Marketing is NOT Optional!

Although it was targeted at retailers, a recent Harvard Business Review article titled How to Market in a Downturn made a good point that enterprise software and solution providers need to heed, especially if they want to not only survive this downturn but pick up new business. The message is this: “Marketing is NOT optional.”

Here’s the Catch-22: if companies don’t market, buyers don’t know they exist. And if too many companies trim their marketing budget to zero, advertising channels begin to shut down (as newspapers are doing), further narrowing opportunities for customer acquisition. In the sourcing vertical, now more than ever, buyers need a solution that can help them reduce and avoid costs, so they can notch an ROI quickly. If you’re a services provider (for example, an expert consultancy in category cost reduction or spend analysis), or a SaaS vendor with a low cost of entry, your time to acquire new customers is now — but that’s going to be difficult if customers don’t know you exist. Ironically, if your potential customers aren’t able to get the help they need, which will be tough if they can’t find you, then they could go out of business as well, taking with them an account that you’ll never win.

As the HBR article pointed out, building and maintaining a strong brand — one that customers trust — remains one of the best ways to reduce business risks. IBM, who had a record profit last year and who recently announced that they plan to have another record profit this year, has spent decades building their brand. Closer to home, Ariba, Oracle, Emptoris, and other big names grab the lion’s share of the spend management business, funding, and buzz. They are names people know, because, year in and year out, they make sure people know them and what they do. Are they the best solutions? With regard to most of their spend management offerings, they are not the best, sometimes not even close to being best. But that doesn’t matter, because everyone knows who they are and they get invited to almost every RFP, while most of their best-of-breed competitors, who haven’t done enough marketing (or, these days, aren’t marketing at all) aren’t invited to the party.

Now, you’re free to believe what you will and disagree with me, but from where I sit, this is what I see: any vendor who doesn’t market is likely to be among the next to go. This prolonged recession is busy doing what years of M&A activity couldn’t, namely, condensing the market to a small handful of key players for each technology and services offering. A number of providers in this space, who thought they could forego all marketing, halt new product development, stick their heads in the sand, and wait it out, have already undergone significant layoffs, and I know of a few who are on the block. I thoroughly expect that more folks who have adopted the conserve-cash and wait-it-out strategy will join them in the year ahead, especially those that simply don’t have the cash reserves or the steady revenue model that will allow their competitors, but not them, to survive.

Thus, if you are an end user, it’s very important to take a good look around and see if you notice your vendor. If they no longer take out advertisements, go to trade shows, host webinars, or appear on the blogs, chances are they’ve stopped marketing. A muzzled marketing department is often the canary in the mine, and it can mean that pipelines have dried up and new deals aren’t closing. Note that this is especially true of traditional software companies whose revenue models rely on hefty up-front payments from new sales. Such companies are particularly vulnerable to dry pipelines, whereas companies using a sales or services model that yields a steady revenue stream are much less vulnerable.

If a company doesn’t have enough customers to sustain themselves at their current level of operation, you’ll see them slashing head count. This is pretty much guaranteed to affect your service level. And if they were already operating at a minimal level of staffing, as many of them were before the downturn, then there’s a chance they could cease operations altogether, leaving you high and dry.

So, take a good look around and make sure your vendor is visible. If they’ve gone radio silent, it would be a good idea to take the time to ask them how they’re doing, and not let up until you get a straight answer. Don’t be afraid to ask them, point-blank, what happens if they don’t get any new customers for a whole year (which is a question you should ask every SaaS provider anyway). If you don’t like the answer, considering looking for a more stable provider. The last thing you can afford in this economy is to be left high and dry when you are depending on critical cost-saving e-sourcing and e-procurement software.

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