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In last month’s newsletter we looked at how technology companies marketed and sold software, along with the pitfalls of many of the tactics used. In the past, the market was dominated by buyers who were speculatively investing in future technologies in order to gain competitive advantage. This trend has now disappeared and we now see mainstream buyers taking longer over their decision-making and looking far more closely at tangible business benefits. So what can enterprise software vendors do?
History repeating itself
Looking back over the last twenty years the phenomenon we are now experiencing is not new. So what can we learn from the slowdowns of the early Nineties? In a downturn buyers become more cautious. Indeed, one of the key lessons that software vendors learnt in the Nineties is that technology, in itself, has no value other than that perceived by the buyer. Therefore, understanding this perception is critical to success in today’s market. We believe there are five key points in a successful sales and marketing exercise. The technology vendor should be able to:
- Understand the market forces at play
- Understand the buyer’s characteristics
- Understand the positioning and value of the solution in the marketplace
- Recognise the need for professional salesmanship
- Stimulate returns through partnership
Market forces
The major shift in the market has seen the majority of buyers moving from adventure to caution and from innovation to consolidation. IT decision makers of enterprises today are keener on getting a return on the existing technology installed. Indeed, the backlash of open-ended integration projects has already hit hard on the CRM market in particular where expectations were often unrealistic, overstated and under delivered. Many companies have become disillusioned with the paybacks that were promised and have almost universally rejected concepts such as “total cost of ownership”. While there may be a number of factors involved, surveys have shown that buyers largely blame the technology vendors for this failure. In a study carried out by Datamonitor, users blamed suppliers for project failures citing inadequate return on investment calculations, poor pre-implementation analysis and a failure to understand a customer’s business needs as the main reasons. Address these problems and you will go some way in improving your performance.
Indeed, if all you ever sell is “a concept” then that will cut little ice with the more conservative buyer. Furthermore, buyers have genuine reasons to be sceptical about “panacea” solutions. We are seeing ‘projects’ that are highly tactical and specific in their requirements. The market today is demanding, return on investment in months, not years. Therefore, if you have a solution for which you are as yet unable to demonstrate an ROI then you will find it difficult to survive.
Microsoft, in their recent advertising campaign in the UK, are promoting .Net on business arguments and perceived business benefits. The message is clear, give value, solve real problems and demonstrate that you have a real solution to defined business needs.
Buyer characteristics
Readers of this newsletter will know that we often refer to Geoffrey Moore’s book “Crossing the Chasm”, in which he expounds the concepts of technology life cycles as well as the different characteristics of buyers. In the current market the “technology buyers” who thrive on getting the latest innovation often for its own sake have significantly decreased. Similarly, the “early adopters” who unlock the key to a solution becoming mainstream, have also had their wings clipped particularly where integration services are a significant part of the solution. These buyers are now looking for fixed cost solutions delivered to budget.
The mainstream buyer will stick with their preferred suppliers. Indeed many would want to reduce the number of vendors they have to deal with as they try to manage ongoing costs. Where the buyer is sticking with a particular integrator then it is obviously in your interests to partner with these companies. System integrators are able to win the projects where your technology may only play a small part, but can be an important route to gaining more mainstream references.
Your positioning and value in the market
One of the first questions we ask our clients is:
“What scale of benefits does your solution/product provide and to whom?”
We are constantly surprised at how many companies are unable to answer this question! However the inability to answer it will have serious repercussions in your ability to survive. To answer this question you need to get answers to the following:
a) Do we have a technology that meets a business need, and how can we show this?
b) Can we demonstrate a real ROI from our solution/product?
c) Where is our product/solution in the technology life cycle of a market?
d) Who are our real competitors?
e) What is the size of the current buyer market?
f) Do we have marketing messages that communicate to the above?
g) Do I have salespeople who understand the market they are selling in?
Positioning your solution
If you cannot answer any or all of the above the first and most important step is to commission the research that honestly and objectively gives you the facts. If you delude yourself about this point you will only continue to spend more money and pursue a “pipe dream”. Go back to your customers and ask them why they bought from you. Write those business case studies. Use the information gained from your biggest asset, your customer, to strategic advantage.
Consider verticalisation. If all your competitors are too strong or to the buyer all solutions appear very similar then look at where you can differentiate yourself and dominate a vertical market. A significant advantage here can be gained through a strategic partnership with a vertical market leader. Consider what technologies are complementary to your solution and find out who the best companies are to partner with in a particular vertical. This can often lead to an increased recognition in the eyes of the buyer. Siebel have recognised this and are looking now to partner vertical market leaders and develop tailored solutions.
Remember people buy solutions to business needs and successful companies are those that adapt their marketing and positioning accordingly rather than add unneeded features to their technology.
Professional salesmanship
If the size and scale of your market has reduced to the point where it is uneconomic to sustain a sales force, or that is unable/ineffective in the type of market you are now in you have no choice but to reduce headcount. The biggest problem we see today is that there are very few salespeople who are trained to deal with persuading buyers to buy in a depressed market.
For instance, rather than just relying on generated leads do your salespeople have a list of prospects that they believe should be customers? In other words, now is the time to identify companies that have similar characteristics, similar problems and put together a proactive and targeted campaign to these accounts. This need not be expensive and often an introductory letter with a case study example is all that it takes to create a highly qualified new prospect.
If the cost of getting the best salespeople is prohibitive then there is the option of selling indirectly through resellers. In a mainstream market these companies are able to open and close accounts, and if your product or solution is suited to this model then once again, partnership can be a very productive channel. If you do have salespeople of genuine potential then now is the time to invest in their professional training so that you will not only get their loyalty but more than likely, increased productivity as well. Remember a productive salesperson or reseller network in today’s market will be more important than new development!
Partnership
Throughout this newsletter we have highlighted some of the possible partnerships which could ease some of your sales and marketing problems. So how do you go about putting a partner strategy together?
The options potentially are these:
Strategic Partnerships: Bigger name reference to help overcome “Who are you” objection. These tend to have greater “PR” value than bottom line results, whilst also giving you access to specific vertical markets.
OEM: Integrate with another vendor’s solution or simply allow that vendor to resell your solution to complementary markets to your own.
Value Added Resellers: appoint resellers who can add value by either getting you in to vertical markets quickly through using their knowledge and expertise, or simply through their expertise in selling technology solutions to mainstream buyers.
Integrators: Get into projects where the solutions needed are bigger than the products/solutions you provide which only meet a portion of these clients needs.
There are still opportunities in the markets today and we believe that the transition from being technology driven to business driven is the key to survival. Understand your customers, provide them with what they need and then constantly communicate to them and they will continue to come back for more.
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