Selling to a profit center versus a cost center

One of the things I’ve always found is that you’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it. And I’ve made this mistake probably more than anybody else in this room…it started with what incredible benefits can we give to the customers? Where can we take the customers? Not starting with let’s sit down with the engineers and figure out what awesome technology we have and how are we going to market that. And I think that’s the right path to take.” - Steve Jobs, 1997

It’s a trap!

The common trap that many entrepreneurs fall into, including this editor, of building a technological solution and then figuring out how to sell that solution, often makes for an extremely difficult sales effort. Much has been written about these entrepreneurs’ initial errors which are aptly described as the entrepreneurs “falling in love with the solution instead of the problem.”

The reverse situation of selling a solution for a potential customer’s problem is much less effort. Customers aren’t looking to buy a technical marvel because it is a technical marvel - they are looking to buy a solution to a problem that they face. The product solution that you are building and selling very likely has some novel technological component, but that component isn’t what the customer is interested in purchasing. The most effective messaging in any situation is a message who’s content and medium align with the expectations of the recipient, and product positioning messaging is no different.

Selling to a profit center

If you are selling a tool to a profit center, you are enabling your customer to do more faster. To be somewhat reductive, this means that you are selling a time saving measure.

Selling to a profit center
Selling to a profit center

Selling to a cost center

If you are selling a tool to a cost center, then you are enabling your customer to do the same amount of work cheaper.

Selling to a cost center
Selling to a cost center

Thinking in vector sums

Think about your customer’s product as a vector in a 2-d space where the axes are “time savings” and “cost savings”. The magnitude of your customer’s product vector is the important part. A larger magnitude means “more success”, while a smaller magnitude means “less success”, however your customer defines “success”. Your product is also a vector in that same space.

The magnitude of the sum of your customer’s product vector and your product’s vector is the success that your customer can have when they’re using your product. This is obviously what you should try to optimize. This is shown as the dotted line in the above illustrations.

It doesn’t matter which axis is increasing more because of the influence of your product’s vector. This is because the same product can be sold as a time saving tool to a profit center, or as a cost saving measure to a cost center.

The trick is to figure out if your target user is a cost center or profit center and then frame your product as the appropriate type of tool.

So what about selling software tools?

Selling software tools to developers is usually selling to a profit center. This means that if you are selling to developers, the entire experience around your product must be quick and snappy since selling to a profit center involves positioning your product solution as time saving measure. Your product should be installable in either a single command or two, or be available to download, install, and use right away - without needing to have a back-and-forth with a salesperson. Your documentation should have a quickstart guide that enables your users to get up and running in a matter of minutes. The quicker that a user can be successful with your product, the larger the time savings offered by your product will seem. A larger (perceived or actual) time savings makes selling your product to a profit center that much easier, because you are already showing evidence of your product’s value proposition. When you are building a product, you are actually building two correlated products; your actual product, and the experience around using your product. Clearly, it is vitally important that your product actually solves your customer’s issue. However, your product must also solve that issue in a way that is better along either the “cost savings” or “time savings” axis than any other solution. It is your job as the one responsible for product positioning messaging to figure out which of those axes is more important to your customer, based on whether they are a cost center or profit center, and market your product accordingly.