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"Research is a process where you can spend a lot of money and come up with zero. Isurus guides me quickly through the key decisions, helps me avoid the pitfalls, and makes sure I walk away with high-value implications."
-Vice President of Marketing, Enterprise Content Management System Provider
The mid-market is an unfulfilled market opportunity for many vendors that serve enterprise segments. Rethinking the needs of the mid-market can improve a vendor’s chances of succeeding with smaller customers.
The mid-market challenge
As enterprise markets mature, vendors look to the mid-market as a growth opportunity that looks primed for entry. Many enterprise vendors enjoy strong brand awareness and the mid-market views enterprise products/services as the “Cadillac” that’s out of reach. The mid-market knows that enterprise-class products provide more capabilities than what they use today and agrees that these extra capabilities provide value.
Given these market conditions, Sales finds it easy to get sales calls and schedule demos. The mid-market likes the attention from premium providers. However, these interactions often don’t lead to as many sales as expected.
Many enterprise vendors frame the problem as a Sales and Marketing challenge, where the mid-market just doesn’t understand the value of the solution, but with the right message or sales process, they could be made to see the light. This is misleading – a range of factors prevent the mid-market from upgrading to enterprise class solutions, even if they would like to do so.
Lessons from BMW
Although BMW is a consumer brand, its experience moving from the luxury market to the mass market offers relevant lessons for enterprise vendors seeking to grow in the mid-market.
BMW possesses considerable brand equity: Most consumers are aware of it, view it as a premium product, and acknowledge that it produces a higher quality vehicle than say, Chevy and Ford. Unfortunately for BMW, despite this brand equity, the market for luxury cars is finite. BMW’s mid-market opportunity for growth is the average consumer. BMW recognizes that it cannot gain sales with average consumers by emphasizing its quality or advantages in its sales and marketing. Consumers don’t need to be convinced of its quality or how it is better than what they drive today – they already know.
Marketing campaigns can attract a small sub-segment of average consumers willing to stretch their budgets to enter the luxury segment. However, this low hanging fruit doesn’t represent an opportunity for sustained growth.
BMW recognizes that price is the limiting factor and has implemented multiple strategies to make its vehicles more appealing and feasible for its mid-market with varying levels of success. These include:
- Offering competitive financing
- Leasing vehicles at a monthly rate average consumers can afford
- Cultivating a used BMW market
- Introducing lower-priced models for entry level buyers
BMW’s mass market challenges seem obvious, and they are. What’s less obvious is that these same dynamics unfold in the B2B mid-market when it evaluates enterprise-scaled solutions. The mid-market’s barriers include:
- Budget limitations: The mid-market faces greater near-term financial constraints than enterprise markets and while they understand ROI arguments, in the short term they simply do not have the budget available.
- Resources to execute: Even if they have the budget many mid-market organizations lack the people or processes needed to take advantage of the features/functionality of robust solutions designed for the enterprise. This reduces ROI arguments.
- Limited needs: Many mid-market organizations do not have enough volume of data, transactions, production, throughput, etc. to require a robust solution, again reducing the ROI argument.
Strategies for the mid-market
One approach to addressing these barriers follows BMW’s lead and asks: How can we make the product/service affordable/feasible for the mid-market? Strategies to consider include:
- Lowering prices: Can prices be lowered enough to attract mid-market customers? This is the simplest strategy, but also the least appealing – modest price cuts typically do not attract meaningful number of the mid-market and leaves money on the table from enterprises that would have continued to pay the higher price.
- Pricing structure: Can the upfront cost be reduced by tying it to usage, number of users, or some other factor that scales along with the size of the customer. The growth of cloud applications in enterprise technology is due in large part to the short-term cost structure that enables organizations to rent software they would not be able to buy outright.
- Develop smaller solutions: Can the product/service be scaled down to align with the functionality the mid-market uses and the budgets they have available? This could be offering scaled down version or developing a new brand altogether.
- Help customers use the solution: Can programs, trainings, etc. be developed that would help customers grow into the solution? Some mid-market organizations need help envisioning how they could use a robust solution, and the steps they would take to make it work, etc.
These strategies do not come without risk. Lowering pricing and offering scaled down options may increase interest within the mid-market, but may also cannibalize enterprise customers willing to accept less if they can lower their costs.
Determining which of these strategies makes the most sense for any given market requires insights into four broad areas:
- The core features/functionality used by the mid-market today
- Their resources and processes
- Barriers to change
- What they pay today
These insights can be collected in a number of ways including.
- Competitor analysis: Vendors that specialize in the mid-market have identified its core needs and general price tolerance.
- Sales reps: Sales reps have direct contact with prospects and can also provide feedback into the aspects of the solution that generate the most interest, why deal stumble, etc.
- Primary research: Primary research can provide direct feedback from the market in terms of its needs, solutions it uses, willingness to invest in new solutions, etc.
In the end the most important thing to remember when entering the mid-market is that it is different than the enterprise market. The businesses aren’t just smaller, they face a different set of needs and limitations. Understanding those differences can greatly improve your chances of success.
Your NPS or customer satisfaction survey can increase the frequency and number of purchases a customer makes over time.
Research by Sterling Bone of Utah State’s Huntsman School of Business indicates that starting customer feedback surveys focused on what you do well increases NPS and satisfaction scores in the short-term, and can increase the frequency and number of purchases a customer makes with you over the long run.
The boost in NPS or satisfaction is expected – asking people questions like “What was the best part of your experience?” puts them in a more positive frame of mind than does asking them to remember how you’ve fallen short. And enough existing research shows that people in a more positive mood give higher ratings on surveys.
That this positive nudge influences purchase behavior months after the survey comes as a surprise. We usually think about how experiences drive the ratings on surveys, not how surveys may influence behaviors. The researchers have two hypotheses for this effect: Asking “what went well?” generates a positive feedback loop by surfacing good memories for the customer; and, that people unconsciously try to avoid cognitive dissonance – if we said something positive about a product, we don’t want to seem inconsistent by not continuing to purchase it.
The findings raises the question: Should you adjust your voice-of-the-customer or NPS program to take advantage of this phenomenon? National brands such as Subway and Jet Blue already incorporate these ideas into their customer feedback programs. There are four broad justifications for making the change.
- Traditional research philosophies reject this type of manipulation and strive to minimize any impact the artifice of a survey has on the results. We don’t want to bias the data. The reality is that most research is biased (more on that later). If asking about positive experiences primes some customers to be happier with a product or service, then the opposite is probably also true. A survey that asks customers to focus on problems may prime them to be less happy then they actually are. More research is required to answer that conclusively, but it would be surprising if the phenomenon only works in one direction.
- There is bias in every data set – the mistake is not recognizing its nature. If you know what it is you can use judgement to account for it as you make inferences, and strategy based on that data. If your VOC program shifts from a problem-finding focus to a positives-focus, expect an increase in NPS and satisfaction at first due to the positive bias. Scores will stabilize as the new protocol is repeated over time. The easy mistake to make would be to forget that the one-time increase in the metrics is due primarily to a change in the survey instrument. But if you account for the one-time jump in ratings and reset your baselines, having a positive bias to your surveys isn’t a problem in and of itself.
- Some strategists believe that it is more effective for companies to focus resources on enhancing what they do well instead of on potential areas improvement. The underlying idea is that whatever a company does well is likely its biggest competitive differentiator and maintaining those strengths should be a priority. Proponents of this approach also point out that identifying and fixing problems does little to attract new customers. If your company embraces this philosophy, focusing your voice-of-the-customer programs on the positive will provides the data you need to strengthen what you already do well.
- For most companies, voice-of-the-customer programs are a cost center – as much as they help companies in the long-term, it is difficult to tie the insights gained to a direct financial benefit. This explains why many VOC programs and other customer surveys are scaled back when budgets get tight. If Dr. Bone’s research stands up to further validation, using positive questions to influence purchase behavior may help justify the cost of voice-of-the-customer programs. Using A/B testing of the survey types and their correlation to long term customer purchasing data would provide you with the insights to show the financial impact of your program.
So what is Isurus’ point of view? To start with, we agree with the broader implication that customer surveys are touch points that influence customer opinions. Customer surveys can…
- Show that you care about customer opinions
- Feel relevant to customers, or conversely make it seem you don’t understand their needs
- Be either a pleasant or a tedious experience for customers
- Show your hand about future intentions
- Feel like a burden to customers if they get too many
- Lose credibility if customers never see any changes based on their feedback
As with any customer touch point, you should manage it to ensure a positive customer experience. Customers should believe the survey was worth the effort they put forth, and that you respect their time and opinions.
The decision to use a positive orientation in your VOC program depends on your competitive situation. If all is going well in terms of growth, profitability, etc. a positive orientation towards your VOC program will likely provide some benefit. However, if growth has slowed, customers are leaving, a competitor is making inroads into your market, etc., you need to know what has gone wrong. Your historic strengths may not be as differentiating as they once were and emphasizing them may contribute to your decline.
For more information on the research visit: “Mere Measurement ‘Plus’: How Solicitation of Open-Ended Positive Feedback Influences Customer Purchase Behavior,” by Sterling A. Bone et al. (Journal of Marketing Research, 2016)
Not long ago brand strategy and strategic brand management languished on the sidelines of B2B marketing. Branding is now experiencing a resurgence. B2B marketers (and their bosses) increasingly embrace the notion that business decision makers are people after all, and that emotions strongly influence business decisions. This year’s ANA/BMA16: Masters of B2B Marketing Conference highlighted success achieved by AON, GE, TD Ameritrade Institutional, Hiscox, and others in engaging with business decision makers at a human, emotional level.
Presumably, B2B buyers have always been humans, so what explains this renewed recognition that in B2B that brands are powerful tools that need to be managed strategically?
Two of the factors are 1) increasing complexity and 2) talent management.
Brands help humans simplify the world. Brands are short-hand summaries of complex sets of information, experiences, and emotions. The field of behavioral economics provides compelling evidence that people rely on heuristics to make decisions throughout their daily lives. These cognitive short-cuts are even more essential as people face more information, more decisions, and more demands on their time. In a recent study, 65% of executives agree that an increasingly complex business environment has made it more difficult to base decisions on purely “functional factors,” such as cost, quality or efficiency. Companies contribute to decision complexity as they become larger and more complex through M&A, expanded product lines, and ever growing feature sets. As a case in point, AON’s global rebranding and Empower Results strategy began in part as a reaction to realizing that customers and even employees struggled to answer the question “what does Aon do?” A clear, compelling brand rises above the clutter and complexity inherent to many large businesses. It enables customers and prospects to connect their needs to your business, and it helps unify employees around a shared idea.
2) Talent management
Many B2B companies compete not just for customers, but also for talent. Brands are powerful tools for engaging employees behind a shared idea, and address employees’ needs for a sense of purpose, prestige or self-identity. Technology talent provides easy examples. Google, Apple, Amazon and others need top developers to continue to innovate. Their brand image helps attract the best and brightest who want to be a part of the company’s vision. In constrast, companies without a brand identity attract people who are looking for a job. The power of brand in talent management is relevant to more than just market leading technology companies. Many companies struggle to attract and retain Information Security talent in the face of more data breaches.
Brand is especially important for engaging Millennial talent: Research with this generation shows they want a sense of purpose at work and show less loyalty to employers. GE’s latest brand campaign addresses the talent problem head-on by using employee characters to showcase GE as a digital industrial company. In one ad, a woman working on an aircraft engine explains how digital and industrial fit together at GE through a humorous exchange with a family touring the plant. The brand message tells GE’s story of what it means to be a digital industrial company, and that Millennial talent should give it a second look.
Complexity and talent management are just two of the compelling reasons to invest in a brand strategy, and ensure the brand is well-managed. B2B marketers increasingly recognize that a strong brand is one of their most important assets. However, recognizing the importance of brand management is one thing, executing a brand strategy is another. One of the first steps most marketing experts recommend is to understand the brand’s existing position and equity – how does the market (not you) view the brand relative to competitors. This exercise consists of understanding 3 key market dimensions:
- What vendor attributes and characteristics does the market use to evaluate vendors?
- In the eyes of the market, how does your brand perform on these criteria?
- In the eyes of the market, how do competitors perform in these areas?
This analysis can be conducted informally based on internal knowledge, or using a formal systematic approach.
The results will highlight your relative brand position, and identify opportunities to strengthen and differentiate the brand going forward.
Re-Thinking the C-Suite Sales Strategy
Selling to the C-suite or other senior executives is the holy grail of many B2B vendor’s sales and marketing strategies. Vendors believe a senior executive is in the best position to recognize the business value of their solution. We believe selling to the c-suite is not the right strategy for many vendors, based on recent research on decision-making, our conversations with executives and some practical realities. If you plan on moving your sales & marketing upstream, consider how the following trends impact your sales & marketing decisions and strategies.
When we interview executives about their buying processes, they almost always emphasize the important role their team plays in identifying and selecting the products and services the organization uses. Executives see their role as managing the business at a strategic level – they set the direction and rely on their team to execute on those plans through a mix of internal and external resources. Most executives acknowledge that they lack the hands-on knowledge to formally evaluate how a product or service will improve existing processes or help accomplish their vision. Executive managers rely on their teams to identify and vet new ideas and vendors before they become involved in the decision process. As a result, support from a team member provides a far more credible voice than any vendor can have by trying to by-pass the team and going straight to executive management.
Although exceptions exist, in most organizations the senior executives build a team of reports that they trust and communicate with regularly. Although the two groups may have different focuses (strategic vs. operational) in most organizations they generally share an understanding of organizational needs, priorities and opportunities. Only in dysfunctional organizations are their opinions and perceptions radically different. Some vendors worry that middle management doesn’t really understand their own business or how the vendor’s product or service could help them. A way to put this in perspective (assuming you are product marketing manager, product director, director of marketing, director of operations, etc.) is to ask yourself if you have a radically different understanding of your businesses’ goals, challenges, and priorities than your boss and are blind to new opportunities? The answer is probably “no”.
Even when vendors manage to get face time with senior executives, the decision process isn’t a top-down decree. Recent studies indicate that 4-5 people are involved in a typical B2B decision, up from the 2-3 a decade ago. The numbers go higher as the size and significance of the purchase increases. The buying process has also become more collaborative and consensus driven. We expect this style of decision-making to be more prevalent as the management philosophies of Silicon Valley continue to influence businesses in a variety of sectors. As a result, top-down decisions will continue to shrink in most organizations. There are, of course, cases when the C-suite brings in operational products and services without the involvement of their team. But in most of these the executive is proactively looking for something specific, not responding to unsolicited vendor pitches.
And at the most basic level, senior executives are busy people focused on the big picture. Therefore, relatively few discrete products and services are worth their attention. They set the direction for organization, and rarely dictate the solutions to use to accomplish operational tasks. Most products and services help organizations accomplish tasks and processes they’ve already identified as important – few change the strategic direction of the organization. Beyond that, many solutions fall into the category of minutia for executives at large organizations – a product that makes or saves $1 million may not be significant enough to warrant the attention of executives.
None of these factors would matter if vendors had unlimited time and resources. However, most need to devote a limited number of sales people and marketing dollars to areas where they will provide the most return. So how can you tell if it is worth targeting the executive suite? Start by asking a few broad questions (and answering them honestly):
- Related to your product/service who is likely to know the details of what systems and process are in place and where they are falling short?
- Who will have the most accurate understanding of how your product/service is an improvement over what they are doing today?
- How large are the improvements/benefits your product/service brings relative to the organization’s other initiatives and priorities?
- Based on your pitch, who is the most likely to take your sales call, visit your booth at the trade show, or notice your ad?
In addition to answering these questions it can be useful to map the customer journey from an organizational standpoint, rather than an individual’s perspective: How do prospect organizations become aware of products/services/vendors? Who goes through the discovery process?
It might be that after a systematic review you find it makes sense for your organization to spend the time and effort trying to reach the C-suite. But it could also be that someone in middle management not only gets you in the door, but also is your most effective champion.
Understanding why deals are won or lost can seem like a game of telephone or “He said, she said”: The Buyer gives one side of the story, Sales has another, and Marketing brings its point of view too. Who is right? Everyone’s partly right and partly wrong. In our experience, the best process combines all available information streams to triangulate on the truth.
Companies often implement win/loss programs when they encounter a rough patch: Sales have flattened or declined, or a new competitor emerges with unexpected success. These dynamics create internal insecurities, finger pointing, and at worst, eroded trust between functional teams. Sales feels Marketing is out of touch with the front lines, Product Management believe Sales uses price as an excuse, and so on. To settle the dispute, a third party like Isurus Market Research is brought in to provide an objective, outside perspective. With no vested interest in the outcome, we listen to wins and losses with an unbiased ear (e.g. we can tell if comments about price reflect actual decision drivers or if they are a red herring). People talk more openly with a third party than with someone who wants to sell them something. This enables a third party, like Isurus, to elicit insights that are unavailable to internal teams.
While results from win/loss interviews provide significant value, we encourage clients to use the insights we bring judiciously. No win/loss program or research firm can provide the end-all be-all of reasons for a client’s wins and losses. There simply is no single point-of-truth. The process is analogous to a criminal investigation.
In an investigation detectives take statements from multiple witnesses and often from the same witness multiple times. Rarely do the stories match perfectly. There are inconsistencies across witnesses and from the same witness over different conversations. Lawyers and investigators evaluate the circumstances and possible motivations. Then, as a team, they take these various information streams to develop the most accurate picture possible of what happened. In the end it’s the collective knowledge that makes the difference – not any single interview or perceived circumstance.
Effective win/loss programs have the same dynamics and follow the same process. The sales reps have multiple conversations with the loss, some during the sales process, some after the decision has been made. The product team has circumstantial evidence on how its products fit the specifics of the RFP. Marketing has insights into competitive advantages/disadvantages. Outside research firms like Isurus provide insights into motivations, perceptions and additional circumstantial evidence. Taken collectively these provide the most accurate picture of why the prospect likely made the decision they did.
This is a mix of good and bad news in terms of setting expectations for a win/loss program.
The bad news first: There aren’t any silver bullets. Often by the time organizations engage a third party for a win/loss program they’re frustrated and looking for a single, definitive thing they can do that will improve their sales outcomes. Unfortunately, the solution is more complicated than that. If a single factor makes a major difference most companies would have figured it out long before looking for outside help. In addition, getting the most out of a win/loss program takes work. The functional teams need to spend time together dissecting the lost deals. This includes thinking through all of the information available and figuring out how to square the circle when Sales heard one thing and the win/loss consultant heard another.
Now the good news: The efforts will bear fruit. When functional teams regularly work together to evaluate why they win or lose deals they start to see patterns. They can then make systematic changes that lead to long term success, which is far better than reacting to the one-off circumstance of any individual lost deal. The process also brings the functional teams closer to the end-customer and helps them develop a shared understanding of the value the company brings to the market.
The takeaway: Relying on a partner for a win/loss program will get you part of the way there. But the most successful programs get more than simple buy-in from the functional teams, they bring the teams together as an investigative team. So before you evaluate potential win/loss vendors, you should evaluate your internal teams and how you will work together to triangulate on the truth.