Listening to Markets: Michael Alter of SurePayroll

April 2002 Product 1 Comment

When firms want to escape hand-to-mouth business and enter a somewhat predictable high-growth market, business leaders have to change from opportunism and cost based decision-making into a market driven mentality. This kind of a growing-up sometimes requires sacrificing immediate cash flow, exploration, and intuition while replacing it with investment, commitment, and data-based decisions. We may have heard of firms doing real research and planning prior to going into business, but many of us believe this is a cost that can be avoided. Perhaps if firms can keep closing deals, even if they are unrelated, they will have a future. Likewise, if the tech department thinks that a new module would be useful, perhaps they should drive the product strategy since they are the closest to the product.

SurePayroll demonstrates that the alternative route pays-off. It is a market-driven business machine.

Last week, I had the opportunity to interview Michael Alter, Senior VP of Business Development, Marketing, and Sales at SurePayroll. SurePayroll is a successful Chicago venture providing an ASP outsourced payroll service. Their revenue stream is attached to running regular payrolls for their customers. Their pricing includes a complexity factor attached to the number of employees. Our interview concentrated on how Mr. Alter listens to his market, and this he does intently.

Before Mr. Alter joined SurePayroll, and before SurePayroll ever had some serious VC cash, SurePayroll invested in their future by biting the bullet and purchasing market research. Market research isn’t cheap, but as their story will reveal, it is valuable.

The founders of SurePayroll had an idea. From their past experience as small business owners, they believed that running and managing payroll is a hassle that many small business owners would prefer to avoid. However, rather than going out and starting a business based upon a hunch, the founders invested around $100K to $250K in the services of Draft Worldwide to conduct market research. Their market research was revealing. For instance, it demonstrated that four in ten small businesses would be interested in an outsourced payroll solution. This gave credence to their suspicion that their proposed solution would yield a positive reaction and reduced the uncertainty of potential investors. Not only did the research validate their approach, but it also indicated the kind of messages that were likely to positively resonate with their market. Armed with this research, SurePayroll was ready to craft a solution that met a market need and also price that solution to capture the value created.

Mr. Alter has taken this solid foundation of researching customer demands and moved it to the next level. He created a metaphorical accumulator to collect market data from multiple sources in directing his product strategy. His accumulator collects data from (1) the tele-sales force front line, (2) Wells Fargo, their private label partner, (3) customer surveys, (4) customer service feedback, and (5) follow up research on lost deals. From these multiple data sources, Mr. Alter searches for commonality in the desires of both his customers and his prospects. Making product enhancement decisions is still an art, but Mr. Alter is able to support his investment decisions with quantitative data.

For example, In September of 2001, Mr. Alter learned from a sales representative at Wells Fargo that the data entry screens for companies with 50 hourly employees took too many steps. While SurePayroll worked fine for salaried employees or a few hourly employees, it was requiring too much work for business owners with this market profile. Mr. Alter, armed with real customer knowledge, was able to put in their upgrade pipeline a new solution to address this customer demand. Within 60 days, they reduced the process to a single step.

Likewise, Mr. Alter learned that some customers had difficulty providing pay stubs to employees that use direct deposit but lack Internet access. For direct deposit employees, pay stubs were only accessible by logging onto the Internet and downloading them. Firms with just a few employees could work around this by downloading the pay stub for their employees, but as SurePayroll attacked larger firms, they had to improve their solution. Again, armed with real customer knowledge, Mr. Alter was able to put a solution in their upgrade pipeline and brought a one-button solution to market within 90 days.

Notice the cycle: A customer demand is heard, the product strategy is informed, and a solution is unrolled on a market time scale. The alternative is to let the technology department run the product or service strategy, use intuition, and unroll the improved product based upon costs and isolated opportunities. Without market data, upgrade and product strategies are some of the most contentious issues at many firms. Product strategies require balancing the voices of sales people with project managers and software architects. These choices often end up being intuition or politics driven. SurePayroll demonstrates how to insert hard, relevant data into the decision making process.

Each action Mr. Alter took was driven by listening to customer demands. Each action Mr. Alter took to improve his offering to the market was also driven by the branding choice of SurePayroll simple, reliable, economical. From these market driven actions and others, SurePayroll has created its own success as marked by attracting thousands of customers and continued top-line growth.

The May Report, . TECH BUSINESS BRIEFS, April 9, 2002

About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

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