
Ask HN: How to become a technical sales engineer? - curiously
So I really enjoy explaining complicated technical products in terms a customer can understand, having done so through my own SaaS projects, I&#x27;ve also worked as a developer before.<p>I&#x27;m very much attracted by technical sales engineer position, how can I land myself that role ?
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dqdo
I have been selling enterprise software for the construction industry (a niche
product) for about a year. In my situation the sales process is fairly simple
once you have the right product (e.g., product market fit). Although this
example is about the construction industry, some of the ideas may apply to
other industries as well.

I start by attending industry trade shows and other industry specific events
(i.e., conferences). Typically the upper management of these companies (VPs
and Project Executives) attend these events since some of the events are in
the day time and regular people have to work at that time. These events are
great for networking and gathering new clients because the people who you meet
are either the decision-maker or they can quickly introduce you to the
decision-maker in their organization. One thing that I learned from selling to
companies is that you should start as high up the organization as possible. A
new employee or some in middle management is much less likely to pass your
message along to their boss.

The most difficult part of enterprise sales is setting the right price.
Typically enterprise software does one of two things. It either (1) increases
revenue or (2) decreases cost. For both situation you need to quantify the
client's current process - what they are doing now without your software. I
typically measure labor hour saving per year per employee or new revenue
generating potential per year. Then I calculate the new condition if the
client were to use my software. The difference between the current condition
and the new condition is the amount of value that the software is creating for
the client. And finally, the price that I charge them should be a percentage
of the new value that has been created. The price also needs to be high enough
to cover all the cost (sales, development, marketing, and operations) and
profit(20% to 60%).

Basically: If (Price < Value_Created && Price > Cost + Required_Profit){ Deal}
else {No Deal}

What I have found is that most software engineers under price their products.
An engineer might think along the following lines: "It costs me about $1000 to
host my servers on AWS per year. If I charge $5000 then I would be highly
profitable."

The problem with this way of thinking is that the person does not consider the
value that they are adding to the client. The client doesn't really care about
how much it cost you to build your product. They only care about the value
that you can add them.

I can go on further if anyone is interested or have any questions.

~~~
curiously
Please do go on further, this is amazing insight into how you price enterprise
sales.

What percentage do you charge of the value provided by the software? In my
case, I save a company $100,000 worth of labor, what portion of that value is
fair to take, and at what portion does it no longer make sense to purchase
(obviously if it's 90% of that you are charging, it becomes too expensive for
little gain)?

I'm sure you have competitors in this niche, how do you make sure that your
prices are competitive?

Would love to talk to you more about this if you don't mind and get your
personal opinion on my software (can you email me at john@appsonify.com), and
how to price it properly.

My biggest and most expensive lesson I learned this year so far is that you
must target decision makers with budget and people with the right long term
fit.

So the million dollar question becomes, how to find these golden nuggets. Is
there any other way besides going to conferences? Although I would love to
hear more on the specifics of what worked for you and what didn't. How do you
pitch your product without coming across as an annoying door to door sales
guy?

Please, I encourage you to continue writing more about your experience in this
domain, would also love to personally talk to you via email.

~~~
dqdo
There is no hard rule for charging the percentage of the software base on the
value delivered to the client. The short answer is I usually charge between 5%
to 20% (read further more the long answer). You want your client to feel like
they are getting a good deal after all. At this percentage of the value
delivered it is almost a no brainer for them to keep on renewing year after
year. Remember that when you sell a SAAS product you want your Life Time Value
of the customer to be as high as possible.

The exact way to price software is a bit more complicated than what I
described in the earlier post so I am going to explain in greater detail. You
always want to start by evaluating the value added of your product because
this creates and anchoring effect to that number, raises their willingness to
buy (After all everyone wants a great deal), and creates a sense of urgency
(now that they know how much they can save, they want to do it right away).
The higher the value added number the better the anchoring effect. By starting
the anchor at a high number, the client might will still be happy to pay for
the percentage of value that you demand even if it might seem absurdly high
from a different perspective. Remember that selling is highly based on
psychology and unlike physics, psychology is not path independent. The way
that you frame the conversation and the path that you take can make a big
difference.

Keep in mind that this only works if both you and the client agree on the
methodology and the result of assess value. For best results, you want to have
the client do some of the work on assessing the value that way they are "part"
of the process. I generally just ask some questions to the client and subtly
guide them through this process.

In terms of what you can charge for the software, you have to also consider
the organizational dynamics and their current expectations. For example, if
the software can save a company $100 million per year and is rather simple it
may be difficult for the purchasing agent to part with $10 million per year
even though that is legitimately only a portion of the value delivered. In
this situation, the upper bound is based on how much the organization can
stomach. So in this case, I might be able to get away with $1 million per year
(just a hypothetical example) after showing them that this is only 1% of the
total value that they are getting.

Another thing to consider about software these days is the cost that the
company might incur by building their own custom solution. I usually raise
this up if the bill for the software is around $100k to $500k. My talking
point here is that since it would cost them ~$200K per developer and they
would need to full-time Project manager and a part-time designer, it would be
cheaper to have us build the product and service them. Another benefit for the
company is that since we are focused on this product, we can innovate faster
and gather ideas from other customers -- some of which may be their
competitors. Overall they would get a better quality product and for much
cheaper than building it in-house. Usually for SAAS solutions the client
already knows that they do not want to build it themselves and probably have
some horror stories to tell.

So to answer the second question about the competitors, I generally do not
focus that much on the competition. The way I see business is that I build a
product that delivers a certain value to my client and I sell it for a portion
of that value. As long as I stick to this plan, the existence of competitors
in the space is not really a big deal. One of the worst product strategy that
you can do is to copy a competitor's features verbatim. By doing so you are
essentially playing catch-up and creating a me too product instead of creating
unique value with your product. If you look closely a software products for
the enterprise, due to the specific needs of a company or an industry the
"competitors" are actually quite different from each other. Some of the
offering solve one or two pain points out of five and the client might have to
mix and match 2 or 3 different solutions to solve their problem. To avoid
direct competition and driving down prices, you want listen closely to the
customer and build the product that solves all 5 of their pain points. If you
can hit the sweet spot and create a holistic solution to one their software
needs then there is not really a competitor. It is just the client and you and
all that there is left to do is negotiate a price.

This is not part of your question but I like to think of the sales process as
a spy mission. You are infiltrating the lair of your customer to understand
their problems and then sending the intel to the engineering team to solve
that problem. The best spies are usually the ones who were engineers
themselves because they know what is feasible before making promises and send
only the relevant intel to build the product.

There is a lot more say about pricing and I think that this is one of those
areas where start-ups and even large companies can leave a lot of money on the
table. One analogy that I like to think about is when you dine at a 5 star
restaurant you are not only there for the food. You are there for the whole
experience. Likewise the enterprise sales process needs to encompass the full
experience from first contact through the follow-up sessions. Most companies
forget this and think that a better product just like better food is all that
is required for them to win the contract. I like to think your revenues are a
function of your product and your sales strategy. A simplified equation might
look like:

Revenue = Sales_Strategy X Product

A great product with a poor sales strategy leads to very low revenues.
Likewise a good sales strategy and a bad product is a poor combination. The
key takeaway is that your company's revenue depends as much on your product as
how you sell it.

To answer your final question (wow this is quite long), I generally meet my
clients at conference and industry events. I go to these events because there
is a natural filtering mechanism at some of these high-end and rather
expensive events. Usually on the upper management folks attend these events so
I get access to the decision-maker or someone who has regular contact with the
decision-maker. Every industry is different and surprisingly an easy way to
find out about how to meet these people is to ask one yourself. Suppose that
you have acquired a client with a certain profile (e.g., VP of .. in X
industry). You can ask them, "If I did not meet you through ... how might have
I found someone of your position and title? Is there an event or conference
that people with a similar position to yourself attend often?" It is really
that simple and you would be surprise to hear about events and meetings that
you might not have thought about before. One thing the remember is that people
high up in the organization tend to be strategic and they tend seek out new
knowledge that can help them better manage their companies. Use this fact to
your advantage.

When I approach a client about my software I usually don't talk about my
software first. I usually ask them about a problem that I suspect that they
have within their company. After the point of the software is solve an
existing problem. I might ask them how they are currently dealing with it and
strategies that I have tried to mitigate the problem. After they give a 5 to
10 minute speech about their "unique" problem, I might say: "well I heard from
XYZ that this is a problem in your industry and we have actually tried to
build a product to solve that problem. We think that to most effectively do
this we should have the following features... " This is a sample dialogue but
it really points back to a psychological principle of commitment bias. The
person has already committed to your conversation by telling you their
organization's problem and it is natural for them to be intrigued when you
present a possible solution. They might actually be glad that someone else
understands their problem and is working to fix it.

Another way to approach a client is to provide them a tip or information that
would be useful to them. I usually talk to the speakers after their speech and
give them some comments and suggestions that they might not have thought
before. By giving free and good advice, you position yourself as an expert in
the field which warms up the client to listen to what you have to say next.
Although I mostly sell and build software, I have had a client hire me as a
consultant based on a piece of advice that I gave him at a conference.

If you are interested in learning more about pricing, you should read into
practice called "Target Costing". It was developed by the Japanese in the
1980s to ensure profitability in new product development. Dan Ariely has some
good books on anchoring and framing for price setting.

There is a lot more to say about this topic and I think that it is an
important one that is often not taught in school or discussed on HN. If people
are still interested in hearing more, leave a message below and I will
continue writing.

Likewise, you can shoot me an email at: doanh [at] paramountdecisions.com

~~~
dqdo
I guess there is quite a bit of positive reception with what I am writing
about enterprise software and pricing model. I might just have to create a
blog to talk about these topics and other related start-up topics in greater
detail. I am lucky to have studied both engineering and business during my
undergraduate and graduate education so some of my insights come from the
blend of learning from these two worlds.

Some of my blogs titles might include: \- The paradox of choice: how to use
psychology to develop your tier pricing.

\- Why selling and product development are actual the same thing.

\- Why learning is the most important part of any organization and how build
it into the culture.

\- What is the lean start-up really and how lean isn't just for start-up
organization?

\- What is value generation, why most people don't understand this concept.

\- How to develop sound decisions within organizations.

\- The difference between upper management and lower manager and how this
affects the sales process.

\- Strategy is really about choosing what not to do.

\- Pricing and feature set discrimination: how understanding and segmenting
your customers can improve your profit.

\- Why charging less may do your customers more harm than good.

These are some of the topics (and perhaps many more) that I will write on a
blog. If any of these topics are of interest to you, please write a comment
below so that I can prioritize my writing.

As for today, I will talk about The paradox of choice: how to use psychology
to develop your tier pricing.

If you look at every single SAAS, enterprise, and consumer facing company's
website; you will notice that they all have a set of prices and features. This
idea is not new and has been a ubiquitous practice. What is often not
discussed is why these practices exist from a scientific perspective and how
effectively develop the tier pricing model. Most companies either look around
the web and copy more established players or develop their own tier offering
with much less thought that they should.

Since we know that the price your product is as important as your product
itself, being conscious about this practice can significantly improve your
revenues.

The first thing to note is that people like choices. I am going to repeat this
again: PEOPLE LIKE CHOICES. So given this statement, the worst thing that a
company can do is not to give the customer a choice. If the customer does not
see a choice in your offering, they will subconsciously create a choice in
their head. In this case they will decide between pay for your product or not.
If on the other hand, you have a nice set of offerings, the customer's
attention will be focus on choosing between which of the offerings that best
suits their needs. As you can see here, including choices in your offering
changes the type of decision that the customer is thinking about. In the first
case, they are focusing on the choice of whether to buy or not. In the later
case, they are focusing on which offering to buy. This makes a big difference
on your revenue and so you always want the customer in the second state of
mind.

When creating a tier pricing model, you can also run into the problem of
giving too much choices. Typically beyond 5 alternatives, clients have a
difficult time of assessing which one is the best for them. This may lead to
frustration and given the difficulty of making this decision, the client might
not choose any of the alternatives. This is a classical case of paralysis by
analysis. When making a decision, people want to be assured that they are
making the right decision. If your pricing strategy can give a sense of
assurance, your conversion rate will also be higher. Likewise people also want
to walk away from the process feeling happy about their choice. Remember that
whenever we make a purchase, we want to feel good about it afterwards. Bonus
points if you make them feel so good that they will tell their friends about
you.

So in order to create a fine balance between too few options and too many
options, the good rule of thumb is to create between 3 to 4 choices for the
customers with different features and price points. The exact method for how
to create this price discrimination and feature discrimination will be
discussed in greater detail in a later post. I will cover some basics here.

Within each of these tiers, the feature set needs to suit a particular
customer demographic. For example, offering 1 is best for the small business
owner. Offering 2 is best for a medium enterprise with 100 to 500 employees,
etc. By deliberately alining the offering with a particular customer, you can
more likely induce the affect of having a customer know that the choice that
they pick is the right one for them.

There is also a number of tricks that you can use to enhance your pricing
strategy. One of the most predominate trick is creating the "dummy or decoy"
offering. The "dummy or decoy" offering is an offering that you know very few
people would go for but the existence of the offering creates an anchoring
effect to the other alternatives and frames the decision in a positive way.
For example, expensive restaurants always list a few very expensive dishes and
wine knowing that few people would purchase them. These alternatives create a
psychological frame so that clients would feel happy when they order a
slightly less expensive dish because they get to think that they are getting a
great value. The "dummy or decoy" alternative is quite interesting because you
often create this alternative to generate a comparison between our product and
a more expensive competitor. You know that most people will not choose it but
its existence can help the client's internal team justify your solution over
the competitors. The reason that this trick works so well is that in decision-
making, people generally think in terms of relative differences rather than
absolute differences.

Another trick that you can play around with is the psychological perception of
different numbers. For example the difference between $69, $70, and $74.99 are
quite different even though they are not that far apart numerically. In this
is an area where the best way to test is through experimentation but as with
the other tricks this can make a big difference in the conversion rate.

A third trick that you can use is called anchoring. I learned this from a
street performer in Europe. Whenever he performed, instead of asking people
for a specific amount of money, he would say: "If you enjoyed the performance
please support us with a small donation. I think that our performance is worth
the sam price as 1 or 2 cups of coffee". In this situation, he anchors his
services to a price of a cup of coffee which is familiar to the audience. In
doing so he is able to get a reasonably good amount of money from everyone.
You can apply the same trick to enterprise software as well.

So overall this post talks about the paradox of choice and how to use it for
creating a tier offering for SAAS products. Every organization, every
software, and every industry is unique and these are just some guidelines. One
thing to take away from this post is that pricing strategies are a lot more
complex than what most people think. Within this complexity is opportunity to
fine tune your offering to increase revenues.

If you have any further questions about this post please email at: doanh [at]
paramountdecisions [dot] com.

I realize that this is an area which is of vital importance for most SAAS
companies (since it is directly correlated with revenues) and an area where
there is not that much expertise (as far as I can tell from my experience). If
you are interested in some consultation for your company on this topic, shoot
me an email.

~~~
20100thibault
I would definitively read your blog, thanks for posting

~~~
dqdo
I took some of the material on HN and put it inside a Blogger. The blog is
quite rough at the moment as I have not spent much time editing the content.

If you are interested in reading it and possibly sharing it with others, here
is the url: [http://doanhdo.blogspot.com/](http://doanhdo.blogspot.com/)

I will write more posts in the near future on the topics that I mentioned
earlier.

~~~
dvsprc
Do You have a twitter account where you publish a link to new articles from
that blog?

------
CyberFonic
Based upon my experience selling $200k to $3m solutions.

You need to be competent in the technology niche that you wish to work in.

You need to be interested in understanding the problems people are trying to
solve, including the business, cultural, political and legacy technology
background for those problems.

Having done that, you then architect the "solution" and present it.

Typically the client wants to pay far less, wants it much sooner and throws in
a bunch of new constraints. So you go back and re-architect, repeat. A fast
sales cycle is 6-9 months some can be multiple years and the technology moves
along as they dither.

It helps to have client-side experience before crossing over to the vendor-
side.

------
smt88
Have you applied and failed to get those positions?

A lot of companies have trouble filling sales roles, and adding your technical
expertise is a huge advantage. I'd imagine any smart hiring manager would at
least talk to you.

~~~
curiously
I have not applied yet. Usually reading the job description it's a bit
intimidating. I've officially only worked as a software developer but have not
worked in a sales role other than building my own SaaS from scratch, and
selling it to other people.

I've been considering an entry level sales job to fill that gap before
thinking about this role, but is that not necessary? Could it be possible to
go into this role directly with only an engineering and some entrepreneurship
experience?

well my email is john@appsonify.com if anyone wants to talk.

~~~
smt88
Applying for jobs is like sales. If you apply and get rejected, you can ask
why you were rejected and use the information to calibrate your next attempt.

Entrepreneurship _is_ sales experience. In fact, it's the best kind.

Lots of people can develop a product, but getting people to use it (and pay
for it!) is really hard and requires sales skills. It's even harder when no
one has ever used the product before, and you don't have the benefit of a big
brand or glowing testimonials.

Someone with your skills and a passion for sales will be a lifeline to many
companies. If you don't end up as a Sales Engineer, you could also be on an
implementation team (meaning like a customer advocate, not like IT
implementation). There are lots of things you could do.

------
JSeymourATL
> how can I land myself that role?

Consider that there is a Senior Sales Executive out there today that you have
knowledge & expertise to help. Suggest reaching out to Diretors & SVPs of
Sales in the SaaS space. Linkedin is a good place to find them. Now gather
intel and network. You must talk to these guys, the more, the better.

Incidentally, start reading up on the sales process. Recommend reading The
Challenger Sale by Adamson and New Sales Simplified by Weinberg.

------
WestCoastJustin
Start a site explaining technical bits, build a following, use that as a
portfolio to land a job. Ideally, specialize in technology & products, which
just so happen to be owned by the companies you want to work for, they will
likely hear about you long before you apply for any job. Think of this as a
1-2 year project, but it will dramatically raise your internet profile, and
you will personally grow too.

~~~
curiously
what are some examples of people and blogs that have done this already? I
think I can learn the fastest by reading such blogs and trying to emulate what
they've done but in a domain that I'm familiar with.

~~~
WestCoastJustin
I have personally done this with much success. It is not easy, but it is not
rocket science either, just consistent effort.

[https://sysadmincasts.com/](https://sysadmincasts.com/)

~~~
curiously
This is very interesting. I'm watching the docker video. Very easy to
understand.

So how did it lead you to a sales engineering role or other opportunities? Do
you ever mention it in your interviews or resume? How do you explain how it
demonstrates your abilities for sales engineering roles?

Did you create the screencasts just to build a portfolio or do you have a
general interest in this area?

You should upload it on youtube and monetize it as well (but I've not done
this but seen other people uploading screencasts on there with success).

~~~
WestCoastJustin
Job offers was not my motivation for creating the site. Just an interest in
the tools and changes happening in the area. Yes, I have mentioned it on the
resume, and in interviews. I should say, that I am working full-time on the
site now, so I am not doing sales for any company. But I do get offers, via
email, from companies that I had done videos on. So, I know the options are
there. I kind of hate how this sounds like I am bragging, I am not, I am just
trying to let you know that building an on-line profile will take you places,
far beyond _a single job_. I am not an expert, I do have domain experience,
there is nothing stopping my colleagues from doing something similar, it just
takes a long time. Go read some of the things patio11 has to say, he is far
smarter than me, check out
[https://training.kalzumeus.com/newsletters/archive/content-m...](https://training.kalzumeus.com/newsletters/archive/content-
marketing-strategy)

~~~
curiously
How did you initially market or get your stuff known? To me that is the
biggest hurdle, you build something of quality but it still must be seen by
others to validate it, which you already have.

