Lustratus REPAMA - Strategic Marketing Analysis

Open Source and the Impotence(sic) of Being Earnest

Q. What do the questions

"How do porcupines make love?"

and 

"How do you 'sell' open source software?"

Have in common?

A. The answer to both is "Carefully!"

Software sales is a funny business.  Push too hard and you're open to accusations of potentially ripping people off through aggressive tactics, don't push hard enough and you end up having had many nice discussions (tea and biscuit meetings as they are known) with many nice people but your children go hungry.  It's a balance.  And nowhere is this more in evidence than in the open source world. 

I was chatting to an ex-colleague last week about the issues they have taking their open source software products to market.  I know that sounds like an oxymoron "taking open source to market" but there is usually a business model somewhere when commercial organisations put effort behind open source projects.  And so it is with my mate's organisation.  They supply documentation, services and support in addition to taking the responsibility for ensuring the stability of releases of the open source projects that they are behind.  They allow organisations to see open source as a viable and low cost alternative to commercial-off-the-shelf software.  And by all accounts, despite what my colleague Steve Craggs said about open source adoption slowing in his 2009 predictions, their business is doing well. 

Many commercial software organisations have invested in open source initiatives.  I'm not talking about the pure-play open source vendors such as JBOSS, Apache, Red Hat or MuleSource, but rather commercial-off-the-shelf software vendors who have put their "support" behind open source initiatives. They donate code, they place key people onto committees, they even open up divisions of their own commercial organisations dedicated to providing commercial support services.

In doing this, you have to wonder at their motives.  I mean, if their open source initiative is wildly successful does that spell the end for their commercial products?  Is it a hedging strategy?  An obfuscation strategy?  An intelligence gathering strategy?  Either way they can't afford to run these efforts at a loss for too long, but neither can they bring their usual commercial sales and marketing tactics into play.  Open source market dynamics are very different.

Open source economics rely on getting "market" reach, having the best community/product, attracting a volume of users and therefore achieving critical mass.  Open source projects that achieve these things in their particular software segment are likely to find their software in use within end-user enterprises and can then expect these companies to require services.  And hence a market for support services around the open source project is born.  It happens almost by osmosis.  As a result, being first and biggest in open source matters more than it does in the commercial-off-the-shelf world.

The issues for those second movers in open source markets who can't rely on the critical mass in open source are many and varied:

• How do you force the sale? 
• How do thy get new users?
• How do they move on from evaluation of the software to generating revenue?
• How do they promote the commercial offer behind the open source project?
• How do they sell?

The dilemma for second movers in an open source market is that open source communities can't be built to order.  They can't be pulled together solely by the actions of a commercial entity.  Sure they can be encouraged and all the right ingredients can be put in place.  But open source is about the community working for the good of the community and is not about hard sell.  Selling to open source communities is seen as a no-no.  Open source is "free" software.  There is no selling to be done.  Like worker bees in a hive or ants in a mound, the community en mass decides to use the software, or not.  

So all open source vendors can do is put passive offers to deliver services out there in the hope that the community reaches a critical mass and the need for these services occurs.  "Build it and they will come"  It's a little bit like a shy teenage boy that goes to stand close to a girl, but stops short of asking her for a date.  If you don't ask you don't get.

Whilst this approach is earnest and admirable, it doesn't help to drive sales.  And if you represent a commercial vendor who has sales expectations from the services you wrap around open source projects, then you will be judged on your quarterly performance and not how earnest you may or may not be.

My question however is what is wrong with making statements about the value you can provide the open source world, and for asking for money for that?

If you' believe that you've got a valid commercial offer that delivers value, then why not shout about this and ask for money for it? 

In the coming months, we're going to track a few open source project "vendors" with our REPAMA Methdology to take a look at how they tackle some of these problems.  I'll report back some of our findings.

Danny Goodall.

Is this slowdown real?

I don't mean to be crass here and I know that I've asked this question before, but I have to wonder whether we are experiencing as deep a slowdown as the media would have us believe. 

Perhaps it hasn't reached my part of the software industry yet but right now I'm working with four companies who are all doing incredibly well.  They've all had great years and are looking forward to a better year.  I have to balance that by saying that I've also got contacts in my network who have been hit by some real problems - but most of them are really closely tied to the investment banking market. 

But most surprising for me is the UK job market.  I've been trying to help someone in my network to recruit for a sales position in the UK.  Because we work with lots of companies I have a very broad and deep network and from time to time I'll try to help companies who are looking for good people.  I never try to pull people out of existing roles, but I'm happy to ask my network if they know someone "good" who is looking for a role.  Anyway the role I'm looking to fill looks excellent.  Good company.  Good pipeline.  Good people.  Good backers.  Good proposition.  But I'm struggling to find candidates.  "All the good people that have jobs and are staying put" I keep hearing.  So either this is the calm before the storm, or things are still "OK" out there.

I'm sure if we all believe it enough we can turn this slowdown into a real crisis but right now, in my network, things aren't as bad as they might appear. 

(This blog inspired by Troy McClure's self-help film "Get some confidence, stupid!")

Danny Goodall

What do you do?

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

Dan.

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.

What Slowdown?

I was discussing the economic slowdown with some friends over the weekend.  We were trying to predict the likely depth, length and impact but we came to the conclusion that logic and a sound understanding of economics alone couldn't help.  You'd need to apply complex chaos psychology first.  The issue, we realised, is that whilst people anxiously focus on the harsher trading conditions, we're not focusing on the positives - the things that will bring us out the other side. 

I'm not going to suggest that all we need to do is shut our eyes and wish it away but if we stop anxiously focusing on the negatives, we can turn a bad situation into a better one.  That said, I do recognise that it would be churlish to suggest to someone that has just lost their job that they should simply look on the bright side of life.  But someone's loss has to be someone else's gain - even if they were previously on the losing side.  It's the way of things.

I believe that in enterprise software sales, generating interest is going to be tough for a little while yet.  But it is at precisely this time that market dynamics can be completely turned on their head.  The share of voice and vendor pecking order that "naturally" exists in a given segment can be completely, positively turned around when our staunchest competitors are focusing on the problem and not the opportunity created.

And as it is such a precious commodity, once we have generated a sales lead and it is handed over to the lead maturation process and ultimately the sales team, we better be completely sure that a) we're saying the right things when we're on our feet in front of the client and b) we know what the competition will be saying. This means laying traps for the competition, focusing on the things you do well and providing proof of the claims you make. 

I think long-time marketing guru Seth Godin has captured it well when he talks about focusing on the wrong boxes.  And I think that the NLP fans out there would refer to the need for positive perceptual filters.  Either way I think it's time to stop focusing on the red box and pay some attention to the others. 

Dan.

An "average" marketing strategy

Mean.  It's a great word isn't it.  But what does mean, mean?  If you see what I mean.  It's either hateful, the intended meaning of something or, as I want to use it here - an average.  In this case it's the "average" marketing strategy for a specific marketing segment.  What would be the value of knowing the "average" marketing strategy for any number of strategic marketing elements for the segment in which you compete?

i.e. on average for your market segment who is the ideal target customer organisation? On average what job roles do your competitors target? On average which vertical markets are favoured? On average who does your competition see as their primary competition? etc.

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The above Marketing Element Distribution(TM) charts are taken from a recent Lustratus REPAMA(TM) Segment Analysis Study into High Performance Messaging.  The study compared the marketing strategy of IBM's WebSphere MQ Low Latency Messaging (LLM), 29West's Latency Busters Messaging (LBM) and Solace Systems' Content Router.  Whilst the study contains full details for each of these vendor's strategies, the calculated "Market Mean" reflects the mean value of each of the marketing elements across those 3 vendors.

Lustratus produces this intelligence as part of the Lustratus REPAMA Segment Analysis Study and we obviously plot the positions of each of the vendors in addition to the mean, but this is relatively simple exercise to conduct for yourselves.  The question is what do you do once you know the mean?  Do you look to be outside of the mean?  The religion of "differentiate or die" suggests you probably do.  But the idea that what "most" of your competitors are doing must be right, suggests that you might want to simply track them.  Look at the Vertical Market Segmentation chart above and ask yourself whether you want to aim outside of Financial Services?  Well it might be an uncontested space, but at the same time their might be a lot of tumbleweed.

The answer of course is that whilst you can compute an "average" marketing strategy, the right strategy for your organisations depends on many factors.  Aiming at the average vertical market and at the average ideal customer might be valid strategies because it suggests that is where the rest of the segment feels there is opportunity.  But if you attack these prospects with "average" messaging and "average" differentiation it will be death by a thousand ho-hum cuts.

Either way, knowing what your competitors are doing is a good place to start.

Dan.

2009 Guidance for CMOs

I think Michael Gerard is spot on with his views on the need for different priorities and strategies for CMOs in 2009.  He talks about the need to remove the disconnect between sales and marketing, decentralisation of both the marketing function and budgets to the region and also about the importance of sales enablement.  These are all hobby horses of mine.  It's well worth a read, I hope CMOs are listening.

Dan.

Audience strata mismatch

If I were to write in this blog

"18th century art has always been my passion.  It's my belief that since the mid-18th century, art, as captured by oil on canvas, has never been surpassed in terms of quality."

You may ask what on earth that has to do with you - a visitor to a blog about high-technology marketing.  You'd be right to question it because I'd obviously written the wrong thing to the wrong audience.  My message may have been exactly what I wanted to say but I chose the wrong audience to deliver it to.  As it happens, I'm afraid I'm a bit of a philistine when it comes to art appreciation - but hopefully you get the point.

This happens a lot in the marketing world. Many hi-tech vendors are confused about who their audience is or should be for outbound communication.  Others are not confused but through desperation, they will simply throw out as many credible messages as they can, hoping that some of it will stick with someone. 

As we know, effective communication comes from providing the right level of information to the right audience.  Just because a message "works" or seems credible, doesn't mean it the right message for any audience.

When marketing high-tech products, you have a number of ways of communicating to the potential end user of the product.  But first you have to understand how your target audience is segmented and what each segment wants to hear.  Lustratus refers to this as the audience strata and we broadly categorise the segmentation for end-user consumers of IT products as follows:

IT Technical - Represents the overtly technical disciplines within the IT organisation that have no management, strategic  or commercial responsibilities
IT Business - Represents the  higher management levels of the IT organisation that have strategic and/or financial responsibilities
Business - Represents the line of business functions outside of the IT organisation

Both the language and the type of communication used at each level has to be directed specifically at the needs of the individual audience stratum.  Take the example below.  If I was communicating to the Business  about our new product called "Product A", would I write?

"Product A complies with the latest duplex standards (KPT2, RRI v4) and is able to perform the Smithson Benchmark is 18.2 seconds (19.2 with override)."

Or if I was talking to the IT Technical layer, would I write?

"Product A will make your software development team productive in a quarter of the time needed for traditional products"

Finally, is this of relevance to the IT Business layer?

"The risk of corporate governance failures is reduced dramatically with Product A.  Internal systems can be brought up to date quickly as Acme Ltd. found out.  They implemented a complete change of governance systems in less than 2 months, removing risk of failure and resulting in a 20% cost saving."

The answer to each of these questions is obviously "no".  Whilst each of these messages may be valid for the capabilities of Product A, we have to understand the specific needs and drivers of each level of audience.  The question as to whether one vendor can legitimately communicate to all three layers is moot, but selecting the most important audience constituent and developing messages that specifically talks to them is key. 

After all whilst each audience constituent above might be able to understand the implications of the statement, in their day to day jobs these statements add nothing, solve nothing and give no value.

It's not easy for early market or innovative companies to understand who their audience should be.  As a vendor grows and evolves so the audience that they need to reach will change.  A useful technique to ensure that you are saying the right things to the correct audience layer is to monitor closely what your competitors do. 

The diagram below is taken from a recent REPAMA Segment Analysis Study (the vendor names have been changed to protect the innocent). 

The Market Element Distribution diagram shows the priority of each audience strata for each of the different vendors in the study.  As you can see, there is a high degree of correlation between the different vendors as they are all very close to the market mean. If I were a vendor in this space, I would have two choices.  Either I assume that each of the vendors has got it wrong and I should aim at a different layer of audience.  Or I believe that my competitors each understands who the audience is, and I aim for the same category. 

Either way understanding who will be most receptive to the value you can provide is essential.

All of the above will only makes sense you you if I've done my job properly.  That is, if I'm right that the average reader of the Lustratus REPAMA blog is a left-handed, 32 year old male product marketing manager living and working in the US. 

So if you're an art critic, apologies but you've come to the wrong place.

Dan.

Book recommendation

I'd like to recommend a book today.  I came across it a couple of weeks ago and whilst I don't know the author, it felt like it was written by someone I knew.  It's well worth a read if you're in product marketing, product management or strategic marketing planning.  It's called quite simply "Product Marketing for Technology Companies" and it's written by a guy called Mark Butje. 

If you're in a hurry then it's a simple as that.  Go buy the book.  You won't regret it.  If you want to know why I recommend it.  Read on.

I've been developing marketing strategies for many companies for many years.  My thinking, methods, exercises and strategies have been influenced by many fantastically talented people over the years but probably one of the earliest influences on my thinking was a guy called Tim de Boer.  Why?  And how is all this related to a book by Mark Butje?  Well I'll tell you.

"I used to be a software development manager but I moved into marketing when I realised that despite developing the best software in the world, I was still having to let people go.  I couldn't reconcile having fantastic software without commercial success.  I wanted to change that."

I'm paraphrasing so apologies for the quote marks, but that's roughly what Tim de Boer told me when I first met him about 10 years ago.  I could relate to this completely having found myself in marketing from a technical background and also having had less success than I had expected with some pretty excellent software.

Tim is the Dutch CEO of the international marketing consultancy Pleon.  When we first worked together Tim was working for a company called Schoep and van der Toorn, which later became Brodeur which in turn became Pleon. I was working as European Product Marketing Manager for Progress Software at the time and Tim's company was helping us with internal business and strategy planning.  We were also helping some of our software partners to develop better business strategies.  Tim and I ran a number of planning workshops together and I really enjoyed the experience.

Anyway, as I was reading the book by Mark Butje I remembered thinking that some of the contents were very familiar.  I conduct a lot of similar exercises with our clients that he advocates in his book.  I couldn't figure it our until I read the foreword where Mark thanks a certain Tim de Boer.  It appears that Mark also worked for Brodeur and presumably for/with Tim.  So that explains it.

A good book full of practical exercises and detailed processes that will help anyone planning offensive, defensive or business-as-usual product strategies. 

Dan.

High-tech marketing spend is...

...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. 

Dan.