Promoting Software and Hardware Products through the VAR Channel

With the exception of some software and hardware vendors who sell super-expensive products to the largest enterprises, a large percentage tech companies uses the Value Added Reseller (VAR) channel, to one extent or another. So how do you best go about doing this successfully? Create a great product, throw it to the channel, and sit back and collect the money?


If only it were so. Unfortunately, many tech companies new to the channel find out the hard way that you will fail by taking the word "seller" in the VAR label too seriously. For those of use with experience in the VAR channel, you know that it is still incumbent upon the vendor to create end user demand for their product. Yes, you need to market to VARs as well. And you will take whatever "push" you can get from the channel. But you must have an active promotional program aimed at end users for a realistic chance at channel success.

So what are the best marketing approaches to support channel sales activities? If depends, of course, on the specifics of your product, market, price point, etc. But let's take a quick look at some popular promotion methods used in conjunction with channel sales. I'll break it down into three basic categories:

End user demand creation

This is first and foremost the most critical activity. It's an unfortunate fact that most new players in the channel don't understand this initially. Many have to learn it through a painful hands-on lesson, which sometimes leads to rejecting use of the channel outright, due to spectacular failure. It may be counter-intuitive, but it doesn't even matter whether you establish end user demand for your products by selling direct or via the channel. The important thing is that with few exceptions there needs to be serious interest in your products at the end user level if you're to successfully sell through VARs. In fact, it's almost always necessary to be successful selling directly to end users, before you can hope to have a successful VAR channel for your products. Almost any end user marketing method that fits with your product type and budget can be used to create this demand, but here are some commonly used promotional types:

• SEO (Search engine optimization)
• PPC (Pay per click) advertising
• Press relations
• White paper marketing
• Targeted online banner advertising
• Direct mail, but traditional and email
• Social media marketing (Blogs, Twitter, Linkedin, Facebook, etc.)
• Trade shows


VAR recruitment

In addition to creating end user demand, you'll also want to market directly to VARs, to get them interested in actively working with you and your products. An important point to remember is that the VAR channel is very large, and generally segmented into many vertical categories. So however you approach them, don't waste time (yours or theirs!) by contacting VARs who aren't doing business in your target end user segments. Here's some common recruitment approaches:

• Direct email through available VAR lists
• Phone campaign using available lists
• Internet research with direct email or phone approach
• Trade Shows (VARs frequent them, and it's a great opportunity for personal contact)
• Have a highly successful product with strong end user pull (VARs will find you!)

Cooperative marketing with the channel

Lastly, once you've created end user demand and recruited enough VARs to have a "program", you need to establish standard methods of working with your new partners to create and fulfill demand. VAR programs come in all shapes and sizes depending upon the market, and I've seen a wide variety of promotional opportunities included in these programs. One of my personal favorite "getting started" methods is to offer to pay for and execute a direct mail campaign (blind to the vendor, if necessary) introducing you and your product family as a new partner of the VAR. Below are some promotional activities that are very commonly included in VAR programs:

• Co-op advertising/promotion with the vendor provides funding for approved VAR-executed promotional programs up to a set percentage (3-6%) of sales of your products
• Free or discounted demo units
• Special pricing for large opportunities
• Co-selling with your in-house sales force
• Deal registration
• Additional discounts for completing product training, certifications or maintaining premium support levels
• Co-branded product literature and other use of the vendor's logo
• Website and catalog listings of authorized or "preferred" VARs
• Rebates for volume sales (not recommended; fraught with danger)
• Vendor-funded introductory direct mail campaign

That's my quick primer on successfully promoting your products for sale through the VAR channel. Many of you have your own experience in this area; post a comment or a question to activate our discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter. Or contact Phil via email.

A Case Study in Bad Customer Service

In my opinion, the quality of a company's customer service is BY FAR the most important ingredient of the numerous factors that go into a company brand reputation. Unfortunately, there are too many companies--even of the large, successful variety--that just don't get it.


I wrote previously about "The End of Customer Service" back in May, 2008. With people pinching pennies due to the great recession, it doesn't appear that things have gotten any better.

The impetus to write further on this topic came from a recent, painful personal experience. The source of my pain was DIRECTV.

Troubling developments for a long-time customer

I have been a DirecTV customer for roughly 13 years. This is a long time for a relationship with any consumer products or services company. I initially fell in love with the programming offered by the company, especially they wide variety of sports. I still find their programming compelling. Initially, I also found the customer service and support to be first rate in the beginning. Unfortunately, over time the level of service has declined from first rate to astonishingly bad.

The level of customer service began slowly deteriorated about five years ago. I suspect that it did because the company was struggling to show a profit. It appears somewhere in that timeframe management of the company transitioned from a customer-orientation to focusing strictly on short-term profitability. This led to some short-sighted policies, which I believe could eventually lead to the death of this company.

A long series of customer service and equipment incidents over the last several years left me so frustrated that I decided I could no longer remain a customer, and became resigned to finding another TV service provider.

The final straw

My last customer service experience was what put me over the edge. I had payed $400 for an NFL programming package, only to find 2 games into the season that one of my two receivers was no longer capable of receiving this premium programming. It wasn't really a technical issue, but a decision by DirecTV to no longer support this specific programming on that type of receiver. The receiver worked fine otherwise, and in fact had some key features not available on the more contemporary DirecTV models of comparable capability. I had paid good money for the receiver and had given the company a large premium programming fee for the NFL package that year (and many previous years), and I had not been told prior to renewing football subscription that year that the receiver would no longer receive this programming.

A few years back DirecTV had come under the control of Rupert Murdoch, which led to an equipment partnership with one of Murdoch's affiliated companies. I have one of these as my primary receiver, and it contains some of the worst software I've ever seen in a consumer electronics device. Because of this, I would have preferred to continue to use my old receiver, which works great. But I wanted to be able to access my expensive NFL package on my second receiver, and I felt that I was at least entitled to one that could do this without losing other features important in my current receiver--at not cost, given the circumstances.

What ensued was a Keystone-Cop like series of customer service episodes punctuated by poorly trained service reps, extremely long phone-support hold times and multiple equipment shipments back and forth. I won't bore you with every detail, but it started with an initial call which required 15-20 re-dials just to get through to the "hold" point, followed by a 1½ hours wait time. I'd like to say that was the worst part of the experience, but things actually went downhill from there.

At the end of this saga, I knew more about the internal customer service processes and procedures at DirecTV than most of the representatives I spoke with. It wasn't hard; most of them seemed to be clueless. Some of them were good people trying hard to help me--others just didn't caret. But many were inexperienced or poorly-trained, and nearly all of them were overwhelmed by the sheer complexity required to accomplish even the simplest task. Long story short, my simple request for a replacement receiver that would leave me happy paying DirecTV in excess of $100 every month was never fulfilled.

Even the CEO couldn't make it right

It was at this point I'd had enough, and was resigned to the fact that I needed to change TV service providers. It wasn't what I wanted--I felt I'd been pushed into a corner by the company's arrogance and incompetence. But first I needed to blow off some steam, and so I wrote an email to the DirecTV CEO, detailing my painful experience. To his credit, he immediately and personally responded, apologizing and agreeing that what happened to me should not have happened. He asked if he could still make the situation right, and promised to have his personal representatives contact me to fix the situation. I was pleased by his reaction.

I was quickly contacted by a member of the DIRECTV Customer Advocate Team, a small top-secret group that you wouldn't be aware of if you hadn't interacted with the highest levels of company management. She was very nice and understanding, and told me that she was empowered to do just about anything that was required to make me a happy customer once again.

Apparently she was empowered to do anything except fill my very simple request.

She offered me a lot of things, many which were desirable. But I was a bit stuck on principle at this point; I wanted to be able to watch my expensive NFL package on a second receiver with comparable features, with no additional money out of my pocket.

She told me she could take care of this, but with one big condition: I'd be locked in to 24 additional months with DirecTV. Apparently, any new equipment sent to a customer automatically triggered this additional 24 month commitment, which no one had the power to override--no exceptions.

Complete idiocy--and very bad business

Here there is a customer who has stayed with a company for 13 years and loves their programming, but has been treated badly by customer service, and feels wronged. Making him happy is going to cost you probably $25 extra to send him a premium receiver instead of a basic one. He'd like to find an excuse to stay, but ready to leave due to frustration. The response is to try to lock him in for 24 months against his will?

I was wondering: are there any managers trained in Marketing at DirecTV? Is there anyone in upper management that has actually ever dealt with a customer? Or are they all accountants?

So for all the software developers and manufacturers out there, what are the takeaways from this customer service tale of the absurd?

Takeaway Lessons

Your product/service isn't everything - I still love the DirecTV programming, but will be leaving because everything else surrounding it has turned bad.

Train your people - There is often a lot of turnover in the customer service department, and it's easy to skimp on training for people that might not be there too long. If you don't want to ruin your brand, Train & Retain! These folks ARE the company to the customers calling for help.

The customer is king - regardless of how desirable your offering is, the customer has alternatives. Treat him badly, and he will vote with his feet--its human nature.

Lock customers in with value, not contracts - that's where you'll find loyalty and long-term profitability. 24 month contracts will only create animosity with your customers--and represent a big opportunity for an upstart, more customer-focused competitor.

Don't be arrogant - Regardless of your market position, if a customer truly has been treated shabbily, swallow hard and do whatever it takes to make it right. Install a customer service culture of taking care of the customer, almost regardless of direct costs. The hidden costs of angry customers are very high from word of mouth and other bad publicity--especially in the Internet Age.

Don't let your accountants set Marketing and Customer Service Policy - As described above, the easily traceable short-term costs savings which are the focus of the financial guys, will be overwhelmed by less obvious negative effects on future revenue, due to damage to your brand.

So that's my sad story, and hopefully some valuable lessons for all of us as we formulate marketing and customer service policies. Do you have a customer service story of your own, negative or positive? Have a different view on the state of customer service today? Share with us in the comment section below.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

VAR vs. Retail Distribution in Software and Technology Markets

There is much talk in the software and technology industry about distribution through the "Channel". Generically that means selling through some type of a third party company, rather than selling directly to the end customer. But in reality the "Channel" includes a wide variety of disparate types of third party resellers. Today we'll take a look at when to consider partnering with two of the main channel reseller types, VARs and Retailer--which also happen to be two of the most different.


What's the difference between a VAR and a Retailer?

Let's start with the retailer, as that's a bit more obvious. With respect to software and hardware products, we're talking about computer, specialty electronics and mass market stores, independents as well as regional and national chains. Retail is both a B2C channel and a B2B channel, especially when talking about serving the small and medium size business (SBM) market. While retailers may offer some "value-added" services such as extended warranties, delivery, installation, etc., the main purpose of a retail store is quite simple. The retailer serves primarily as a point-of-sale location, holding inventory and enabling end customers to have immediate access to products at favorable prices.

VARs (Value-Added-Resellers) are in many respects the polar opposite to retailers. The VAR channel is strictly B2B, and sells to both large enterprises and the SMB market. Usually there isn't a retail storefront--if there is, it's not a big part of the business. Expensive retail space is avoided to minimize their real estate costs, because walk-in traffic isn't part of the business model. Unlike retailers, VARs are focused on selling their services, such as installation, configuration, integration, customization, etc, rather than turning over large quantities of products. VARs aren't interested in having a large "assortment" of products like retailers. This is a key point that channel newbie are prone to miss--at great cost to their company. While VARs do sell products, they are motivated to do so in only two instances:

1) Core products which are strategic because the VAR's services are built around them
2) Easy to sell, demand-driven commodity products requested by their customer base

If you take just one thing away from this article, let it be this: VARs aren’t dying to sell most products. If your product doesn't fit into one of the two categories above, you will be pushing on a rope trying to make progress in the VAR channel.

Is one of these channel types "better" than another?

One is not superior to the other. Each reseller type is better for different product types and circumstances. They both can be used quite profitably, but they serve different purposes. It's important when designing a channel strategy to start with the end customer and work backwards. Where would the end customer like to buy? How important is price vs. services and support? What reseller type best meets the desires and needs of your target customer type(s)?

When you should use the VAR channel

While VARs aren't product-oriented businesses, in aggregate they are still a very important channel for many product types. If you have a product which requires a high level of support, or "value-added" services such as expert installation, integration with other products, customization or 24/7 support, VARs can play a key role in your distribution strategy. If you have a popular commodity product, they can be useful (in aggregate) to greatly expand your distribution points. The VAR channel is highly segmented by vertical market, so if your product has a vertical orientation (networking, medical, insurance, etc.) this often creates an opportunity for VARs to be an important channel partner.

When you should use the Retail channel

Retailers are usually best for horizontal, commodity or mature products. They are effective at providing broad, immediate access to your products across a wide geographic area. Retailers typically are "inventory turn" oriented in their business models, and tend to work on thin margins. So if keeping your price point low is important while still using a third party channel, they are an excellent choice. Of course the fact that they provide instant access to your products during business hours can be a very important asset.

Can you use both VARs and Retailers for the same product?

Yes, but you must know what you are doing, or you may end up very sorry that you did. Since VARs and retailers bring very different things to your distribution, there is a strong chance of serious channel conflict if you use both reseller types for the same product. The biggest potential issue is degradation of your product street price, because while VARs typically work off high product margins and low turnover, retailers are the opposite. Retailers optimize their businesses for high inventory turnover, while accepting low product margins. The low margin strategy causes the street price of your product to fall for all channels distributing your product. If the street prices drop too low, the margins may drop too far to be interesting to VARs (even though they are focused primarily on their service offerings). Companies new to multi-channel distribution sometime make this problem even more acute by offering price discounts based on volume, which makes the situation even worse. A volume-based pricing strategy favors the higher volume retail channel, and also incentivizes even deeper street price drops, to create higher volumes and resulting better wholesale prices. Multi-channel pricing is a complex area fraught with danger for the uninitiated--new players should solicit outside advice, and tread carefully.

VARs and retailers can be important, high volume distribution channels for many software and tech companies. They can each be primary distribution channels, or combined with direct a sales approach and other channels to form highly efficient multi-channel distribution networks. More distribution is not always better, however. Companies need to know what they are doing when proceeding with a multi-channel strategy, or risk doing great damage to their sales and marketing efforts.

That's how I view using VARs and retail in your distribution strategy. How do you see it? Post a comment to get a discussion going. Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

Will SaaS Lead to the Death of Software Product Management?

There is a lot of talk in the software business these days about changing business models, particularly the trend toward SaaS (Software as a Service).

Will SaaS business models dominate the software business?

Many consultants, pundits and other industry figures are proclaiming that SaaS will very soon take over the world; saying if you're not on the bus soon, you're going to be out of business. I believe this is a bit overstated, but the strong trend toward the SaaS business model can't be denied.

My opinion on SaaS adoption: When bandwidth is unlimited and close to free, all IT systems are totally secure, the Internet is as reliable as old AT&T and every customer in the world decides they want to rent everything and own nothing--then I'll agree that SaaS is heading toward 100% market share. As I said above there's a strong trend in this direction, but we're a long way from there.

Is software product management dead?

I've written about SaaS a number of times before, and since it has become very important in the software business I'll continue to do so frequently. What I want to address today is another opinion some "experts" are also espousing: that the trend toward SaaS means the end of the Product Management function in the software business.

I find this statement to be downright silly.

When following this debate, it's important to take notice that many of the folks proselytizing these opinions have businesses whose success is based upon these predictions actually coming true. It's always important to consider conflicts of interest among the debaters.

In one recent webinar they trotted out a SaaS software company that was growing briskly every year with no product managers in the company. What wasn't said is that it was always possible to find software companies (of the traditional sort) who didn't have a product management function. Software companies are often founded by programmers, and they haven't always seen the need for Product Management. There are very successful companies where the developers talk directly to the customers, with no product managers at all. However, the facts are that a very small percentage of companies that do business this way are successful, and its usually based upon special circumstances: the rare developer who understands markets and customers as well as he does coding, markets where the developers themselves are perfect customer proxies, etc.

So while software companies without Product Managers have always been out there, it just hasn't been a broad formula for success. Trotting out one SaaS company successfully doing business this way (incidentally, I saw some big holes in their model long-term) doesn't impress me much.

I'm not defending the status quo--I'll say it once again, there is a huge move to SaaS in the software biz. Many (and maybe most) will be doing business this way in the near future. However, like most over-hyped trends, this are some pretty big overstatements being thrown around.

SKILLED product management will always be important

The argument being made is that many of the functions Product Managers currently perform are obsolete under the SaaS model. With continuous development more practical using SaaS, there may be fewer (or no) new version introductions. So the old waterfall chart with MRDs being created for the new version may go away along with new product introductions. I'm sure you get the picture. SaaS is a pretty fundamental change to the software business model, so you wouldn't expect a product manager's job to be stagnant under such change.

But those predicting the death of product management are focusing on the more mundane aspects of Product Management. The essence of this critical function is the ability to understand markets and match widespread, aggregate customer needs to the technical skills and IP of your company--creating a PRODUCT which can be sold to these many people. It doesn't matter whether you deliver this PRODUCT over the Internet in a hosted manner using monthly subscriptions, or in the more traditional on-customer premises, licensed model. Product Management is about creating a profitable PRODUCT well-matched for a market segment. It matters not whether you are engaged in customer facing marketing/promotional activities, or upfront product planning--the product manager's understanding of market needs and how your company can fulfill those needs is crucial in a product business. Otherwise, you're just selling custom software--one-off's for every customer. That's a different business--not a bad one--and one you which doesn't require product managers.

Can Social Media replace Product Management?

Another thing being bandied about by my favorite pundits is the impact of communities and other social media for its potential impact on product development. The thinking goes that there will be much more direct interaction with the end customer, leading to tremendous amounts of data available to ISVs. While SaaS is very well suited to communities (although not exclusive--they can be well utilized by traditional licensed software vendors), the ability to more easily obtain direct customer comments, and maybe take votes on potential new features doesn't eliminate the need for product management. To the contrary. While communities and other forms of social media are very powerful tools, don't mistake more data and customer access with actionable market intelligence. Data needs to be interpreted, and skilled marketers are best positioned to discern who's telling you what and why--the underlying motivations behind any customer feedback. So all of this added customer access and resulting data will only put a premium on good product management, to use these powerful new tools and data for quicker action and to allow better product planning decisions. Remember, SaaS competitor down the road will have access to the same tools and data that you do.

It is rare to find a developer who has truly exceptional product management skills. That's not a knock on developers; as a whole they are an extremely sharp bunch. But specialization in life happens for a reason--very seldom is someone the best at everything. Developers are trained to write code and build applications, not understand markets or extract the "truth" from customers. Different types of people's brain's work differently, and a good developer and good product manager are an example of this.

I find that it's when a talented, open-minded development manager teams with a market-savvy product manager, that most great software applications are made. So no, I don't believe that the Product Management function is going away anytime soon in the software business. There are many important changes going on in the business, the SaaS business model not the least of these. With any change in business model, functional roles will evolve and change. But I believe strongly that Product Management is a fundamental, important role that will remain critical in software businesses far into the future.

That's what I think about SaaS and product management--what do you think? Post a comment to start the discussion! Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

All atwitter About Twitter Marketing

There's been a lot said and written about the newest Social Media craze, Twitter.

Particularly in the popular press, there's also been a lot of misinformation. Sometimes the only way to get the real story is to try it yourself. I thought I'd give it a shot, and throw in my two cents on what Twitter's really all about with respect to marketing.

I've been on Twitter for a few months now. As of today, I'm following around 45 people, and have about 45 following me as well. I think that at this point I've got a pretty good idea of what Twitter is and isn't. So here's my take:

WHAT TWITTER IS

Most fundamentally, it's a micro-blogging platform with a limitation of 140 characters per post. Most of you have almost certainly seen a blog online by now. Just like blog postings come in many shapes, sizes and topics, so do "tweets"--the term for an individual message or post on Twitter. "Following" someone on Twitter is akin to subscribing to updates on a blog.

The 140 character limitation is very extreme, and forces even the most verbose writers to be very brief. This can be a good thing. This 140 character limitation also allows Twitter to be available on even platforms with very limited resources, such as cell phones. This wide platform availability extends the potential uses for Twitter, greatly adding to its utility as a one-to-many instant-communication tool. Twitter is actually pretty simple.

WHAT TWITTER ISN'T

It's not robust--it's very limited by the 140 characters. So it isn't suitable for everything--certainly not anything that requires a lot of detail. You really can't publish anything of note directly on Twitter. It's not good for:

* Complex or lengthy communications
* Private communications, while possible, are probably best handled via other methods.
* It doesn't replace a Blog or website

Contrary to what you see in the popular mass media, it's not some weird cult of people who are inexplicably exchanging tweets on what they're having for breakfast. It's also not strictly an avenue for following the day to day minutiae of People Magazine's list of 100 top celebrities (Aston Kutcher's 1 million twitter followers notwithstanding) The biggest thing to remember about Twitter is that it's just a horizontal communications medium--which by itself isn't much of anything. Twitter is really what people decide to make of it.

WHAT TWITTER IS GOOD FOR

The uses for Twitter are almost as broad as the profile of its millions of users. It's hard to classify best uses because of this. But in simple terms, I find that the major uses of Twitter falls into a few categories--at least with respect to what interests a marketer:

Personal Communications with friends
In this respect, Twitter is like a simpler, quicker version of Facebook in how it's being used. This is where you see people broadcasting where they're having breakfast--those messages are really intended for their circle of close friends.

Personal Branding
An executive or professional using Twitter to increase awareness of his/her capabilities or work.

Business Branding
Similar to personal branding, but used by a business to provide exposure to the capabilities, products or services it offers.

Business Communications
This is the more tactical business use--restaurants broadcasting the specials of the day to their customer base, new product announcements, links to press releases, etc.

HOW BEST TO USE TWITTER

Have a strategy, and stay true to it
If you are using Twitter for business branding, don't continuously talk about what you're doing for fun that night. A more personal message occasionally which is of particular interest in fine, but remember your target audience. This is one of the biggest mistakes that a newbie Twitterer makes--they think being on Twitter means broadcasting their daily minutae. But for business conversations--who's interested in that? It's common sense. If you're using Twitter for business/marketng purposes, stay on topic at least most of the time. If you want to use Twitter extensively for multiple purposes, it might be best to create multiple personas.

Use it to listen and learn--not just broadcast
If you pick the right people to follow, Twitter can be an extremely efficient source of information in your chosen topical interests. You have to be careful--you can easily become obsessed, and Twitter can become a real time sink. But if you're judicious in your use, you can leverage the work of others to find things of interest to you. And by watching how other skilled Twitter users utilize the platform, you can learn how best to use the tool yourself.

Use links
Even though the 140 character limit won't allow complex messages, links are allowed, and are very powerful in Twitter. Often Tweets are "teasers" or introductions to the linked document. For example, I broadcast the availability of new articles on my Blog by posting a Twitter message

Use keywords
One of the most powerful aspects of Twitter is the ability to easily "re-tweet" a message, or pass it along to your own Twitter network of followers. This makes Twitter a very powerful viral platform in getting the word out on your chosen topic. If you include keywords in your tweet that are relevant to your target audience, the viral aspect can really enhance the breadth of delivery of your marketing message.

That's a take on Twitter after a few months of use. I'm sure many of you have different experiences with this exciting new platform--post a comment and let's get the discussion going!

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

Will Microsoft's BING Finally Bring Success in the Search Engine Market?

Microsoft's new search service is called BING, and takes a contrarian approach to the simple Google Interface. The BING interface is kind of a cross between Google and the Yahoo Directory, with a bit of Expedia, MapQuest, Shopping.com, UTube and Flicker thrown in for good measure. Never accuse Microsoft of being modest in their ambitions--this site takes on directly just about every major category in the online world.

I've given BING a quick look. It's polished and appears pretty comprehensive. The search results don't seem to be that much different from previous Microsoft efforts, although the interface's major categories may allow the finding of information more quickly than an elegantly simple one like Google's--if you know upfront the category of information that you're looking for.

HOW LIKELY IS SUCCESS?

Will they succeed? They have many times before in similar situations. They've been laughed at and written off in quite a number of markets over the years. MS has a bad corporate habit of releasing poor products in their first one, two, and even three incarnations. Any other company would give up after so many failures in a particular segment-but not Microsoft. Don't forget that as a software company, Microsoft has always seemed to believe that it is their god-given right to sell every line of software code written in the world.

There are many examples of Microsoft rising from the dead in software market segments. In spreadsheets, Excel was at one point in time a speck on the wall compared to Lotus 123. WordPerfect had a commanding lead over MS Word in word processing back in the DOS days. And a large number of MS Network Operating System Server software offerings (beginning with LAN Manager) were considered a joke relative to Novell Netware, for the longest time back in the 90s.

In all of these situations, Microsoft had the last laugh, soundly beating their seemingly entrenched and unbeatable rivals in large market segments. As a result of this corporate history, they believe that can beat anyone and rarely give up. Occasionally, I have seen them back off, notably after several tries competing with Intuit in personal financial software. But if it's considered a strategic, core segment by MS, they will throw a huge amount of resources at the segment, take large losses, and not give up until they've broken through.

I call them the Terminator of High Tech.

TERRIBLE TRACK RECORD IN ONLINE SERVICES

Of course, this isn't a pure software market, its online services. The problem for Microsoft with Bing and the search engine market in general is that they've been floundering almost completely, for a long period of time, in online services. In fact, they've not had much success in their history online at all. This is especially noteworthy in contrast to their domination of the desktop software business, and the competitive advantage their desktop monopoly should provide them in online services. Yet they've done poorly in almost everything online, and are a distant third in search engine marketing--not even all that close to a fading Yahoo.

So as most pundits will confirm, Microsoft has been terrible in the online world. This does not bode well for the possible success of Bing. But as I alluded to earlier, there is another side to this equation.

MICROSOFT CONSIDERS ONLINE SERVICES IN GENERAL AND SEARCH ENGINE MARKETING SPECIFICALLY, TO BE ABSOLUTELY AT THE CORE OF THEIR FUTURE SUCCESS--AND EVEN THEIR SURVIVAL.

Yes, this hugely successful company has always been a bit paranoid--which may be a bit on the humorous side given their overall success. But it has worked well for them over the years. It has given the company a sense of urgency which is very hard to generate in corporations of their size and stature. So anyone with a sense of history would be foolish to rule them out.

HOW CAN MS OUTFLANK GOOGLE?

But how are they going to defeat their competitors, mostly notably Google, this time in the online world? In my quick evaluation, I didn't see anything technically revolutionary, such as demonstrably more-relevant search results. Some people may prefer the Bing category-oriented interface better than Google's, but it will be a matter of taste--I can't see an overwhelming advantage here. In past cases MS may have overwhelmed a segment with marketing, or simply given away a product, to ensure defeat of a rival they feared could grow into a broad line Software competitor (Novell, Netscape, etc.). It's unclear to me what strategy they will be able to take to defeat Google, which is a dominant, embedded brand with wild profitability in Search Engine Advertising. But I believe they fear the Google franchise and know they need to crack to code to online success if they are going to retain their position in the long run. So don't expect any throwing in the towel any time soon.

Maybe Microsoft will hit upon some innovative strategy that will enable them to win the day in this crucial market. But the one thing I can think of right now, that may work in their favor, is deep pockets, longevity and sheer persistence. Google has also been unable to achieve success outside of their domination in their core Search Engine Marketing segment. This is very analogous to Microsoft's struggles outside of desktop software. The Search Engine advertising segment will eventually mature, and there are already some early signs of slowing. Plus Google risks killing the goose that laid their golden egg by raising their "Auction" bid rates to levels that will make it hard for their customers to make money--don't get me started on that. Advertisers may eventually take their advertising budgets elsewhere. So for MS in this crucial platform it may be a matter of hanging around, making incremental improvement to their Search Engine offerings, until Google shoots itself in the foot.

Doesn't sound like much of a strategy, I know. But stranger things have happened. Let me know what you thing of Microsoft's launch of Bing. Post a message or drop me an email.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

White Papers in the High Tech and Software Marketing Mix

There are many marketing methods in Software and IT marketing that can be appropriate in some, but not all situations. I'd put White Papers in that category. The term "white paper" is a broadly used term, and can mean different things to different people. I define a white paper as a document written to provide insight or expertise specific to a market, process or product category.

PRODUCT & MARKET APPLICABILITY

White Papers are used far more often in B2B marketing than in B2C marketing. I have seen them used in a B2C environment, but only infrequently. A White Paper is most often useful when there is complex technology or work processes involved. In a B2C environment, they would usually only be used in an "early adopter" market where a product concept is new, and prices and sales cycles are still long.

MARKETING RATIONALE FOR WHITE PAPERS

Why use a White Paper at all? The best reason is to build credibility for your company or product. White papers are most frequently accessed by prospects early in the sales cycle, when a prospect is just beginning research on a product category. These documents allow company personnel to show off domain or technology expertise, which should reflect well on the product you eventually want to sell the prospect. The white paper shows off your company as thought leader in your category. It also allows you to subtly and gently position your company and product in the prospects mind, very early in the sales process. It is often helpful to designate one (or a few) people in the company as the author of the white paper and as an expert in the field.

THE "RIGHT WAY" TO DO WHITE PAPERS

So what are the key factors to creating a successful white paper? Here's a few:

* Written by a domain or technical expert
* Succinct-no fluff or overt marketing, to the point
* Aimed directly at your target prospects
* Provides valuable information to your target
* Mostly solution-agnostic, any product or company promotion must be subtle

WHAT NOT TO DO IN A WHITE PAPER

And what are the things to avoid a wasted effort? Keep these points in mind:

* Can't be a product brochure -no relentless promotion
* Don't make it the length of a book
* Never stretch the truth
* If it's too general, so that no one will invest time to read it

BEST USES FOR WHITE PAPER

What can you do with your white paper, once you've put in the time, money and effort to create one? There are many good uses--here's a few to consider:

* It will contribute positively to Search Engine Optimization on your website
* An excellent item to use in a PPC campaign offer
* A great email marketing campaign offer
*An important intermediate step in the sales process; often useful just after a website visit, but prior to a webinar or product trial
* Versatile as "lead bait"; regardless of the medium or campaign, you should require contact info from the prospect prior to a white paper download
*Assists in moving a prospect along without "high touch" interactions--helping automate the sales process and shorten the sales cycle

SUMMARY

White papers can be very valuable tools in a number of market segments. These documents should be used to differentiate your company as a progressive thought-leader in your market category. The optimal goal for a successful white paper is to position your company as a preferred vendor or serious alternative for prospects in your market segment. This is accomplished by demonstrating expertise and providing credible, valuable and unbiased information which is valued by the target prospect. It is NOT accomplished by "tooting your own horn", playing fast and loose with facts, or duplicating your company brochure. If you want to be a successful white paper marketer, it's important to restrain yourself from tactics in the latter category. That's what I think about making white papers an important part of your marketing mix. Please post a comment and add your experience and thoughts on this topic.

Phil Morettini
PJM Consulting
www.pjmconsult.com

Integrating Sales and Marketing at Software and Technology Companies

In some, but not all tech companies, the Sales and Marketing functions are managed separately. They are separate, but closely related functions that some people (especially technical folks) have a tendency to confuse. Normally, there is a VP or Director heading up the Marketing department, and another VP or Director leading the Sales staff. But it is also not unusual to see a VP or Director of Sales & Marketing who leads both functions at once.

This all seems benign enough, so what's the issue? The issue comes when actual revenue fails to meet the forecast--that's when the finger-pointing usually begins. Unfortunately, not meeting forecasts is a common event in technology businesses, where forecasting of new software and tech products can be particularly challenging. When that finger-pointing starts, it often breaks out first between the Marketing and Sales departments--here's how the ensuing "discussion" might go:

SALES: "You haven't planned products that our customers want to by. You've priced them too high. And those leads that you've spent SO MUCH money on that you are giving us aren't qualified, and are essentially worthless to us."

MARKETING: "You're not selling the right products as we directed, or presenting the positioning of our product line properly. All you do is try to sell on price, constantly discounting and hurting our margins. If you'd follow up on all the leads we gave you, get off of the golf course and work more than 4 hours a day, you'd be well over quota and the company would be doing fine."

Sales folks and Marketers are different types of people, and tend to view the world differently and from their own selfish perspectives. This often nasty "discussion" as simulated above is far from uncommon, and can get pretty ugly--which can really hurt a company in trying to reach its goals. So what's the right way to get the Sales and Marketing departments to work together as a team, avoiding all of this counter-productive ugliness?

SOLUTIONS TO REDUCE POTENTIAL CONFLICT


The VP of Sales & Marketing
One way to greatly reduce this conflict is to have a common leadership for the Sales and Marketing functions. This usually means having a VP-Sales & Marketing in your organization. If you can find the right person to fill this role, this can actually be a very good solution. Having a single leader can go a long way toward eliminating or at least greatly reducing this conflict, assuming he has a balanced background and perspective, and is fair, not favoring one department over the other. Good people to fill this role are out there--but are very rare, in my opinion. There are far more managers who have been put in the position of VP-Sales & Marketing than there are those who were suited for the role. Most of the time you end up with a manager that understands one function well, and gives short shrift to or completely screws up the other function. . You will often find this combined VP position in companies that are not "marketing-intensive", where the sales function is the dominant aspect of the job. If the Marketing function is truly less important, a company can get by with this structure, although it usually isn't ideal. You can read more about the issues with a VP-Sales & Marketing role in a previous article that I've written entitled "Big S, little m".

CEO Demands Communication and Cooperation
If care isn't taken, the very different personality types in sales and marketing can lead to some pretty intense conflicts. I've been a soldier, captain and general in this war--and let me tell you, it isn't pretty. I've also (effectively) filled the role of VP-Sales & Marketing, which is a story for another day. Much like the battles between Marketing and Engineering that I've previously written about, I have seen this battle play out regularly in the companies that I have worked for as an employee, as well as at many of my clients in eight years as a consultant at PJM Consulting. Things can get out of hand very quickly, and paralyze a company. In many cases, the key is how the CEO handles the situation. He must go well out of his way to be a fair arbitrator in these discussions. Even the most benign comment can appear to show favor to one side, in the eyes of the other. Don't ignore or deny the problem, or assume it will be handled at the VP level. It is the CEO's responsibility to prevent, recognize and fix this problem. Be careful that you don't inadvertently make decisions or set up policies that reward or tolerate company politics.

Departmental Social Integration
I recommend planning activities which allow sales and marketing counterparts to get to know each other as "people" outside of their project activities. In many ways a successful outcome is all about relationships, so closely monitor the personal relationship between VP-Marketing and VP-Sales. Also, make sure that the VPs are monitoring the relationships below them. Ensure both VPs are open and honest with about the relationship between departments. Also watch for arrogance (especially from "experienced veterans") when screening potential new hires for either department that will interface with the other --arrogance often usually the trigger which starts the battle rolling

Integration of Departmental Functions
Encourage the sales department to get marketers in front of their customers. Hire marketing people that have had some sales or business development experience, who understand dealing directly with customers--and know what's it like when your living depends upon making your quota. Insist that the marketing department include the sales folks in determining what a "qualified lead" looks like. If you can get agreement on this up front on this important issue, much of the finger pointing goes away when things don't go as planned.

Joint Goals and Compensation Structure
It currently isn't common to design department or individual goals which cross marketing and sales functions, but if you can find a way to do this, you are structurally setting up the desire and need for close cooperation. Design goals and MBOs to reward the two departments for working together. Also, don't ever allow one department to "get ahead" by blaming the other--tie them together as much as possible in your goal setting.


SUMMARY

To limit issues between sales and marketing functions and ensure that they "sing from the same sheet', make sure to pay close attention to the individual departmental activities, which can nevertheless greatly effect the perceived performance of the other department. Optimizing the cooperation between sales and marketing demands an up front look at things such as the corporate structure at the highest levels, the social fabric of the company, compensation structure and use of MBOs, and formal cross-departmental reviews so each department can influence the other department's approaches. All too often in my practice at PJM Consulting, these things aren't taken into consideration until after the fact--when things have already blown up and there is a mess to clean up.

That's my view on this all too common conflict. What has been your experience in this area? Post a comment and begin a discussion.

Phil Morettini
PJM Consulting
www.pjmconsult.com

Integrating the Marketing and Engineering Functions at Technology Companies

In most tech companies, Product Marketing and Product Development/Engineering are managed separately. There is usually a VP over the Product Development function and another over the overall marketing function, which usually includes future product marketing/planning.

While this is certainly an appropriate way to organize a tech company, there is a great danger in one are when it comes to these separate operating "silos": the planning of new products.

I have a particularly strong opinion on this topic, with an extensive product marketing background and also having worked as a product developer earlier in my career (albeit in a non-tech business).

With respect to current products, the silo approach isn't much of an issue. The day-to-day activities of the marketing and engineering departments are very different, and can be managed separately quite successfully.

It's in the future product area that things can get messy. Product Marketing and Product Development both have a key role to play here, if the company is to optimize the process of planning, developing and introducing the best new product possible. The problems is that at every level, from the VP-level down to the engineering project managers and marketing product managers, the product marketing and engineering functions are often staffed by individuals with very different world outlooks when compared to their direct counterparts in the other department.

Inevitably, if care isn't taken, these very different personality types can lead to some pretty intense conflicts. I've been a soldier, captain and general in this war--and let me tell you, it isn't pretty. The battlefield often is a company's strategic plan, which ends up in a trampled mess. I have seen this battle play out regularly in the companies that I have worked for as an employee, as well as at many of my clients in eight years as a consultant at PJM Consulting. It sometimes gets so ugly it paralyzes a company, putting it at a severe disadvantage vs. competitors who have less of a conflict.

THE "WRONG" WAYS TO HANDLE THIS POTENTIAL PROBLEM

Unfortunately, most CEOs that I meet are not all that in tune to how damaging these conflicts can become.

Often they will ignore or deny the problem, thinking it is a responsibility to be handled at the VP level.

Another strategy that I have seen companies put in place is to extract the product planning function from the marketing department, and put it under engineering. This will often greatly reduce or eliminate the conflict, but it akin to throwing the baby out with the bathwater. As I said earlier, both marketing and engineering have a key role to play in product planning. This strategy effectively removes the voice of the customer, which is a key role that the marketing department should be playing in any successful software or tech company. As much as product developers think it looks easy, they almost never have the mentality or experience to accurately read markets or customers. Almost no one is great at everything; monitoring and reading markets, and technical product development, are two very different skill sets. Having both mentalities involved in a positive way leads to far better products in the end.

Finally, if they happen to have come from one side of the battle or the other, CEOs sometimes "take sides" in the battle--predetermining the winner. The problem is there is never any real winner in this battle--and the only certain loser is the company and its shareholders.

A CEO can choose to let Marketing have the upper hand--and this may work out adequately in commodity products where there is very little engineering differentiation. In any other circumstance, results will likely be sub-optimal.

Or he can let Engineering win and dominate the planning process--which is a very common occurrence in early stage, technically-driven software and tech companies. But this generally only works well for products made by engineers, built for engineers (the early days of Hewlett Packard are an example of this strategy working successfully). For every company that has used this approach successfully, there are probably hundreds or even thousands that failed in large part because of it.

Ultimately, to make sure that this conflict and its dire consequences are to be avoided, there is one key thing that needs to happen:

IT IS THE CEO'S RESPONSIBILITY TO PREVENT, RECOGNIZE AND FIX THIS PROBLEM.

So what steps can a software or tech CEO take to be on the lookout for this problem--and more importantly, what can they do to prevent it from developing?

*It's all about relationships: closely monitor the personal relationship between VP-Marketing and VP-Engineering
*Make sure that the VPs are monitoring the relationships below them
*Make sure they are both VPs are open and honest with you about the relationship between departments
*Plan activities which allow engineering and marketing counterparts to get to know each other as "people" outside of their project activities
*Be careful that you don't inadvertently make decisions or set up policies that reward or tolerate politics
*Design goals and MBOs to reward the two departments for working together
*Don't ever allow one department to "get ahead" by blaming the other--tie them together as much as possible
*Hire marketing personnel that can talk the language of engineers
*Screen product development hires who will interact with Marketing for the not uncommon attitude that engineers are "superior" human beings
*Encourage the marketing department to get product developers in front of customers
*Watch out for arrogance when screening potential new hires for either department that will interface with the other --arrogance is usually the trigger which starts the battle rolling

SUMMARY

Marketing/Engineering conflict over the product planning process is a common problem that is often overlooked by tech company CEOs. A certain amount of creative tension can exist between the two departments, and be totally healthy. All too often, though, this tension turns into a bloody fight which is destructive to the company's prospects. It is not "fait accompli", however. It can be minimized and even prevented by a watchful and proactive CEO.

That's my take on a common issue which is rarely discussed out loud. Have you had your own issues in this area? Post a comment to add to our discussion.


Phil Morettini
PJM Consulting
www.pjmconsult.com

Trade Shows for Software & Technology Firms - Do They Still Make Sense?

Let's talk about what, for some people, is a marketing method from a bygone era: Trade shows, or Trade Fairs, as they're referred to in most places outside of the US.

At one point in time, Trade Shows were a staple in most every tech company's marketing budget--shows like Comdex, PC Expo, Network World and a host of others were annual rites of passage. But in this Internet age, they have been greatly reduced in the marketing mix, if not taken completely out of the picture.

There are many reasons for this. First and foremost, the ROI of tradeshows was always very questionable for most exhibitors. In marketing departments everywhere there were sharp discussions during budget time, on whether to continue the expense of the major shows. They always seemed important to be at, but usually it was pretty difficult to make a direct correlation to enough actual revenue, to justify the large expense. As the Internet became more prominent, this ROI looked even worse in comparison--as it did for many other "offline" marketing methods, such as traditional direct mail and print advertising.

So are tradeshows now obsolete? Probably not, but many marketing folks might say that they are on the endangered species list. So when, if at all, do traditional trade shows still make sense today? And what should your goals be, if you do decide to invest in a show or two? Let's take a quick look at 4 points relevant to each of these two questions.

4 REASONS IT MAKE SENSE TO GO TO A TRADE SHOW

A CONTRARIAN APPROACH
One of the major enduring tactics of marketing is to "zig when your competitors zag". If you are in a market where a show is still well attended, but vendors are starting to stay home rather than pay for booths, you may have an opportunity. If your competitors aren't there, you have a larger, captive audience of prospects to strut your stuff to. One of the basic tenets of a good marketing program is to find a "communications channel" which isn't too crowded. With trade shows falling out of favor in marketing budgets, there is potential to benefit from a contrarian approach in some markets.

INTRODUCTION INTO A NEW MARKET
This is always one of the strongest reasons to attend a few shows. If you have a brand new company, or your company is entering a market space it hasn't previously participated in, a couple of well-selected shows can be a very good investment. Remember, you only get one chance to make a first impression.

INTRODUCTION OF A NEW PRODUCT
Much like a company entering a new market, a new product introduction is a very traditional reason to exhibit at a trade show. In my opinion, introducing new products at shows has historically been over-estimated as a marketing tactic. Sure, the press is there covering the show, but if 50 other vendors are also announcing new products, your new product might get lost, or at least get less press coverage then if you announced two weeks before or after the show. Remember the comment above about over-crowded communications channel?. In some cases, announcing at a show fits this description. This can still be a very sound marketing tactic--just do careful research and planning to ensure it is a net positive.

IMPORTANCE OF HIGH TOUCH
If you have a product that absolutely requires some hands-on or personal selling before prospects buy, trade shows can be an excellent investment. For example, if the product is quite expensive, or an expert demo sells far more than prospect downloads from your site. I have a software company client at PJM Consulting who is in a market where expert demos are essential; they have grown the company, to a great extent with trade shows, and almost always can demonstrate a profit on their show budgets.

4 GOALS TO ENSURE A HIGH RETURN FROM A TRADE SHOW

PRESS COVERAGE
This is always one of the most important reasons to go to many shows. If it is an important show, the press will be there in full force. You really need to plan PR tactics ahead of time, however, as all of the other exhibitors have the same goal of getting press appointments and coverage. It is CRITICAL to plan far ahead in securing appointments with target editors, and have a "tease" of substantial news to obtain the appointment. Editor's schedules fill up far in advance. Properly planned, the show can pay for itself here by eliminating the need for a dedicated press tour. But if not well planned, you will end up "wasting" your product introduction or other news, resulting in little or no press coverage.

EFFICIENCY OF INDUSTRY NETWORKING
Networking with the other exhibitors is often overlooked by many vendors. The focus is generally solely on customers, and maybe distribution channels. Often many companies with complementary offerings are attending exhibiting, along with a few competitors. This can be a great arena to begin or continue discussions with potential strategic partners. At a minimum, makes sure to set aside some time to walk the show floor, and see who might have synergy with your company. Even if you're pressed for time, shake a few hands and gather some business cards--it can be an excellent setup for future discussions.

LOCAL CUSTOMER VISITS
This is also an area that holds potential to lift your show budget's ROI, which is often overlooked by many exhibitors. You are flying staff to a faraway city--why not go in a couple of days early, and call on a few potential major customers? At a minimum, make sure you get those free show tickets that often go to waste out to local prospects in your database, so they can come to the show for a meeting or demo at your booth.

LOCAL CHANNEL VISITS
In the same vein as visits to customers, it makes a lot of sense to call on current or potential channel partners, once you decide you'll be spending money going to a show in a certain region. Add a couple of days to your trip and visit a few key partners and prospective partners in the area. And make sure to invite them to the show well in advance and supply those free tickets, so you can see many more later at your booth.


SUMMARY
If you just fly to a city, set up your booth, and wait for new customers to flock by to see you--you are likely to be very disappointed in your return on investment. But if you use a tradeshow as a hub for a variety of related activity, adding a couple of key shows into your marketing mix can still bring a very nice ROI. The key is preparation and planning, to make sure your results are optimized. I've outlined a few reasons why it may make sense to exhibit at tradeshows/trade fairs even today, along with some ways to maximize your return. What's your reason for attending tradeshows in the Internet Age? And what concrete results do you hope to achieve? Post a comment to continue this discussion.


Phil Morettini
PJM Consulting
www.pjmconsult.com

More SEO Tools

From time to time, I let you know about some of the more useful (out of the abundant crop available on the Internet!) online tools for Search Engine Optimization (SEO) that I have come across. So here's the latest batch of valuable, and free, widgets that I've found:

The first is a site that checks on all of your back links, with a twist: it actually details not only the back link itself, but the anchor text associated with the link. For those of you sophisticated about SEO for your website, you'll know that this is very important information. There are a couple of reasons why this is important. First of all, the search engines use anchor text to associate your site with keywords that might be searched on in that engine, and uses this information in it's search rankings. So it's very important to have your most important keywords show up as anchor text on as many back links as you can manage. Secondly, if the search engines find that the anchor text on your back links is too repetitive, the engines will penalize you from a ranking perspective. The reason is that if the anchor text on all of your back links reads the same, Google and the other engines assume that the links are "manufactured" by the owner of the site--rather than generated naturally as a result of your site being interesting to others. So I highly recommend that you check out and use this tool:

Backlink Anchor Text Checker

A similar tool is the "C Class Back Link Analyzer". Once again, this is a tool for those sophisticated about SEO. The "C" Class Back Link Analyzer investigates the links pointing to a website, and then groups them according to the IP addresses they result from. If one back link comes from 54.37.14.5 and another comes from 54.37.14.6, the tool would group together. Links which come from the same C-Class IP are likely to be hosted by the same company, often lowering the site's search engine ranking.

"C" Class Back Link Analyzer

One last esoteric tool for the true SEO fanatics out there. It's called Deep Link Ratio Calculator. This tool measure the number of links to pages on your site other than the Index/Home Page, divided by the total number linked to your site. This is important because the Search Engines consider these "Deep Links" to be more "natural", more likely the result of someone creating a link to some great content in your site (as opposed to you listing your own site in a directory, for example). So this neat tool can give you another view of how "natural" the Search Engines are viewing the links to your site.

Deep Link Ratio Calculator

Finally, I present "yet another" Keyword Suggestion tool. I know, there are lots of them out there, but I find that when you're looking to generate keywords for SEO on a site, or when starting a PPC campaign, there are never enough good tools. This Suggestion tool claims to accumulate and report Keyword variations from the six most major search engines. Give it a shot and report back how it goes.

Keyword Suggestion Tool


I hope that you find these online SEO tools useful--post a comment and let me know!

Phil Morettini
PJM Consulting
www.pjmconsult.com

Business Models in the SMB Market

The SMB market is typically a very popular topic for hardware and software companies. Every one wants to sell to the Enterprise market; as a result, competition is fierce and standards are very high. If you get to the Enterprise market early, with an innovation that creates a new category, you can find success if you are truly making a contribution to the market. But late entries into a market segment, as well as early stage companies competing with larger, established companies, often have a very tough go of it. In these situations, attention often turns to the Small and Medium-Size Business, or SMB, market.

And why not? At first blush, the SMB market appears to be huge, as well as underserved. It looks like a perfect haven for an early stage or turnaround company with a solid product, but not quite enough differentiation, brand name, or marketing muscle to push out the big boys in the Enterprise space. So the decision is made to focus on SMBs.


What's Wrong With This Decision?

There is nothing wrong with this decision, per se--if it's done with eyes open, for the right reasons. But too often, it is done to run away from a problem (the inability to penetrate enterprises), rather than run to a great opportunity. A lot of times, companies see the SMB market as easier turf; simply a larger, less competitive market than the Enterprise market. Major problems can result from this type of mentality, and I see it quite often in my consulting practice. Companies that enter the SMB market from this perspective usually aren't fully prepared to do what it takes to be successful, in what is a very different type of market than they may be familiar with. So where are the land mines in the SMB marketplace?


What's Not Obvious in Marketing to SMBs

The first thing to consider is that customer needs are often quite different. A lot of this depends upon what technology and market segment you are in, and whether your product is aimed more at the "S" (small) segment, or the "M" (medium) segment of the SMB space. For example, if you are selling a single user productivity tool which is useful staff accountants, you may not see much difference. If on the other hand you are marketing a company wide, networked application of some complexity, the differences may be huge. Like everything in technology marketing--the devil's in the details. Every situation needs to be evaluated closely, and treated differently on its individual merits. The most important thing is TO NOT ASSUME THAT THINGS ARE THE SAME BETWEEN SMBs AND ENTERPRISES IN YOUR CATEGORY. Do the work, evaluate the situation--don't assume. Assumptions, without verification, are what get you burned in this transition. Below is a list of some of the major differences in the SMB market:

IT Departments are small and less of a factor--if they exist at all.--In Enterprises you may be dealing with persnickety CIOs that want thing just so. In SMBs, if there is a CIO at all, he will be looking for an off the shelf SOLUTION that will "just get the job done". Or you may end up struggling to figure out how you can sell your complex solution, to a company that has NO IT DEPARTMENT AT ALL.

There is less money to spend--It's harder to make money with big ticket hardware and software, let alone customization and expensive services. Your products better have value - and margin - right out of the box.

Ease-of-use is even more critical--There probably is no training department or other corporate staff, and people are busier overall. If they can't figure out how to use it quickly, you're going to have a hard time selling it.

There is much less time available to purchase products--Even the sales process may be compressed, in terms of how much time the prospect spends reviewing your marketing literature, or talking to your sales people. The actual TIME ELAPSED during the sales cycle could be EVEN LONGER due to lack of time available to the prospect, but the INTENSITY of the purchasing engagement is often much less.

How Do You Need To Structure Your Business Model Differently?

Lower prices-- They just can't, and won't pay the same prices that you can get in the Enterprise space, in most cases. So you'd better come into this segment with a price and value proposition that makes sense to these price-sensitive customers.

Marketing vs. sales--The SMB market is more marketing intensive, with respect to marketing/sales ratios, than the Enterprise market. There are many more customers; the average sale amount is much lower, and much less face time available for direct sales. While in many respects Enterprises are the most demanding customers in the world, you've got to be a better marketer to succeed in the SMB space than you need to in the Enterprise world.

Low cost sales force-- With much lower average sales amounts, and much less time available on the customer side, it is usually impractical to have a large, high-cost field sales force. Inside sales forces are the general rule in this market. If you have a product that demands customization and hands-on support, VARs are a good adjunct to consider. The more they are taking orders generated from marketing, and the less they are cold calling prospects, the better.

Better usability and reliability-- You'll need many more units being sold to get to the same level of Enterprise revenue, across a much larger customer base, with much less (if any) maintenance revenue to fund a large support staff. Your product better work when it's installed and better be very easy to use over time. Unless you have a highly customizable solution and are using VARs as a channel, SaaS is a great platform for delivering software to this market.

Little or No IT support--The good news is that there is no prickly IT committee or staff that you have to "go through" to sell to the real users. The bad news is that if even the littlest thing goes wrong, there's no one internally at the customer to pick up the slack--you're going to hear about it directly from the user--over an over again.

Summary

The SMB market is actually a simplistic catch-all phrase for a large, heterogeneous group of markets. But it is a useful abstraction, as a starting point for understanding how to penetrate and thrive in B2B marketing to smaller companies. I hope this short introduction is useful--feel free to pitch in and post a comment adding to this topic.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

The Mechanics of Email Marketing

There are many different possibilities for technology and software companies, when it comes to formulating a marketing mix. I've written before about some of my favorites. One method that can be a big winner, if done well, can also be a big loser if done poorly. I'm referring to email marketing. If you want to be successful, you need to do it very well, as a result of SPAM and the general bursting of everyone's email inbox these days.

Why Email Marketing?
Email marketing can be so productive for a company, because unlike more passive forms of online marketing (ex: PPC advertising, Banner Ads), you can usually target you audience very effectively. This is especially true if you are using an in house list; by definition, these are prospects that have some reason to have an interest in your products. In B2B marketing, there is an abundance of excellent niche lists available for rental, to use in a targeted campaign. In B2C they aren't quite as good overall, but there may be very good lists available for a particular category.

Like all other forms of online marketing, another primary benefit to this method is the ability to measure results with great accuracy, granularity and speed. Lastly, you can make a very big impact quite quickly, unlike other online methods which may fit more into the "steady as you go" category.

The Elements of a Successful Email Campaign
So if "doing it right" is so important, just what are the important things to concentrate on, to achieve success in email marketing? Let's take a look at some of the most important elements:

Relevancy
First and foremost, your email must be relevant to the people who are receiving it. This is the great problem with the email marketing universe today, especially when considering the Spammers. Scattershot emails to every name that you can get your hands on not only won't raise your sales; it will ruin your online reputation, and prevent you from effectively marketing online in the future. It's been said by others that the difference between SPAM and legitimate commercial email is RELEVANCY. I firmly believe this. If your offer resonates with the list that you send it to, you will receive very few complaints.

The List
After relevancy, the next most important thing is the list. Absolutely do send your message to a list of folks that you have good reason to believe will be interested in what you have to offer. This is called target marketing; it is good practice across ALL marketing media. In email marketing--IT'S ESSENTIAL.

The Offer
Next comes the offer; often this is the most critical thing that you have a lot of control over. You need to remember that in email marketing, you are "going to the people". They aren't coming to you--actively looking for your product or service. As a result, your offer needs to be very aggressive to get their interest, and to compel them to act in the manner you desire. I always say that in direct marketing you want to make your very best offer. In email direct marketing, make them an offer that is so aggressive, it actually makes you wince a bit!

Creative
The above categories are the most critical to success. If you don't get them right, nothing else will matter. However, it's still very important to properly execute your relevant offer to the proper list. Even if you've got these elements formulate properly, poor creative execution can still lead to failure. My advice here is to make the email look like an email--not a web page. People's expectations in an email message are very different from visiting a website (and attention spans are short enough in web-viewing!). I recommend that you keep your message simple, direct and relatively short. Feel free to include some attractive, eye-catching graphics. But remember, this is direct marketing--not an art project. The most recent research suggests that email graphics has no effect whatsoever on response rates. It's all about the copywriting. Make your copy compelling, and get to the point very quickly--there isn't much time before the "delete key" get punched.

Legal
The legal aspects of marketing via email are important, and quite a bit more restrictive, relative to any other form of direct marketing. So make sure you are aware of the laws which apply to your message--they vary from country to country. In the US, for example, the CAN-SPAM act requires an honest subject line, "remove requests" instruction, and a listing of the sender's physical address--among other things. In some cases there are also state laws that apply. In Europe and other countries, the requirements can be far more restrictive, sometimes going so far as to require "opt-in" permission before any message can be sent. So be sure to research the local laws and comply with them at all times. To do otherwise risks ruining your online reputation--or worse.

Deliverability
This is one of the most difficult aspects to this particular direct marketing method. The advent of SPAM has created many barriers to delivering even the most welcomed messages to email inboxes. This was necessary, of course, for the preservation of the ability to use email at all. But deliverability is a very challenging, every changing scenario that has morphed into a marketing specialty of its own. There are many good places on the Web to assist you in getting your email delivered to your prospects. Return Path and Habeas are two of the more well known new companies that specialize in this area. I have used a free tool called SpamCheck to great effect over the last year, in screening my messages for deliverability problems. Contactology also has a great free Spam checking tool, as well as a turnkey service which enables you to easily create highly-deliverable email messages. EmailReach is another company that has some deliverability great tools. They aren't free, but they do offer a 24 hour free trial for their service.

Continuous Measurement & Testing
The last thing I want to mention, which should be part and parcel to any successful email program, is measurement and testing. Since email is an online medium, it's easy and cheap (or free) to measure your results. Frankly, doing any form of direct marketing without measurement is dumb. Online direct marketing with measurement is criminally dumb. There is just no excuse for it, other than laziness. Direct email marketing works best when it isn't considered a "single-shot" campaign. Each drop should be part of an overall campaign aimed at continuous improvement. Multiple elements of your message should be tested and measured with each drop. If you do this, you WILL improve your results as you go--and likely will end up with a highly successful, and repeatable, marketing method to help drive your company's growth.


Wrap Up
That's my review of the nuts and bolts of good email marketing. Let's hear from some of the other experts out there, on your best email practices. Post a comment so we can discuss this important marketing method in depth.

Phil Morettini
PJM Consulting
www.pjmconsult.com

Selling Through OEMS

I've recently discussed selling through VARs as a distribution channel strongly favored (maybe a bit too much!) by many early stage technology and software companies. In this article I'm going to look at another channel that is often misunderstood and misused: The OEM channel.

When a company goes about it the right way, OEM business can be an excellent additional revenue source for startups--and any high tech company, for that matter. Where I want to throw out a caution flag, is when a company decides they are going to rely on OEMs as its primary--or only--channel.

Now this can work, you might say. And you would be right. But in most cases, I believe, it isn't the best way to proceed. It can work, if you have the right type of product, and you've thought your strategy through very thoroughly. The problem is with most companies, this the usual scenario. What I find more prevalent is the old "let's make it, and we'll get someone else to sell it for us" approach. As I've discussed before, 'let someone else sell it' almost never works. This sentiment often occurs with a technology-driven senior team, without a good feel for marketing or sales. The natural tendency in these situations is to avoid the current weaknesses in this organization, and "let somebody else do it".

The problem here is that sales and marketing needs to be a core competency, in most situations, if a technology company to become as successful as possible.

So what are the "bad effects", when an early stage technology company pursues OEM relationships as their sole distribution strategy--or at least "too early" in their company development?

EFFECTS OF "BAD" OEM STRATEGY

No Leverage
If you approach potential partners with a brand and existing sales, there is no leverage in negotiating with the larger, more established OEM prospective partner. In addition, it's a much harder sale, because your company and product don't have a track record.

No development of internal sales & Marketing
Companies with OEM-only business models tend to have weak (or nonexistent!) sales and marketing departments. My belief is that sales and marketing is a core competency--making this a bad idea. While you can run a company this way, in most cases, the ultimate size and profitability will likely be a fraction of what your technology could have otherwise supported.

All push, no pull
Every sales and marketing activity works better if there are "pull" elements, in addition to "push". If selling to the OEM is almost solely a "push" activity, with no brand or your own market share to help pull--the process is much harder.

All the eggs in one basket
Even if you do well and gain OEM deals with premier partners--success is far from guaranteed. It isn't unusual for OEM deals, especially early ones, to yield actual revenues in the 10-15% range of forecasts. If this happens to you and you've built your company around these projections--you're basically screwed. You risk "crib death" or at least a difficult restart with your own brand, due to the disappointing sales from the OEM relationship(s).


Your OEMs swallow you whole
A very common scenario is a much larger OEM that starts treating its small, entrepreneurial partner like another department in its bureaucracy. The OEM stunts your overall company development by "tying up" the scarce resources of your smaller company in meetings, special projects, ever-changing product development requirements--and yes--more meetings.


Given the potential pitfalls, how do I recommend using OEMs?

THE "RIGHT WAY" TO INCORPORATE AN OEM STRATEGY

Develop your own brand/channel first
Pursue OEM business only AFTER you've established products under your own brand. It not only will provide you with a product that will be more attractive and stable to potential OEM partners, but you've got your own branded business to sustain you

Important--but secondary--revenue source
Treat OEM business as an important, but secondary revenue source relative to your own brand. This will keep things in perspective and prevent you from putting your company's future in someone else's control.

Bundle rather than integrate
Once way to take advantage of large OEMs without the downside of losing your own identity is to seek bundling deals, rather than private label deals. By doing this you are essentially co-branding, building the power of the partner brand through affinity with the bigger company. This leaves you with greater marketing, selling and support requirements, but may lead to a larger, more profitable company in the long run.

Address a vertical out of your reach
A good way to utilize OEMs is to fill a key vertical where your technology has a market. This occurs when you decide that you can't address this vertical well with your own brand, because you don't have a presence, and have decided that it doesn't make sense strategically to expend resources to develop one.

Final harvest
Another smart way to use OEMs is to "harvest" a volume product which is now in decline, and is a product which you don't intend to continue major investments. If you can get such a deal, it can be great way to maximize end-of-life revenue with minimum incremental investment.

Offer another price point
A strategy that can be used successfully in some cases (but is a bit dangerous) is to use an OEM to offer another price point in the market, one that you choose not to address with your own brand. More often you would do this with your own alternative brand or sub-brand. But there are instances where this investment might not make sense. Special care should be taken if the OEM is to fill a lower price point--care needs to be taken so that your own brands share isn't eroded significantly.

Integration with complementary products
There are some instances in the marketplace where 1+1 does indeed equal 3. In these cases it may make sense to team with an OEM, to gain the advantages of product integration with a key product in your market, offering them as a single, integrated solution.

Leverage your IP into a new market
There are also cases where you main technology base can be easily used to create an entirely different type of product, which is intended to serve an entirely different market, relative to what you are selling under your own brand. In these cases it may make sense to team with an OEM in this disparate segment, to market this spin-off product from your main technology.

Summary
The bottom line is that OEM marketing is very important in the software and technology business. I strongly recommend that most everyone pursue this type of business; however, do it as part of a balanced, overall revenue strategy. Tread carefully and wisely and this may be the distribution channel that makes a break-even, or modestly-profitable business, into a profitable winner. It's easy to say you want OEM revenue, but like most things in business, doing it right is hard--the devil's in the details.

That's my thoughts about how OEM strategy best fits into a typical high tech business. Post a comment and let us know how YOU approach OEM relationships--I look forward to your opinions.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

Search Engine Optimization (SEO) Through Online Bookmarking

I've spent a fair amount of time talking about Search Engine Optimization in the past. The reason is that in the new century, this is as fundamental to marketing success as print advertising in the last fifty years, and maybe billboard advertising in the fifty years previous to the last fifty. The details and tactics of marketing change, but goals don't really--getting your products and business in front of prospective customers. It would be really hard to find a business of any size these days that doesn't have a website. If they don't, they are probably on the same path as the carriage builders of the early 1900's--becoming extinct.

That's why I spend so much time exploring SEO: it is nearly universally critical to the market presence of every company, especially high tech and software companies. So here is one more new technique that you can use to build your company's Internet presence, including the always present goal of improving your ranking in Search Engine Results for the keywords important to your business.

ONLINE SOCIAL BOOKMARKING

Online bookmarking, also known as "tagging" is a way of making available to others online, your recommendations on interesting content to visit on the Internet. Think of it as making your browser "bookmarks" or "Favorites" available publicly. In fact, most social bookmarking services allow you to upload your bookmarks/favorites into their system to streamline the process. You often have the choice of making your bookmarks available to just people you are acquainted with, or broadly to the public.

While this is a neat thing to do for a consumer from a Web 2.0 perspective, this activity also can have application to online marketers, if used correctly. You simply bookmark or tag the articles that you've written and posted online, press releases, news stories, etc.--any important and interesting content related to your company. In doing this, you get the opportunity to include your name, company name and a link to your company's website in the tag detail. This will create some organic traffic to your site, but will also be of assistance in improving the SEO rankings of your site.

Some people consider this to be spamming, but it really isn't. You are simply tagging interesting things for people in your industry to find easily. I recommend that you also include your other interesting bookmarks along with your company-specific content, to minimize any concerns.

Now this is a bit of work, even for one social networking service. For maximum effect, you want to cover as many social networking services as possible.

I've come across another great, free website that's assists you in doing just that, greatly limiting the labor involved. It's called ONLYWIRE. You can use this site to place a tag across multiple social bookmark sites(currently 16 different sites). Using OnlyWire you only have to place the tag once, instead of 16 different times if you tried to do this manually. It requires you to visit the 16 sites and open an account first (which you'd have to do anyway), which is a bit of work--but OnlyWire then increases your productivity tremendously from there on. I've been using it for a couple of months and found it to work great. Give it a shot and let me know what you think!

Phil Morettini
PJM Consulting
www.pjmconsult.com

Marketing and Selling Technology Products through the Value-Added Reseller (VAR) Channel

Selling through multiple channels is one of my preferred strategies in technology marketing. If done properly, it allows a company to fully exploit its expensive, hard-earned intellectual property to the maximum extent. One of the most popular channels (and one of my favorites) used to sell B2B software and hardware is the Value-added Reseller, or VAR channel.

VARS ARE THE DISTRIBUTION HOLY GRAIL FOR MANY STARTUP COMPANIES

In fact, with a great many startup software and technology companies, building a VAR channel network to sell their companies products is the first thing they want to do, upon releasing their first product. This is especially true when the founding management team primarily comes from a technical background. The thinking goes; they are technologists who have created a great product. They don't have a lot of experience selling or marketing--and most of the startup money has gone to, and will continue to go to developing products. Why not just recruit a bunch of resellers to market and sell their product for them? Sounds like a great idea on the surface, doesn't it?

Unfortunately, there are few strategies that are more flawed, and which have continuously led to failure than this one.

Let's contrast the realities of the VAR channel, against this simplistic notion that has been tried again and again, without success:

WHAT VARS DON'T DO

1) First of all, VARs DON'T market. At least not YOUR products, anyway (they may market their services). So the very first flaw in this strategy is that it is based on a gross misconception of what a VAR typically does.

2) VARs don't create new markets. VARs are great at selling into established markets and further expanding already growing ones. Missionary sales: brand new markets, categories and products? Not so much.

3) They don't sell a wide variety, or a large assortment of products. In fact, VARs are focused on actively selling VERY FEW products--if they are even focused on selling products at all.

4) VARs aren't motivated by high product margins.

5) The individual VAR does not exist to help YOUR company make money.

Now if you're not a sales or marketing professional with experience working with the VAR channel, you're probably very confused by the list just above. So what is it that VARs actually do? And why is it worth dealing with them at all!

What happens time and time again is that a technologist startup CEO will pursue the VAR channel as their exclusive distribution channel, without knowing any of the points in the list above. Their effort will fail miserably, and they will then scramble to begin selling their product directly, or through some other means. They will swear off the VAR channel forever, and I do mean swear:

"Those !!@#$%^^* resellers are good for nothing. They take a big cut of your margins, while adding no value in return. I'll never deal with them again."

I can't tell you how many times I've heard some version of the quote above.


But the VAR channel is a major force in the technology business, and if you know what you're doing, it can be used to great leverage by your company. So let's now take a more realistic look at what VARs CAN DO:

WHAT VARS ACTUALLY DO

1) First and foremost, VARs are in business to sell their own HIGH MARGIN SERVICES. That is why they exist, and how they put bread on the table. This revelation may be discouraging to some product vendors, but you must understand and respect this above all, if you hope to leverage this channel. The only exception to this is the "core" product, which will be discussed later in this article.

2) VARs are very interested in things that apply to their own vertical focus. Although it wasn't so true many years ago, most successful VARs these days have a very tight vertical focus.

3) Many VARs act as "thought leaders" for their corporate customers. So they are very interested in "what's new" in the market, so they can stay on top of trends and remain market experts for their clients. This means that they will sometimes spend a lot of time talking to you about your new product, but never find the time to actually "sell" it (even if they have the best of intentions). In the busy world of the small VAR, client demands and selling the core product and services usually soak up all excess time.

4) VARs are often used as "aggregators" of purchases by corporate clients. This way, the corporation can use a single vendor point of contact for their technology purchases, greatly simplifying their purchasing process. They can also leverage the VAR as an evaluator/validator of new products and technologies. This makes them a very important part of the purchasing chain for many corporations.

5) If they put any real effort into selling products at all, it is usually into one or two "core" products that they have built their service offerings around. If you aren't a product that pulls services, forget about getting high mindshare with the VAR.

6) When it comes to selling "non-core" products, VARs are almost completely driven by the demand they see in their installed customer base. They won't often add in new products that they don't see a demand for, unless they are really techie, early adopter types. And these techies will often add a product, but never find time to actually offer it (let alone sell it) to their customers.

7) The VAR channel is EXCELLENT at fulfilling demand for great new products into their existing, installed customer base.

8) VARs can be an excellent proxy for a vendor in installing, configuring and offering first level support. This can enable a vendor extend its reach and to leverage the VAR channels existing infrastructure rather than building out a large field organization (which depending on the product category, may not even be feasible).

So given the points outlined above, what are the "best practices" to follow when you are seeking to build and leverage a VAR channel?

VAR CHANNEL BEST PRACTICES

*Always sell your new product directly in the beginning. Even if you don't plan to build a direct sales force and sell directly in the long run, it is critical to establish that the product works, and can be sold successfully. If you can't sell your own product, no VAR will be able to either (and few smart ones will be willing to try). De-bug and systemize the sales process, make sure that your end user price points are right, and build a small reference account list--at a minimum. Only at this point should you begin to approach VARs to distribute your product.

*Marketing the product is the vendor's responsibility. Do not naively think that the VAR will market the product for you, or that since you have VARs to sell, you don't need to market at all. Remember, VARs are great at fulfilling demand among their existing customers--and very poor at creating it among new customers. The vendor must position its products in the market and create demand for them--otherwise your channel efforts will certainly fail

*Treat VARs like the valued business partners they should be. If you do sell direct, don't "steal a deal" and take it direct just to make a few more points on one sale. Nothing is more short-sighted. Not only will this VAR not do business with you again, in any given vertical it's a small community--and word gets around fast. You risk becoming a pariah in the VAR channel, and losing all the hard work that you put into building your network. My philosophy is: when in doubt, cut the VAR in on the deal. If you don't feel he's adding any value to your business, eliminate him from your network after the deal. But don't use your low opinion of a particular VAR to convince yourself to cut him out of the deal. You risk cutting off your own nose in spite.

*Be realistic in what the VAR channel can do for you. If you have a non-core offering, be happy that they "make it available" to their customer base, rather than expecting them to sell it actively. Remember, VARs are key influencers of their clients; just being available to endorse your product as something they offer, to a customer that hears about the product elsewhere, can be very valuable.

*Provide a reasonable margin, but don't "throw margin away" thinking that it will motivate a VAR to actively push your product--if they otherwise would not. It won't work, and you'll just be giving away money for no reason--that you could use creating demand instead.

*For most products, make sure that you don't over-distribute by signing up more VARs than your market will support. Even though greater margins might not make a VAR push your products, the erosion of margins to near zero will cause a VAR to eliminate your product from their portfolio. It's better to leave a few deals on the table, than to risk demotivating your entire reseller network, because they are 6 competitors are bidding on every deal in an particular area. The exception to this is if you represent a "core" product that pulls significant service revenue, you can get away with a lot more stuff, because the product margins are trivial to the VAR compared to the lucrative service revenue. But in this case, be careful when using your market strength to abuse partners. People have long memories, and "what goes around, comes around."

SUMMARY

That's my primer on how to approach, and even more importantly, how NOT to approach doing business with Value-Added Resellers. Post a comment or send me an email to delve into this important topic further.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/