How do ISVs incorrectly estimate the value prospects see in products?
ISVs often incorrectly understand the value estimates prospects come up with for product offers. In my experience this wrong understanding leads to decisions to price products below fair market value. These ISVs make related decisions to proceed with a problematic product marketing plan and, too often, fail.
Clayton Christensen’s book “Competing Against Luck: The Story of Innovation and Customer Choice” presents the notion of Jobs Theory for product marketing. Jobs Theory, as I understand it, provides product marketers with a way to conceptualize their products from the perspective of prospects. This transformation of view point is absolutely the first step in framing a useful estimate of the value (if any) target markets may attach to a product. ISVs unfamiliar with jobs theory are hard pressed to wield a tool with comparable power and, therefore, often mistakenly estimate market perception of product value.
Jeff Thull’s book, “The Prime Solution” includes a lengthy section on the importance of value for selling products to large organizations (Mr. Thull is well known for promoting a sales theory, “The Complex Sale” for markets characterized by these same large organizations. From my own professional experience I can confidently endorse the usefulness of his theory).
One example comes to mind as typical of how easy it is to base value estimates on simply the wrong data: Mr. Thull recounts a story about a product sale to one of these large organizations. This business had been losing money for years in one division. The sales team had qualified this division as a reasonable candidate for its software product, but mid level management at the division expressed little interest. Despite losing money, this division was still budgeted for operation. So line management saw no reason to do anything. Their “job to be done” (to use Mr. Christensen’s terminology) was to operate successfully within the budget, regardless of whether or not the parent organization was making money or not.
But when the sales team changed its focus and had some conversations with managers within the parent organization who actually had responsibility over the ongoing losses experienced at the division, they heard a different story. Senior management had a “job to be done”: “we need something to help us stop losing money and start operating this division profitably, once again”. Once the sales team identified a contact in the senior management team, the dialogue could proceed.
I hope readers can see how different prospects at different organizations can come up with widely different estimates of the value of software solutions. Market prospects at different levels in a decision-making process need to be surveyed before estimates of value can be correctly formalized for products.
ISVs otherwise unfamiliar with Mr. Christensen’s “Jobs Theory” and/or Mr. Thull’s Complex Sales methods come to a wrong conclusion, most of the time, on market value for their product offers. Therefore, the “Measure” step in Eric Reiss’ “Build, Measure, Learn” has to be “done right” if useful results are to be had from the effort.