lustratus REPAMA

Archive for the ‘budgets’ Category

...falling in 2009. No great surprise there then as marketing budgets have been used by many struggling organisations as a “profit shock absorber” .

But what is of interest is what that reduced budget has meant to the shape of marketing organisations and their priorities. How are they actually allocating remaining budget in these tough times? What has this meant to marketing headcount? etc.

That is the focus of IDC’s Michael Gerard in his annual analysis of marketing spend. Some snippets of the study have been released publicly and I’ve listed some of these below:

• Large organisations’ marketing budgets have on average reduced by 8.3% and their headcount has reduced by 10%
• 6000 IT vendor marketing roles have been lost worldwide in 2009
• Lack of budget has forced process improvements and in particualar has meant closer collaboration with sales
• Broader, product portfolio marketing has been sacrificed to allow for more tactical themed campaigns.
• Sales enablement has become a focus

Michael makes some other general observations and recommendations in his blog which is well worth a read.

Danny Goodall

It’s an easy question isn’t it?  But its one that in my experience is so often misinterpreted or wrongly answered by high-tech software vendors through their web sites, marketing materials and meetings with prospects.

When a prospect poses that question of a software vendor, what are they looking to understand?  The answer is that they actually want to know what you can do for them.  They want to quickly envisage what will be left behind after they have bought software from you.

So an answer like:

“ACME provides KJ8 compliant infrastructure that is compatible with the latest WP* series of standards”

…does not really answer the question “What does ACME Corp do?”.

Consider the situation when a sales representative from a high-tech company engages a prospect in conversation and the prospects asks the question:

“…so what does ACME do”?

Behind that questions is the implication that the prospect wants to know what ACME Corp. could do for him.  But instead of providing that information, I’ll wager that the sales rep will list a series of facts about ACME Corp.  He’ll start by telling the prospect the name of the company, the product name, the product category and he may also go on to describe some of the features of the product.  Like this.

“ACME Corp has recently introduced our DooperSuper product which is an advanced enterprise capability product that features support for the KJ8 standard”.

This is wrong.

Well it’s not wrong, but it’s the wrong time to provide this detail.  Remember the context of the question is that the prospect is thinking “What will this do for me?”, “What would I be left with if I were to become a customer of ACME Corp.?”.  An answer like the following would be more suitable:

“ACME Corp. helps our customers to reduce their data centre capital and energy costs”

This immediately tells the prospect what they would be left with if they were to become a customer of ACME Corp. and, if they’re interested, they can follow-up by asking for more detail.

So the question remains.  Why do so many high-tech vendors not lead with such a value proposition in their marketing communications?  The answer I think is two-fold.  Firstly, I think then many early marketing high-tech vendors have a very technical audience which means they feel that they should lead with some technical facts rather than translate this to a value statement.  This is naive because even the technical audience wants to know what they would get if they were to become a customer.

Secondly, many vendors do not understand the value that they can provide.  They’ve never documented the business value enjoyed by their customers.

So here are a few lessons for high-tech vendors:

1. Review your current customer successes
2. Look for a patten of the benefit or value that you’ve delivered
3. Adjust and tier your prospect communication.
   1. Lead with what your prospects will be left with – what will persist after the sale has been made.
   2. Add supporting technical detail where relevant.
4. Train the sales force to engage prospects in the same way

Danny Goodall.

I’ve been scanning other marketing blogs recently, attempting to get a feel for what other folks are doing out there at the moment.  I see lots of advice on creating strategies to generate leads through social media and the creation of networks.  Whilst I wholeheartedly support any efforts to get closer to prospects by creating communities and networks, that alone will not cut it when IT spend is under such close scrutiny.

Imagine this situation.

You’re a senior manager in an IT division of a large corporation who is tasked with delivering more than you did last year with less resources than you previously had.  You’re technically very savvy and when a software vendor proposes new technology you quickly “get” the technical proposition and you are equally able to project the potential benefit to the business that the technology can provide.  However, you also know that there is a draconian spending policy in place at the moment.  A policy that says that no matter what potential justification or pay back or total cost of ownership evidence is presented, you are not able to spend a penny.  So does this mean that you’re not able to spend any money this month/quarter/year?  No it doesn’t.  There are a small number of projects that are allowed to go before the spending “committee”.  These are the projects that are imperative to the business – the funded initiatives.

So the question for the vendors out there looking to generate leads is

“What are the funded initiatives for my prospects?”

This situation came to light recently when looking at the results of a REPAMA study on the value proposition of 3 vendors in the high performance messaging market.  Whilst 2 of the vendors were fundamentally taking the same value propositions to market, the other vendor was the only one to talk about a specific value proposition around risk mitigation.  This risk proposition wasn’t one I would usually associate with high performance messaging and I couldn’t reconcile the difference.  I discussed this with my colleague Steve Craggs and it was Steve that pointed out that the vendor was focussing on this area because in a slowdown specific types of projects are still funded.  A smart move.

I recently did some work for a cloud computing/application virtualisation/DASM vendor and I have to give credit to them for understanding the above principle very clearly.  Right at the heart of their marketing planning was the question:

“In what areas are our prospects actually spending money?”

This resulted in a short list of project types where prospects were spending money and this list defined their entire go-to-market approach.  The logic is simple.  If a prospect isn’t able to spend money, no matter how convincing the argument or relevant the technology, then there is little point in going through the motions of a sales process only to bravely lose the battle when you ask for the money.

There is no news here.  It has always been this way, but the economic slowdown will bring this into sharper relief.  So here are 7 steps to follow for lead generation in a slowdown.

1. Understand what the competition is doing
2. Understand your own capabilities and how you are different from the competition (*and change your positioning and messaging if required)
3. Understand where your prospects are still willing to spend money – the funded initiatives
4. Understand what pain is causing the prospect to still spend money – what are they looking to achieve?
5. Create messaging by mapping your own capabilities and differentiation, to the prospect’s pains and their willingness to spend
6. Retrain the sales force with the new focus/messaging
7. Use the right medium to get your proposition in front of the right person in the right organisations

This is marketing 101 but it’s worth restating because as I examine vendors’ marketing strategies I see them doing the same things that they’ve always done and I see little real differentiation.  And paraphrasing that wise old maxim, if you do what you’ve always done, don’t expect to get different results.

Danny Goodall

I often find that when building competitive strategies, vendors tend to focus all of their efforts on other vendors with similar products and technologies.  They believe that if they understand how the other vendors in their segment are taking their products to market, they will give themselves a good chance of winning business.  Whilst there is nothing wrong with this strategy, it is very easy to get trapped into the habit of seeing things only from a vendor perspective and forgetting that the customer always has a choice.

The result is that vendor A believes that as long as he/she builds clear differentiation versus vendors B,C and D he will win the business. The reality is that vendors need to build strategies to combat the other alternatives that might equally well serve the end user.  These alternatives might not be recognisable as a “competitor” at all.

I wrote in an earlier blog about the 8 fingered glove seller who might find that their competition doesn’t just come from other glove suppliers but also might come from sellers of coats with big warm pockets.  A little tangential perhaps and a better illustration might be a middleware vendor who believes that its competition for a piece of ERP integration business comes from other middleware vendors but who actually loses the business to an ERP vendor that addresses the problem within the ERP software.  The ERP vendor isn’t in the integration space, but they were able to eliminate the problem by changing their software.

Understanding all of the legitimate alternatives that a prospect has is essential and it is this issue that comes into sharp focus in a slowdown where the obvious alternative that presents itself to an organisation is to do nothing.  No amount of competitive planning and intelligence gathering will allow a vendor to win against a strategy of committed inaction.

This “inaction alternative” represents a double conundrum for early market vendors. The approach that that more mature vendors use to convince the customer to invest is to sell on value, or as part of a solution sale.  They demonstrate the value they’ve been able to deliver to previous customers, focus in on a pain that they perceive their end user prospects are experiencing and build investment justification for their solution.  It is this justification, if sold at the right level in the organisation, that can turn round a decision to do nothing.

Early market software vendors are typically trying to build brand new demand for their new technological approach.  As a result the ”need” does not already exist in their market which makes generating leads difficult when IT spend in under so much scrutiny. Secondly, early market vendors struggle to document the value they have delivered to existing customer which makes it difficult to justify investment. This is because their sales are usually made to the technical side of their customers’ organisations and their propositions typically focus on features and capabilities instead of business value.

A fantastic example of the dilemma that early market vendors face is found in the cloud computing space.  The cloud proposition is multi-layered, subtle and spans hardware and software but it effectively revolves around cost savings and on-demand scalability.  With corporations facing incredible pressure on IT spend, cloud computing should be able to save most large corporations vast amounts of money.  Obviously, there will need to upfront investment and it is also true that many cloud computing offerings need to mature to totally fulfil enterprise needs but the potential benefits are clear.  So it will be fascinating to see how these early market cloud and cloud-enabling vendors will tackle a market where investment in new concepts is tight.

The irony is that cloud computing offers not only the potential to shave a few points of the corporate IT spend but instead could completely transform the size and nature of IT budgets and departments.  It could be the killer application of the economic slowdown, but first vendors will need to convince enterprises to invest.

We’ll be carrying out a REPAMA Segment Analysis Study on the cloud space (Application virtualization/Dynamic Application Service Management) in the coming months, and will be fascinated to map the different go-to-market approaches that the successful and not so successful vendors are taking.

Danny Goodall

…slowing according to IDC’s Michael Gerard.  No surprise there then given the global economic slowdown.  I guess we’ve all seen some evidence of a slowing in spending and recruiting perhaps the surprise is that the slowdown is not as bad as one might have expected.  The results come from IDC’s 2008 Tech Marketing Benchmark Study (covered more fully on btobonline.com).  This is a piece of research that should find itself on every senior marketing exec’s highly polished desk.

Anyone expecting a grilling over budget requests should have studied this report beforehand for justification.  If you’re asking for money and you haven’t realised that your request is 10% higher than the average in the industry – you’re toast!  Well almost.  But knowledge is power and asking for cash whilst being able to point to good quality stats from your peers that justify the amounts against industry data will add weight to your request.

I’ve not seen the report but judging by the summary I’ve seen, it provides all sorts of benchmark data from budget levels (as a percentage of revenue), spending priorities to staffing levels.  What I found most interesting was the focus on the ratio of corporate (head office) marketing spend to field marketing.  Gerard concluded that in general it is too highly skewed towards central spend, depriving the field marketing teams of money that might work better for their local sales organizations.

“Hallelujah” is all I can say.  When I worked on the vendor side of marketing I held down a number of senior European field marketing positions.  This is an impossible positiong when budgets are tight.  You’re caught between the needs of the local sales VP and the corporate marketing organisation kicking out programs that you can’t use in Uzbekistan or France.  Well you know what I mean.

In addition the report provides some real gems showing where other technology marketing execs have placed their bets in terms of the marketing mix.  For example, across the entire study, marketing teams allocated the following budget percentages to the following program categories:

Events (22%), Advertising (17%), Direct Marketing (16%), Marketing Support and Sales Tools (14%), Digital Marketing (12%), PR (5%), Collateral (5%), Market Intelligence (4%), Analyst Relations (2%) and Other (3%).

These figures come from a mix of hardware (41%), software (40%) and service companies (19%) and across a broad spectrum of organisational size.

Any firm data that helps marketing organisations justify their plans and build better campaigns is good news as far as I’m concerned.

Danny Goodall