21 March 2008

Taking software downmarket

If any one of you have run software companies, you probably have faced this problem at least once in your life. You have a software product that is very successful with the large customers (higher end of the market). But taking it down market – while sounding reasonably simple (after all, it solved more complex problems – right?), was never successful.

And you probably have heard the same “reasons/excuses” – mid-market customers have the same problems as the large customers… the software is too complex / costly for smaller customers, implementation takes too much time etc etc.

And you have wondered why can we not “package” the software up and sell it at a reasonable price point for the lower end market with very quick implementations. Well, you have company, at least – in me. Not once, not twice – but quite a few times, we failed in taking a software product down market. The definition of “failure” is not being able to sell quite a few copies of the “tightly packaged” products – obviously with far shorter sales cycle and implementation cycles than the larger customers. With one exception – only once in my experience, it actually worked. And it is important to understand why.

Here are my learnings:

First, technology is the easiest part. Shrink-wrapping a software – using templates, smaller set of APIs, limit setting – whichever path you take is usually simple and given a little time and money, can be easily accomplished. I need to add here that sometimes if the total cost of ownership dictates that the software be ported to a different platform (third party components, database, OS, J2EE vs .Net), that might take quite some time and money. Still not a difficult task.

Of course, naming your new product “Your Original Product LITE” or “Your Original Product EXPRESS” is the next logical step 🙂

The real challenge comes during the sales process. Your sales organization is acutely aware of the strength of the product (having sold it before to large customers or the internal reputation of the product). And that is where the difficulty starts. Invariably, the sales process goes to a point of feature-functionality war (feedback from the sales person’s contacts that the competitor’s product demo-ed very well or the prospect asked questions about certain features). It is infinitely difficult to stay within the “boundaries” if you know the product can do more and you feel pressure (real or imaginary) that the product needs to come off as the better one. Ask any sales person if you do not believe this. The sales person’s single focus at this point of time is to close the deal.

Even if the sales happened “within the boundaries”, the next challenge comes at the implementation level – maybe not that acute though. When a customer asks for another report or implement a unique business situation/case for them, the service consultant’s first, second and third instinct is to go ahead and implement it. First he/she knows it can be done. Second he/she, as a consultant, wants to come across as “knowledgeable” and “helpful” to somebody who helps pay his paycheck. At that point of time time, most are thinking of the “boundaries”. And thus the project is no more a “quick and simple” one.

So, is this winnable at all?

The only time it worked for me was in a small country in Central Europe where we we able to sell a high-end product that we had packaged down in really short sales cycles and definitely short implementation cycles. It was not about the country or the market – their problems were exactly the problems we had seen in the smaller prospects in US. The big difference was – this was done thru a different channel. We had trained this company on the product (the dumbed down version, of course) for two weeks. After that, they were free to sell and implement the product in the market. We got a cut of the license and maintenance. And it worked great!! Till this day, I am convinced, that the only reason it worked is because the sales persons and the implementors did not know any better. They had very little idea about the true power of the product or what it had done for large customers.

So, faced with requests for more features, they figured out how to work harder to downplay the importance of those features, find alternate ways to getting the value to the customer or possibly sometimes lose deals. (I never got visibility to the deals they lost).

So, my clear learning is, taking a high end software down market is a very difficult proposition (unless you use different channels altogether). On the contrary taking a software up market is far easier (it takes time and money though). If you need to play both the markets, it is my suggestion (somewhat unintuitive to many people) that you might want to think hard about having two different products if you insist on using the same channel to sell and serve.


Posted March 21, 2008 by Rajib Roy in category "Reflections

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