Marketing Technology

Blog for Marketing Professionals in the Technology Sector

What is the future of Sun Solaris?

Oct 30

Posted by Marek Ranis in Market Trends

I am currently involved in a study that focuses on the assessment of the server OS migration market, especially regarding large-scale migrations of mission-critical applications from Sun Solaris to other platforms. It is an interesting time to look at this phenomenon, for obvious reasons.

Our study included questioning a random sample of 2,000 Sr. IT professionals in enterprise-level companies about whether they recently migrated a large workload such as ERP from Sun Solaris to either Windows or Linux. Interestingly, almost 50% of respondents have, with Windows having a lead over Linux as the target platform of choice. We then conducted interviews with some of these respondents to assess the economic (TCO and ROI) and the business benefits of their migrations. In a nutshell, Windows again outperformed Linux in both areas. To get a better picture of the overall market, we spoke with global systems integrators and analysts about their read of the market and the future of Solaris. While the SIs are a little more optimistic about Solaris, the analyst community sees the current uncertainty around Sun as another reason (besides higher TCO) for companies to migrate to other platforms. The server OS market has been already shaken by factors such as dire economic conditions, cloud computing and adoption of virtualization, etc. In the recent recessions, we experienced notable shifts in the OS server market deployments and migrations, the most recent example being the shift away from RISC-based Unix servers and toward x86 server architectures during the 2001-2002 recession. Will the uncertainty around Solaris result in a mass exodus from Solaris to other platforms? If so, which platform will benefit the most?

I will be updating this post as we continue to gather and analyze the data and draw conclusions. Stay tuned…

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Selling to the CIO

Oct 24

Posted by Marek Ranis in Sales

Selling to the CIO is a relationship sale as CIOs are typically not involved in buying commodity products. Their role has become quite strategic and requires a sales approach that reflects this.  While 10 years ago, CIOs were mainly expected to cut IT costs and make sure the system was running, today they are expected to significantly contribute to creating corporate competitive advantage and enabling business strategies at the highest levels. As a result, CIOs are increasingly procuring technology from vendors who act as trusted advisers and participate in solving the CIO’s technical and, often more importantly, business problems. The CIOs want the vendors to stick around after the purchase and participate in implementation and integration. As the CIOs’ role becomes more strategic, the buying dynamics and the decision process for IT procurement becomes more complex and fragmented. For large IT decisions such as purchases of enterprise software packages that are procured with the objective to enable business processes (BI, ERP, PLM, etc.), many decision makers are involved (typically at least COO, CFO but often also external consultants and/or systems integrators). Navigating through the decision-making process becomes a challenge. How do you influence such diverse group of people, and, how do you influence the influencers (typically SIs, SPs and consultants)?

Here is a few points that will help you get started:

- Demonstrate to the CIO that you understand the company’s business and the market in which it plays (what are the key success factors, what are the sources of competitive advantage, what are the needs of top customer segments, etc.)

- Develop a specific (vertical, segment, business problem) value proposition to the CIO based on your thorough understanding of his/her objectives and pain points.

- Map the decision process and understand the motivations of all the key players. Understand the buying dynamics: what are the key drivers, what are the evaluation methods, what are the steps in the selection process, where are the decision points and criteria on which the decisions are based?

- Develop a strategy for influencing the decision process at each critical step.

- Become a trusted adviser to the CIO. Talk to him/her about their business problems and contribute to developing solutions, hopefully supported by your product. This entails arming your sales force with knowledge specific to the CIO’s business and sales tools that are relevant and appropriate. For example, while ROI calculations can be effective if bottom line is the focus, they don’t impress decision makers that are concerned about gaining competitive advantage by improving customer and supplier relationships.

- Design the right sales coverage model. This includes incorporation of channel strategy and working with key influencers (again, e.g. systems integrators, consultants, ISVs, SPs, etc.) to effectively influence the (prospective) customer indirectly.

- Assure that your sales force is equipped with knowledge that’s relevant to the CIO and other key decision makers, and that the compensation structure reflects the fact that this is a relationship, consultative, solution-driven sale, as opposed to transactional sale. Importantly, design the compensation structure to promote behavior that will result in cementing a long-term business relationship based on trust, not on achieving quarterly quota.

- Collaborate with your channel partners on developing value propositions and influencing the key decision makers. It is likely that you don’t have the internal capabilities and skills to cover the entire solution. Even if you do, scalability is an issue.

- Intentionally develop a BC (behavior control) system in managing your Sales function. BC systems are much more effective for relationship sales than are OC (outome control) systems. This couldn’t be emphasized enough as the BC/OC systems affect the way salespeople perceive business challenges, how they approach the customer and what message do they send to the customer by their interaction.

- For large accounts, involve top management. The personal involvement of C-level executives in the relationship-building signals commitment and goes a long way in gaining customer confidence and trust.

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Purpose as a Source of Competitive Advantage

Jul 18

Posted by Marek Ranis in Competitive Advantage

This post is more of a musing of someone who has had the privilege of working with dozens of prominent companies as a management consultant. I would like to briefly talk about “purpose” and its impact on the success of a business. Let’s start with a question: How do you define the ultimate objective of your company? Most business owners would answer this question by pointing to some derivatives of profitability and market share. Indeed, in absolute terms, a business without profitability is a failed business. However, in my mind, these goals are as limited as they are mundane. What I have learned from working with my clients is that the top executives of the most successful companies in the world do not see profitability as their paramount objective, but rather as a natural outcome of their following a purpose, and implementing a set of values that support this purpose and drive their actions. For example, Microsoft’s core purpose at the inception was to make it possible for every person to have a personal computer. Microsoft has been quite successful in pursuing this purpose, and achieving vast profitability and market dominance as a result.

This presence of purpose has a huge impact on the way a company conducts business, and ultimately on its market success and profitability. When a company has a purpose, it introduces a human factor into its business objectives and conduct. It cares about their customers on a much deeper level than “how do I produce a product that they will buy”. Consciously or not, customers will realize this and reward such an approach by their buy-in and loyalty. By following a purpose, a company becomes much more connected to the real needs of customers and this permeates into its R&D, marketing, sales and HR functions. Workers who share the same purpose are significantly more effective in their jobs that workers who merely follow profitability targets. Profit-sharing mechanisms are somewhat effective in stimulating workers’ creativity and dedication but they don’t come close to the effects of purpose-sharing. To come back to the mundane stuff, when economic benefits are the only motivation, a worker produces “x” units of labor for each “y” units of money. Since there is a point of diminishing returns to the worker, after a certain point the worker’s productivity per dollar starts decreasing. This relationship is not true in the presence of purpose. Next time you have a strategy-planning session, brainstorm about your purpose. It’s a rewarding exercise in life and in business.

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Technology Adoption Rates and the Role of Lead Users

Jul 8

Posted by Marek Ranis in General Marketing Tips, Market Planning

In the high-tech industry, technology adoption life cycle is one of the most important concepts. It is used to segment the market into early adopters, early and late majority, followers and laggards, and to develop customized strategies for approaching these disparate target segments. In a graph, these adopter categories fall into normal, bell-shaped curve. Each segment has different psychographic characteristics and different reasons for adopting new technologies.  Early adopters are typically companies that take higher risks and expect higher returns, while the majority and the laggards wait for the technology to prove itself in the mass market before making a purchasing decision. Marketers must distinguish between these segments in order to capture the largest possible share of a given market. In other words, they need to understand the buying dynamics and the motivations of these segments to develop an effective sales and marketing strategy. Customers in the early adopters segment demand personalized solutions, great support and knowledgeable sales force. They are more tolerant to glitches and are willing to pay a premium. They buy new technology to achieve breakthroughs in their competitive position.  The majority market is not looking for revolutionary changes but rather evolutionary ways to improve their operations. They demand end-to-end solutions and proven applications (case studies are an effective sales tool for this segment), as well as a great technical support. Last, the laggards are extremely risk averse, price-sensitive and only buy solutions that have undisputedly higher ROI than alternatives. They are typically not worthy of significant investments but it is important to understand their characteristics, nonetheless. At the end of the day, focusing on early adopters has its advantages but market leadership comes from a successful capture of the majority market.

Below are examples of effective strategies for capturing the majority market:

1)  Offer end-to-end solution and a great technical support (often these are achieved via collaboration with partners)

2)      Simplify product features (focus on a few features of highest importance)

3)      Develop vertical sales and marketing strategies

4)      Assume responsibility for system integration (work with partners, SIs in particular)

5)      Methodically assess the buying dynamics and adjust your sales and marketing strategy accordingly

6)      Develop sales tools that demonstrate your competitive advantage (features, support, ROI, etc.), and include case studies to support your value proposition and messaging

Learn from Lead Users

Lead users are a sub-category of early adopters that has a unique value to a technology vendor. Lead users are those customers that buy the product mostly for the satisfaction of being on the technical cutting-edge. As I mentioned before, they require high customization and thus are an expensive segment to pursue.  They have, however, a unique quality that can be extremely advantageous to technology marketers: they come up with break-through ideas that can result in dramatic product improvements, and a much better chance of winning the majority customers. Lead users often develop workarounds in packaged applications that enable them to achieve their business objectives. Often, they develop custom applications when they deem the functionality of packaged applications insufficient. Learning the reasons behind workarounds and development of custom applications can be extremely telling to R&D and marketing professionals at a technology firm. Thus, while the lead-users segment might not necessarily be profitable, the access to their knowledge and understanding the way they use your technology is extremely valuable for your ability to develop winning solutions. Gathering information from lead users is most often realized via empathic design, focus groups and customer visits. Traditional techniques such as surveys or interviews are not as effective (see my post Product Features: How to Get it Right).

Crossing the chasm from the early adopters to the profitable majority market is what makes or breaks a technology product. To cross the chasm, one must clearly understand the characteristics of each customer segment based on the technology adoption rates, and, while learning from lead users, develop a highly-focused strategy for capturing the majority-market customers.

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Relationship vs. Transaction Marketing: How to Choose

Jul 7

Posted by Marek Ranis in Partnerships and Alliances

Customer relationship marketing means creating close and long-term relationships with your customers with the objective to secure steady revenues. It is common knowledge that keeping current customers happy is more cost effective than investing in new customer acquisitions. Relationship marketing has become a buzz word a long time ago. However, many companies are going too far and overextend themselves by trying to create too many close customer relationships.

Below are some points to consider:

1) For most companies, 20% of customers provide 80% of revenues. Therefore, prioritization is key and so is a careful calculation of opportunity cost and ROI.

2) It is difficult to sustain close relationships unless all of the following attributes are present: trust, loyalty, commitment and interdependence. Therefore, unless you are fairly confident that these attributes are achievable, do not invest in relationship marketing.

3) Relationship marketing is appropriate only when switching costs for the customer are high. In the presence of high switching costs, the customers tend to have a long-term view, are less price-sensitive, their systems are more integrated and their buying behavior centers around technology and vendor, rather than product or person. In these cases, once the customer switches, she is lost for good. This is a case where investments into relationship marketing is appropriate. Under reverse circumstances (low switching costs, focus on product, modular customer system, short-term customer time horizon), transaction marketing focusing on price and advertising is more suitable.

To sum up this short post, relationship marketing has its esteemed place in both B2B and B2C marketing. However, companies that invest into expensive relationship marketing programs for customers that face low switching costs are exposed to losing customers to low-cost competitors.

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Product Features – How to Get it Right

Jul 6

Posted by Marek Ranis in General Marketing Tips

One of the key aspects of effective product management is the ability to identify and offer the features and the functionality that will satisfy the preferences of your target market better than the offerings of your competition. Naturally, customers make trade-offs between product attributes and price, so the right features must be offered at the correct price point. Conjoint analysis is one of the analytical tools often used to unravel these trade-off patterns. This is a somewhat simplistic view, as there is a myriad of other factors such as brand equity, level of support, partner ecosystem, etc.  For the purposes of this blog, however, let us isolate the issue of identifying and offering the right product features.

There are 3 types of features, each having a very different impact on customer satisfaction (and your success):

1.) The must-have features: these features are extremely important but do not increase customer satisfaction. They are assumed to be part of the product offering. Their presence does not improve satisfaction. However, their absence is exponentially related to levels of dissatisfaction. These attributes are often unspoken by the customer, due to the fact that they are assumed.

2.) The one-dimensional competitive features exhibit a linear relationship with satisfaction: increasing the performance of these features by one unit will increase customer satisfaction by one unit. These features are easily identified during customer surveys.

3.) The leap features are those that have an exponential positive relationship with customer satisfaction. Improving their performance beyond that of competitive products has a dramatic impact and leads to significant competitive advantage. The catch is, these attributes are unspoken by the customer and are hard to identify.

Below is a graphical representation of the relationship between functionality and satisfaction described above:

Features vs. Satisfaction

Now, let’s talk about implications. What this means to marketing professionals is that they need to select the appropriate techniques of assuring that customer functionality preferences are properly identified. Typically, the must-have features are common knowledge; for example, in the case of servers, this is reliability, scaleability, security, etc. These attributes are often included in customer surveys (online or phone) and customers assign high importance rankings to them. However, they are not interesting in terms of achieving competitive advantage. The competitive features display a higher impact. Understanding their importance is key to being competitive. Customers can identify them on their own, as they think of these features in terms of solving their business problems and enabling their business objectives. Market researchers look for their relative importance, for trade-offs that customers are willing to make, and for the relationship between importance and satisfaction (the goal is to achieve high satisfaction for attributes of high importance).

The most intriguing and difficult to identify are the leap features. They are also the ones with the largest impact. Because customers are typically unaware of the features (or of the fact that they would significantly improve their business), marketing professionals cannot rely on traditional research techniques such as online panels or phone interviews. Other methods such as empathic design or customer visits need to be deployed to identify leap features. The idea behind empathic design and customer visits is to close the gap between what customers say they do (need) and what they really do (need). Ideally, these visits would include someone from the engineering and/or marketing team (though this is seldom the case).  Depending on the maturity of these solutions, these methods can be augmented by an online survey (for more mature solutions) after building hypotheses based on the results of phone surveys and empathic design/ customer visits. The purpose of this validation is to arrive at the desired confidence interval and margin of error (typically, we target 95% confidence and 5% margin of error).

To sum up, marketing professionals need to understand the relationship between functionality and satisfaction to select the appropriate market research techniques. Depending on the product maturity and its position in the technology adoption cycle, they ought to deploy the proper mix of methods to achieve their objectives.

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Tips for Creating a Strategic Market Plan

Jun 15

Posted by Marek Ranis in Market Planning

Again, high-tech companies should follow a slightly different path when creating their strategic market plan, as compared with their non-tech peers. This is a result of the different dynamics that are unique to high technology. For instance, competitive actions and reactions are much quicker in the technology sector. Thus, traditional planning processes are quickly rendered obsolete. Market planning in the technology sector must be more nimble, simpler, and integrated.

Below are some quick tips as to what to focus on:

1. Start with internal capabilities before looking outward: define source of your unique value and core competency. Analyze internal financial resources, intellectual capital, manufacturing capacity, brand equity, technical and business skills, knowledge).

2. Define the broad business arena that you will focus on and segment it based on benefits and functionality that you are capable of offering.

3. Understand the features that customers value the most but also understand what trade offs they are willing to make and at what are the price points (this is best done via conjoint analysis).

4. Understand the buying dynamics: who is making the purchasing decisions, what needs are fulfilled by the technology, who in the organization gets involved and when. What are the top 5 buying criteria? Is it brand, reputation, partner support. What are the top 5 product attributes the customer is basing their decisions on? Reliability? ROI? Support? What are the barriers?

5. Understand the value chain: where is value created, from suppliers of raw materials to the channel.

6. Analyze competitive landscape: who provides related products or services, what are their value propositions and core competencies. What is their business and distribution model? How do you compete? Differentiation? Price leadership? How do you make customers switch to your product or service? Who are your direct and indirect competitors? What is the level of threat of a substitute product or a “killer ap” coming along before you get to the cash-cow stage?

7. Based on the above, conduct a SWOT and GAP analysis to determine what will make your firm achieve a sustainably profitable position in the market. Are there synergies with other products/ processes to be exploited? Is investment into new initiative leverageable? Is your strategy consistent?

8. Select a FEW top opportunities to focus on. Concentrate your resources and develop a leadership position in the key truly attractive markets or segments. Don’t over-extend your resources.

9. Select the appropriate channel (reselling vs. influence). What players are best positioned to a) sell your product while b) realizing lucrative gains. If your product is complex, look at SIs and consulting firms channel. For commodities, Service Providers, VARs, ISVs with complementary products might be your best bet. Plan and execute a focused strategy of building key channel relationships. Develop partner programs that will incentify your channel to work with your firm.

10. Finally, develop a financial model and determine the level of investment to achieve your target ROI.

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Basic Questions Technology Marketers Should Ask (and Answer)

Jun 15

Posted by Marek Ranis in General Marketing Tips

Marketing of technology products is very different from marketing products in other industries. This is due to the following factors:

- High market uncertainty: customer needs are ambiguous and the customers display a high degree of FUD (fear, uncertainty and doubt) about technology and its ability to address their pain points and needs;

- High technology uncertainty: the degree of certainty that the technology is viable;

- High competitive volatility: new entrants can come from all directions, even outside the industry; high level of innovation.

All these factors make marketing of technology product much more challenging that marketing traditional items.

Below are some key questions that marketers of high-tech products should ask themselves when creating a marketing plan:

- Do you market your product as a radical innovation (revolutionary) or position against existing products as an incremental innovation? This depends on how customers perceive it and drives marketing strategy and use of marketing tools.

- Is this a supplier-drive market or a demand-driven one? Supplier-driven market requires R&D to play large part in marketing.

- What are the target segments (based on benefits) and their size and growth, what is the product positioning relative to competitors, what is the current market share and what are the goals for 3-6 years from now?

- Positioning: customers’ perceptions of how your product compares to competitors on important dimensions.

- Incremental innovation: what is the product’s differentiation vs. competitors? Radical innovation: competition unknown, how do I position the product?

- Incremental innovation: features vs. cost trade-offs determined by customer surveys; radical innovation: testing done by customer partners/ alliances.

- How well does the customer understand your technology?

- How much education and evangelism is necessary? If it’s new, the value of customer feedback is questionable as they have no point of reference. Thus, for radical innovations, qualitative research is more effective (phone interviews with existing customers rather than mass-scale quantitative studies).

- How do I select my market and identify segments?

- How do I clearly communicate the benefits relative to other solutions?

- How do I develop an effective distribution channel and build effective relationships?

- For radical innovations, how do I cross the chasm from selling to early adopters to mass commercialization?

- How do my customers buy and why do they buy? Why are we losing deals – internal and external reasons?

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