follow-up, their support questions, etc.

    Perhaps you decide that a lead isn’t qualified (an MQL) and therefore isn’t turned over to sales – or flagged for human outreach – until they’ve reached certain milestones within the Free Trial.

    Ultimately, all of this requires that trust between Sales and Marketing and that, for some weird reason, seems to be the sticking point in a lot of companies… not just SaaS.

    In SaaS – and any business, really – the technology is the easy part. It’s everything else – especially organization-level issues – that will bring you down or at least slow you down.

    Organizational alignment and an understanding that we’re all moving toward the same goal is huge.

    As a way to get started, you could begin backfilling/appending data and letting Sales have access to that… then they’ll see how potentially powerful that is.

    I’d also start scoring leads on your own and when you get to a point that you’re having success in predicting who closes, take that to Sales and show them how accurate the scoring system is… maybe they’ll buy-into it at that point.

    Or not… just some thoughts.

  • Kim

    Hi Lincoln,
    You mentioned you can take just the email address and pull in personal info from external data sources, including other software they use, web stats, competitive info, etc. Will you share some tips on how to do that, with what tools, etc? Btw, I follow your blog too :) Kim

  • http://sixteenventures.com Lincoln Murphy

    Sure thing… here’s a post where I talk about using email addresses for “pre-targeting” prospects to warm them up before you send them an email:

    http://sixteenventures.com/saas-growth-hacking-email

    In that post, there’s an embedded presentation from SlideShare that gives a bunch of resources for doing what I said in my comment above. One that’s not on the list that is relatively new and that I’ve used a lot in the past month or so is StackLead (no affiliation, I just like what they’re doing). They put together a Google Spreadsheet so non-programmers can really see the power of their product… here’s the post where they tell you how to make that work. http://stacklead.com/blog/hacking-the-email-spreadsheet/

    Hope this helps.

  • Kim

    Thanks Lincoln. Funny, I’ve actually read that post of yours before but completely forgot about it. Thanks for sending it. Stacklead does look interesting. I’ll look into it more.
    Thanks again!
    Kim

  • http://www.forentrepreneurs.com David Skok

    Lincoln, your comments, as always add a ton of value. Thanks for contributing your wisdom.

  • http://www.forentrepreneurs.com David Skok

    Hi Kim, Thanks! One company I looked at was called Walk Me: http://www.walkme.com/. There was another in Toronto, but I can’t remember the name.

  • Kim

    Thanks for the response David! I’ll check out Walkme.

  • Storewars News

    Interesting article! Here is something equally
    interesting: Dubai’s retail space gets pricier, full story here: http://on.fb.me/1haJDKL

  • http://www.vidcruiter.com/ VidCruiter

    The other one in Toronto was called Kera.io but they closed down. I thought they had the best product for this type of solution.

  • http://www.vidcruiter.com/ VidCruiter

    Intercom.io is pretty cool

  • http://www.forentrepreneurs.com David Skok

    That’s right – Kera.io.

  • http://www.forentrepreneurs.com David Skok

    Agreed.

  • Storewars News

    Nice
    read! Very informative. Did you know that? French Connection Retail Sales Rise
    11% In The UK, Europe. Full story here: http://on.fb.me/1hGbfsz

  • http://bothsider.com/ Mark Gavagan

    RE: asking customers “What was the business objective you were hoping
    to achieve using this software?”

    It might be helpful to use a single survey question that appears bottom-right of your landing page, like those offered by Feedback Daddy or Qualaroo.

    (I’m a customer of one of these, but have no other relationship)

  • abbysllc

    All of the articles assume that product development is done / external to the sale process, however in a start-up there is only so much funding, so saying that we’re going to spend X to acquire Y customers won’t work if there is nothing left to build the product (or in the above example, move WOW to #1 spot / add in the in-app messages).
    Do you have any guidelines on product development costs?
    If I come to you looking for $1M seed, are you expecting Z% to be R&D?

  • http://www.forentrepreneurs.com David Skok

    Unfortunately there are no guidelines for product development costs. We’ve seen simple products get built in 3-9 months, and complex products take over 24 months with a big team. For the average B2B million dollar seed round that I see, it’s probably 70-80% product development, and 20-30% customer development.