ITSMA E-ZINE	June 2005

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Editor's Notebook: When the Customer Isn't Right

A questioner at a recent ITSMA briefing wondered how to become more "customer-centric" in marketing when her organization's offerings were way out on technology's cutting edge. Because our work constantly emphasizes the importance of understanding customer environments, preferences, and needs, the question certainly goes against the ITSMA grain. Although being ahead of the market is a common refrain among technology marketers, it can also serve as an excuse for folks who might be more comfortable extolling the virtues of new technology than listening to customer pain points.

Nevertheless, the customer isn't always right. Sometimes the technology folks actually do have a better idea of what would work in a customer's situation. And sometimes, as several McKinsey consultants noted in an interesting recent article, customers undercut their own stated best interests with contradictory behavior. McKinsey research with IT executives suggests that although most buyers say they want stronger, more strategic relationships with their IT suppliers, they too often fall into transactional negotiations focused much more on immediate costs than longer term benefits.

On balance, I have little doubt that most marketers (and their companies) pay too little, not too much, attention to customer wants and needs. Sure, the hypothetical purely customer-driven organization is a bit too extreme. Spending some time and energy looking beyond today's marketplace is essential for long-term growth, and just saying no to unreasonable customer demands is also necessary at times. Overall, however, we're still far from the ideal when it comes to integrating the customer perspective. Working overtime to create more of an outside-in approach to the market remains the wisest course.

—Rob Leavitt

What's Hot: Marketing Communications in the Twinsumer Future

“Another nail in the coffin of traditional marketing.” Hmm. That's how trendwatching.com describes the so-called Twinsumer trend—customers relying on purchasing advice from like-minded fellow consumers they don't know personally but are connected to via virtual communities, collaborative filtering software, and online personal profiles.

You've probably had a taste of this via your favorite e-commerce and news sites (e.g., “People who have purchased/listened to/traveled to your selection have also…”). According to Amazon.com, responses to recommendations based on collaborative filtering “vastly exceed” those of more traditional promotions. And according to trendwatching.com, we're still at the beginning of the Twinsumer phenomenon, with more sophisticated tools and communities fast coming online. But so what? Does this really matter for marketing technology services and solutions for business?

Well, yes. Word of mouth is enormously important for business buyers. IT services buyers have always relied on references and recommendations from trusted colleagues and advisors; that reliance has only increased in a time of information overload. In fact, ITSMA's latest buyer behavior study, Connecting with Customers, shows that 35% of buyers cited recommendations and references as their most important information source about services providers, compared with only 17% or far fewer citing other sources such as the Web, analyst firms, sales calls, advertisements, or research.

Meanwhile, the Internet explosion is dramatically amplifying that word of mouth for business buyers by facilitating much wider and deeper online conversations among buyers and influencers. According to Rachelle Spero, vice president of Digital Influence Group, the “new spheres of influence” for technology marketers include online executive communities, business reputation aggregators, and the spreading-like-wildfire blogosphere.

Buyers of your services and solutions are checking you out on the Web, talking to their peers, listening to your critics, and gathering input from an endless array of online sources—and you are probably paying too little attention to this conversational whirl that can make or break your sales and reputation.

In other words, the Twinsumer trend has a business analogue and technology marketers would do well to consider the implications.

Practically speaking, three C's become central to marcom success.

• Content. Thought leadership is a hot topic in marketing these days, but too often companies fail to invest adequately in developing and communicating their ideas. What is called thought leadership is often thinly disguised product or service pitches, which have little appeal for prospective customers. But clear ideas about business and technology challenges, well researched and developed, help engage potential buyers, deliver real value, and provide context for specific offers. The best ideas actually spread themselves, and you reap the benefits.

• Conversation. Shifting from monologue to dialogue is critical. No technology company has all the answers, and your customers know that. They're not interested in a lecture or a sales pitch, but they do want to talk…if you have good ideas and demonstrate a commitment to collaboration. The growing appeal of blogging for business comes precisely from its encouragement of more “real” interaction with customers, employees, partners, and others. Especially as we contend with longer and more complex buying cycles for more elaborate solutions, building ongoing dialogues is the only way to create the confidence and trust it takes to make a sale.

• Community. The greatest challenges in IT today demand the most substantial collaboration. Businesses looking to improve customer loyalty, refine their supply chains, secure their information and networks, and otherwise use technology for competitive advantage are tapping into increasingly powerful networks of expertise to understand their options and possibilities. Marketers in this environment have two important goals: join and contribute to those existing communities that prove so influential in buyer thinking and action, and host and build your own communities of influence around the key issues and markets you serve.

Ultimately, marketers need to think differently about marketing communications in a digital word of mouth world. The emerging reality is that marketers have less and less control over their messages and how they make their way through cyberspace. Rather than fretting about that loss, marketers should instead focus on participating in and influencing the much larger discussions that shape customer thinking.

IBM's new guidelines for company bloggers get at this newer approach by encouraging IBMers to blog for two main reasons: to learn and to contribute. Rethinking all our communication programs from the perspective of learning and contributing will go a long way toward success in the Twinsumer future.

Is the Twinsumer phenomenon for real? Does it matter for IT services and solutions? What are you doing to rethink marketing communications?

—Rob Leavitt

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Marketing Excellence Awards: Last Chance to Enter (June 15 Deadline)

As the clock winds down on the June 15 deadline for the 2005 Marketing Excellence Awards, marketers from around the world are racing to get their entries in.

"The pressure, the pressure," moans Suzy,* a field marketing director at a leading IT services firm. "I've been up for forty-three hours straight trying to perfect this award submission. We simply have to win this year!"

Meanwhile Zeke,* a brand manager at a prominent outsourcing firm and the winner of a past ITSMA award, tells us, "It's ugly, how low the competition will stoop to steal our submission. They've dressed up as mailmen, pizza delivery boys, and even window cleaners to get their hands on it. I know it's prestigious, but come on! The deadline is still a week away; write your own submission!"

Don't forget to submit your entry for the 2005 Marketing Excellence Awards. All kidding aside, we're looking forward to learning about all the great marketing programs you've been doing this year. View details and submission guidelines at http://www.itsma.com/news/mea. *Names have been changed to protect the innocent.

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Features

Tell Me a Story, Make Me Believe

In an environment characterized by intense competition for skeptical and hard-to-reach buyers, the burden on marketing to spur growth and profitability has grown accordingly. And as marketing takes on more responsibility, it's finding that differentiation has become the number-one challenge. What good is it, after all, if a buyer recognizes your name but can't say why your offering is any better than any other one out there?

You've got to convince customers of your unique value and coax them into learning more about your offerings and your brand. You've got to tell them a story they're never going to forget, a story that motivates them—inspires them—to become part of your vision. That's how you're going to make the sale.

According to ITSMA's new report on services marketing budgets, marketers in the IT services industry are turning to new and different storytelling vehicles to make their competitive stand:

• They're spending only 3% of their marketing communications budgets on advertising, way down from the 17% they spent in 2003 and the 12% they spent in 2004. Instead, they're spending more on live events and direct marketing, reaching out to individual customers on a more personal level, telling them a story that's aimed specifically at them.
• They're spending a whole lot more on making sure that employees and other key stakeholders have their story straight, with 15% of the marcom budget allotted to internal communications, up from 3.4% in 2003. After all, it's the employees who interact directly with customers, serving as ambassadors for the brand. If they're contradicting the story you're trying to sell, you're not going to get very far.
• They're also investing more in reaching out to industry influencers such as journalists, analysts, and even folks in the community through sponsorships and participation in civic events. These outside (and therefore credible) advocates are often far more effective than anyone within the company itself at educating and convincing prospects to go with a particular service provider.

Compelling communications has always been at the heart of marketing excellence, but today's marketers are telling their stories in more personal, interactive, and targeted ways. As more and more direct and interactive approaches such as account-based marketing, blogging, and podcasting come to the fore, ITSMA predicts that we'll see an even more dramatic shift in the allocation of services marketing budgets.

—Julie Schwartz, jschwartz@itsma.com

For more on services marketing budgets and priorities, see ITSMA's new report, Services Marketing Budgets and Benchmarks: 2005 Metrics, Trends, and Challenges. The report provides essential data and analysis on 2005 services marketing budgets, budget allocations, and marketing priorities from a range of companies across the technology and consulting industries. This ITSMA Benchmarking Report is available at no charge to study participants and for sale at member and nonmember rates to all others. To learn more, visit http://www.itsma.com/research/abstracts/b015.htm.

Three Keys to Selling Solutions

The ability to sell solutions effectively is one of the greatest differentiators between high- and low-performing technology companies, according to Accenture's Robert Blakey, who recently presented at ITSMA's Marketing Leadership Forum on Mastering Solutions.

Solutions may be the answer to reigniting growth and improving sagging profit margins, but the path to selling solutions is fraught with obstacles. Solutions generally demand a higher level of sales skills as well as the integration of more data and multiple product lines, services, partners, buyers, and influencers.

How are technology solutions providers meeting the solutions sales challenge? ITSMA's annual Sales Practices Study, Raising the Bar: Selling Technology Services in a Competitive Market, highlights several successful initiatives:

• Retooling the sales force. Leading technology services providers are investing in developing and maintaining the right talent to sell solutions. They have increased their hiring and are improving training to build the right kind of sales teams that have the necessary business knowledge, vertical market expertise, and account management skills.

• Breaking down traditional silos. In response to the need for globalization and standardization, companies are abandoning traditional siloed approaches in favor of forming teams of sales specialists. This means stepping up cross-company communication and knowledge sharing, centralizing the sales operations organization, and creating a common "sales language" with consistent tools and templates.

• Implementing sophisticated account management practices. Solution providers recognize that account planning has to evolve from a hodgepodge of forms and individual discussions into a structured process with baselines, metrics, and checkpoints. Furthermore, by including members of marketing on account-planning teams, sales benefits from receiving in-depth knowledge of the customer's business and is better equipped to step into the role of consultative advisor.

Although selling solutions is a difficult endeavor, technology providers that make the transition to solutions will reap the benefit of superior long-term business performance. By investing in new selling skills, organizational structures, and processes, forward-thinking technology organizations are laying the groundwork for business success for years to come.

—Julie Schwartz, jschwartz@itsma.com

For more information on the latest trends in selling services and solutions, see Raising the Bar: Selling Technology Services in a Competitive Market. The report includes detailed benchmark data and best-practice examples on the sales organization, account planning and management, sales performance, sales training, and sales costs and compensation. This ITSMA Benchmarking Report is available at no charge to study participants and for sale at member and nonmember rates to all others. To learn more, visit http://www.itsma.com/research/abstracts/S005.htm.

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Moving to Solutions

If You Don't Know Where You're Going...

If you must know, I'm a hopelessly addicted Boston Red Sox fan. I've been through many, many seasons of false hopes and broken promises. But as many of you know—at least those of you who can tell the difference between a baseball and a volleyball—the agony ended last October when the Red Sox won the World Series. And contrary to a commonly supported prophesy, Hell did not freeze over in the process!

Anyone who follows sports knows that half of the fun is analyzing the statistics of the game. Why did Boston win? Let's look at the metrics that count:

The numbers tell the story; it was Boston's time. If you don't understand baseball, trust me—with performance reflected by these metrics, the outcome was a foregone conclusion.

Baseball managers are maniacal about statistics. Good managers don't make a move without looking at trends, player-against-player performance, and strengths and weaknesses of each opponent. They also set metrics at the beginning of the year that define success in all aspects of the game—hitting, relief pitching, base stealing, and so on.

What about the solutions game? How do you know if you're winning at that? Have you even determined exactly what winning looks like?

There's every indication that measuring solutions success is more difficult than measuring the other parts of your business. Consider the following:

• Solutions are made up of components that come from both the services and products groups. They cut across business unit (BU) boundaries. How do you recognize each discrete product/service contribution and then the overall contributions and value of the solution?
• There are significant and often complicated indirect costs in building, marketing, and selling solutions. How can and should you track the added costs of creating cross-functional teams, solutions councils, reskilling the sales force to be more consultative, and so on? Are these attributed to an integrated solutions business or to the different product and services groups that contribute resources?
• The processes of creating and marketing solutions are often disruptive to organizations since they require cross-organizational collaboration. How effectively are companies getting BUs that have traditionally focused on their own bottom lines to play nicely with others?

Notwithstanding the difficulties, companies are moving forward. We recently asked a group of ITSMA member companies that are keen on growing their solutions businesses to describe their measurement dashboards. As you can see from the following table, they're measuring progress across a range of important business areas, including financial, sales, customer, culture and behavior, and process.

Common Solutions Metrics

The multimillion-dollar question, of course, is what sort of results companies should be seeing in each of these areas. For some, we would certainly expect notable improvement with solutions compared with products and services. For example, total revenue, average deal size, and customer satisfaction should all increase with a solutions push. For others, such as direct and indirect costs or internal awareness, there may be little difference.

Ultimately, the point is to have a clear definition of success with a manageable number of metrics that help define winning and losing. What are the metrics that count for your solutions business?

By the way, I'm fully prepared for the Red Sox to revert to their old tricks and end up back in the pack at the end of the year. I assure you, however, that regardless of the final performance, team management will understand exactly where they went wrong.

—Steve Hurley, shurley@itsma.com

New ITSMA Resources: Forum Review, Solutions Quiz, and More

The new "Moving to Solutions" section on ITSMA.com brings together critical resources for marketers, including:

• "Solutions" definitions from ITSMA members and friends
• A "reality check" quiz to review your company's solutions progress
• An overview of our Solutions Roadmap
• A PDF version of our Moving to Solutions handbook

Check out our solutions resources at http://www.itsma.com/solutions.

We've also continued the dialogue sparked at last month's Mastering Solutions Forum by creating a new microsite that explores the topics addressed at the Forum, including The Solutions Imperative, Enabling Solutions Sales, and Managing Organizational Change.

Visit out our new microsite at http://www.itsma.com/solutions/forum.

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EuroNotes: Cultivating the Business Perspective

Today's marketers are stuck between the frying pan and the fire. Faced at every turn with demands to set the company up for long-term success while delivering just as many tactical programs to drive short-term results, services marketers are tired. They're looking for a better way to do business.

At ITSMA's Annual European Forum in May, we took a close look at how to balance the strategic and tactical demands of the job. Since this is an area where so many marketers struggle, those who are able to achieve the right balance will reap great rewards. Forum presenters explored a number of ways to strike this balance, with several of the speakers stressing that marketing can learn a lot about how to prioritize from people outside the department. Two key takeaways include:

1. Measure, measure, measure! And do it in a way that makes sense to the business folks.
2. Expand marketing's role to include everything you do to go to market, focusing especially on the customer as you go along.

Read the full story

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Research Desk

Enterprise Software Solutions: Who Owns the Customer?

Buyers of enterprise software applications focus first and foremost on features and functionality, according to ITSMA's forthcoming Brand Tracking Study on software applications and services. Asked about the most important considerations when reviewing software vendors, buyers across a range of vertical industries agreed strongly that software features placed at the top of the list. Secondary considerations include technical support, implementation partners, and consulting expertise. Those service-related issues are viewed as necessary but clearly less of a priority in the purchase decision.

Meanwhile, enterprise software buyers remain only moderately satisfied that their applications and solutions providers are truly meeting their most important needs, such as responding to specific business challenges, enabling regulatory compliance, and mitigating risk. Buyer satisfaction is mixed, at best, in critical areas, including software implementation, support, and realization of business benefits. Buyer ratings in these areas average about 3.4 on a five-point scale, where 1 equals not at all satisfied and 5 equals very satisfied.

The paradox of focusing first on features but then worrying about insufficient business impact creates a muddle in terms of the customer-service provider relationship. Buyers show a slight preference for having the software firms themselves implement their applications rather than using third-party systems integrators. But the relatively low satisfaction with both suggests that customer loyalty is limited. Both software and services firms can differentiate themselves from the competition by improving on the very attributes for which clients' expectations are unfulfilled.

Indeed, although only a small number of buyers are currently ready to move to more ambitious application hosting or managed services options, there does appear to be a real opportunity for software providers to gain ground with new approaches.

More than ever, providers of software solutions need to demonstrate credibility in their offerings, commitment to generating substantial business impact, and accountability for business results. Features remain more important in enterprise applications than in many fast-commoditizing hardware markets, but, in the end, "owning" the customer relies primarily on creating the satisfaction that comes from measurable business value.

—Lori Weiner, lweiner@itsma.com

Tapping the SMB Opportunity: ITSMA's New Study

Small- and medium-sized businesses accounted for almost 25% of overall IT services spending in 2004, and analysts are predicting that the SMB share of the market will continue to grow. Several key trends are driving this growth, with major implications for IT companies:

1. Increasing comfort with the Internet. Every motel you drive by these days advertises "Free high-speed access" or "Free Wi-Fi." As people become increasingly comfortable with the Internet and associated technologies, they are beginning to recognize how more sophisticated hardware, software, and systems can benefit their business. For example, Datamonitor projects that that the CRM market for SMBs will grow at nearly three times the rate of the overall market.
2. The mainstream adoption of breakthrough technologies. As technologies emerge that make smaller players smarter, better, faster, and more connected, the SMB IT market is taking off. Voice over IP, for example, is emerging as a truly disruptive technology; Infonetics forecasts that that VoIP revenue will grow 1,431% by 2009, driven largely by uptake in the SMB space.
3. Compliance. Sarbanes-Oxley, too, will make its mark in the SMB space, especially with the deadline for smaller public companies looming close on the horizon (July 15, 2005). Storage and security vendors have been reaping the benefits of enterprise compliance for a while; now they'll start seeing growth driven by SMB compliance, too.

In light of these and other trends, there's never been a better time for services and solutions companies to target the SMB market. But for providers used to dealing with enterprise buyers, the SMB market requires a rethinking of traditional strategies. Marketing and selling in the more dispersed and fragmented SMB world requires new:

• Segmentation schemes
• Go-to-market plans
• Communication channels
• Operational support

ITSMA's new multiclient study, Best Practices in Marketing to Small and Medium-Sized Business, will identify how SMB decision makers evaluate and purchase services and solutions and uncover best practices in marketing to these decision makers. Study sponsors will receive a detailed report containing customer data and best-practice examples as well as video clips from customer interviews explaining what's working and what's not.

—Meghann Grandy, info@itsma.com

For more information on the benefits of study sponsorship, visit http://www.itsma.com/research/prospectus/mk0525_smb05.htm.

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Marketing Toolbox: Mastering Solutions Reality Check

Talk of “solutions” pervades the technology industry, but becoming an effective solutions provider typically requires substantial organizational change, affecting nearly every aspect of marketing, sales, and delivery. ITSMA's Mastering Solutions Reality Check provides a quick scan of how well your organization is making the solutions transition.

Take me to the Reality Check
More Marketing Tools (membership online access required)

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Upcoming Events

Best Practices in Solutions Marketing
July 8 Marketing Roundtable (Munich, Germany)
http://www.itsma.com/Events/event_desc/05RT06E19.htm

Measuring the Solutions Business: Meeting the Metrics Challenge
July 12 Online Briefing
http://www.itsma.com/Events/event_desc/05OB07N22.htm

Demonstrating Differentiated Value: Building Your Case in a Crowded Market
July 19 Breakfast Briefing (Newton, MA)
http://www.itsma.com/Events/event_desc/05BB07N24.htm

Positioning and Competitive Differentiation
July 21 Executive Roundtable (Boston, MA)
http://www.itsma.com/Events/event_desc/05RT07N23.htm

Complete Events Calendar

Ask ITSMA!

Do you have a services marketing question?
Visit Ask ITSMA to access our experience, insight, and research results.

(c) Copyright 2005, ITSMA

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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.