Stealing Customers – Indicator of a Saturated Business Software Market?

A fundamental marketing strategy decision is whether to generate sales and business growth by developing and growing the target market or stealing customers from other vendors in an established market.  In saturated markets with no or low growth projections, the tendency would be to focus on stealing customers.

Recent marketing campaigns from a number of business software vendors primarily focus on stealing customers from other vendors.  Another major business software vendor just announced this type of campaign targeting a particular competitor.  Does this mean that the business software market is saturated with limited growth prospects or are there other factors influencing these decisions?

Reviewing 2009 revenue performance for business software vendors, there’s a distinct dichotomy between two classes of vendors:

1. Legacy On-premises vendors showed significant and continuing declines in license revenues.
2. SaaS vendors showed significant and continuing increases in subscription revenues.

So it’s no surprise that many of the legacy on-premises vendors’ current marketing and sales tactics focus on stealing customers from other vendors – usually other legacy on-premises vendors.  No question that SaaS vendors are taking customers from on-premises vendors, but that seems to be more a result of customers motivated by a more appealing value proposition and solutions that meet their current needs.

There is good anecdotal evidence that prompting companies to consider switching business software, expands the evaluation to consider all alternatives.  An unintended consequence of legacy on-premises vendors raiding each other’s customer bases is that they’re probably creating additional opportunities for SaaS vendors.

Discounting is usually considered as the last resort in sales negotiations.  Is stealing customers the last resort marketing and sales tactic for vendors who are unwilling or unable to contribute to the development and growth of target markets?  Several of the customer-stealing campaigns also include substantial channel and buyer incentives and discounts.

Projections from analysts and other research sources show positive market growth, development and expansion opportunities for business software in most market segments.  Vendors that create real value for customers relative to current needs are in the best position to pursue these opportunities.  Vendors that contribute to the growth, development and expansion of their markets will reap long-term rewards while vendors trying to steal customers as a short-term revenue tactic will continue to see long-term business declines.

While stealing customers has always been a customer acquisition tactic in the software industry, the current focus on stealing customers as a primary marketing and sales tactic by so many business software vendors is unprecedented.

What are your thoughts about the marketing and sales tactic of stealing customers and how this relates to the current state of the business software market?  Your comments are always welcome.
Copyright © 2010 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

SaaS Solutions – Are You Marketing for Leads or Sales?

Traditionally, Business Software vendor marketing has primarily focused on generating leads for sales to follow-up and engage with prospects.  This was predicated on the complexity and duration of the sales, delivery, deployment and implementation processes for traditional On-premises solutions.

Software as a Service (SaaS) radically changes the delivery, deployment and implementation processes for business solutions.  This creates opportunities to rethink the sales and marketing approach and processes for the SaaS solution model.

Business software vendors that started life in the SaaS world, primarily focus their marketing campaign strategies, materials and website on:

• Demonstrating the real product online, on-demand
• Offering a free trial to sign-up online right now to use the full product for a limited time period and subsequently convert to a paying customer
• Pricing and other specific information about subscribing to the solution
• Providing relevant information for prospective buyers in their context with multimedia materials
• Engaging with their audience using online marketing and sales methods to expediently make the sale online with or without salesperson involvement
• Alternatively, collecting contact information for generating leads for subsequent follow-up by a salesperson.

The intent for new generation SaaS vendor marketing is to firstly attempt to make the sale or part of it online and secondly to capture contact information for the lead generation process.

In contrast, On-premises business software vendors that also offer SaaS versions of their solutions, seem to be continuing their traditional marketing approach:

• Providing general information about products, solutions, industry applicability, etc.
• Focus on harvesting contact information for their lead generation process at every opportunity such as registration to read a whitepaper, view a video clip, etc.
  
• Limited or no information about subscription costs and terms
• Creating the need for a prospective buyer to provide their contact details to get additional information and details they need for a buying decision.

Even though SaaS creates new opportunities to reorient marketing to actually sell solutions or initiate the sales process online, most traditional On-premises vendors that offer SaaS versions of their products are still primarily focused on generating leads for SaaS solutions like they have done for On-premises solutions in the past.

Some SaaS solutions such as CRM, Expense Management, eCommerce, etc. have a proven track record of selling online in a customer self-service mode with little or no live salesperson assistance.  Prospective buyers may not be ready to buy all SaaS solutions, especially more complex or higher value solutions, in an online self-service mode.  However, there are proven methods for opportunities to redirect the focus from marketing for leads to marketing for sales.

“I am the world's worst salesman, therefore, I must make it easy for people to buy.” ~ F. W. Woolworth

The ultimate objective is to make a sale – SaaS provides the opportunity to directly market for the sale, rather than market for leads for the sales process.

Have you shifted or considered shifting your marketing focus from leads to sales and what have you experienced?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Marketing & Selling the Service Differentiation in SaaS Solutions

My previous post ‘Are there Differences for Marketing SaaS versus On-Premises Solutions?’ proffered that customers need to make 2 buying decisions with the increasing availability of mainstream SaaS alternatives to traditional On-premises solutions:

1. Which solution best fits their business needs
2. Which acquisition / deployment option best fits their IT strategy.

The second buying decision means that prospective buyers will want information and comparisons to help them make the best decision for their business.  This creates a need and opportunity for marketing and sales to establish additional differentiation for their solution based on the Service aspect of Software as a Service.  It may help to consider the following three questions more broadly to develop your Service differentiation for marketing and selling your SaaS solution:

Who are you competing against?
In the first buying decision of solution fit you are primarily competing against other vendor solutions.  In the second buying decision of acquisition / deployment options you are competing on multiple fronts such as:

• Other vendors on service costs, terms and delivery
• Other vendors on the delivery platform – is it just a SaaS solution or are there Platform as a Service (PaaS) and/or Infrastructure as a Service (IaaS) cloud computing differentiators?
• Customer’s internal IT organization’s perspective on SaaS solutions
• Other vendors and customer’s internal IT on service delivery – Service Level Agreement (SLA), operational controls, security, SAS 70 compliance certification and whether it’s Type I or II, etc.
• Financial – operational expenditure versus capital expenditure considerations
• Total Cost of Ownership – there’s a lot of spin from both On-premises and SaaS marketing and sales pitches about which model costs more over three, five or more years
• Inertia – some buyers and/or companies may be reluctant or even resistant to having their business systems run in a data center they don’t control.

Considering all the possible competitive points will help formulate your best competitive differentiation.

What are customers buying?
Although a customer needs to make 2 decisions during the buying cycle, once they decide on going with a SaaS solution, they are buying one inseparable solution comprising of the application functionality, acquisition method, services, deployment, provisioning and other elements to make it work.  In a previous post I suggested a bifurcated marketing approach to attack the market from two positions to find prospective buyers on either decision track.  However, the overall marketing and selling strategy should be on the goodness of the complete SaaS solution, because that’s what customers are buying.

What are you really selling?
The bottom line is that you’re selling trust – that the customer trusts your company, product and the representative people they’ve dealt with to provide the solution to satisfy their core buying motivations of solving business problems, developing new opportunities, improving performance, increasing profitability, etc.  This isn’t different for SaaS versus On-premises solutions, but SaaS adds another major dimension of trust in the Service aspect.  With the continuing commoditization of business software and minimal functional differentiation between products in the same category, Service is the operative word for differentiation of Software as a Service solutions.  Marketing and selling the Service differentiation will attract and engage prospective buyers, and trust in your company’s ability to deliver the Service will make the sale.

Do you have additional suggestions and ideas for marketing and selling the Service differentiation in SaaS solutions?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Are there Differences for Marketing SaaS versus On-Premises Solutions?

From a customer perspective Software as a Service (SaaS) and On-premises business software solutions have the same objectives of creating business value by providing applications and functionality for improving business processes and performance.  The customer buying motivations are the same – solve business problems, develop new opportunities, improve performance, increase profitability, etc.

Marketing SaaS and On-premises business software solutions have the same objectives of developing a credible market presence, creating awareness, generating leads and enabling sales to efficiently sign up new customers.  The marketing tactics are the same – using a familiar mix of webinars, events, collateral, PR, SEO, web content, analyst reviews, email marketing, videos, social media, etc.

When SaaS solutions first emerged as viable alternatives to the traditional On-premises approach, the marketing focus was primarily on the different acquisition and deployment characteristics of SaaS.  More recently the marketing focus for SaaS solutions has shifted to the application functionality and business value for customers as more SaaS and On-premises vendors compete for the same customers in target markets.

So what’s different?  The real difference is that customers now need to make 2 buying decisions:

1. Which solution best fits their business needs
2. Which acquisition / deployment option best fits their IT strategy.

Customers can take two different paths to making the buying the decision:

1. First develop a short list of best fit solutions and then decide on available acquisition / deployment choices as part of the final decision process.  While SaaS versus On-premises may not be the initial primary decision driver, it could be a key final decision factor.
2. First decide which acquisition / deployment option they want and then find the best fit solution that meets the selected acquisition / deployment criteria.  SaaS versus On-premises is the initial primary driver, but functional fit between qualifying solutions will be the final decision factor.

This has implications for marketing both SaaS and On-premises solutions for positioning and differentiating according to each decision choice and path in the customer buying process.  It also has implications for sales to determine how to engage with prospective buyers depending on which decision path they are following.

Given that customers need to make 2 buying decisions and usually take two different paths to reach a decision, business software vendors may want to consider a bifurcated marketing strategy for positioning and differentiation:

1. Traditional functional fit solution marketing approach emphasizing business benefits and applicability of the solution functional capabilities.
2. Acquisition and deployment marketing emphasizing the business and IT benefits of each available acquisition / deployment option.

“If you're attacking your market from multiple positions and your competition isn't, you have all the advantage and it will show up in your increased success and income." – Jay Abraham

I’ll explore the differentiating and positioning possibilities in future blog articles.

Have you faced this situation and how are you approaching it?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Is that Cloud Computing or is it SaaS?

No question that Software as a Service (SaaS) and Cloud Computing are hot topics and major trends in the business solutions market.  SaaS vendors and solutions continue to grow new customer subscriptions and revenues while traditional on-premises vendors and solutions experience declining new customer license revenues.

But vendors are causing confusion for prospective buyers by referring to SaaS and Cloud Computing interchangeably in their marketing materials.  As with most new technologies, prospective buyers largely depend on the vendors to provide information and educational content as part of their marketing outreach.  We’re at the early stages of a major long-term trend on how business solutions and computing capabilities are delivered to customers.  Using standard and consistent terminology and definitions avoids customer confusion and disinterest in what may appear to be more tech jargon.

While most of the terminology is established, the definition or interpretation of the terminology is still inconsistent and a source of confusion for prospective buyers.  In the interest of resolving this situation, I hope to instigate a broader discussion by proffering the following definitions and interpretations of the common, currently used terminology:

Software as a Service (SaaS) – customers subscribe to the use of a functional solution as an on-demand service delivered by the vendor or authorized partner in a multi-tenant deployment online environment.
Cloud Computing – provides customers with a complete, secure, private and scalable on-demand computing environment from a utility-computing provider on a subscription basis.

The important and confusing distinction is that while a SaaS vendor may use cloud computing to deliver a CRM solution for example, the SaaS customer is only subscribing to the CRM application service.  If they do not have access to the underlying cloud computing environment for other purposes, it should be referenced as SaaS, not cloud computing.

On the other hand, a cloud computing customer subscribes to a computing environment for all their computing needs and deployment of multiple solutions as an alternative to their own data center.  The solutions could be sourced from multiple vendors and/or self-developed.  They may choose to deploy one or more SaaS solutions in their private cloud computing environment.

This leads to more terminology and definitions to more fully describe all the available possibilities.  The cloud computing environment is currently comprised of three layers of services:

• Infrastructure as a Service (IaaS) – this is the computing foundation and infrastructure for cloud computing consisting of the computing services, storage, networking, security, backup, recovery, operations management and other requisite capabilities.
• Platform as a Service (PaaS) – this is all the application enabling technologies for developing, deploying and servicing functional SaaS solutions in a cloud computing environment.  PaaS also enables customers and authorized partners to develop and deploy their own applications using the tools and services provided by the PaaS vendor.  PaaS runs on the underlying IaaS.
• Software as a Service (SaaS) – these are specific functional applications such as CRM, Expense Management, HR Benefit Management, etc. licensed and delivered by solution vendors in an on-demand online or cloud computing environment.  SaaS runs on the underlying PaaS and IaaS.

Hopefully this article will help prompt a larger discussion for industry analysts and vendors to agree on standard and consistent definitions and interpretations of the terminology for evolving SaaS and Cloud Computing technologies.

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com