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

What’s a VP/Director/Manager of Sales & Marketing?

I know what a VP/Director/Manager of Sales does, I know what a VP/Director/Manager of Marketing does, but I’ve always been somewhat perplexed about what a VP/Director/Manager of Sales & Marketing does. Over the years, whenever I meet someone with a ‘Sales & Marketing’ title I usually try to have some conversation about their job to find out more about their role. Without exception the person in that role is a salesperson with primary responsibility for sales. A quick review of current VP/Director/Manager of Sales & Marketing job postings confirms that the requirements for these positions are primarily sales related.

Based on my anecdotal research, the Sales & Marketing organization is really a sales organization with a small marketing functional area in a secondary, supportive role usually responsible for primarily two types of deliverables:

1. Lead generation – generally a more tactical function than you would find in a full-fledged marketing organization. Focus and performance measurement is on driving the volume of leads into the top of the sales funnel needed to eventually and hopefully produce the required volume of sales from the bottom of the funnel.
2. Sales collateral – production of tactical collateral such as brochures, datasheets, product overviews, case studies, etc. used during the sales process.

"The Sales/Marketing Manager is like an amphicar (amphibious car). Great idea, but what you really get is a highly ineffective car and a highly ineffective boat." – Mark Goff

The marketing functional area in this type of organization generally doesn’t have the bandwidth, budget or management support for a market-driven approach or a more strategic marketing role. However, the marketing functional area in these organizations can add more value and some strategic direction to help sales be more effective and productive:

• While the performance measure for lead generation is on volume into the sales funnel, marketing should add research, analysis and segmentation to drive more targeted and relevant leads. Sales will appreciate not wasting time and effort chasing 100 leads with a 2% probability of closing versus focusing on 30 more targeted leads with a 10% probability of closing.
• For the collateral, marketing should add value to make the materials more appropriate for the intended audience and provide guidance to sales for using the materials more effectively:
• Strategic messaging aligned with the value your stuff creates for customers should be used consistently in the materials.
• Develop the materials to align for use at the various stages of the sales cycle. It’s not ‘show up and throw up’ as many salespeople are inclined – guide salespeople on which materials to use at each stage of the sales cycle to help move the buyer to the next stage.
• Company website – if you haven’t already, take control of the company website and make it a marketing vehicle that all business websites should be.
  

In spite of marketing usually being in a tactical, supportive role reporting to a VP/Director/Manager of Sales & Marketing, there are several ways for marketing to add more value, help sales be more effective, improve results and ultimately raise the stature of marketing in these organizations.

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