During the last month, I have attended a number of trade shows with vendors selling business software and hardware to large corporations. There is a distinct change in successful selling messages from the tech vendors. They’re focusing on ROI and money saved.
In the late 90’s, it was considered acceptable to state that a piece of software would enable a business to capture more clients, sell more core goods, conduct more cross-selling, capture more profitable clients, and prepare the firm for the next generation of competition. For industries that were getting ready to compete in a rapidly changing industry environment or a market going through disintermediation and deregulation, this kind of selling message had some play. It appeared that companies would undertake a major IT project without really thinking of how the new tool will affect the existing business. Change management, for instance, was often an afterthought. Business Process Reengineering had been discredited it seemed. It was about acting quickly to grab a larger piece of a growing pie. The environment has changed
The death of “Build it and they will come”
Top Line Difficulties: The recession and 9-11 events left firms wondering if there are marginal dollars to be captured. While the Feds report that the consumer spending has remained somewhat strong throughout the recession, business managers are cautious about spending to capture these dollars. In recessionary times, most customer growth comes at the expense of the competitor and not by capturing new customers that weren’t previously in the market. However, capturing a competitor’s customer is usually more difficult and expensive than capturing a new customer. Therefore, corporate heads began to reconsider investments that promised to grow their top line revenues as an effective means to grow shareholder value.
Bottom Line Difficulties: The McKinsey research, by Michael Nevens and others, reports that IT investments have little statistical correlation with productivity improvements. At best, the McKinsey group is willing to state that IT plays a necessary part in productivity gains in firms like Wal-Mart, but is insufficient alone as an enabler for higher productivity. Businesses listen to statements about productivity. Higher relative firm productivity can be translated into charging the same for a product or service but providing it cheaper than the next firm, leaving the higher productivity firm more profitable. Yet, if IT isn’t a silver-bullet anymore for productivity gains, then firms are going to be more cautious in IT expenditures.
The mantra of the film “Field of Dreams” seemed to have played its game. Even as the economy is in recovery and the PMI (purchasing managers index) for capital goods is up (reflecting an increase in capital expenditure), the purchasing managers also report that their anticipated IT expenditures will be less than what it was last year. If our market for high-tech is down, it is time for a new selling message.
Return to ROI and Insurance sales.
One of the hottest products at the Distributech Conference in Miami Florida was by LineSoft. Their selling message concentrates on an expected 10% reduction in expenses for the business function of planning where to lay electrical power lines. This 10% cost reduction is translated into a direct ROI (Return on Investment) for the software product and installation services. Moreover, the business customer can infer that the payback period is within their expect time as a manager of the department making the investment. LineSoft is growing fast and they are not alone. LiveData also has a product that delivers ROI by focusing on the ability to collect and integrate all the data from embedded circuits within distributed utility assets. The investment opportunity could save a utility $3 MM to $4 MM per year while is priced at less than 1/3 of that savings. (Unfortunately, Chicago’s darling for the Utilities Market, SmartSignal, wasn’t represented at this important conference that serves one of their target markets.)
Likewise, at COMDEX, the message of hot vendors selling to corporations has changed. Wireless software vendors are making insurance sales expressing how a company can save money by attaching an electronic leash to their IT support person. With this wireless app, the IT support person can manage a down computer from anywhere without coming into the office. When downtime can be translated into dollars of lost productivity, the ability to reduce that downtime can represent a savings. In this case, the wireless software represents an insurance policy sale. Downtime is a negative productivity event that occurs randomly but with statistical accuracy. The software and wireless product reduces the negative effects of the statically relevant event which may or may not happen when the person with the software is out of the office. Hence, the software represents an insurance policy that may go unexercised.
What does this mean for us?
We, as sales and marketing managers, have to update our messages to reflect the buying motives of today’s market. Out are the build it and they will come and in are the difficult statements of correlating the total costs our products and services with higher financial returns or avoided financial losses. We can’t just state “our product will let you do more.” Instead, we have to go the next step and say by doing X with our product, you can save/make more money. This is a difficult statement to substantiate, but it’s what we get paid to do.
The May Report, TECH BUSINESS BRIEFS, March 22, 2002