

If Money Doesn't Change Hands You Can't Call A User A Customer - skmurphy
http://www.skmurphy.com/blog/2010/12/23/if-money-doesnt-change-hands-you-cant-call-a-user-a-customer/

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nlavezzo
This piece is clearly talking about an enterprise sales model, and because of
that I think his point about taking extremely low amounts of money for first
customers requires a word of caution.

In our experience at our last company, which was an enterprise software
company selling a powerful data analytics platform, almost ALL of the customer
negotiations at all stages of the business involved "Most Favored Nation
Pricing" clauses - as in, the customer wants to know that no other customer
has gotten a better deal. This can be subject to fixed volume discounting,
etc. - i.e. someone buying 50 licenses prior to the currently contemplated
sale of 20 licenses could have paid less. However, try telling a potential
customer that someone previously paid less for the product they're thinking of
buying and at a minimum you'll have a hold-up of months of red tape as they
get an exception to their purchasing checklist authorized. These corporate
purchasing processes are highly inflexible and often imposed by Sarbanes Oxley
"internal controls" measures (meaning they're dictated by outside auditors,
and not up for discussion) - they are real and need to be factored into
pricing strategy.

A good workaround we found is this: make your early licenses have some type of
specific restriction or obligation that you will relax in the different class
of licenses you will sell later in the company. You might restrict early
licenses to dealing with a certain type of data, or you might even add the
obligation of participating in a "marketing case study". Do something along
those lines (and get it actually written into the contract) so that in the
future, you can with good conscience sell less restricted licenses at a higher
price point under the inevitable MFN clauses you'll get with Enterpise
software sales.

~~~
skmurphy
I would not worry about special restrictions in your first license, you need
to close the deal and establish an ongoing and mutually beneficial
relationship. You will learn more about what features your product really
needs from your first few customers that it will naturally evolve so that you
are selling a different product to later customers asking for MFN.

There are many ways to legitimately neutralize/minimize MFN, focus on making
your early customers successful.

------
rue
Corollary: if money changes hands, you can't call a customer a guest.

~~~
brudgers
Unless you are a hotel.

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aberkowitz
It's irrelevant what you call a user. Almost anything a user does with your
app is helping you - whether it's consuming ads, talking about your product /
service, or giving feedback.

~~~
il
Unfortunately, vendors and employees don't yet accept payment in feedback.

~~~
aberkowitz
If you're bootstrapping a company that you cannot afford to bootstrap, then by
all means, figure out how to bring in money ASAP.

On the other hand, if you can afford to develop a loyal user base first, then
that is your best path to success.

~~~
run4yourlives
>On the other hand, if you can afford to develop a loyal user base first, then
that is your best path to success.

Assuming you don't define success as "stable and profitable company", I
suppose it is.

~~~
aberkowitz
I apologize if the meaning of my prior comment was misconstrued, as you have
not reached my intended conclusion.

I'm intending to say that building a user base should come before monetizing -
not replace it.

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marssaxman
This is one reason it irritates me when airlines call their passengers
"customers".

~~~
skmurphy
Passengers pay, they should be called customers.

~~~
marssaxman
Typically, my employer was the customer, and I was the passenger.

------
Yaa101
You call that user a product!

------
vessenes
My first thought on reading the title: "Ah, Google, the company with no
customers.."

~~~
jonhendry
Google's customers are the advertisers.

The end users are Google's product.

