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Thanks for the answer - I had seen something similar somewhere but it hadn't gelled. I'm still not completely clear how this would apply to products that were v

Thanks for the answer - I had seen something similar somewhere but it hadn't gelled. I'm still not completely clear how this would apply to products that were very cheap or ad-supported. Maybe just with a lighter touch? Note: this is academic to me at this point in time as I'm not doing sales.

pmarca 13y ago
Let's separate the two: (a) Very cheap products -- the problem with very cheap products is that you can't afford to spend very much money selling or marketing them unless you are selling them in gigantic volume. We see this a lot in raw startup land (including YC). Company X has a product Y and it's selling for price $Z. But product Y actually costs $A to sell (a single instance to a customer) -- fully loaded -- including cost of marketing, cost of sales, cost of implementation, etc. When Z < A, you're in real trouble as you try to scale. (This is called "selling dollar bills for 90 cents"... or 50 cents, or 5 cents.) The answer, of course, is to raise price until Z > A. If you can't do that, they you have a bigger problem (people aren't finding value in your product). The number of product founders these days who will engage seriously on this point is shockingly low. They would do much better in their businesses and in their fundraising if they did. (b) Ad-supported products. If you are direct selling your ads, then you're in the same boat as any company selling product -- one of the ironic twists of the big ad-supported Internet companies is that they're actually enterprise sales companies at their heart (selling ads to businesses). For example, the salesforces at Google and Facebook have more in common with the salesforces at Oracle and Cisco than you'd think. If you outsource ad sales to an ad network, you can sidestep this... but then the ad network needs to actually perform for you, which generally they don't, at least as a sole source of revenue.

pmarca 13y ago

Let's separate the two: (a) Very cheap products -- the problem with very cheap products is that you can't afford to spend very much money selling or marketing them unless you are selling them in gigantic volume. We see this a lot in raw startup land (including YC). Company X has a product Y and it's selling for price $Z. But product Y actually costs $A to sell (a single instance to a customer) -- fully loaded -- including cost of marketing, cost of sales, cost of implementation, etc. When Z < A, you're in real trouble as you try to scale. (This is called "selling dollar bills for 90 cents"... or 50 cents, or 5 cents.) The answer, of course, is to raise price until Z > A. If you can't do that, they you have a bigger problem (people aren't finding value in your product). The number of product founders these days who will engage seriously on this point is shockingly low. They would do much better in their businesses and in their fundraising if they did. (b) Ad-supported products. If you are direct selling your ads, then you're in the same boat as any company selling product -- one of the ironic twists of the big ad-supported Internet companies is that they're actually enterprise sales companies at their heart (selling ads to businesses). For example, the salesforces at Google and Facebook have more in common with the salesforces at Oracle and Cisco than you'd think. If you outsource ad sales to an ad network, you can sidestep this... but then the ad network needs to actually perform for you, which generally they don't, at least as a sole source of revenue.