Dear friends and colleagues,

ITSMA has always prided itself on thinking ahead. The organization was founded in 1994 with two premises: that the future of technology firms lay in services, and that services marketers would soon play a central role in driving corporate strategy. That vision hasn't totally been realized, but we've certainly come a long way, and it's now time to think ahead to the next phase of services marketing. This month's ITSMA E-ZINE highlights comments from our first Chief Marketer's Conference, along with a new Services Marketing Framework to help guide that strategic thinking we've been talking about for so long. The news hasn't been great for many of us lately—and our "marketing survival" survey documents the extent of recent cutbacks—but we remain deeply optimistic about the future. The CMOs at our conference were looking beyond the current slowdown, and we hope you are too.

– Rob Leavitt, director of member advocacy, editor of ITSMA E-ZINE

What's Hot: CMOs Look Beyond Market Slowdown

CMOs and other top marketing executives at ITSMA's Chief Marketer's Conference last month described a delicate balancing act as they negotiate the current market slowdown. Most marketing leaders have had little choice but to cut costs and redirect resources toward efforts that drive short-term revenue. At the same time, many services marketing executives are looking beyond the near term and focusing on the increasingly central role that marketing must play in corporate strategy in the years ahead.

No doubt the slowdown is hitting marketing hard. Many conference participants talked of the intense pressure coming from top management to cut budgets and produce immediate results. As one marketing leader joked: "Last year I wasn't sure the CEO knew my name. Now I'm talking with him every week." The word from above is to get more tactical and put off strategic investments.

While greater scrutiny clearly means that CMOs must demonstrate that marketing investments will pay off with near-term results, the interesting twist is how expansively many CMOs are beginning to define "near-term results."

IBM, as often the case, provides a leadership example. Successful IT services marketing, according to Paul Magill, vice president of marketing and strategy for IBM Global Services, depends on building a systematic approach to strategy, planning, organizational development, and leadership. This approach clearly requires a long-term commitment to investment in the whole infrastructure of marketing, far beyond the most immediate revenue-generating activities.

Magill is not immune to the need to demonstrate near-term results, but he is able to broaden the focus of inquiry to include such areas as training, measurement systems, and career path creation as well as the more traditional financial measures.

Other executives at the Chief Marketer's Conference echoed Magill's emphasis on moving marketing from a tactical to a more strategic approach. Richard Reid, senior vice president of global marketing at Nortel Networks, reviewed his firm's efforts to focus marketing on long-term customer loyalty, utilizing a model termed Return on Relationship. John Loiacono, senior vice president and CMO of Sun Microsystems, described his efforts to bring a more centralized, long-term approach to building Sun's brand. Linda Rebrovick, executive vice president and CMO of KPMG Consulting, outlined the construction of a long-term branding strategy at her firm, including dedicating some 60 percent of current spending on internal marketing to build firm-wide knowledge and help ensure consistent customer experience after the firm's recent IPO.

"Marketing leaders right now are beginning to balance four priorities as they look beyond the current slowdown," according to ITSMA President Dave Munn. "Financial results is certainly one, given the current economic climate, but they're also emphasizing three other issues: developing a balanced scorecard to measure marketing performance; creating a more strategic approach to marketing; and targeting investment on the internal education and communication programs necessary to sustain a more strategic approach."

Balancing short- and long-term investment needs is no easy task when all eyes are on quarterly earnings and revenue. But while most conference participants expect the technology slowdown to last anywhere from 6 to 18 months, they are doing their best to invest in those quick-payoff initiatives that are also most likely to strengthen the well-balanced marketing organizations that can sustain long-term success.

How goes the balancing act at your firm? Have you taken specific steps to shift marketing toward a more strategic approach? Let us know how you're managing the tradeoffs between short- and long-term needs.

– Rob Leavitt

Research Desk

Survey Results: Marketing Enters Survival Mode

ITSMA's recent member survey provided some hard numbers on the economic downturn's impact on services marketing budgets and operations. Two-thirds of ITSMA member firms have cut back their overall services marketing budgets, according to the April 2001 survey. The cuts are often deep. Of those firms making cuts, almost half have sliced their services marketing budgets by more than 20 percent. Interestingly, though, 18 percent of firms have responded to the downturn by increasing their services marketing budgets.

Not surprisingly, travel, entertainment, and staff development funds have borne the most frequent cuts. More than three-quarters of ITSMA member firms have cut back on travel and entertainment, and more than half have cut training. Roughly one-quarter to one-third of the firms have made cuts in areas such as market research, marketing communications, service product management, and sales support.

The news is not all bad. More than one-third of the firms have increased spending for staff development, demonstrating a good understanding of the need to support staff with training that helps firms adjust to the changing market. More than 40 percent of firms have increased spending on customer satisfaction and loyalty programs. Those firms know well the importance of getting as close as possible to their existing customers when times are tough.

Other recent changes cited by a majority of the survey respondents include refocusing the sales force, redefining partner relationships, creating new services offerings, and revamping value propositions.

For more information on ITSMA's Marketing Survival Survey, contact Julie Schwartz at +1-781-862-8500, ext. 12, or jschwartz@itsma.com.

Research Excerpt: Improving Incentives for Services Sales

The following is adapted from ITSMA's Sales Practices and Metrics Study, an extensive review of sales coverage models, channel partner practices, performance metrics, sales costs, compensation and incentives, and general sales practices. The study includes data from more than 35 companies in computer systems, software, networking, and professional services, including Agilent, BMC, Cisco, Compaq, Ericsson, IBM, Novell, PricewaterhouseCoopers, and Sun Microsystems.

Sales representatives often consider services a much tougher sell than products. Consequently, they do not necessarily perceive a dollar of service as equal to a dollar of product. If service is a tougher sell, it can be perceived as less valuable by the reps, who want to make sure they can make their quarterly numbers. Given a choice, sales reps tend to focus on the products with which they are more comfortable and can more easily reach quota.

IT firms can and do attempt to educate their sales forces about the value of services, and the importance of selling services with, or even instead of products as part of the larger corporate strategy. Sales reps themselves cite the lack of compelling value propositions and sales tools for services as critical obstacles to services sales success. But absent concrete incentives, the impact of more effective education and marketing support is limited. One of the most important initiatives firms can take to improve services sales performance is to provide sales forces with the right mix of commissions, quotas, rewards, and benefits.

Sales Commissions

According to the study, approximately 40 to 45 percent of the sales reps' compensation is variable pay in the form of commissions or bonuses. Most sales commissions are paid against revenue, although some are based on a combination of revenue and profit. Only a handful of firms pay commissions on profit alone, but this is preferable because it discourages discounting.

The timing of commissions is also critical, especially for firms that sell multiyear contracts and recognize revenue over long periods. Sales reps obviously don't want to wait for commissions, and most companies indeed pay full commissions when the orders are booked. But what about non-payment and contract cancellations? Forty four percent of study participants let sales reps keep the commission regardless of payment status. But 38 percent of the firms dock the amount from future commissions. Most of the remainder simply don't pay commissions until the client pays.

Sales Quotas

ITSMA was surprised by the large number of product companies that do not have explicit services sales quotas for their sales forces that sell both products and services. The lack of quotas is a significant barrier to performance. Pure services firms and product firms with dedicated services sales forces, of course, do have specific services sales quotas. But the quota philosophies are quite diverse. Some firms set high quotas and expect half the team or less to reach quota; others set more reasonable quotas and expect 85 to 90 percent of reps to meet them.

Benefits, Rewards, and Recognition

Most firms include such incentives as 401K plans, cell phones, tuition reimbursement, and formal recognition programs. These are all "must-haves." Roughly half to two-thirds of firms offer additional incentives, including stock options, company cars or allowances, subsidized home offices, and incentive travel programs. Only a few firms offer further sweeteners such as sabbaticals, health club memberships, day care or day care subsidies, or profit sharing.

Existing sales compensation and reward plans do seem to be effective in motivating the dedicated sales forces. However, they are far less effective in motivating the shared sales teams. Compensation is not the only determinant of services sales success, but companies clearly need to strengthen incentives to get the shared sales force's attention.

For more information on ITSMA's 2001 Sales Practices and Metrics Study, visit http://www.itsma.com/Research/abstracts/s002.htm.

New Report: Getting the Metrics: Building Accountability for Services Marketing

Traditionally, management has viewed marketing as an expense rather than an investment. Further, senior managers often disbelieve that most marketing activities have a direct impact on revenue generation. Consequently, marketing can easily be seen as "discretionary" spending when the economy takes a downward turn.

Services marketers, of course, understand that a successful marketing operation to acquire and keep customers is a critical investment in corporate success. But marketers need more effective ways to communicate the value of marketing, justify resource allocation, and demonstrate the tangible fruits of their labor. The latest ITSMA Update examines the challenges of measuring marketing results and the primary methods used by IT services marketers today. The Update outlines a balanced scorecard approach to marketing metrics and highlights best-practice examples from five companies. Finally, the Update presents ITSMA's own Services Marketing Performance Index (SMPI), a multidimensional tool used to benchmark marketing performance relative to other IT services firms and to track year-to-year improvement.

Getting the Metrics was recently distributed to all member delegates. The Update is also available for sale at ITSMA member and nonmember rates. For more information or to order your copy, talk to your member delegate about online access to ITSMA's Member Research Library, visit http://www.itsma.com/Research/abstracts/u0033.htm or contact Rich Staples at +1-781-862-8500, ext. 17, or info@itsma.com.

Sign Up Now! ITSMA's 2001 Multiclient Research Programs

Every services marketing organization needs benchmarks and performance metrics to guide planning and improvement initiatives. ITSMA's multiclient research programs enable services marketers to quantify marketing parameters, identify best practices, and compare their performance with that of industry peers as well as "best-in-class" companies. ITSMA's portfolio for 2001 includes three unique and affordable offerings:

• The 2001 Services Sales Effectiveness (SSE) Program. Launched in 2000, this year-long program includes a series of research studies on sales metrics, models, and best practices. Highlights include a field survey of services sales reps and another survey on corporate models and metrics as well as best practice case studies, topical updates, and online briefings of research findings. This year's overall focus is on team selling and selling solutions.
  
• The 2001 Professional Services Pricing Study. New for 2001, this study will deliver both qualitative and quantitative data on billing rates, pricing methodologies, target margins, and policies surrounding professional services offerings. Participants will also benefit from custom peer-group comparisons and a customer survey on buy-side perspectives and concerns related to professional services pricing.
  
• 2001 CRM Services Brand Awareness Study. New for 2001, this study provides participants in the fast-growing customer relationship management (CRM) market with critical data on aided and unaided brand awareness, positioning, and favorability ratings for CRM services providers. Only a few sponsor slots remain, so sign up now!

A detailed prospectus for each study is available online at http://www.itsma.com/research/research.htm.

To discuss or sign up for multiclient research sponsorships, contact Rich Staples at +1-781-862-8500, ext. 17, or info@itsma.com.

Professional Development: Analyzing Customers to Build Loyalty

Building customer loyalty is never so important as in a down market. Loyal customers provide reliable and repeat revenue, purchase add-on services more quickly, and provide all-important references to skeptical new prospects. Analyzing your customers to assess loyalty and support new loyalty initiatives is thus a critical task in today's market. To support customer analysis at your company, ITSMA has adapted Dr. Philip Dover's presentation at ITSMA's February 2001 Client-Centric Marketing course on successful customer analysis. Dr. Dover is faculty director at the Babson School of Executive Education, associate professor of marketing at Babson College, and an expert on technology market planning and services marketing. Babson College, a national leader in executive education, is ITSMA's partner in services marketing education.

Click here for the complete article: http://www.itsma.com/education/prof_dev/pd_0501.htm

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Services Marketing Excellence Awards: Enter Your Submission by 30 June 2001!

Show us your best! Standout performance deserves recognition, and ITSMA's Services Marketing Excellence Awards have recognized special achievement in marketing technology services since 1998. So sharpen your pencils, dig out the data on your star programs, and apply now for the 2001 awards!

Categories for the 2001 awards include: Increasing Sales Effectiveness, Measuring Marketing Results, Field Marketing Execution, and Solutions Marketing Programs. Awards will be given to the programs that best represent innovation and measurable results.

Past Services Marketing Excellence award winners have included Accenture (formerly Andersen Consulting), Cisco Systems, EMC, Hewlett-Packard, IBM Global Services, Oracle, and other top IT firms. Applications are due 30 June 2001. ITSMA will notify winners in September 2001, and present the awards during our annual MarketingServices/2001 conference on 15-17 October in Chicago.

For more information, participation guidelines, and application forms, visit http://www.itsma.com/press/sme.htm.

EuroNotes: News and Views from ITSMA Europe

Just a month after our formal launch, ITSMA Europe has developed an exciting and extensive programme for the coming year. With help from a wonderful advisory group of senior marketing executives, we are highlighting a series of critical issues for European services marketers, including the changing role of marketing communications, managing channel conflict, the importance of marketing internally, the focus and role of country marketing teams, and measuring the impact of marketing. Please look out for ITSMA Europe research reports and events to begin covering these key issues in the months to come.

The ITSMA Europe member advisory board has also emphasised three organisational priorities, which we are taking to heart:

• Pay extra attention to the convergence of traditional IT business with emerging firms in broadcasting, digital television, wireless technologies, and other media
• Look beyond technology and communications sectors to learn from marketing organisations in other industries
• Provide multiple opportunities for open discussion, debate, and networking; no other organisation provides this type of forum in Europe

These are all great suggestions, and we're looking forward to getting off to a good start next month with our first ITSMA Europe event on 20-21 June in London, "Marketing Technology Services in the New Millennium" (see below for details). I hope to see you there!

– Melanie Oakley <moakley@itsma.com>

For more information on ITSMA Europe please visit http://www.itsma.com/europe/eu_home.htm or contact Melanie Oakley at [44] [01] 1628 527691 or moakley@itsma.com

Upcoming Events:

16 May 2001, 12:00-3:15 p.m. ET: Marketing e-Business and Professional Services:
The Role of Marketing During Turbulent Times - Lessons from Three Market Leaders (Special Online Forum)

No travel required! Attend from your office. Complementary attendance for the first five registrants from each member company.

Great marketers shine brightest in tough times. The knee-jerk reaction to an economic slowdown is to cut marketing programs and expenses. That response is natural, but the damage can last much longer than the downturn. Now, more than ever, e-business and professional services marketers need to exhibit leadership to maintain their companies' focus on key marketing initiatives and investments. Join ITSMA's senior staff and industry leaders from IBM Software, PricewaterhouseCoopers, and Art Technology Group in a special Online Forum to discuss successful strategies for fine-tuning your services marketing initiatives and capturing new opportunities amid the current market conditions.

For more information or to register online, visit http://www.itsma.com/events/event_desc/E05160101.htm.

22 May 2001, 7:00-8:10 a.m. PT: Marketing Survival: Turning the Corner (Breakfast, San Francisco, free for ITSMA members)

How are your peers adapting their marketing agendas to the "new" New Economy? Join ITSMA's Breakfast Briefing with Julie Schwartz, ITSMA's vice president of research, and Lori Weiner, ITSMA's director of research, to hear the latest from ITSMA's research on strategies and tactics for marketing your way through the downturn. Julie and Lori will provide fresh insights on marketing priorities and CMO perspectives, as well as exploring new resource allocation strategies and decision models designed to maximize return on investment. ITSMA's briefing leads the second day of the Dataquest ServiceTrends conference, and it could be the most valuable breakfast you'll have all year.

For more information or to register online, visit http://www.itsma.com/events/event_desc/E05220101.htm.

19 June 2001, 12:00-1:00 p.m. ET: Adventures in Field Marketing: Getting Close to the Customer (Online Briefing, free for ITSMA members)

The best-performing IT services marketers centralize marketing strategy and processes but build strong field capabilities to execute locally. Striking the right balance between headquarters and the field is not easy. However, all the electronic tools in the world mean little if you don't continue to get as close as possible to your customers. Join Rob Leavitt, ITSMA's director of member advocacy, for a discussion of best practices and benchmarks for field marketing strategies and tactics. Rob will present ITSMA's latest research findings on field marketing and will highlight specific examples of how IT services marketers are working to increase field marketing efficiencies and returns.

For more information or to register online, visit http://www.itsma.com/events/event_desc/E06190101.htm.

20-21 June 2001: Marketing Technology Services in the New Millennium: ITSMA Europe's Inaugural Event (London)

ITSMA Europe kicks off its new events program with a two-day Marketing Forum and Workshop that combines discussion with industry leaders and a workshop on managing and marketing the customer experience in Europe. Featured presentations will highlight Accenture's brand launch in Europe, IBM Global Services' comprehensive Web marketing initiatives, Hewlett-Packard's new sales and marketing model, Ericsson's strategy for marketing services in a down market, and Microsoft's efforts to balance direct and channel sales for enterprise services. Christine Carrol, CEO of the Global Future Forum, will also discuss the benefits of thought leadership marketing and a host of practical ideas on turning intellectual capital into competitive advantage. The London Forum is designed specifically for mid- and upper-level managers involved in the creation and/or implementation of marketing strategy.

For more information or to register online, visit http://www.itsma.com/events/event_desc/e06200101.htm

Event Sponsorship Opportunities

As the premier industry association for IT services marketing, ITSMA offers event sponsorship opportunities to member companies throughout the year. Event sponsors benefit from direct access to services marketing executives and managers from the world's leading IT services firms as well as the broader association with ITSMA.

For more information on event sponsorship opportunities, benefits, and costs, visit http://www.itsma.com/events/other_desc/01_sponsorprg.htm or contact Rich Staples at +1-781-862-8500, ext. 17, or info@itsma.com.

Click here to view ITSMA's complete events calendar for 2001:
http://www.itsma.com/aspfiles/Events/calendar.asp

Toolbox: New ITSMA Services Marketing Framework

Each month ITSMA highlights a new idea, book, application, or other type of tool that services marketers can use immediately to strengthen their programs and organizations.

Too often, services marketers focus on just one or two pieces of the marketing puzzle. In today's hypercompetitive environment, marketers need to exhibit leadership by shifting from mastering piecemeal tactics to driving business strategy.

Marketing is much more than marcom and sales support. Marketing is the key function that drives real business results such as revenue, profits, and brand loyalty.

The new ITSMA Services Marketing Framework outlines a comprehensive approach that services marketers can adopt to establish and maintain a strategic approach to client-centric marketing. The framework places the client in the middle of all marketing functions and emphasizes a life-cycle strategy to meet client needs.

The framework provides details on the four major marketing processes: strategy and market planning, solutions management, internal and external communications, and relationship management. It also highlights three critical, cross-cutting marketing issues: marketing infrastructure, sales, and business partners.

Use the ITSMA Services Marketing Framework to evaluate and revise your marketing strategy and organization. Is your organization sufficiently client-centric? What will it take to get there?

Click here to view the framework: http://www.itsma.com/Research/toolkit_free/research_rt_smf.htm

New Ideas : Cisco's Community Initiative

How's this for creativity in hard times? Cisco Systems is offering employees about to be laid off the choice of continuing with one-third salary plus health benefits and stock options if they sign up to work for one year with a nonprofit organization. For those who can afford the pay cut, it's a win-win-win solution. The nonprofits, such as the Second Harvest Food Bank, get experienced new staff for free. The employees get fulfilling work, continued benefits, and the chance to return to Cisco later. And Cisco actually saves money compared with their standard (very generous) offer of six-month severance checks. Cisco expects several hundred people, especially veterans with long-term stock gains, to participate. Gaining widespread respect when your market is booming is one thing. Maintaining creativity and a sense of community when the going gets tough is quite another.

Member Voices: Survival Strategies: Vertical Market Alignment

The most recent ITSMA Commentary, "Survival Strategies: AGENCY.COM Challenges the e-Consulting Collapse," highlighted six initiatives that AGENCY.COM has taken in recent months to rise above its struggling e-consultancy brethren, including a more aggressive effort to build vertical marketing expertise.

Scott Hillman of Honeywell responds:

Vertical market alignment is critical to the sustaining and growth of a consulting practice in at least the near to mid term. With the extensive build-out over the last several years, due in large part to Y2K and the dot-com mania, there are plenty (almost a glut) of individuals and firms on the market who know their way around the technology. Thus the edge belongs to those who understand their clients' markets, empathize with their problems, and can predict the next turn in the client's business. Those with vertical market expertise must also then exhibit the discipline to focus on the market segments where they have expertise. For those who can do this successfully, there will be no market downturn.

Click here if you missed the original commentary: http://www.itsma.com/press/commentary/agency.htm

ITSMA In the News: E-Consultancies Battle for Brand Recognition

"Most large e-consultants struggle to stand out in the marketplace, according to a recent survey of 400 executives at Fortune 1000 companies. Only IBM Global Services and Accenture (the former Andersen Consulting) were identified without any prompting as e-business consulting services providers by more than 10% of the CEOs, CFOs and other leaders with purchasing power."

Click here for the complete article (PDF version) from Consulting Alert: http://www.itsma.com/press/itsmainthenews/Ca010331.pdf

Reproduction or disclosure of this or any other ITSMA document, in whole or in part, to other parties shall be made according to the ITSMA Citation Policy http://www.itsma.com/press/press_newsfromITSMA.htm#citation

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About ITSMA
ITSMA specializes in helping companies market and sell services and solutions more effectively. As a membership organization, we provide research, consulting, and training to the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.