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Why do some marketing and sales strategies seem to work so well
for some companies, but fail miserably when applied to others?
The technology industry has been criticized for years about its marketing acumen. Typically founded by engineers, high tech firms promoted their benefits in technical terms highlighting the fact they have built a better mousetrap. Companies such as Microsoft, IBM, and DELL have created tremendous wealth for their shareholders, largely due to their successes with their marketing and sales functions.
By the mid 1990's, Board of Directors of many technology firms were looking for successful executives from well-known consumer companies and business schools to out-market their competitors and repeat the success stories of the companies mentioned above. By the end of the decade, we had an Internet boom fueled by outstanding advertising and public relations. But were the investments made that fueled this excitement the best use of those funds?
We recently completed a study spanning a four-year period of 50 public companies that sell technology-related solutions (either software, services, or consulting) directly to large organizations. Some of results are extremely eye opening.
On average these firms are investing $119,000 for every one of their clients and $477,000 for every new client they acquire in sales and marketing expense alone. Why are these costs so high?
A recent study by Harvard University found that up to 80% of all leads generated by marketing programs are never acted upon by sales. While the American Marketing Association suggests that as much as 90% of the collateral marketing creates is never even used by the sales force in the first place. In a recent survey of its client base of over 100 enterprise technology firms, Current Analysis (a real time competitive intelligence and response firm) found that sales people are spending less than 30% of their time engaged in actual sales related activities. Ultimately, each individual sales person invests a tremendous amount of their own time creating from scratch sales tools and proposals to provide the customer relevant information prospects need to make a buying decision.
To make matters worse, the majority of marketing investments are aimed at promoting awareness about the company and its products. However, Michael Bosworth (author of Solution Selling: Creating Buyers in Difficult Selling Markets) suggests that at any given time, only about 5% of the entire market is actively looking for a solution the marketing department is promoting. Therefore, if these marketing investments are finding the right people, the best result possible is for the prospective account to include your organization in the RFI / RFP process. As any sales person will tell you - being invited to participate in an RFP process is typically a low win (10% rate of success) proposition.
This problem has lead to a sizeable marketing backlash within the high tech community. VP's of marketing experienced a 75% turnover rate between 2002 and 2003. Additionally, there are many organizations with revenues between $15 million and $50 million who have eliminated every single marketing position. Software Product Marketing, a volunteer group whose charter is to help out of work software marketer's find jobs, has over 3500 members.
Why is this happening?
As high-tech firms rushed to improve their marketing capabilities by hiring experienced brand managers from organizations like Coca-Cola, Pepsi, and Proctor and Gamble, these executives brought with them the marketing models that had been so successful for them in their markets. However, selling Tide is a lot different than selling enterprise solutions. We propose that the overwhelming majority of marketing strategies being applied in technology organizations are better suited for other industries and inappropriate for firms with a complex sales process.
There are a many different sales and marketing disciplines taught in business schools some examples include:
However, each of these disciplines have varying success when applied to the different buying situations. The purpose of the model is to help match the various disciples with the right buying situations. In the next chart (figure 3), we define the various disciplines and map them to the level of involvement customers take to make a decision.
Consumer Marketing. Companies like Coca-Cola, Proctor and Gamble, and McDonald's all have products that are inexpensive and do not require a lot of thought on the customer part to purchase. Because these businesses require heavy volume, brand building is critical to retaining customers, and advertising is the most effective way to stimulate customer demand for their products. When most people think of marketing, they think of this category. In the high tech industry, Intel and Microsoft operating software are the best examples of products in this segment.
Direct Marketing. Purchase decisions that either have many options (such as clothing catalogs) or require some consideration (such as switching long distance carriers) comprise this category. In either case, the additional information requires more knowledge to be exchanged between buyer and seller and thus different tactics emerge. Catalogs, direct mail, and telemarketing are tactics employed by companies such as Land's End, Publishers Clearinghouse, and MCI. Technology companies that pursue direct marketing strategies include Dell and PC Warehouse.
Negotiation Selling. Items that are familiar to consumers but are either more expensive, or are a riskier purchase fit in this category. Home sales, automotive sales, and business services such as water and coffee all are sales focused, but use branding to compete against other similar products. All of these offerings require some form of knowledge exchange, but the buyers have a good understanding about what will happen once they take ownership (home buyers have lived in a house before, car drivers know how to drive a car, etc). The goal of marketing is to get people connected with a sales person who can provide the client with the information they need to feel comfortable to make a buying decision. Cisco (routers), Hewlett Packard (PC's) and AT&T (corporate long distance carrier services) are examples of technology companies using these kinds of models.
Consultative Selling. Long and complex sales cycle times, multiple buyers within each account, high-ticket purchases, and intensive information exchanges are all common elements of this category. These products and services are often associated with change, and therefore the client has very little understanding about what the end result would be. Complex and customized machinery, consulting services, and enterprise software are examples of business in that fit in this model. Companies such as BearingPoint, SAP, Accenture, and IBM are common examples of firms in this space.
The chart below helps to summarize the differences between each of the categories.
Square pegs into round holes
The overwhelming majority of marketing research, education, and training are all focused on consumer marketing, direct marketing, and negotiation selling. Technology companies whose offerings fit in the consultative selling space realize marketing is important; yet deploy tactics more suited for other models. Corporate branding, advertising, collateral development and tradeshows are generally over-emphasized as tactics and strategies better suited to other situations. The reason technology companies are so inefficient in their sales and marketing efforts is they are applying the wrong tactics for the wrong models.
Due to the fact there is a large wealth of information about best practices for the other three sales and marketing models - we are providing an outline of some of the key elements required for success with consultative sales processes.
1. Solution positioning. Solving a business problem is not having a well-architected product, better methodology, or a global reach. All too often companies believe their value propositions rest with what their company can do, rather than the business problem they can solve for their clients. Companies are far more successful if they align the products to customer problems, rather then their own way of defining the market.
2. Account profiling. The overwhelming majority of IT vendors are not a "gorilla" or dominant market player in their space. Additionally, because of the complexity and expense involved in the purchase decision, there are a finite number of accounts that would be interested in your offering. Account profiling entails identifying the right organizations (based on criteria such as industry, functional areas, infrastructure, etc), mapping the business problems that relate to your offering and determining the titles (or roles) of the various stakeholders who will be involved in your buying process.
3. Demand generation. Demand generation entails all activities to get targeted prospects to initiate a buying process with your sales force. This includes advertising, public relations, and even prospecting for sales people. We suggest best practice tactics for demand generation comprise of highly targeted informational events (teleconferences, webinars, seminars) that focus on a business problem you solve, has qualified attendance, and speaks little about your product or service. Marketers should always keep in mind that they only have one goal with demand generation efforts: to convince a prospect your firm has a mastery of a particular problem area and that they want to speak in more detail with you about addressing it.
4. List acquisition and maintenance. Because direct activities are so important in the "consultative selling" quadrant, your organization should strive to identify (by name) the entire universe of buyers in each of the segments you compete. List brokers can only compliment a portion of your master list, as most senior executives are not easily accessible. Given your specific offering, it might be most economical to hire a telemarketing agency to call and get the contact information for a given set of titles for a list of accounts.
5. Relevant and tailored content and messaging. Mass communication strategies are highly ineffective in this market. The content you develop should be relevant (to the various stakeholders involved in the decision-making process) and timely (aligned to what stage of their buying process they are in). Additionally, marketing will get more mileage developing content that can be easily modified by sales so they can make it more relevant to the prospects they are working with.
6. Education programs. Understanding the informational needs of your customers is critical to maintaining your firms "face time" with the account throughout the entire buying process. Often, sales will run into clients that have need for their solution, but are not yet ready to buy. In these situations, the client requires education (either about the business problem, the impact of that business problem, or how to solve the problem). Vendors can help facilitate (and control) this process by providing the right information to them.
7. Sales tools and pipeline stimulation. The pipeline is the most important tool for any company and offers the greatest potential return on marketing investment. A pipeline is really a series of milestones that lead up to an ultimate close. The average length an account takes to achieve each of these milestones is a sales cycle. Marketing can play a huge role in reducing the sales cycle time (and improve both top line revenues and profitability) by developing targeted sales tools and programs to help a client reach a given milestone within the pipeline.
IT vendors are applying "brute force" sales and marketing techniques that are resulting in less than optimal returns on sales and marketing investment. Marketers are wrongly applying the consumer-oriented marketing techniques to lengthy, business-to-business transactions. The consultative sales approach requires a more targeted, direct and methodical formula that successfully maps content to help buyers achieve milestones throughout their decision-making process. Companies selling complex solutions can double the effectiveness of their sales and marketing efforts fundamentally changing their current execution models and tactics.
Scott Santucci is a leading authority on reducing the business development friction caused by the divide between sales and marketing. His company, Blueprint Marketing ( www.blueprintmarketing.com ), helps companies realize the compounding returns on revenue generation investments that are achieved by harmonizing sales and marketing efforts. Scott can be contacted by e-mail email@example.com and phone (703) 723-5900.
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