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A Services Marketing FAQ |
A Services Marketing FAQ
We're beginning to put together a new half-day ASP workshop on "Services
Marketing for Software Companies" (schedule to be announced), and as part
of the "listening to customers" phase we recently invited ASP members to
describe their most challenging services and support marketing problems.
Well, the floodgates opened. So far, we've heard from more than a hundred
people, all of whom are struggling with some aspect of the problem. It
was a terrific reality test for the focus of the seminar (the original
version has already been sent to the trash…), because we've run into
many marketing problems that are surprisingly common throughout the
software support world.
We're now working on incorporating these "frequently asked questions"
into the seminar. As a kind of interim progress report, we've drafted the
following Q&A. Comments and advice will be most welcome:
ON WINNING INTERNAL SUPPORT FOR SERVICES
Before I can plan a major campaign to market our services, I need
to get a commitment from management that they'll fund the effort.
Suggestions?
Chances are, your management has already noticed how much revenue other
software companies are getting from their services portfolio. If not, you
can point out that a statistically typical company now generates slightly
over half of its total sales from maintenance and professional services,
and you might add that services as a whole are growing faster than license
or product sales. (The details can be found in the ASP's 2004 Maintenance & Services Ratios report.)
If the revenue numbers alone don't make your case, you might mention
profitability (the overall margin on services is about 58%), customer
loyalty (a strong services presence tends to open the door for follow-on
license sales), and the relative lack of competition (installed base
customers almost always prefer to buy support services from the same
vendor who sold the software itself).
But don't be surprised if top management is still skeptical.
Bear in mind that the senior decision-makers in your company probably came
up through the ranks of product marketing and development. They don't have
much faith in services, and their instinct is to "test the waters" with an
under-funded, poorly-executed services campaign that will almost certainly
fail.
Your best strategy may be to start with small but dramatic successes—for
instance, by proving you can raise the renewal rate on maintenance contracts
by 10%, or by doubling the number of training seats you sell. Once you can
point to a few wins like these, you'll have a much easier time getting money
for projects that will have a bigger impact on the company's business.
My sales organization has been giving away customization and
training from the earliest days of the company, and they insist freebies are
necessary to close deals. How can I make services profitable with this
behavior?
Easy (well, maybe not that easy...). Every time a sales rep gives away
services, make sure the customer gets an invoice that says something like
"$5,000 training package—no charge." Putting a price tag on a giveaway is
always more impressive to the customer than just saying "free training," so
your sales guys certainly won't object.
Then tally up the dollar value of the free services your team has provided
and show the number to top management. At very least, ask for credit for
the lost services revenue on your internal P&L (which means it will
probably be deducted from the sales group's P&L). Even better, point out
that your numbers show that the company is giving up serious money when it
treats services as a Cracker Jack toy.
We have five different groups—support, consulting, training, engineering,
and field services—that each provide support-related services. I'd like to
get everyone together on unified marketing themes, pricing, cross-selling,
etc., but so far I keep running into turf wars. Advice?
It helps if you can get the various groups to work together on a shared,
tangible project—for instance, a Web-based portal for all support-related
services, or even a common services contract and billing process. If you
can pull together a small team to make the company's services at least look
relatively seamless to the outside world, you'll have a mechanism in place
for addressing the deeper divisions between your different services groups.
But it's almost certain to be a painfully slow process.
ON BUILDING A CUSTOMER VALUE PROPOSITION
How can we convince our customers about the value of our support and
maintenance services?
Sadly, support and maintenance are like lima beans—your mother may have
insisted that her lima bean casserole was good for you, but she probably
never convinced you to ask for seconds. The same holds true for your support
customers: You can argue all you want that support contracts are full of
benefits, but support will still be a hard service to sell. Lima beans are
lima beans.
A more productive approach, I believe, is to figure out what your customers
do value highly, and then show clearly how your support services deliver on
those values. That's your core value proposition and sales message.
Often, a little probing will uncover a real pain issue that your support
services can address. If your users face a severe shortage of third-party
consultants and integrators, for example, you might emphasize your support
team's role as "the world's leading experts on Product X." With that value
proposition, you're not selling support any more—you're offering a backup
service that protects customers from potentially serious business
interruptions.
Will it really make a difference if you identify the right value proposition?
Consider the price difference between the U.S. Postal Service and Federal
Express for essentially the same service-delivering a letter. The post
office gets 37 cents for this service; FedEx, about $18. The reason we pay a
50x premium is summed up in the FedEx sales message: "When it Absolutely,
Positively Has To Be There Overnight." In other words, FedEx has figured out
that the hot button for its customers is reliable, timely delivery. And
those customers don't hesitate to pay a price that's appropriate for the
FedEx value proposition.
Is there a good way to quantify the "return on investment" for
support?
You may be able to calculate a lower total cost of ownership (TCO) for
products that are well-supported compared to those that aren't. But don't
expect customers to be easily won over by your numbers. Unlike products,
services are almost never sold by presenting a financial case. Would you
pick a lawyer or doctor based on the ROI of their billing rates?
In fact, we all tend to buy services by considering relatively intangible
qualities, such as trustworthiness, competence, personal chemistry, and
professionalism. That's actually a very rational approach: In the end, the
value proposition of any service is embodied in the people who deliver that
service. You'll make your strongest business case for support services by
letting customers see your people in action (as speakers, forum participants,
and expert advisors) and by encouraging one-on-one "account manager"
relationships.
So how do we discover what's important to our customers?
Just ask. Once it's clear that you're genuinely interested in their opinions,
you'll hear lots of helpful advice. Be sure to keep the conversation focused
on their needs, not on your specific programs. The best way to kill an open
conversation about customer needs is to show up with an hour-long PowerPoint
show. You don't want customers to "validate" your approach—you want a
wide-open brainstorming session where you do most of the listening.
When you have large companies as customers, it may be hard to figure out who
really speaks for the "customer." You may end up dealing with a whole cast
of characters—help desk staff, IT managers, developers, end users, and
purchasing agents. Each will have a personal list of priorities for what they
want in your support plan. That's okay: Keep asking, and eventually you'll
start to see a few common threads.
If you find you're uncomfortable or defensive about what your customers tell
you, don't give up. Your customers want you to succeed—because then you'll
do a much better job for them. Worst case, you can always hire an outside
marketing consultant to conduct your interviews for you. But the bottom line
is that you can only do a good job of serving customers when you know what's
going on in their heads.
Okay, but what if we find that our customers value something we
really don't do well?
It happens all the time. Customers want rapid response, but you're routinely
backlogged.They want simple support plans, but your program looks like the
federal tax code. They want support reps who know their unique applications,
but you're routing all calls through a low-bid outsourcer in Arkansas. Ouch.
If that's the case, then your problem isn't the sales message—it's the basic
focus of your services programs. And before you go any further with services
marketing, you need to redesign your services offerings (and perhaps your
whole organizational structure) to match what your customers really want to
buy from you. There's absolutely no other way to solve this problem.
We've surveyed our customers, and it's clear that their top priority
for support is "accurate answers." Should that be our sales message?
Probably not. (The one exception might be if all other sources of support
information are notoriously untrustworthy.) Usually, customers take for granted
that anyone who offers a service has some basic level of competence. We assume
lawyers give adequate legal advice, coffee shops serve decent coffee, and tech
support departments provide reasonably accurate answers. "We do what you expect"
doesn't tell customers anything that sets you apart from the pack.
So how do you distinguish yourself from other "accurate" sources of
support?
One good tactic is to suggest that you deliver services in a more personal and
caring way—the "Avis tries harder" approach. The marketing folks at Avis
clearly recognized that car rental services are pretty much a commodity—same
cars, same prices, similar locations. So Avis defined itself as the one rental
company whose employees care more about customers. In effect, Avis promises
that its employees will be extra helpful if something in the rental process goes
wrong—an especially compelling message if a customer has recently encountered
a "not-my-problem" attitude from a competitor.
(Of course, you need a corporate culture that supports this kind of promise. United
Airlines makes a similar pitch when it invites you to "fly the friendly skies,"
but its stressed-out employees are often far from friendly.)
In fact, personal qualities—trust, friendliness, empathy--are remarkably powerful
elements of any good services message, even if there's no direct competition.
That should be no surprise, since human beings ultimately deliver (and embody)
most services. It's okay for product brands to be impersonal; in the services
world, however, people literally are the brand, and we tend to have far stronger
relationships with live human beings than with faceless institutions.
Here, for instance, is a ranking of services attributes that Alexander Consulting
found were most important to buyers of professional services:
1. Competence
2. Credibility
3. Trustworthiness
4. Likeability
5. Business savvy
6. Responsiveness
7. Empathy
8. Communications
Unfortunately, most support marketing never gets past "Competence." Too often,
support organizations hide the real faces and personalities of their services
people behind a wall of corporate anonymity, and then management wonders why
customers feel the company's support people don't really care. Develop a more
personal support message and most of your customers will love you for it.
In our market, price really is a sensitive issue for many customers.
Our sales guys are getting tremendous pressure to give discounts on
maintenance.
The sales experts insist that you can always bamboozle customers into paying
a high price. I'm not sure that's true: Sometimes price is a genuinely
compelling value proposition that outweighs most others. The airlines have
found, for example, that more than half of their passengers will endure
cattle-car conditions--no leg room, bad food, screaming infants--in the coach
section to fly as cheaply as possible.
If you're convinced that you have a lot of price-sensitive customers, then
you might want to think about creating a bare-bones "Economy" or "Basic"
maintenance plan that you can deliver at a significantly lower cost to
yourself. Start by finding out what concessions your customers are
willing to make to get the savings you offer. Slower response time? Fewer
hours of availability? Fewer contact people?
Bear in mind that your goal is not to punish customers for being cheap, but
to develop a reasonably attractive plan that satisfies their needs and
preserves your margins. (And be sure there's a clear upgrade path to the
next level of support--budget dollars have a way of miraculously appearing
once customers have to make sacrifices for their company's benefit.)
What about bundling several services together—maybe some training
classes and development hours—to add value to our maintenance plan?
Bundling is a good strategy when you're selling products (witness the
phenomenal success of Microsoft Office), but it doesn't help much with
services. In fact, bundling makes the core services package look more
complicated, and complex services are almost invariably hard to sell.
Instead of bundling a lot of services together during the initial sale, you
might want to try an incremental sales process. Every month or so, have your
telesales reps invite maintenance customers to add another useful service
(such as certification courses, special reporting, or "tuneups") to their
basic support plan. Each new service becomes an impulse purchase; over time,
the revenue from these incremental services can add significantly to the
support group's profitability.
I have several sales reps who like to put together customized
support plans, which usually involve discounts based on eliminating services
the customer doesn't want. That seems reasonable, but how do we manage all
the variations?
It's a lost cause to even try. When you let customers subtract services from
a support plan, you almost always end up losing your profit margin and you
create a logistical mess. The right way to structure support is to create a
series of standard configurations or tiers, each of which adds services to
the previous configuration-for instance, "premium" 7x24 coverage instead of
the "basic" 5x12 plan. That way, customers are encouraged to move up the
price ladder to get what they want, instead of cherry-picking the plan for
discounts.
Of course, you need to make sure that the number of tiers you offer isn't
confusing (three tiers seems to be about right). And the services you add to
each tier should be things that customers really value. If you toss in
services that are just window-dressing to make a premium service look more
impressive, you're inviting exactly the kind of discounting that your sales
reps are currently practicing.
My sales force doesn't like to mention services because they feel
we're implying that our software is buggy and hard to learn.
Your sales reps may have spotted a real issue here. Many support plans and
support Web sites do offer little more than bug fixes and entry-level
training, so it's reasonable for customers to conclude that the vendor's
value proposition is equally limited.
You'll make a far more favorable impression if you showcase a richer
portfolio of services. Demonstrate how you'll help your customers extend
the product (custom engineering), enhance their skills (advanced training
and career development), network with each other (forums and user groups),
and solve business problems (strategic consulting).
COMMUNICATING THE VALUE PROPOSITION
Okay, I think we know what to say about ourselves. Now what?
The good news is that you don't need a fat advertising and public relations
budget, because most of the people you want to reach are already part of
your installed base. The bad news, of course, is that there probably aren't
a lot of channels that reach just your customers (at least not efficiently).
So what channels do you have? Your Web site is certainly important (in fact,
support pages often generate about half of all software company site
traffic). Start by making sure your value proposition is clearly stated
throughout your support pages, and not just with a cute tagline. Test the
site itself on a sample of customers to see if they feel
you're delivering on what your marketing copy promises.
Then look at your alerts and newsletters. Again, avoid empty bragging and
"success" stories. Offer a generous serving of content that your readers
will find compelling. If your value proposition is that you help customers
throughout their lifetime of ownership, mention advanced training and
career enhancement tips. If your customers see you as a hub for social
networking, stress your online forums and user group conferences.
(Politicians call this "staying on message," by the way.)
Finally, get your best speakers in front of live audiences of users whenever
possible. And make sure they stick around to schmooze afterwards. Even if
you have thousands of customers, the percentage of people you've met
face-to-face adds up very quickly if you keep plugging away at it. And
face-to-face meetings are always an important part of establishing trust
and personal chemistry.
Do we need an "elevator speech" version of our value proposition?
With services, you need something even shorter—ideally, a single phrase
that describes what's really special about you. When you think of car
rental companies, for example, Avis's "We try harder" slogan instantly
positions the company against all its competitors. Because services are so
intangible, your prospects tend to rely heavily on what they conclude from
their first impression of what you do. You can add to their mental picture
later, but if they draw the wrong conclusion or are confused, you're
probably dead in the water.
There's a related reason for developing what I sometimes call an
"idiot-proof" message: Referrals. Word of mouth is by far the most
influential source of referrals for virtually any service offering, so you
want to make sure your value proposition doesn't get garbled as it passes
through the gossip network.
In fact, referrals are likely to be boiled down to a simple formula—"the
best ______ I've ever found." If your customers routinely talk about "the
best training class I ever took," or "the best tech support we've ever
experienced," then your referral message is secure.
We spent a lot of money printing brochures about our services, but a
don't see much evidence that anyone reads them. What's your feeling?
You're probably right. It's hard to write compelling sales copy about
intangible services, and in any case the buying decision for services
usually relies more on personal chemistry and referrals than on the kind
of features-and-benefits discussion that's effective with product
marketing. If you must have a brochure, load it up with testimonials and
include a very personal pitch signed by a senior services executive.
Of course, there are some services-related documents that customers do
read very, very carefully—your contracts and invoices. And chances are,
these documents were written by the least customer-friendly people in
your company. Make sure your contracts are written in the friendliest
possible, clearest language that your lawyers will accept, and then review
the invoices and other correspondence that your billing department sends
out to make sure there are no surprises or ambiguities. If customers even
suspect you're cheating on their bills, you'll never be a trusted partner
again.
[Still to come: Maintenance renewals, professional services, training,
and more tactical tips.]
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