Sending Signals
On the value of making it easy to get going
A few years ago, I was looking for inspiration and found a real gem from the past.
We were trying to move our product to something closer to a CRM, and couldn’t quite figure out how to position what we were building or what we should prioritize to build and add.
The obvious place to look was the market leader, Salesforce.
Which was a good idea on multiple levels. They’ve figured out a lot in terms of what people want and need out of a CRM. While we thought we were providing differentiated features to our audience, we couldn’t escape the comparison. We needed to know what we were up against.
It also struck me that the comparison was inapt. We were a fledgling startup with a few million dollars of revenue. They were one of the largest companies in the world. Salesforce generates a few million dollars of revenue every few hours.
What did Salesforce look like when they were at our stage?
To my great pleasure, the people at Autodemo had salvaged a demo video that Salesforce produced in 2003 for their then-new team edition.
It wasn’t a completely apples-to-apples comparison. From what I could dig up about Salesforce’s pre-IPO financial data, they were probably past $10 million in revenue when this video was put together. But that’s still a much closer point of comparison.
I love this video. There’s a lot we could mine it for. Though for our purposes today, I want to highlight the integration and set up process.
It’s remarkable how much time the video invests in educating people about getting started. From what we can observe about the product circa 2003 in the video, it’s also interesting to see how much effort they’ve put into building features to make getting the product set up as smooth as possible. They clearly want to make it as easy as possible for people to try out Salesforce and get hooked.
And there’s where I see the broader lesson.
I’ve become a real advocate for making it as easy as humanly possible to get people in the door and experiencing the joys of your product. But I’ve struggled to find a really solid basis for that position. Then it struck me: making it easy to get started with your product fits really neatly into signaling theory.
First, a bit of microeconomics.
When you’re trying to assess something — a car, a potential employee, an insurance broker — it can often be difficult to assess quality and information can be asymmetric. If you’re buying a car, you can read reviews, think about the brand reputation, or maybe take the vehicle out for a 20 minute test drive. But reviewers can get it wrong, reputations can fade, and you can only glean so much from driving the car for 20 minutes. In more unscrupulous cases, it’s possible the person selling you the car knows there’s a problem with it, and may not disclose it.
How else might we look for signs that something is going to match the quality level advertised?
An economic signal is something the seller can offer that, slightly simplifying, has a cost that’s inversely proportional to what they’re trying to signal.
For instance, if you’re selling cars and claim your cars are extremely reliable, offering a long, extended warranty to buyers acts as a signal.
For the buyers, it’s credible: they know that if you’re lying and their car breaks all the time, you’re going to have to pay for it. You’re incentivized not to let that happen. Or, worst-case, at least the buyers don’t have to pay for the repairs or replacement of the car if you’re lying.
But it goes a step beyond that. Because no firm would ever offer a complementary extended warranty if they knew they would need to cover warranty claims on their shoddy product. It makes no business sense. If your product is actually reliable, the extended warranty signal is relatively cheap. People are almost never going to call your bluff.
Making it easy to set up and get going with your software product follows the same logic. Speaking from experience, it takes a lot of technical investment and strategy to make it easy for potential buyers to start using your product. But it’s relatively cheap if you actually have a product that people will love and pay you for.
So beyond the direct benefit — potential customers save time and effort, and potentially convert more quickly — it also has a benefit as a high-credibility way to show people you’ve got something worth checking out. It’s not about (or not only about) getting to value or the a-ha moment that’s more frequently discussed. It’s about sending a signal you know what you’re doing.
Or, looking at this from another angle, if making integration and setup looks relatively expensive to you, that might be a sign your product hasn’t found its niche as much as you might think.
One of the biggest mistakes I’ve made and that I see early-stage companies make is building or working for the place you want to be rather than where you are. And I think one way we get lured into this kind of thinking is through well-intentioned comparisons with successful reference points.
But in the same way it can be dangerous to look to Microsoft for how to run your software engineering teams, it can be dangerous to take too much inspiration from a product’s feature set when that product is a thousand steps beyond you. Not that there’s nothing to learn so much as you need to learn the right pieces.
Getting back to see what Salesforce looked like when they were younger was my attempt to counter that potential source of bias. And I think it’s an instructive case. Salesforce today is stuffed with every feature imaginable. It would be easy to see their now even more powerful data integration and setup tools as another nice-to-have feature along with everything else. Looking back at time clues us into the fact that the “get started quickly” features were critical to their early success. Something we can understand even more deeply when we see how it represents a strong signal to buyers as well.
Enjoy this? Have an idea for something you’d like a perspective on? Drop me a line: I’d love to hear from you.