Deliberately Underselling as Sales Strategy

Viewed in Tomasz Tunguz

For any ambitious sales executive, the temptation might always prove too irresistible: Hype their product or service, exaggerating it beyond reasonable expectations, to be sure a sale is secured.

If this extra hype actually helps secure the sale, what’s so wrong with that?

Hype pitfalls

In this article, venture capitalist Tomasz Tunguz explains why the overhyped sale may not backfire immediately but does ultimately and should be avoided.

The danger of overselling a product or service is that the customer, usually starting with the procurement executive or team, ultimately is held accountable to these overhyped expectations. This places the customer in a vulnerable and defensive position in their respective organization, and often can lead to poor outcomes, including cancellation of the contract and damaged brands and reputations.

Undersell benefits

The alternative, what Tunguz argues is a conscious decision to undersell, is actually strategically preferable, leading to vastly better outcomes, including expanded contracts, referrals, and customer contentment when a product or service turns out to represent value that exceeded original expectations.

Tunguz points to the glaringly distinct hypothetical outcomes of overselling and underselling.

Backfiring

In the former example of an overhyped sale, the truth ultimately emerges and backfires on both the sales executive and the customer. “Nine months into the contract,” Tunguz writes, “the customer realizes they have over-provisioned…

The customer loses confidence in the account executive, feels misaligned, and blushes under the challenging questions from the procurement team. Either the internal champion pursues a competitor or management appoints another person to lead the procurement cycle. In both cases, the vendor is out.”

Champion

Alternatively, the strategic approach of consciously underselling proves vastly preferable, Tunguz argues. In the hypothetical case of underselling, “other stakeholders compliment the champion on a great choice. She’s promoted. She refers you to a friend, who buys software from you and then tops up again.”

Compensation

The case for not overselling and actually underselling is persuasive, but it presents a compensation challenge. Given that the undersold contract would typically represent a smaller sales commission, how does a company best structure commissions to ensure their sales executives are not overhyping sales?

It’s a question that needs answering because, as Tunguz writes: “Who doesn’t prefer to sell to happy customers?” And happy customers are not oversold customers.

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