Mark Evans

Software is among the most valuable products in the world. It has been used to solve some of the worlds most complex problems, replacing thousands of man-hours with just a few seconds of computer time. Software has also given the world Billionaires – and several of them! So, what do mean when I say that software is among the most valuable products in the world? Well, valuable is a loaded word in this context, and in the case of software it absolutely needs to be unpacked.

In business, value is measured by a seller and a buyer in different ways during a transaction. For a seller, value is tied to the amount of money that can be obtained through the sale and distribution of their product. For a buyer, the value from a transaction is tied to the size, amount, and complexity of problems that can be solved by the product they are purchasing. This exchange of value between the buyer and the seller is what makes the world go round. If the seller didn’t receive value out of the transaction, they wouldn’t put in the effort to build a product and offer it to other people. Similarly, if the buyer didn’t receive value out of the transaction, they would not be willing to part with their money to obtain the product being sold.

That’s pretty straight forward. Exchange of value is not a new concept, and as you read that last paragraph you probably thought you were reading something that you already understood. And even if you didn’t know you knew it, I’m convinced you already did know it. People ad business sell things that other people and businesses need/want/require. Simple, right? Good. Ok, now lets jump into software. Something that is perplexing, exciting, and packed with so much value, that people can give it away fro free and STILL become insanely rich. Wait, what did I just say?! Give software away for free to become rich, uh, what?! Ok, read on and I’ll explain.

How to determine the value of your product

In a traditional value-based economy, the value of your product is determined by the supply and demand of the market. A familiar concept; supply is how much of a certain good exists in the world, and demand is how many people in the world need/want/require that good.

Using an apple as an example, lets ask a rhetorical question: if you have 5 apples and 10 people who want apples, how much do you think you could sell each apple for?

Now reversing the numbers, assume you had 10 apples and 5 people who wanted apples, how much do you think you could sell each apple for?

And finally: assume you had 5 apples and 5 people, what price do you think is appropriate for the sale of 1 apple?

As you read through those 3 scenarios, it became obvious that the price can be changed based on the number of customers and the number of available apples to sell. This dynamic is what is behind the supply and demand equation that determines the price of just about every physical good in the world. If you have more supply than people to buy, the price is lower. If you have more people than supply to provide them, people are willing to pay a higher price to get access to the scarce resource. Supply & Demand. Ok, simple. Now, the golden question; what drives the price of software, and how do you determine it’s value?

Oops, I just introduced to you something new. No, that wasn’t a typographical error. I did meant to say value and price in the same sentence. I also want to tell you now that software completely ignores the realities of supply and demand when setting it’s price – it also ignores the concept of value-based on scarcity. Yet, making the most money selling software has always been about recreating those supply and demand forces. Confused? Awesome, me too… Let’s see if we can answer the thousand questions floating through our heads about why software is so different from normal goods.

The value of software is confusing, and that’s ok

Software is a very different beast when it comes to determining its value. This is largely due to the way software is made, stored, distributed, sold, resold, and used. It is nothing like the physical goods that are created from physical components that are durived from raw materials – if you go far enough back in the supply chain, everything is sitting in the dirt at some point.

Software originates in the minds of people, it’s created through an abstract interaction with a computer, that stores it’s most basic constituent elements as a 1 or 0 in an electronic storage device. If you want to go all the way down, that 1 or 0 represents something as simple as a switch being on or off. When all these small bits (technical term for a 1 or 0) are combined together, they create something awesome, called a byte (technical term for 8 bits). Then megabytes, then gigabytes, terabytes, petabytes, and so on. No matter how big the scale, all software is made of the exact same basic digital elements. The differences in software offerings comes in the unique configuration of those elements.

Did you catch that last part? Software is all made from the same basic elements, but the configuration of those elements is what makes creates different products.

Now, because the materials required to create more software is of a virtually unlimited quantity, creating 1 more piece of software has no material cost associated with it. And because creating 1 more piece of software is equivalent to creating a copy, there is also no physical cost to creating more of it.

So, you might be asking yourself at this point – if you can create an unlimited amount of something by simply copying it, why would anyone pay money for it?!

There are at least 2 reasons why people pay for software:

• The law prohibits the unauthorized copying of software
• Technical restrictions make unauthorized copying impossible (for most people)
• Less often – but not unheard of – people pay for software because they feel an ethical obligation to (more on this later)

The law that governs the copy and distribution of software is Copyright law. Without getting into the weeds and nuances of copyright law, we can reduce the protections to a few basic points:

• Original works of creation that are stored somewhere (books, film, audio recordings, computer software) is the property of the creator
• The creator of original works are granted certain rights and protections regarding that work.
• Rights include: create copies, create derivative works (audio book out of a text-based book), sell, offer for sell, and restrict others from doing the same.
• Protections include: exclusive rights, enforced by government, lifetime of the author (plus more time)
• Finally, the owner of an original work has the ability to grant all of these rights to another person. This grant can be either through a term-based license or through a full sale of the copyrighted material.

There are at least 2 ways to sell. And depending on which method you choose to adopt, you’ll find yourself in two camps.

Camp 1 believes that sales is a numbers game and the proven way to success if through grit, luck, god-granted raw-talent, and outlasting everyone else.

Camp 2 takes a very different approach toward sales. In fact, camp 2 is mostly hidden from the sales people who are in Camp 1. Perhaps it’s a personality thing, or maybe it’s the unfortunate reality that sometimes it takes longer to get information to certain people. However, just like people leaving Android for iPhone never go back to Android, people who leave Camp 1 and come into Camp 2 stay in Camp 2. it’s like they’ve seen the light.

So, what is the approach that is employed by Camp 2? Well, to put it as simple as possible, Camp 2 employs the correct approach to selling. No, this isn’t a contest of who can vaguely and arrogantly state something they hope will be accepted as a truism. The reason Camp 2 can confidently say that they employ the correct approach to selling is because the method was born out of science. And, believe it or not, Camp 2 sales people have been doubling and tripling their sales outcomes consistently, predictably, and with very little guessing.

Sound too good to be true? Well, I thought so myself – until I really dug into the research and learned more about how the best sales people treat sales the same way a laboratory chemists approaches chemical experiments. You wont find a chemist blindly throwing ingredients together in a beaker, hoping something good might come of it – and on the rare occasion something good does come out of it – gloat that they are experts! No, trained scientists and disciplined, thorough, and have a very clear understanding why some things work and other do not.

The research and experimentation methods behind the science of selling, as it’s called, will look very familiar to the science community that demands research be well-documented, thorough, and repeatable. And the people who are approaching sales like a scientist are achieving outcomes that Camp 1 dreams of.

Ok, so now that we have reviewed a quick teaser about the kind of approach that is more likely to help us succeed, lets start chipping away at the sales architecture that we are going to leverage for the next half of the month.

In the next few sections we’ll walk through the steps to start putting together your sales strategy:

• Step 1: Identify where your customers gather today
• Step 2: Identify the places and platforms that enable you to connect with your customers in a commercial way – advertise and sell to them
• Step 3: Put together your advertising and sales strategy for each platform
• Step 4: Deploy your advertisements – start small and plan to make changes
• Step 5: Master the customer journey – From first impression to customer support
• Step 6: Planning your re-marketing strategy

Step 1: Identify where your customers gather

Identifying where your customers gather is a vital part of the selling process. I’m sure you’ve heard the saying, “location, location, location.” To be honest, I have no idea what that saying was originally referring to, but it seems to apply here.

Imagine how successful a person selling Chili dogs and soft drinks would be if they were to try and sell their products door to door. Or perhaps you can imagine a log cabin sales person who is walking up and down the aisle of a baseball stadium trying to sell log cabins during the World Series.

Up front, I don’t want to confuse the issue of identifying where your customers gather with where do your customers go, or where your customers have been. People go all over the place, they have been and will go to many places in their lifetime. They also go to the same place very frequently. But we’re not talking about knowing their physical location or just what websites they visit. That information can be helpful for helping us understand and connect with our customers better, but for the purposes of selling something to them, we are trying to answer a specific question about where your customers gather to buy something.

Where do the people who will be your customer gather when they are wearing the hat of being your customer?

Here are a few additional questions for you to answer to help you answer this question:

• What is the mostly likely place your customer will make the decision to spend money on your product or service? Are they browsing their phone in line at the grocery store? Sitting at a desk in their home office? Browsing products on a popular marketplace?
• What places do your customers have the intent to spend money
• What placed to your customers not have the intent to spend money
• Where are your customers when they purchase similar products

In our world today location can have very little to do with where someone physically is. That’s because most of us exist in the physical and digital world. And we’re able to make meaningful connections and transactions in both – at the same time. Consider someone standing in line at Starbucks about to pickup a physical good they ordered from their iPhone while riding an Uber. Where was the order made? Think about how strange the answer to that question really is. The order was made riding in a car, but it was also made online, which actually means it was transacted somewhere in the “cloud” and then made it’s way to the actual Starbucks to be processed by the barista who handles online orders.

If you were Starbucks and you were answer the question; where will your customers be when they are wearing the hat of being your customer, the answer seems to be anywhere. Which is actually the least helpful answer they could come up with.

For Starbucks, and every other business that is trying to sell something that can be purchased digitally, physical location is irrelevant (unless your’e selling a physical good, like food or drink, that needs to be physically handed off. Then you’ll at least want to confirm your customer is physically close enough so you can deliver your goods to them). But for digital products, sales to your customers can happen anywhere.

Step 2: Identify the places and platforms that enable you to connect with your customers in a commercial way – advertise and sell to them

Let’s start this section off with a 2 lists:

The list on the left – Top eCommerce Platforms – contains all the self-hosted or company hosted sites where sellers can host and offer their products to customers.

The list on the right – Top online Retailers (US) – contains a list of retail brands that also help people offer their products online, but there are no self-hosted options like the ones you find in the eCommerce platforms column.

There are trade offs when picking where you’ll offer your products for sale. The main trade-off is the existing traffic that is going to the platforms and marketplaces in the right column. In some cases, you don’t have the option to sell on these platforms unless you become a supplier – by supplier i mean the old school big business type of supplier that can provide enough of their products to stock the shelves of 100 Walmart stores.

The other difference is how much of your product sales are taken by the platform you sell on when you make a sale. Those commissions can range anywhere from 10% to 60% depending on the type of product you are selling.

For the eCommerce platforms in the list on the left, when you self-host one of those solutions, the commissions you pay are zero. For example, if you were to deploy a website and then install a wooCommerce storefront, you will be able to keep closer to 100% of your income. Obviously, selling product on your own website means you’re missing out on the billions customers that visit sites like Amazon or eBay. It’s also important to point out that it takes a certain amount of technical ability to launch and host your own online store. There are tools to make the process easier, but the more help you get from the platform you’re using, the closer you get to paying them a percentage of your sales revenue.

So, when deciding which platform or marketplace you’ll offer your product through, keep in mind the trade offs and what it means for your success.

Step 3: Put together your advertising and sales strategy for each platform

Step 4: Deploy your advertisements – start small and plan to make changes

Step 5: Master the customer journey – From first impression to customer support

Step 6: Planning your re-marketing strategy