Product Cycles for API products are different

I was speaking to a partner today about sales cycles and traffic for websites.  I thought I would take a few minutes to expand on what I told him, and to make it available to everyone.

Sales Cyclic Patterns

All products have cycles to their sales patterns.  When I did game software we were very much Q4 driven, over 90% of our sales came in the last few months of the year.  When I sold Spam Filtration software the cycle was very much driven by outbreaks of virus or spam attacks.  When major attacks happened, we would see large increases in sales.  You couldn’t really predict these, they just happened. 

Now that we sell API products the sales cycle and cycles of sales are totally different.

Sales Cycle

All products have a sales cycle, how long from when the customer hears about your product until they buy?  What steps do they take to make that decision?  From the customer they general start with a need and then they go looking for a product or service.  How they learn about you, and what steps they take are all part of the sales cycle. 

Cycles of Sales

When I say cycles of sales I mean to rhythms or patterns to sales for a product or service.   Most electronic games sell in the fourth quarter of the year for example.  Some products, like Tax Software, are seasonal in that there is a tax season when people expect to buy them. 

API and Developer Tools

February is usually a good month for us.  The cold keeps people indoors, we get more tire kickers.  Actually we get a lot more hobbyists this time of year.  The fact that people have more “indoor” time on their computers general means that we get a lot more website traffic. 

What are our best months?

October is our best month historically.  This is due to the number of large companies that match their fiscal year to the US Government year.  New budgets usually kick in on October 1 (unless their is a budget crisis), and we see a lot of large companies asking questions during September and October.  I had never thought of this as a market for us, but the facts have proved me wrong.

January is usually our second best month of the year.  I think it is because so many smaller companies have new budgets in January, due to them having a calendar and fiscal year that match up. 

Backup a month or two before these and we usually see a large increase in trial downloads.  Companies are starting to think about the “what next” in their product cycle.  In the case of December a lot of companies are running short handed or low hours anyway due to the holidays.  This leaves people with time to explore other options, or learn new technologies.

What about existing company product cycles?

You have to get into peoples product cycle, they will never add you to their product mid-release cycle unless they have a major problem that you fill the need.  If that happens, they will typically be in a hurry and need something quick to solve an active pain point in their company.  This is not the usual cycle though.

From my experience with VistaDB, the typical product lead cycle for existing products is around 14 months. Customers will come and kick the tires, play with it and mark it as something they are interested in for version x+1 or x+2 from where they are today.  They will come back when version X ships and look at what you are doing, make sure you still look good.  If it is high on their list of features for the next version they buy and start integration. If it is a "nice to have" feature you don't show up until very late in the product cycle. 

If the customer has extra time when shipping x+1, you get crammed in at the last minute as a small feature. They probably will not take advantage of much that you do, just enough to get it integrated and declare it a new feature within the release. X+2 will be the first release where they have finally understood what you do, and take advantage of it.  This second release cycle is usually when we get our most complex tech support requests.  The users are hitting edge cases, or pushing boundaries and typically want help.  This version is also when we usually first hear from the management of the company wanting to forge a better relationship with us, make something more solid for the long term.

What about hobbyists and new products?

Hobbyists and small business with new products are typically much faster (30-90 days).  They usually don't have existing products or legacy concerns, and can just go faster.  There are usually no budget committees to have to gain approval for purchase, and the decision makers are also the ones using the API.

The largest number of VistaDB licenses have been this smaller segment.  They are of course usually buying 1 or 2 developer licenses.  The larger corporate users make up a much larger segment of our cash flow (it takes a lot more of these smaller sales to make up one larger entity).

Consultants are a wildcard

Consultants are a different breed.  Some are working on quick one off projects, quick in and out.  They are quick sales and you want them, because once they understand what you do they will bill each new customer for your tool and then turn it over to them at the end of their contract.  There are just not that many of these guys out there (that we know about anyway). 

Then there are the big corporate consultants.  They make large recommendations on platform strategy, corporate directions, etc.  They are good to know, but rarely do you see a direct sale from them.  They make these grand plans and then leave it up to the company to enact the plan, at which point the large company politics come into play.  We field questions from these guys from time to time, and usually they have grand plans for some company to use us, only to find out they are totally formalized on some other database (not SQL Server) and the move to anything other than that database would be a major effort. 

The typical sales funnel

This is a simplified sales funnel diagram for purposes of illustration.  See this wiki article for the full diagram and explanation.

Many will argue that the typical sales funnel is now dead with the advent of social media and the Internet, but I would say only the specifics of the funnel have changed.  The funnel still exists, how the users gain awareness of you doesn’t really matter.  They still have to become aware of you at some point.

At each stage you lose some signification percentage of users.  Just because everyone knows your name doesn’t mean they need your product.  Some will evaluate and find it doesn’t meet their needs, etc.

Where does web traffic fit?

Web traffic is more an indicator of where you are on the awareness phase, and how well your site is performing from an SEO standpoint.  The site traffic is important because you need a lot of eyeballs looking at your site, but the other leads cycles are just as important to watch.

Evaluations are more critical

The number of outstanding evaluations are far more important to watch.  If you have no trial users, then you can’t possibly convert them to an Action (buying your product).  The way you track evaluations, follow up with them, and hand them off afterwards is vital. 

We have a 30 day evaluation of VistaDB and send one email per week for the entire period with information about VistaDB, hints, tips, facts that users might not have known, etc.

Real world?

The real world we have people typically in the Evaluation stage for a much longer period than their trial.  They will try it usually within 7 days and make a decision.  The rest of the time is just them getting approval, or waiting until the next development break in their own planning cycle.  You need to keep their interest during this period as well.  You won’t know who they are, so you can’t just keep emailing everyone on your trial list (that is spam).  Make sure you have a blog for them to subscribe and keep up to date with your company.

In some cases we have customers who come to us more than a year after their initial trial and tell us they bought because they saw a consistent company with regular product updates.  Keep this in mind if you are not blogging or posting about your product on a regular basis, there are some customers who are watching to see what you will do over time.

What is your cycle?

New companies will have no idea about this cycle.  But keep an eye on it over time. 

Poll new users about how long ago they first heard of you (and maybe where), and how long from when they evaluated your software.

Produce public information through a blog or some other public medium that users can subscriber to if they are interested.  They might just need to see some performance from you before they decide to buy.  New companies especially have this problem since customers are naturally worried about the stability and longevity of the company.  Put these concerns to rest by being open about what you are doing over time.

Best of luck to all our partners in their software endeavors!