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

Adaptive Brand Marketing – More Than Just Four New Ps

Forrester Research published a research paper titled ‘Adaptive Brand Marketing – Rethinking Your Approach To Brands In The Digital Age’ in October 2009. Much of the subsequent comments and discussions about this paper concentrate on the proposed four new Ps of Adaptive Brand Marketing that will shift the brand marketer’s focus from the original four Ps to deal with new realities:

1. Permission – better understanding of whether and how someone wants to engage so that marketers engage and communicate according to buyer and customer preferences.
2. Proximity – moving away from the “one-size-fits-all” approach to more closely connect with local markets and specific consumer / buyer / customer groups.
3. Perception – in using the social Web for marketing the marketer should respect the distinction between a person’s social and commercial personas and not try to make or use social connections for commercial purposes.
4. Participation – there is no central command and control for communities on the social Web. Marketers should facilitate and participate with communities of consumers / customers for developing trust, loyalty and advocacy.

However, there are much more interesting and important concepts and proposals in this paper than the four new Ps that have received most of the attention.

Much of the traditional marketing approaches are based on a command-and-control and/or hub-and-spoke approach where marketing exercises complete control over all things related to marketing. However, in today’s interconnected world of social media, globalization and 24/7 always-on communications, control has shifted to consumers and customers who are more informed and more engaged to find the best deals on their terms.

Some of the principles of Adaptive Brand Marketing in this report that should be of particular interest to most marketers are:

• Channels – rather than deciding on channel strategy from the inside-out in traditional approaches, channel design (part of the Place P in the original 4 Ps) is determined from the outside-in by first understanding the needs and behaviors of prospective customers.
• Intelligence – in traditional approaches most marketing intelligence comes from formal research sources. Today, the intelligence from other sources such as social media, online communities, websites, eCommerce activities, customer interactions, etc. are more current, dynamic and possibly more important.
• Spending and Planning – traditionally these decisions are annual events with possible quarterly adjustments. No more – marketing spending and planning decisions should be a daily event based on the availability of dynamic, real-time data in unprecedented volume and detail.
• Brand and Segment – traditional approaches relied primarily on taking a brand to the masses. New media and marketing capabilities now enable taking a brand in specific contexts to multiple different segments with common shared attributes for each segment.

There is much more to this report that marketers should consider about how they operate in the current and evolving environment and adapting their marketing approach to their customer and market environments.

Have you reviewed the Forrester ‘Adaptive Brand Marketing’ report and implemented any of the recommendations? Your comments are always welcome.
Copyright © 2010 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Does Positioning Get the Attention it Deserves at Your Company?

My answer would be "no" based on most of the companies I’ve worked for and with over the years.  What is your gut response before reading this article?

All marketers learn about the original "Four Ps" of marketing and use them in all aspects of marketing strategy, planning, development and execution:

1. Product – deals with the dimensions of the product being marketed.  This applies to all types of 'product' – whether it’s tangible, intangible, service, practice, etc.  The product dimension addresses characteristics such as the branding, functionality, design, quality, safety, packaging, warranty, etc.
2. Price – deals with the dimensions of pricing decisions such as pricing strategy, suggested selling price, discounting, wholesale pricing, seasonal pricing, bundling, flexibility, price discrimination, etc.
3. Place – deals with the dimensions about how the product reaches the customer.  Marketing decisions on place include distribution channels, coverage, channel members, inventory strategy, order processing, logistics, etc.
4. Promotion – deals with the dimensions of promoting the product including decisions on promotional strategy, advertising, campaigns, promotions, selling, public relations, publicity, marketing communications, etc.

Al Ries and Jack Trout introduced the concept of Positioning as a key marketing strategy during the 1970’s and popularized Positioning as a core marketing discipline with their seminal book; Positioning: The Battle for Your Mind.  Since then many marketing practitioners and academics have included Positioning as the 5th P of marketing.  However, doing some quick checking around while writing this article, I was surprised to see many recently published materials, some from reputable sources, still referring to the original "Four Ps" without mentioning Positioning.  In spite of these surprising omissions, it does appear that most university curricula do include Positioning as one of the updated "Five Ps" of marketing.

So why is positioning most important?

Positioning deals with what you want to do in the mind of the prospect – i.e. how do you want prospects and customers to uniquely perceive your product in their minds regardless of exposure or familiarity with other similar or competing products – e.g. "safe vehicle" = "Volvo".  Positioning is the promise of the value you create for your customers.  Positioning cuts across the other 4 Ps and determines how you develop the specific dimensions of the other 4 Ps within the overriding positioning.

Positioning dictates what you do with a product and/or how you develop a product.  Pricing decisions must support the positioning.  Place is determined from positioning to define how to take a product to market.  Promotion is how you consistently communicate the positioning to the mind of the prospect.  If any of the 5 Ps are out of sync, your marketing strategy and execution will not produce good results.

According Philip Kotler of the Kellogg School of Management, all good marketing planning starts with Research, which reveals potential customer Segments, which determines the Targeting of specific segment(s) a company can serve better than anyone else.  The next step from this process is Positioning which must be done before considering Product, Price, Place & Promotion of marketing planning and execution.

A previous article discusses why positioning should take precedence over branding.

Where does Positioning fit in your business planning and marketing process?  Do senior management and other functional areas in your company understand and appreciate the importance of positioning before everyone runs off to build, market and sell product?  Your comments are always welcome.
Copyright © 2010 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Are you Inside-out or Outside-In?

Anyone who has worked with me has probably heard me refer to ‘outside-in’ versus ‘inside-out’ more times than they care to remember. While these are familiar terms and concepts to marketers, seems that many of us are easily captivated by all the wonderful new things our companies are doing with products, services and technology, causing our messaging to be inside-out. This appears to be more prevalent in B2B and particularly Information Technology companies.

Take an example of a Distribution Company that needs an operational system to expand their business for new opportunities in after-sales services. They make some inquiries, visit websites, receive emails, white papers, etc., but most of the information is about “platforms”, “services oriented architecture”, “next generation technology”, “software as a service”, product feature/functions, product brand names and other inside-out jargon, all of which are meaningless to them. The prospective buyer begins to question whether anyone actually has a solution to meet their business needs.

“Nobody cares about your products and services (except you)” – Pragmatic Marketing

Outside-in begins with customer value. The ‘customer’ is not just research, demographics and statistics about some market segment. It’s about the current problems, challenges and opportunities that real companies and people face in markets you plan to serve. What roles these people have in companies, what they worry about, what solutions they really need, how these businesses operate and many other factors.

Value is defined by the customer or prospective buyer – it’s not your list of perceived benefits, ROI and other claims. The value is expressed in terms of how your solution creates value for customers by meeting their real needs within their context.

With this deeper understanding of what, where, who and how to provide customer value, you’ll be ready to formulate an outside-in marketing strategy with value propositions that connect with the real needs of these customers. To make the outside-in value connection, messaging should start with value in customer terminology and context, along with specific messaging for the roles of key influencers and decision-makers.

A good consequence of the outside-in approach is that you will have more definitive market segments comprised of sets of companies based on their specific needs and the value you provide. Expanding on the Distribution Company example – you may find a common trend that industrial distributors are facing a slowdown in their traditional business, but some are seeing more demand for installation and maintenance services. If you can create value by providing a solution for them to quickly establish the necessary capabilities for a services business extension, then that would define a very specific target market segment.

Businesses are always looking for growth opportunities. Being market-driven and following an outside-in marketing approach are excellent strategies for driving growth.

There’s a lot more to the outside-in / inside-out discussion I’ll revisit in future blog posts. Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Marketing in a ‘Market-driven’ company

This is the fifth post in the series about marketing considerations relative to company culture drivers. Being market-driven means that everything done by everyone in the company is driven by the needs of the target market(s) you serve. Easy to say, makes sense to most people, many agree with the proposition, but truly market-driven companies are in the minority, particularly in B2B.

The following are key characteristics of market-driven companies (in no particular order):

1. Strategically selecting the market(s) and segments you serve
2. Understanding the problems, challenges and opportunities prospective buyers in your market are dealing with
3. Knowing the trends and future issues prospective buyers in your target market(s) will face in the next 1-3 years
4. Listening to and understanding what your customers are telling you about what’s really going on in their business, not just what new feature/function enhancements they want
5. Using reliable fact-based research data and industry/market analysis amongst several inputs for making strategic go-to-market decisions
6. Making strategic decisions across all areas of the company for which market(s) you’re going to serve and the key value propositions your company drives to market
7. Always using the ‘outside-in’ perspective
8. Your solutions genuinely create value for your customers
9. Focusing on where and how your company can excel in selected markets rather than just having a presence in many markets
10. Developing a corporate mindset of being a trusted advisor for customers and prospects rather than just another vendor of stuff and/or services
11. All functional areas in the company are aligned around the same go-to-market strategy
12. Understanding and responding to the buyer’s process while sales retain control of moving the buyer to a decision
13. Developing long-term customers who want to do business with your company
14. Using a balanced scorecard approach to measure marketing performance across multiple dimensions
15. Marketing is the strategic leader in the company and central to the success of the business

The above is not intended to be an exhaustive, scientifically researched list, but IMO represents the key attributes that I would look for to determine whether a company is market-driven.

Marketing has a significantly more strategic and pervasive role in a market-driven company. Performance expectations from marketing are higher and the risk of making wrong go-to-market decisions will derail the company.

“Business has only two functions--marketing and innovation.” – Peter Drucker

An article about the ROI of Being Market-Driven by Pragmatic Marketing cites various sources that market-driven companies are 31% more profitable, twice as fast in getting new products to market, and have 10-20% higher customer satisfaction levels. Seems that the benefits of being market-driven are tremendous, but my anecdotal view is that it may be the least frequent of the four company cultural models discussed in this series of blog posts, particularly in B2B companies.

Do you work in a market-driven company – how does it work in your company?
(use the comment link below to share your thoughts on this topic)
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Marketing in a ‘Customer-driven’ company

Following on from my previous three posts on company culture drivers; this post looks at the ‘customer-driven’ company and how Marketing functions in this type of environment.

This is not about being customer focused, providing great customer service, creating value for your customers, listening to customers and all the other good things related to taking excellent care of your customers. This context of customer-driven is about companies who are slavishly dedicated to serving their customers to the extent that their business strategy and culture is driven by their customers.

The customer-driven company culture is prevalent in smaller companies where the founder started the company with a contract for the first customer, added more customers, grew the business, but essentially does what the customers want. There are however a surprising number of large and public companies who are basically customer-driven. A key characteristic is that the company is dependent on a relatively small number of customers for the vast majority of its revenue. So, while customers get ultimate service and attention, the company has limited scalability, high risk exposure to various changes in customer companies and limited control over product and go-to-market strategy.

“You can't just ask customers what they want and then try to give that to them.
By the time you get it built, they'll want something new.” Steve Jobs

These companies are likely to have a collection of ‘markets of one’ – i.e. each customer (or small sub-group of customers) is essentially its own market segment. While there is usually a common thread across these customers, they don’t comprise a market in the usual manner. These ‘markets of one’ and lack of the usual market scalability, heavily influence marketing options and approaches.

Marketing in these companies seems to be focused on two main areas:

1. Retention – while customer retention should be a high priority for all companies, it is particularly critical for companies that depend on a relative small number of customers. Marketing programs such as newsletters, free educational events, customer conferences, satisfaction surveys and featuring customers in trade publication articles appear to be most common. If customers pay recurring support or maintenance or other types of retainer fees, then marketing must run programs that emphasize the value customers receive from these fees.
2. Cross-Selling – marketing campaigns to sell more products and/or services to existing customers. The key is to focus on complementary or additive solutions relevant to each customer’s situation.
   

New customer acquisitions tend to be more opportunistic and generally not driven by a significant marketing campaign.

A good approach for improving marketing effectiveness in customer-driven companies is to reach more people in different roles in customer companies. But you shouldn’t just send the same stuff to more people – it should be personalized and/or role-based materials that connect to each individual’s responsibilities. This will enable developing greater exposure, more customer advocates, more buyers and ultimately better retention and more sales from existing customers.

Do you work in a customer-driven company as defined here – what’s your marketing approach?
(use the comment link below to share your thoughts on this topic)

Next post, a look at marketing in a market-driven company.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Marketing in a ‘Sales-driven’ company

Following on from my previous posts How is your company ‘driven’? and Marketing in a Competitor-driven company – this post looks at the ‘sales-driven’ company and how Marketing functions in this type of company culture.

The message and emphasis from the chief person(s) who establish the sales-driven culture is that Sales are in charge and they need to get out and sell something and have marketing support them. That means that the sales teams are generally empowered to pursue whatever business they can and sign deals for just about any products and potential customers.

Salespeople typically do what they’re comfortable with and done for years – they sell in the same way that worked before. Markets shift, demand dries up, customers move on, but Sales keeps plugging away doing what they’ve always done. Marketing is viewed as supporting sales, to provide collateral, generate leads, help respond to RFPs, and other tactical functions.

“More great Americans were failures than they were successes. They mostly spent
their lives in not having a buyer for what they had for sale.” Gertrude Stein

I think sales-driven is the most challenging environment for Marketing. In many cases, the head of Marketing reports to the COO who in many organizations is really the head of sales. While the marketing operational activities to generate leads are understood and mostly appreciated by Sales in a sales-driven company, it is the positioning, messaging, value propositions and other strategic direction that is challenging for marketing to get buy-in from sales.

Marketing should and usually wants to provide direction on what to sell, where to sell it, who to sell it to, how to sell it, why customers would buy, and other strategies to be more effective and productive, by directing and enabling Sales to pursue the right opportunities in a manner that connects with current market circumstances. However, sales-driven companies are more inclined to rather add channel capacity to drive more sales even though it’s less effective long term. I cringe when marketing runs a campaign for a very specific value proposition, prospects raise their hands, marketing cultivates the leads, and then the salesperson engages a prospect with “so, you’re interested in buying our super-duper (or whatever) product…”.

The other challenge is that product direction is often driven by the needs of current prospects to get a sale – not a good direction for long-term business success.

Don’t get me wrong, Marketing is there to drive sales revenue and new opportunities for the company and enable Sales be successful. However, a sales-driven culture obstructs and constrains Marketing from being a truly effective and valuable contributor to the long-term company success – more on this in an upcoming post on being market-driven.

Seems to me that sales-driven is the default way to go for many companies?

Do you work in a sales-driven company – what’s your marketing approach, how do you deal with these challenges?
(use the comments link below to share your thoughts on this topic)

Next post, a look at marketing in a customer-driven company.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Marketing in a ‘Competitor-driven’ company

Following on from my previous post How is your company ‘driven’? , this post looks at what it means to be a ‘competitor-driven’ company and how Marketing functions in this type of company culture.

Competitor-driven companies generally identify a market opportunity for a copycat or ‘me-too’ product or service. The value proposition is usually to offer a cheaper alternative, or greater availability, or some tweaks to the design, features or functions to make their product or service an appealing competitive alternative. The market leader usually holds a dominate market share with a number of competitor-driven companies battling for what is usually single digit or low double-digit market share each.

The common marketing approach for competitor-driven companies seems to be mostly tactical, focusing on competitive comparisons, cheaper price promotions, higher availability through mass-market channels, product comparisons in trade publications, comparative ‘shoot-out’ coverage, and pursuing favorable exposure from the myriad of awards, recognitions, seals of approvals and other endorsements. While these products or services are mostly undifferentiated in the minds of target customers, marketing must come up with some differentiated value propositions to gain prospect and customer mindshare.

If applicable, a competitor-driven differentiator that works in some markets is to offer an industry standards-based product versus proprietary technology products. The beauty about standards is there are so many to choose from. :)

A more strategic marketing approach would be to research and identify niche market segments or adjacent markets where competitive products may have minimal presence or little traction. These niche markets could be geographic, vertical industry, demographic, psychographic, professional, trade, persona, or one or more of many other market segmentation dimensions marketers regularly use. Strategically this could be a great approach – building market share and credibility in niche or adjacent markets. This strategy moves the approach from undifferentiated to differentiated marketing.

“If you don't have a competitive advantage, don't compete” - Jack Welch

IMO, a mistake many competitor-driven companies make is trying to directly compete with the market leader(s). That’s tough territory. If you look at typical market share breakdowns, it may be strategically better to first directly compete with other smaller players and build up a solid position in the top 5 or better before putting resources into competing with the market leader(s).

Do you work in a competitor-driven company – what’s your marketing approach?
(use the comment link below to share your thoughts on this topic)

Next post, we’ll look at marketing in a sales-driven company.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com