Category Archives: Markets

Why They Aren’t Buying

There are all sorts of allegories for sales. Hunting, farming, fishing, and a large list of others. They all seem somewhat out-doorsy and active (as opposed to passive – waiting for something to happen), but I think you get the point I’m making. Sales also seems to run in streaks. Some days it seems you can’t miss and all you need to say is “sign here, press hard for three copies”. And other days it doesn’t seem to matter what you do. You don’t seem to be able to close a door, let alone a deal.

We all like to think that it is superior salesmanship, or possibly a break-through product or technology advantage, when sales are good. We also like to point to inferior marketing and support, or a weak product offering when sales are not up to expectations.

When sales are not up to desired levels, it is usually left to management to blame poor salesmanship for the results, since both product technology and support are not readily changeable items in any short-term drive to improve sales.

I think the reality of sales booms and sales busts are more associated with those factors that either occur or evolve on a market wide basis. The deregulation of the mortgage industry led to an explosive growth in housing sales as people could then buy more house than they could normally afford, via balloon payment type and other exotic mortgages. This worked well until payments came due and real money was not available. The well documented housing bust and broader economic recession ensued.

Going a little further back into the end of the last century, was the telecom boom associated with deregulation. Companies suddenly found themselves with the opportunity to enter communications markets that they had previously been restricted from. This market attractiveness was further exacerbated by all equipment supplier’s willingness to lend these new companies the funds that they would need to by their equipment to enable access into these new markets.

This too worked well until the then new market was flooded with new competitors. The result was that there was not enough business to go around and no one had the real money needed to make their loan payments on their equipment. The well documented telecom bust then ensued as well.

In both of these examples, as well as many others across many other industries (banking, oil, etc), there were some very good times to be in sales, which were then followed by some very trying times to be in sales. It didn’t really matter what your individual effect on the sales process was.

I bring up these kind of market wide events not because I want to examine them, but because I want to exclude them from any discussion regarding why customers may, or more importantly may not be buying now. When various markets are thrown out of equilibrium by any number of market affecting legislative changes or other events, it seems that standard sales logic just doesn’t apply – usually to the eventual detriment of all involved.

I want to briefly look at why in a stable market, sales may not be achieving your desired goals.

I think that when you look at sales there are basically three aspects that need to be in place to be successful. Some may point to a multiplicity of other factors, but I think when you net them all out, you get back to these three basic ones.

The first is relationship. I know. This is trite. Relationship blah, blah, relationship. There is a reason everyone says it is important. That’s because it is. Do you trust the guy that sells you a car? No? That’s partly because you know that once he sells you a car, you are no longer his problem. You are the service department’s problem. He is probably not going to talk to you or try to sell you anything else for a while, unless you decide you need another car.

In the business to business sales world, most sales people cannot achieve their targets by simply selling something to a customer every three or four years. They have to face their customer continually. What they do after the sale is probably more important than what they do before the contract is signed. That is if they hope to get another sale.

That is how a relationship is built.

The second is the ability to solve a customer’s problem. It might be a problem they didn’t know they had. Faster, better, cheaper are always items that come to mind. Understanding what a customer wants to do as well as why they want to do it are keys here. It is in essence providing an answer to their question.

The third is providing the customer with the proper reason to buy your solution. This is usually known as a business case. If you are ten percent faster, but twice as expensive, is this acceptable? It’s hard to say at this point without more information. However, it’s a much easier decision if you are ten percent faster and the same price as a competitor.

Having a great relationship with your customer, and a great product are no longer enough. There must be a strong enough financial reason for a customer to buy. The customer must expect a sufficient return on the monies that they invest in a product in order to get them to spend those monies.

This customer return can take several forms. Does it reduce their costs of operations? Does it allow them to gain more customers? Does it allow them to get more revenue from their existing customers? And just as importantly, when does it allow them to recognize these returns. These are all very definable and quantifiable numbers.

If they are not, then in today’s business climate and environment, you may have an issue closing a sale. Quantification of customer value is rapidly becoming the key to sales success.

It should be noted that saving a dollar this year is far more preferable than potentially saving ten dollars, five years from now.

It seems that suppliers can get seduced by the elegance of their own technical solutions to their customer’s problems. They have a tendency to forget that just because what they are offering may be technically better than what the customers may currently have, that no longer means that a sale is assured. If the customer cannot identify the quantifiable benefit and returns associated with the proposed purchase, and when these returns can be expected, then the expectation should be of a difficult or delayed sales process.

Just because they trust you and what you are offering is better doesn’t mean they will buy it.

It appears that it is more and more about money, and more specifically today’s money when it comes to sales. Preparing for future opportunities, or addressing potential opportunities, or enabling future applications may no longer be a good enough reason for a customer to part with their limited amount of funds set aside for such expenditures. Customers are recognizing that if the sales discussion involves future benefits to them, then it also means that the actual purchase decision can probably be delayed to that future time when it coincides with those future benefits.

In today’s business environment, if companies are going to spend their money, they need to know what they are going to get in return. Not just the product or service that they are purchasing, but the quantification regarding what the purchased items will mean to their bottom line. How much of a reduction in costs. How many more customers. How much more will they be able to charge.

If today’s product will enable an as yet undefined application or future capability, then it is probably wise to assume that today’s customer may in fact wait to purchase that product until that future application or capability is defined and the market for and value of it can be quantified. Being bigger, better and faster for the sake of being prepared for the next big thing and the potential associated end user demands that go along with it, is probably no longer going to be a good enough reason to purchase.

If your customers aren’t buying, and there is no discernible, market wide issue causing a broader customer industry slowdown, then it is probably a good guess that the appropriate customer spend business case has not been made or met. As markets evolve to this technical solution – appropriate business case model, the solution price will remain a key aspect of every opportunity, but not so much from the aspect of how much a customer has to spend, but more from the point of view of how much the proposed solution must recoup in value for the customer, and as previously noted and just as importantly, how long it takes the customer to recoup it.

It is also possible that this lack of an appropriate specific return customer business case can turn out to be the broader customer industry slowdown, since all customers seem to be heading this direction. It can also depend on the relative competitive starting point for each customer in their respective markets.

It doesn’t seem that being bigger, better, faster or prepared for the next new thing will remain as good enough reasons for customers to buy. It appears that it will not be what the proposed customer solution operationally or technically does, but more what it financially does for the immediate benefit of the customer’s bottom line that will be the purchase decision criteria.

Clouds

I’m having a little trouble getting started on this topic. With the number of articles already written about clouds in the various business publications, it seemed that it would be only a matter of time before I got around to talking about it. I am now paraphrasing a speech by Winston Churchill in that it appears: “Never has so much been written by so many and understood by so few”.

Churchill was of course referring to the RAF and the Battle of Briton early in World War Two, but this variation also seems somewhat apropos for the market battles looming for the hearts, minds and most importantly pocketbooks of corporate customers now as well as in the future.

I went out and tried to find the simplest definitions for clouds that I could. I did this for two reasons. The first is that there is already an incredible amount already written on these topics (as I noted above) and the second is that I am just the tiniest bit lazy and don’t want to have to rewrite all of it. You will notice this trend throughout this article. Here is what I came up with for “Clouds”:

1. The second studio album by Canadian singer-songwriter Joni Mitchell, released on May 1, 1969.
2. A visible mass of liquid droplets or frozen crystals made of water or various chemicals suspended in the atmosphere above the surface of a planetary body.
3. A service with any resource that is provided over the Internet. The most common cloud service resources are Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

I’ll skip the first two definitions for now, and focus in on the third one.

I think the evolution of the name “Cloud Services” actually came from the fact that it was difficult for technology companies to draw a “network” when using the early iterations of the Microsoft PowerPoint application for presentations. The simplest ClipArt icon that conveyed the idea of a network without having to draw in all the complexity was a “cloud”. That was what was used in all network related presentations. We all became familiar with it. Hence the cloud became synonymous with describing a network and cloud services have become synonymous with services delivered over the network.

The power of PowerPoint. If early iterations of the presentation application had contained interesting representations of multi-sided geometric shapes instead of clouds, it is possible that we might all be discussing “Polygonal Services” instead of “Cloud Services”.

Getting back to Cloud Services. Software as a Service (SaaS) is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet. Platform as a Service (PaaS) refers to the delivery of operating systems and associated services over the Internet without downloads or installation. Infrastructure as a Service (IaaS) involves outsourcing the equipment used to support operations, including storage, hardware, servers and networking components, all of which are made accessible over a network.

The question that initially came to my mind when looking at all of these items “as a Service” was why would anyone want to do all of this over the network instead of buying the stuff and doing it the way that it had been done?

The answer seems to lie in the potential efficiencies that may be gained. Moving to “the cloud” focuses on maximizing the effectiveness of the shared resources. In the past each company and its associated users, had to purchase its own dedicated resources, whether it was software, computing or network infrastructure. Cloud resources are usually not only shared by multiple users but are also dynamically reallocated per demand. This can work for allocating resources to users across a single company, or multiple companies.

The claim is that moving to the cloud allows companies to avoid upfront infrastructure costs, and focus on projects that differentiate their businesses instead of on infrastructure. It is also claimed that the cloud allows enterprises to get their applications up and running faster, with improved manageability and less maintenance and enables Information Technology (IT) organizations to more rapidly adjust resources to meet fluctuating and unpredictable business demand.

Cloud computing is viewed as having become the vanguard offer for cloud services in that it can provide a highly demanded service or utility with the advantages of high computing power, cheap cost of services, high performance, scalability, accessibility as well as availability. Cloud vendors are claiming to be experiencing growth rates of up to 50% per year in this area. Cloud services are provided to an organization by moving away from a traditional CAPEX model (buy the dedicated hardware and depreciate it over a period of time) to the OPEX model (use a shared cloud infrastructure and pay as one uses it).

So, if the computing piece of corporate infrastructure seems to work in a “cloud” environment, then every piece of corporate infrastructure ought to work in a cloud environment, right?

I suppose this could be the case, but when I look at it a little more closely it seems that cloud based services are best applied to those capabilities that could almost be considered a commodity. In the case of cloud computing it is the basic amount of computing power and memory that are commoditized. In buying a cloud based computing service you purchase an amount of memory and a number of processing units, both of which could be considered commodities at this point.

By extension, there seems to be groups that are trying to commoditize other customer infrastructure aspects in an attempt, or in preparation for them becoming a cloud based service. If we think of routing as a commodity we end up with a number of bits (megabits, gigabits, etc.) routed per second. The same sort of approach would be applicable to switching. Pretty soon you may be able to take everything down to a function, instead of a platform or piece of equipment, and provide it as a service.

The question is when will companies and businesses be ready to look at their infrastructures, platforms and software in this way?

The most recent market analysis that I could find (from 2014 I think) shows that the total data processing market is approximately $115 Billion in annual revenue, while the Hosted / Cloud services portion of it is about $13 Billion (or a little over 11%) annually. While the portion of the computing market being served by cloud based solutions is a significant amount of money, it is still a relatively small but growing amount of the available market.

It is widely thought that computing services are the lead capability driving cloud services. That would indicate that other platforms, applications and pieces of infrastructure have not taken root in the cloud based structure and grown to the extent that cloud based computing has. That doesn’t mean that they won’t. It just means that they haven’t yet.

The market growth rate forecasts and estimates for Infrastructure as a Service (IaaS – computing, and other infrastructure capabilities) are reasonable, or at least it seems so to me. But when IaaS represents only 11% of the market, even a 50% growth as claimed by some suppliers only takes it to 15% of the market. Such is the next layer down analysis that must be done when such large percentage growth claims are made. Even at these growth rates and assuming there will be no slow down in its adoption, it appears that full Cloud Services market acceptance and utilization may still be a little ways off.

In other words, it seems that it is very wise to be aware of and prepared for cloud based services, but in the mean time it also appears that for at least the next few years the current capital based equipment solutions and services market systems will still be the majority market approach for business infrastructure, platforms and software. Cloud based services for these capabilities, for at least the shorter term will probably be a smaller, but potentially growing part of the market.

As Joni Mitchell said in the song “Both Sides, Now” on her 1969 Clouds album:

“I’ve looked at clouds from both sides now
From up and down, and still somehow
It’s cloud illusions I recall
I really don’t know clouds at all”

Wow. She wrote that forty six years ago. I’d say that’s pretty good but then I always liked Joni Mitchell.

Big In China

I think we are all aware of the position that China now holds in the economic world. It is the most populated country on the planet with approximately 1.37 Billion inhabitants. It has the second largest economy (behind the United States) as measured by Gross Domestic Product (GDP) at $9.3 Trillion per year. China is also the leading manufacturing nation in the world responsible for the production of approximately 22.4% of the goods manufactured on the planet. I think you see where I am going here. China is an important player in both the economic and political global landscapes. So, imagine how I felt when I logged into my Blog to read the comments my last couple of articles engendered and saw a plethora of comments that originated in China.

I was ecstatic. I had made it. My work had gone global.

I have blogged about business and sales leadership for several years and have generated more than two hundred articles. I enjoy writing them and try to draw on personal experience as well as direct observation in creating them. I get paid nothing for writing them and do it only because I enjoy it and consider it a great outlet.

I have also had the opportunity to work in China and at one point managed a joint venture with a Chinese partner in Tianjin, China. Tianjin is a reasonable sized city about an hour and a half by highway east of Beijing, China’s capital city. A reasonable sized city in Chinese terms translates to a population of approximately 14.7 million people. It is both an amazing and interesting place. I enjoyed it a great deal.

They also had some really amazing golf courses there.

In any event, when I checked my Blog comments I had twelve to fifteen comments that originated in China. These comments were sprinkled in amongst all the other very useful comments that were designed to inform me that I could buy cheap Uggs shoes, or cheap Louis Vuitton bags, or replica Cartier jewelry and all manner of other cheap products with ease since I had my own web site.

There were also several comments informing me that for some sort of nominal fee all manner of individuals would undertake the here to fore herculean task of driving more traffic to my web site since that was the obvious reason that everyone who was anyone would have a web site. It seems that traffic to your web site is the way people keep score of your success on the web.

I actually think it is associated with how you can monetize the value of your site, but since I did not start Blogging for any real monetary reason, I don’t pay too much attention to these solicitations.

In amongst the veritable blizzard of internet generated detritus were these pearls of Chinese comments on the almost indescribable value of my business and sales observations and musings. I thought this was very cool. What was even more interesting was that they were rendered in my comment section in the original kanji script.

There was カナダグース レディース who said:

“カナダグース-レディース/]カナダグース レディース”

Which according to the infallible Google translator application either means:

“You are truly a gifted and insightful business individual”
or,
“Please buy our surplus cheap dog food as it is now safe for consumption by your precious pet.”

I guess it depends on the dialect they are using.

I don’t know about you but I know which one of those translations I am going with.

There was also ヴィヴィアン ピアス (no relation to カナダグース レディース – I think…) who also opined:

“ヴィヴィアン-ピアス/]ヴィヴィアン ピアス”

Which is also has two possible translations, again according to Google translate:

“The wisdom of your comments is a thing of beauty”

Or possibly,

“We offer cheap Louis Vuitton bags and many people who can increase the traffic to your lowly, largely ineffective website.

There were many other similar comments. These were just a random sample of the ones that I received from individuals based in China. As I said it was gratifying to receive such excellent recognition for my work on an international scale.

For many years I had heard that China was an important and emerging market. They were part of the “BRIC” set of countries that were viewed as the important markets of the future (“Brazil, Russia, India, and China”). I think that it is safe for me to say that based solely on my personal web based interactions with China that they are no longer an emerging power when it comes to internet based comments and solicitations. They definitely appear to have already arrived.

Now if I can just get these strange programs offering dog food and assistance with driving web traffic to my web site off of my PC that I seem to have gotten when I tried to reply to the obviously intelligent comments that my new admirers in China left for me.

Diversify Revenue

It is very easy to fall into the trap of being very good at one thing. You start with a successful sale. You follow it up with a similarly applied successful sale, then another, and so on. Soon you have what you feel is the “recipe” for your product/service and a market. The key item to be aware of here is “a”, as in singular market.


 


Being very good at one thing is great while that market is good, but no market is good forever. You need to make sure you are diversified in your revenue sources.


 


I am in the communications and technology industry. It has been a rollercoaster ride for over a decade. Companies have flared up very large by taking advantage of the various technologies and needs bubbles, only to almost disappear completely when that particular market bubble bursts.


 


Good rules of thumb are to focus on the needs and uses of the end users of your product or service. This means you must potentially have to “see through” your customer, to their customer, if you are not dealing directly with the final end user of your product or service. As the communications industry learned in a very painful way, it was not the network that drove the end user; it was the end user that drove the network.


 


Examples of revenue diversification can include understanding the various demographics and needs within the market and grouping like ones as targets. This would be an example of vertical market definitions and diversification. Markets such as “Governments”, “Financial Entities”, “Education” and “Manufacturing” are good examples. That way you diversify yourself into specific markets that hopefully do not move fully in coordination with each other.


 


Another methodology is to move into complementary goods and services. If you are an equipment or product provider you may want to look at moving into providing services that are associated with your product. That way when customer capital expenditures are reduced, you can still generate revenue from the service associated with your product.


 


It sounds simple, and it sounds like common sense, but it seems that all too often in the heat of the drive for ever increasing revenues, we end up focusing only on what we have done well before, and not on other potentially unfamiliar markets that we should do well on in the future.