What is a Product Demo?

A product demo is a live or recorded presentation that showcases the core features, capabilities, and value of a product to either a prospective or current customer. The main goal of product demos is to demonstrate how the product can solve specific customer problems and, ultimately, drive a purchase decision.

Often referred to as a sales demo, this process forms a critical component of the B2B SaaS sales process. It is a unique opportunity to present the value of your product in a way that resonates with potential customers. A well-executed product demo can tip the scales in your favor, while a poorly conducted one can significantly hamper close rates.

In essence, the product demo is often the defining factor between winning a deal and losing a prospect. A compelling demo enables potential customers to see exactly how your solution addresses their pain points and helps them achieve success in their role.

As Geoffrey James aptly puts it, “There is almost nothing more powerful than a great product demonstration. When done correctly, a demo allows the customer to see and feel how things will be better if they buy (and worse if they don't).”

Product Demo vs. Sales Demo: What’s the Difference?

The terms product demo and sales demo are often used interchangeably. Other terms like product demonstration or SaaS demo are also commonly used in the software sales world. However, depending on who you ask, there might be subtle differences.

For instance, HubSpot differentiates the two terms by stating that a sales demo is presented to a prospective customer, while a product demo is delivered to an existing customer. However, most SaaS sales experts, including Steli Efti, Jacco van der Kooji, and Peter Kazanjy, view the demo as a key sales tool primarily aimed at prospective customers, regardless of the terminology.

Who Delivers a Product Demo?

In most organizations, the sales representative—or more specifically, the account executive (AE)—delivers the product demo. However, in smaller companies and early-stage startups, it is often the founder who takes on this responsibility.

When is a Product Demo Delivered?

A product demo is typically conducted after a lead has been qualified. The B2B SaaS inside sales process generally follows this sequence:

• Lead Generation: A lead is captured, either through inbound or outbound efforts.

• Discovery: The lead is qualified by verifying if they match the company's ideal customer profile.

• Pitch: The product's value is demonstrated to the prospect through the demo.

• Conversion: The qualified lead is nurtured into becoming a customer by closing the deal.

For instance, let’s say a visitor lands on your website and fills out a contact form, expressing interest in your product or service. This visitor becomes a lead. By analyzing their information—such as company, role, location, and authority to purchase—you determine if they align with your ideal customer profile (ICP). If they do, they become a qualified lead. Once the demo is conducted, the lead becomes an opportunity. The final step is to close the deal and turn the prospect into a customer.

How to Deliver a Product Demo

Over the past decade, B2B software sales have shifted significantly from traditional field sales to inside sales—sales handled remotely via phone, email, and online meeting tools.

Today, most SaaS demos are delivered using online meeting tools that offer features like screen sharing, audio, video conferencing, and chat. While general-purpose tools like Zoom, Microsoft Teams, and Google Meet are commonly used, purpose-built tools such as DemoDazzle are gaining popularity for their advanced features tailored specifically for sales and demos. These tools offer functionalities like interactive virtual meetings, automated scheduling, and sales coaching.

Why is the Product Demo Critical in B2B SaaS Sales?

The importance of the product demo in the sales funnel depends on various factors, with the most significant being Annual Contract Value (ACV). ACV refers to the average annual revenue generated per customer contract, excluding one-time fees.

For SaaS companies with a low ACV (e.g., <$1,000), personalized product demos may not be financially viable due to the associated resource costs. However, for companies with a higher ACV, a well-executed demo becomes indispensable.

Clement Vouillon explains this in the context of SaaS sales models:“Your SaaS sales model should aim at self-service for low ACV products. For higher ACV products (>$3,000), a transactional sales model involving personalized demos becomes essential to justify the investment.”

SaaS Sales Models and the Role of Product Demos

Before optimizing your sales process, it’s important to determine the appropriate SaaS sales model for your product. Below are the three primary SaaS sales models:

Self-Service SaaS:

Designed for low-cost, user-friendly software (e.g., Slack, TurboTax, Dropbox). This model requires minimal sales effort, as customers can onboard themselves and find value independently.

Transactional SaaS:

Applicable for products with a higher price point (<$5,000 ACV) that require a more personalized sales approach. This model relies on inside sales teams to conduct demos, nurture leads, and close deals.

Enterprise SaaS:

Focused on high-value, complex software tailored to large enterprises. This model involves a longer sales cycle, multiple decision-makers, and extensive pre-sales support.

For SaaS products with an ACV above $1,000, the demo becomes the most influential part of the sales process.

How Product Demos Impact Close Rates

Delivering an exceptional demo is no easy feat. It requires a thorough understanding of the product, the prospect's needs, and the ability to build a strong rapport.

Robert Falcone categorizes demo outcomes into three groups:

• 10% of demos will go great regardless. These are prospects who immediately grasp the value of your solution.

• 10% will fail no matter what. These are cases where the solution doesn’t align with the prospect’s needs.

• 80% are where you make your money. These are the prospects you need to win with a compelling demo.

The financial impact of mastering your product demo is enormous. For example, let’s say your team conducts seven demos per week with an ACV of $21,000. At a 20% close rate, this generates $1.5M in annual sales. Improving the close rate to 50% increases sales to $3.8M—an additional $2.3M in revenue.

How to Master the Product Demo

Mastering the art of the product demo involves more than just explaining the product's features. Here are some tips for success:

1. Understand Your Prospect:
   Tailor the demo to address the specific pain points and goals of your prospect.

2. Highlight the Value:
   Showcase how your solution solves problems and delivers measurable results.

3. Engage Your Audience:
   Make the demo interactive by encouraging questions and discussions.

4. Practice and Refine:
   Continuously improve your presentation skills and adapt based on feedback.

5. Focus on establishing a connection with your prospect. After all, 71% of customers buy because they trust the salesperson they work with.

Conclusion

A well-executed product demo can make or break your B2B SaaS sales process. By delivering a personalized and value-driven demo, you not only improve close rates but also build lasting relationships with your customers. Remember, the goal of a demo isn’t just to showcase your product—it’s to show your prospect how their world will improve with your solution.

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