Buy One Get Another Free – Is this a Good Marketing Tactic for Business Software Vendors?

A major business software vendor recently offered buyers at midsize companies CRM product licenses at no charge when they purchase a particular version of their ERP product.  There are qualification requirements to get the free CRM licenses.  The catch – customers must pay the regular annual maintenance fee on the no cost CRM licenses.

Other business software vendors have made this type of offer either directly with buy one get another deals or indirectly through product bundling deals.  The real objective is to get more of their software and more users in a client site which produces additional implementation services and annual maintenance revenues in exchange for foregoing the initial license fee.  I’ll discuss the business perspective of doing this in next week’s post, and focus on the marketing aspects of this tactic in this post.

From a strategic marketing perspective, considering that everything a company does is marketing and impacts marketing, I think there’s more downside than upside to this tactic for the following reasons:

  1. This type of offer smacks of a wheeler-dealer approach to marketing and selling.  We’re talking about serious business buyers, and major industrial strength business software from major well-established vendors.  Do they really want to project a wheeler-dealer type of image for their company in that market?
  2. There are a number of qualifying requirements for these types of offers and there’s always the back-end implementation and annual maintenance costs.  Even though the vendors may be upfront, open and honest about disclosing all these terms and conditions, there’s always the risk of the customer perceiving they were taken in by a bait-and-switch type of tactic.
  3. The vendor is debasing the product they’re giving away by openly declaring that it has no license value.  The product they’re giving away will be viewed as adjunct or subordinate to the main product customers have to buy.
  4. Is there any going back?  Although it may be a limited time special offer, buyers will remember that they attached zero value to this product, and may never be willing to pay for it again.
  5. How do you explain this to existing customers who paid for the product that is now being given away?  If I were a customer who previously bought ERP and CRM, I would be on the phone with my sales rep asking for a refund or credit for the CRM I paid for and others are now getting for free.
  6. What about customers who previously bought the core product (ERP in this example) but didn’t buy CRM, can they now get the CRM at no cost on the same terms?  If I were a customer in that situation, I would certainly ask for it if I need a CRM system.

While I can see this type of offer generating some activity and sales, I’m struggling to find anything positive from a strategic marketing and market positioning perspective.  I think the product being given away will be forever devalued or debased.  Is that a fair trade for the annual maintenance and short-term service revenues in the vendor's business and product plans?

What do you think about this marketing tactic for major business software vendors?  Have you tried something like this and if so, how did it work out?  Your comments are always welcome.
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1 comments:

Melissa Paulik said...

Mike,

I tend to agree with you, but maybe it’s because I’ve never seen it work either. (same issues you cite) I might keep it in my back pocket for a particularly tough negotiation, but that can also leave you up to a yearly negotiation on those maintenance fees.

It seems to me that vendors that follow this path are trying to take the aspects of the SaaS route that make it an easier upfront sale. However, SaaS providers don’t devalue their product because it is their model. The mixed model, for whatever reason, leaves the customer with mixed messages.

Melissa