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This month the SSP newsletter begins a two part series on the way technology is marketed. In this issue we will look at some examples of typical mistakes made in selling technology, whilst next month we will analyse ways in which sales techniques can be improved.
With the news that Gartner has extended its estimate of the ‘gap year’ by a further 50% to 18 months, it is now becoming ever more apparent that for a software company to survive it must begin to aggressively tackle the key problem from which all businesses suffer – how to increase profit (or even, how to make a profit…). In the current tough environment, when IT budgets are being squeezed, it is becoming clear that technology does not simply sell itself, although in many ways, that is how the industry has worked historically.
Selling an idea
Quite often, a great deal of investment is made in something that does not yet exist, or is still only in its infancy. Of course, this is due to the fact that these early concepts are marketed as being the next great advance in technology. However, in some cases these concepts never actually turn into a profit-making reality, and can weaken the market at the same time. The problem is that all too often technology is being sold on merit alone.
A headline case of how the industry has suffered as result of an over reliance on marketing hyperbole and vapourware is the 3G licensing fiasco. The industry has cried foul over Governments’ greed in accepting such astronomical bids, but telcos should face up to the fact that they have fallen victims of their own hype. The telcos talked up the possibilities of third generation networks for months and years, without a strenuous business case forthcoming for its profitable use. They then fell victim to their own spin as prices soared. This has had a profound impact on the IT sector, and not just for those at the forefront of the auction wins. The enormous debts this created have resulted in a drop in demand, across the board, for IT services.
Selling a Buzzword
We have seen over the years a number of trends created by certain genres of software; for instance there have been ASPs, ERP software, knowledge management, CRM, e-commerce, e-[anything], even EAI. Frequently, high tech. companies believe that by attaching themselves to the latest hot topic they can gain profit, simply by association. Unfortunately, when this buzzword becomes unpopular, they are often left with a tag that they would like to remove. A key area where this has been both successful and unsuccessful is in e-commerce, a catch-all term with many definitions.
The initial excitement some years ago with the chance to do business electronically (primarily over the internet) has now dissipated considerably. Over a year ago ‘e-commerce’ was a buzzword and many companies attached themselves in some way to the term, spotting the benefit of the latest bandwagon. In particular B2B e-commerce vendors appeared to have a compelling offering to industry. The leading lights in this sector include companies such as i2 and Commerce One. Recent financial results have demonstrated just how little this initial excitement has translated into hard technology over the last 12 months. Further analysis of the actual business benefits and cost-savings from use of this software have led to a major change in direction.
Many companies realised that they had to stop marketing or selling a concept and start selling a proper business case. What was being marketed as ‘e-commerce’ is now ‘supply chain optimisation’. The actual end result of implementing an e-commerce solution linking all your suppliers, distributors, resellers, retailers (i.e the supply chain) was to automate certain processes and streamline others. In large enough organisations this then lead to significant cost savings that over time justified the investment made.
Selling a solution
This last example highlights the next point. Time and time again we have fallen into the trap of believing that a software product or IT solution will be able, on its own, to solve the problem that a business is trying to address. We must remember to keep in sight the fact that software technology plays only a part in a business’ processes and structure. In many cases there has to be a change in the way a business is run, or, more frequently, employees have to be educated to work in a different way.
Specialists in customer relationship management have increasingly had to deal with the issue of business change. Since the early to mid 90’s corporations were beginning to realize the importance of their customers and the lengths to which they must go to retain their loyalty. This has filtered throughout the consumer industry and now more than ever, companies must be prepared to go to greater lengths to satisfy their customers in order to remain competitive. This well documented phenomenon has many success stories and study after study has been commissioned so that companies can maintain their cutting edge.
As the importance of customer relations grew, so did the popularity of customer relationship management software. For a company to be able to manage its customers better there was a need for a CRM system. Unfortunately, an all too common mistake was made as customers thought that by implementing a call centre or contact management product they would become a customer-centric enterprise, thanks mainly to sales executives and marketing departments selling this vision. Of course, there has to be a company-wide commitment to CRM, from boardroom to reception desk, for it to work. The tool is only one part of the equation. There has to be a capable hardware infrastructure, the CRM front-office application, the ability to analyse the data gathered and, most importantly, the management skills to know how to put this information to profitable use. As we can see, the actual CRM software plays a minor, albeit crucial, role in the chain.
In extreme cases, a technology solution can even have a negative impact. In a survey carried out by leading mid-range CRM vendor, FrontRange Solutions, the findings suggested that customers want a person on the phone quickly, and a fast resolution to their problem, rather than an automated system. We, for we are all customers, generally prefer to have a problem fixed rather than to have to help ourselves. Customer self-help tools, online customer support and knowledge bases don’t appeal to customers, they appeal to companies who want to cut their costs, whilst supposedly managing their customers. In addition to this, some businesses have such a diverse multi-channel presence that they are unable to service them properly and so end up putting customers off – with the very same system that was designed to retain them!
Is there a need?
At the very extreme end of the scale, some software companies know so little about their market that they are trying to sell software to customers who simply do not want it, or even who have no actual need for the software technology. It is commonplace for a technology company to have no idea where their market lies or who their customer is. A startling finding from a survey carried out by the CSSA in association with KPMG is that IT companies of all sizes spend between 15% and 30% of their revenues on marketing and of this only a staggering 5% is spent on market research. In a market where the customer is at the very core, companies must be prepared to budget for more analysis of their target market.
At the European Technology Partnering Forum recently, a selection of industry heavyweights revealed their understanding of the key issues of the moment and the overriding factor was return on investment. This is not a revelation; the industry has known for some time that customers have demanded a demonstration of this but are being slow to catch up. We have seen many examples of companies who have a piece of technology which is believed will either sell itself, or, that the simple act of ownership justifies the cost of purchase.
At the end of the day IT budgets are only being spent on software that generates a swift, if not immediate return on investment. As industry experts have recognised, European technology businesses have historically been founded by software engineers, who have an assumption that the technology will often sell itself once it is taken to market. European companies, on the whole, are often more interested in research and development than in sales and marketing; there is a general belief that they must become more ruthless in order to survive. Here in Europe we need to learn a few lessons from our American counterparts, many of whom understand far better the needs of their customers and how to sell to them. They recognise that technology simply will not sell itself and that at every level we must be able to demonstrate the key economic benefits of using a particular software product.
In next months issue, having studied the pitfalls and mistakes in how to market and sell IT software and services, we will look at what companies should be doing and what the key points are in selling software.
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