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

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