Lustratus REPAMA - Strategic Marketing Analysis

Funded Initiatives and lead generation

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.

Dan.

Inaction. The biggest "competitor" in a slowdown

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.

Dan.