18
Jan

A Post on Rising Above the Commodity Fray

I met recently with the president of an Independent Software Vendor (ISV) with software offerings built with the Java® programming language who expressed disbelief when I let him know that his prices are too low. I later learned that when I took a break to leave the meeting he asked of a trusted colleague “what does he mean that our prices are too low? Each of our competitors are priced into our range? How can we raise our prices?” I should state that this ISV offers a product in the online marketing category, a piece of software that delivers lots of reports about search engine placement for products by keyword, etc. I should also note that I’ve written elsewhere in this blog about the controversy implicit to online marketing for the sale of complex products to global businesses and other large organizations; specifically does marketing online get you anything besides a big dose of commoditization if you’re offering complex products with intangible value to an uneducated prospect? From my conversation with this CEO I must say that the same question applies to vendors of online marketing software, as well.

All well and good, but what’s relevant to marketing and selling big ticket software and other technology products to global businesses and other large organizations in 2012? Specifically that the old adage, “a sales person without a sense of urgency is no sales person at all” rings true. With a product with an entry level price of $199.95, lots of competitors, and a limited universe of prospects, I am of the opinion that the price of this software has to go up, one way or another, if this CEO’s business is to grow to any size of significance. I should also add that this ISV is located in Eastern Europe, where the cost of living is substantially lower than the cost of living here in the States, but no matter. Opening offices internationally will be an inevitable step forward for this ISV if/when they do manage to grow; therefore, at some point they will have to pay out higher salaries which will put lots of pressure on the present pricing model.

When I returned to our meeting I attempted to educate this CEO that he should think about turning some weaknesses of his product into the foundation of his higher pricing model. Our discussions illuminated the fact that this ISV assumes that its customers are presently only utilizing 10% of the capability of their product. My response was, is there a common additional value that most any customer can derive from the remaining 90% of the product that is under utilized? If there is such a common additional value, then why not take a proportion of that additional value (in hard dollars and cents) as an entirely justified additional cost for customers who want, need, and “must own” the remaining 90% value that is presently alluding them. Of course, then let’s take that proportion and build it into the pricing model of the product.

There is an old time precedent to this strategy. Just look back to the mid 1980s when Xerox Corporation successfully sold high end laser printers into the global business market against HP LaserJets. How did Xerox bring off these sales against a competitor with drastically lower prices? Xerox took the steps to integrate its laser printer products into the predominant computing environment of the mid 1980s–distributed mainframe and PC computing. Fact was that their printers had the necessary “hooks” to print mainframe data where HP’s products did not. It doesn’t matter that the required connectivity was rather trivial. What matters is that Xerox had it and HP did not. Xerox made the sales at a higher price point within a heavily commoditized market.

I specialize in these types of discussions. If you have a technology product with some broad market appeal for global businesses and other large organizations, I’d like to hear from you. Give me a call at +1 631-673-2929.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved

3
Dec

Good Luck Selling Unclear Products

Technology innovators with products in flux should have minimal to no expectation of sales.

What are products in flux? Products in flux are conceived by marketers who opt for the “ready, fire aim” approach to product development rather than a more conservative “ready, aim, fire” approach. I am using “in flux” as a synonym for “in play”. Changing either products, or the method of distribution for products, subsequent to market introduction confuses buyers. Confused buyers generally are in no position to buy anything, especially if a confusing product presentation alights atop a heap of additional internal confusion within the business. Therefore, be especially careful not to opt for this product development technique for products that require a commplex selling strategy.

If you’ve already gone and polluted your market space with this lack of product clarity, then the best way to deal with your soon to be sales-less situation is to drop any/all pretense of selling and revert to listening and surveying customer prospects to garner their best thoughts of markets that you intend, ultimately, to serve with your ever evolving product. How to catch an early indication that your product might need retooling? Consider your market pricing, and preliminary estimate of the length of a typical sales cycle for your product. If realities are way off of your assumptions, then you need to reconfigure your product.

Real life example: a client of mine has built a product for a market serviced by channel partners, meaning resellers who add value to manufacturers by configuring products for end customer implementation and supporting these same products after implementation. My client opted to offer products directly to end users, without availing of channel partners. Our attempts at direct sales were characterized by very lengthy sales cycles, and a rather low level of buying interest. When we landed orders, the orders were landed at low prices. General consensus, we would not be able to achieve revenue “escape velocity” via our direct to the end customer approach for our market.

We decided to reconfigure our distribution plan. We approached channel partners with an interest in discussing their expectations for products like ours in their market, etc. We also reassembled his product to better conform to channel offerings. All of this work transpired during his initial “go to market” effort. Revenues lagged, but we had taken a promising turn that bodes well for the future of his product.

If your product is unclear, better strive for clarity before expecting much of sales. Your time will not be wasted. Once you’ve repositioned your product you may be able to hasten revenue beyond the timing you assumed in your product plan.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2011 All Rights Reserved