Recent Developments in One Price Management Provider's Business

Zilliant, a data-driven price management software provider that focuses on business-to-business (B2B) enterprises, continues to take its science-based enterprise pricing solutions to higher levels. To learn more about Zilliant and its offerings, please see What if Companies Could Use Science to Align Prices to Market and Maximize Margins?, How One Vendor Parlays Price Variation into Profit Improvement Opportunities, and How One Provider's Solution Covers the Bases of Price Optimization and Management.

A New and Improved Zilliant Precision Pricing Suite

In October 2006 and in April 2007, Zilliant announced general releases of its pricing software ZPPS 6.0 and ZPPS 6.1. This application suite provides significant enhancements across all four of the vendor's earlier pricing applications, to which Zilliant added a fifth. In addition to increased product functionality and platform support, this latest suite improves usability, making it easier for pricing stakeholders to make smarter, data-driven pricing decisions. ZPPS 6.0 and 6.1 include enhancements for the following:

* ZPPS Optimization, with improved graphical user interface (GUI) to enhance visibility into the market dynamics and the business rules that drive price recommendations

* ZPPS Price Manager, with new decision support capabilities to allow companies to assess the impact of cost, price, and discount changes on future financial performance

* ZPPS Deal Manager, with enhanced capabilities to manage and analyze complex price agreements, as well as usability improvements, including comparative impact summaries and scenario development

* ZPPS Deal Manager for Agreements, a similar set of capabilities as Deal Manager, but tailored for negotiating profitable agreements and contracts. Zilliant packaged these capabilities separately as of release 6.1, at which time it introduced a robust set of enhancements in this area.

* ZPPS Analytics, with new subscription-based capabilities to provide users with easy access to relevant pricing information and insights

In early 2006, Zilliant announced the general availability of ZPPS 5.4, which delivered numerous enhancements to the pricing applications of ZPPS Deal Manager and ZPPS Analytics. ZPPS 5.4 further extended the ability of these two products to improve sales effectiveness and deal execution. Highlights of ZPPS 5.4 included the following:

* Enhanced scenario comparison and analysis views, allowing users to more efficiently create and evaluate an unlimited number of alternate deal pricing and term alternatives in real time. These capabilities helped with determining the optimal product mix and pricing terms for each deal.

* Usability and scalability improvements, permitting users to more efficiently review and refine complex sales deals containing thousands of component line items. The enhancements were meant to increase the productivity of a company's deal price approval process, which is a frequent sales bottleneck in large, global companies that have significant field sales organizations.

* Additional industry-specific features, addressing the complex requirements of manufacturers and distributors, whose businesses span multiple industry sectors, channel models, and geographies.

At about the same time, Zilliant announced the general availability of its Price Integration Framework 5.4 to enable ZPPS to accept and publish pricing rules from leading enterprise order management applications. A component of ZPPS 5.4, Price Integration Framework provides easy, upgradable integration support between Zilliant's price setting and execution applications, and transaction-oriented order management systems from leading enterprise resource planning (ERP) and customer relationship management (CRM) vendors. The component extracts transaction, product, and customer data from the order management application; uses the data to produce optimized price recommendations; and then feeds pricing rules and conditions back into the application in the native format of its pricing engine.
Price Integration Framework supports SAP's Java Connector (SAP JCo) to connect directly to pricing-related remote functional call (RFC) and business application programming interface (BAPI) interfaces. This "price engine ready" feature (one that can be used by simpler formulas in ERP systems) enables Zilliant's many customers that run SAP to integrate Zilliant's price recommendations directly into SAP's pricing module. This integration approach is aimed at accelerating deployment, increasing adoption, and maximizing business benefits for these customers without introducing risk or complexity to their order management processes.

Given that more than 30 percent of Zilliant customers are also SAP users, in mid-2006, Zilliant announced that ZPPS 5.4 had successfully completed formal integration certification testing with the SAP NetWeaver platform (see Multipurpose SAP NetWeaver). Closely following the release of Zilliant's Price Integration Framework, the Powered by SAP NetWeaver qualification further underscores Zilliant's commitment to tightly integrating its pricing applications with mySAP ERP and mySAP CRM applications.

The extensive customer, order, and product data at the heart of SAP's applications allows Zilliant Precision Pricing Suite (ZPPS) to engineer precise price recommendations for every sales transaction across all channels. ZPPS's comprehensive workflow and process integration with SAP's transactional applications then ensures that SAP customers are able to fully execute upon this pricing guidance. With the formal integration certification of ZPPS, Zilliant customers that currently integrate ZPPS with SAP applications using SAP JCo, IDocs, and BAPIs can now leverage ZPPS's integration certification with the SAP NetWeaver Application Server and SAP Enterprise Portal to achieve more seamless integration with SAP applications on every level.

Being Partner-friendly

This brings us to Zilliant's culture of striking partnerships with leading strategy and implementation firms (such as Deloitte Consulting and Hitachi Consulting) and enterprise application vendors, even though some of these might occasionally be competitors. To that end, in mid-2005, Zilliant announced a partnership with Acorn Systems, a costing and enterprise performance measurement (EPM) solution provider (albeit with some price optimization capabilities as well), to integrate each vendors' best-of-breed applications and further improve customer margins. The integration of products and services was aimed at providing corporate decision makers, possibly for the first time, full and accurate ability to determine and maximize true customer profitability.

Acorn's value proposition is a solution centered on cost-control, and it is verifiably accurate, auditable, and actionable, especially for a user company with complex costing issues that obscure margin leakage. Cost to serve is a financial measurement that typically reflects a roll up of all costs associated with selling and servicing a specific customer, including overhead, other indirect costs, and sometimes non-allocated costs. For instance, the solution has enabled a large, US grocery retailer to analyze detailed route and warehouse costs that can be quickly and easily aggregated by store, distribution center, or customer segment for executive level decision making.

Thus, the integration of Acorn's and Zilliant's technologies should give companies a 360-degree view of profitability, combining costs to serve, cost allocation, market price response, and profit analysis at the internal business process level with an external analysis of customer segments and their elasticity to price, discount, and promotional changes.

Most Zilliant customers have either already figured out a way to allocate costs, or they use the basic cost allocation engine to manage this aspect of profitability. Thus, although some customers would benefit from integrating both Zilliant and Acorn offerings for a combination of demand-side price optimization and supply-side price analysis with full visibility for their pricing decisions, and ultimately for a more profitable business, the alliance is yet to bear fruit in earnest.
Challenges

This brings us to some of the challenges Zilliant faces, as well as the inevitable question: where is Zilliant and its market headed? Price management is an expanding and strategic market, in large part because it has delivered significant, measurable return on investment (ROI) for early-adopter customers (whereas counterpart cost containment initiatives are reaching a point of diminishing returns). However, it remains to be seen whether advanced pricing applications will become established as a stand-alone application space in the long term. Time will only tell whether rapidly increasing market awareness and references will be enough to propel the price management and optimization marketplace into mainstream adoption and engender the accelerated growth of the best vendors into strong, sizable market-leaders. The current market still has some clutter and noise from (too many) vendors preaching different value propositions and pricing approaches that are perhaps confusing prospective customers more than educating them.

Fragmentation in the price management space has occurred mostly along vertical industry boundaries, which both helps and hurts market evolution. This fragmentation makes it easy for prospects to narrow their vendor selections to a few vendors with track records in their markets, but it may also limit the size and scale that these vendors can ultimately achieve. Furthermore, cumbersome (yet widespread) administrative price list and discount management functionality from ERP and CRM players, along with their copycat claims about price optimization, have clouded the space. The ultimate question is whether the pure-play pricing management vendors that focus on different niche areas or industries will survive, thrive, or be consolidated into a single vendor delivering an integrated, business-process-oriented pricing solution (that is, one that covers all the price life cycle bases of optimization, execution, and enforcement of prices); or will these vendors be acquired by one of the ERP or CRM behemoths like SAP or Oracle.

Despite the need for and benefits of pricing solutions that can become value multipliers for both front- and back-office applications, there has not been a real boom in the pricing optimization and management market yet. That said, Zilliant and several other pricing vendors are growing rapidly, and they claim to see even sales ahead based on their pipeline. But the estimated number of total customers in B2B is probably only around 100 companies.

There are several reasons why pricing remains a nascent market. For one, even the companies that have implemented pricing solutions successfully, and that have reaped tangible benefits, have been somewhat secretive about leveraging these, both for competitive reasons (not wanting to give their "best kept secret" away) and for fear of alienating (or even angering) customers. Customers might feel they have been taken advantage of.

There are also questions and concerns about product maturity, data availability, the risk involved, cultural and change management conflicts, etc., but these seem to be fading as vendors have improved their capabilities through successful deployments at very large user companies. Another issue is the possible skepticism of sales forces (if not outright sabotage by them) if they fear "big brother" is controlling them and taking away their autonomy in pricing. Again, results from initial deployments indicate this is manageable. After all, how can salespeople argue with pricing that is based on actual data of what has been achieved in the market? Despite these signs that indicate the market is heating up, the status quo (that is, doing nothing) remains a bigger challenge than direct competition for companies like Zilliant.

Because the upper-range pricing management solutions are designed to support large, complex businesses (those with 10,000 to 100,000 stock-keeping units [SKUs], 1,000 to 100,000 customers, hundreds of sales people, etc.), these enterprise-class pricing solutions require considerable investments in software, integration, and change management. Implementing pricing management solutions can range from a few hundred thousand dollars to more than one million dollars in license fees. A company also needs to consider the supporting technology, since most large pricing deployments require the customer to purchase a scalable, back-end database server, hardware, and a reporting tool to support it. Then, there is the customary software maintenance and support agreement, which typically adds an additional 15–25 percent to the software and hardware expenses, depending on the vendor.
Some pundits suggest that companies should, in principle, consider upper-end solutions only when they have the financial assets and requirements for a solution capable of handling the multitude of sales complexities needed to go to market. And of course, there are hard and soft costs associated with business process improvement and change management education about the space, critical success factors to deploying pricing technologies. The combination of all these factors is, for the time being, deterring the most risk-averse purse string holders, leaving them working off of hunch, manual spreadsheets, and multiple silos of data indefinitely. But for the rest of the potential market (early adopters and mainstream), the cost of status quo (leaving millions of dollars on the table) and the compelling ROI of the first movers seem to be breaking the inertia.

Zilliant offers a full range of services to its customers, including professional services, maintenance and technical support services, and educational services to deal with these technical and cultural obstacles. With regards to professional services specifically, the vendor provides its Zilliant Solutions Group (ZSG), a professional services team that plays a direct role in project implementations. By focusing on both short- and long-term value drivers, these experts aim at helping companies achieve their strategic pricing goals. These drivers are capable of (a) customizing the solution to solve customers' unique business challenges; (b) ensuring user adoption through change management; (c) incorporating long-term pricing improvement strategy; and (d) reducing costs and risk by planning out the entire solution road map.

The ZSG team is a direct extension of the user company's project team. Price (profit) optimization is the "holy grail" (ultimate goal) of pricing, and the team's job is to take the user company's ever-evolving data and, using algorithms and models, turn it into actionable price recommendations, rules, and policies that deliver margin lift. Changing the mentality and practice of pricing is an evolution that impacts the entire organization, especially when the "cost plus" mentality is deeply ingrained. Zilliant's change management experts work with key stakeholders to build internal, strategic pricing best practices that lead to long-term, repeatable, thought-out pricing decisions.

Zilliant's own financial performance has dramatically improved over the last twelve months, though it is yet to become profitable on a generally accepted accounting principles (GAAP) revenue accounting basis. However, the vendor has had two consecutive blow-out years and has been cash flow positive the last two quarters. Given that Zilliant has been reinvesting to continue this rapid growth in 2007, it remains to be seen what their longer-term profitability trend will be.

Continued growth is imperative, and one way for expansion would be to attract small and midsize enterprises. But in order to do that, every pricing vendor has to make its offering and underlying principles understandable and affordable to smaller businesses having limited internal pricing expertise. To that end, Zilliant has been investing heavily in out-of-the-box configurations that are vertical and industry-specific. In this way, the vendor hopes to further reduce the cost of deploying the software to make it more palatable to smaller companies. The vendor should also explore the possibility of offering a subscription model, which is already well established in some segments, and is often suitable for smaller companies with variability in demand and limited information technology (IT) bandwidth (see Software as a Service Is Gaining Ground).

While the vendor touts some traction with Deloitte on deployments and marketing (with the most recent press announcement of a truly strategic relationship in February 2007), Zilliant should try to nurture similar relationships with the likes of Accenture and McKinsey. However, this might be difficult due to both parties competing for the same opportunities in pricing strategy and impact analysis engagements (before the pricing software is even deployed). Official partnership and integration programs beyond those with SAP (for example, with vendors such as Oracle, Infor, Lawson, Epicor, or Microsoft Dynamics) would also seem prudent.
A blessing and a curse always comes from a cooperative relationship with SAP. On the one hand, recent moves by SAP might jumpstart a more comprehensive and pervasive adoption of price management solutions, providing a marketing awareness boost and investments for all vendors. On the other hand, what's unclear is how Zilliant will fare in SAP's installed base given SAP's ongoing, close relationship with fierce competitor Vendavo (under the name of SAP's Industry Value Network [IVN]), a vendor that offers a more comprehensive solution for price and margin management. SAP is reselling Vendavo's price management software suite to its customers within the manufacturing industries, such as chemicals, high-tech, and oil and gas.

The SAP-Vendavo joint solution, which is also certified as Powered by SAP NetWeaver, has been complementing and enhancing the price execution capabilities of mySAP ERP and mySAP CRM with real-time, sophisticated pricing analytics, which is a framework for price setting and policy management. Sold under the name SAP Price and Margin Management (SAP PMM) by Vendavo, the solution has been available for over a year. SAP is initially targeting it at the above mentioned three industries, but it anticipates it will address a much broader set of industries in future release cycles. For more information, see Applications Giants Bolster Their Pricing Management Capabilities.

Zilliant still has some opportunity within the huge SAP install base, since its science-based pricing approach can supposedly deliver up to three times the margin lift of a non-science-based approach that relies solely on process control and analysis to eliminate obvious pricing mistakes (the current approach of Vendavo). This is the basis for Zilliant's promise to customers—to help them "achieve the best (most profitable) pricing possible on every deal." Zilliant's competitive wins at such SAP accounts as Insight Enterprises, Schneider Electric, and Smith & Nephew validate that this difference matters to some customers. However, immediate short-term gain is almost always achievable when preventing counterproductive sales processes (granting a huge discount for an unprofitable customer, for example). To this end, Vendavo offers some degree of profit lift too, and combined with its SAP relationship, Vendavo's offerings may be sufficient for some SAP "house" accounts.

Vendavo often claims that segmentation and optimization are not necessary, and that the basic analytic approach reveals all actionable price improvement opportunities. Given that long-term benefits come from the incremental gains of pricing segmentation and optimization to drive margin impact, SAP and Vendavo have recently announced that they will offer these capabilities at some point in the future. But the competition is not going to sit still and wait for Vendavo and SAP to deliver algorithmic price optimization capabilities, especially in manufacturing and distribution verticals, where Zilliant is currently strong.

Lastly, Zilliant and the SAP-Vendavo combination still have competitors. These competitors claim to have credible customers in the B2B industries and offer price management solutions that cover many of the same areas as Zilliant and Vendavo. Such providers include PROS Pricing Solutions, pVelocity, Maxager, Metreo, and Rapt. Acorn is also an alternative in some parts of the market, owing to its appetizing price tag. It is always tricky for the customer to discern which of the above players offers a not-too-simplified or one-dimensional approach.

Some of these players do have the ability to make optimization work and deliver margin uplift. But these capabilities should not be delivered in the form of ad hoc consulting and subsequent customization of software endeavors. Rather, they should be delivered with an instantiated, repeatable approach to the problem in terms of configurable, out-of-the-box products.

User Recommendations

In short, Zilliant does not view price optimization and management as a generic market. The vendor is focused on and serves a range of vertical industries that have specific needs and drivers for success. Therefore, prospective user companies within industrial manufacturing, high-tech, medical device, distribution, advertising and media, transportation, and B2B e-commerce businesses should evaluate Zilliant's offerings. However, consumer retailers and the travel and hospitality segments, all of which are not characterized by major negotiation processes with consumers, are not good prospects for Zilliant, except perhaps in terms of the Test and Monitor application. Zilliant's solutions seem to fit especially well with companies that have a range of price-sensitive and value-driven products and customers that result in meaningful variations in price response—a fertile environment for price segmentation and price optimization to produce the most profitable pricing on every transaction.

The CMO—CIO Organizational Alignment Mandate

The topic of aligning the information technology (IT) agenda with the business agenda has spawned literally hundreds of articles, and certainly sensitized the IT community regarding this issue. Despite the progress made regarding the alignment question, chief information officer (CIO) reporting relationships continue to be positioned at a distance from the chief executive officer (CEO) and strategy function. A comparable trend appears to be occurring with the marketing function. The chief marketing officer (CMO) position is experiencing this same distancing from strategy. These two functions should be on the leading edge of strategy formation rather than the receiving end. Organizationally, this is a source of dilution few organizations can afford, yet it is unlikely to change unless these two functions can demonstrate a clear contribution to the CEO's agenda. In this regard, the CMO and the CIO may be more effective working together than separately.

An Odd Association?

The first thought that the title of this article may bring to mind is "what an unusual pairing—the CMO and the CIO?" The next logical association would be to recognize the need for CMOs to justify or otherwise rationalize their function's spending and their dependence on IT systems (the CIO) to support such an effort. Although it is true that CMOs are under considerable budget scrutiny, the thrust of this article is to address the dilution of influence of marketing and technology on organizational strategy, and to offer some suggestions as to how to create a framework that will leverage the potential of these functions, thereby increasing organizational alignment and performance.

Marketing, IT, and Alignment

There is a common management mindset that results in an immediate association with the IT function when the words organizational alignment are spoken. Obviously, there is a legacy of misuse and misdirection supporting this association, and there are reams of literature that address how to correct the situation; however, the reporting relationship of the CIO remains removed from the center of power and strategy.

Ironically, the CMO position is gravitating to a similar position. Despite a history of marketing leading the direction of the company, current trends are strikingly similar to the plight of the CIO. Consider the parallels in the two positions:

* CMOs and CIOs are reporting to executives other than the CEO.
* In most cases, the CMO and CIO are not members of the board or even part of the executive committee.
* The marketing and IT budgets often deal with extended time horizons, and impact results in a manner that may be viewed as intangible.
* Marketing and IT have their own language and concepts that are not understood by other functions.
* The marketing and IT budgets often eclipse other functional budgets in terms of expense and capital expenditures. For these reasons, there is increased pressure to justify spending. However, justification involves extrapolating into the future with minimal near-term visible results.
* In general, with an organizational emphasis on near-term results, the CMO and CIO are not viewed as the "go-to people" to make them happen.

Thus, though it can be argued that these two functions are among the most strategic within the whole organization, they are increasingly isolated from the seat of influence, where they can have the greatest impact.

Is the Answer ROI?

Most management pundits argue that the answer for marketing and IT is to demonstrate connectedness through a demonstration of return on investment (ROI). From the perspective of fending off the challenges of the CFO at budget time, ROI may work; however, ROI does not address the alignment or connectedness issue. The CEO must be able to connect the dots between the executive agenda and the actions of marketing and IT, in both the short and long run. Likewise, the other peer functions must sense (moreover experience) a common feeling of pain and commitment.

For many in the marketing community, the answer is brand equity and ROI. Certainly, brand recognition and the power of the brand are intuitively appealing, but these concepts are difficult to measure as a component of the whole purchase rationale and experience (meaning impact on customer behavior). Therefore, from a non-marketing perspective, it is difficult to rally around the abstraction of brand attitudes and perceptions. Likewise, ROI is often dependent on forecasted impact, which has its own aura of lack of credibility—and utility.

Thus, the discipline of ROI is certainly a positive step toward creating a sense of accountability relative to the decision making process; however, it does not address the issue of alignment or influence—all it does is introduce a sense of constraint, as opposed to contribution.
In Search of a Lynchpin

The most logical common ground for the CMO and CIO is in the area of customer relationship management (CRM). The obvious follow-up to this starting place would be marketing automation, which is an application designed to help the marketing function more efficiently plan programs and assess the corresponding ROI. Success in this area can build the relationship between the CMO and the CIO, and can generate some slack from the CFO relative to budgeting. However, it is unlikely to create much visibility outside these perspectives. Even if it does receive visibility, it is likely to be viewed as justifying one's actions, as opposed to pulling the organization forward.

The more central and relevant issue is the customer. In business-to-business (B2B) transactions, marketing may be viewed as relevant only in the context of promotions, leads, and literature. Typically, the other functions view these contributions as follows:

* Promotions
Promotions may not be timed to match other strategies and needs. Moreover, promotions may produce customer behaviors that negatively impact the other functions (such as spikes in demand that add pressure and costs to operations and customer service).

* Leads
Leads are often considered unqualified (if they are not decision makers, or if there is a questionable decision time frame) by the sales function; this translates into essentially zero follow-up.

* Literature
Because the marketing department is structured into product groups, literature communicates product attributes versus solutions. Customers are seeking solutions, and the sales function must improvise proposals that address customer needs. Product literature tends to be general (30,000-feet level) or detailed (3-feet level), and therefore does not address an audience of mid-level people, who are often decision influencers, if not buyers. The sales function must again improvise to create relevant literature and value arguments to obtain access to decision makers and influence their decision process.

For the CIO, the customer-facing functions may be operating with systems that limit flexibility, require many workarounds, have slow response times, or have data integrity issues. These limitations can impact the ability to scale operations or improve the customer interface.

For these reasons, the customer-facing functions may not have warm feelings for the CMO or the CIO. To be credible, the CMO and CIO need to be seen interfacing with customers in a listening and learning mode. Any help these functions can derive that will make them more productive and improve profitability will be well-received. Key (B2B) issues revolve around various topics:

* Who is buying (customer attributes), and why do they buy?
* Who is not buying, and why?
* What is the customer's buying process, and who are the players (decision makers and influencers)?
* What type of solution is being sought, and how does it fit with the customer's competitive strategy?
* What supplier policies or performance drives them nuts?
* Where are the opportunities to work more closely together?

What should emanate from these discussions is a clearer definition of how to help the customer-facing functions communicate and deliver a value proposition that will drive revenue and profitability, while improving competitive strength. The sales organization should receive tools and programs that help them relate to the myriad of buyers and influencers they must deal with, and the other functions should receive system and policy support that makes the organization easy to do business with. These types of changes will reduce the height of the walls of the functional silos, and set precedents for working together. Moreover, progress in this area will position the CMO and CIO as clearly directing their efforts to eliminate impediments that impact revenue, margins, and profitability—as well as fostering sustainable performance (music to the CEO).

The Seven Deadly Sins of Software Marketing

Marketing collateral does not come cheap. Costs associated with textual content, graphic design, and production quickly add up. Obviously, you want to get an appropriate return on your investment. This article looks at seven common mistakes, or "sins," made when developing marketing collateral for the software industry. The sins discussed consider such concepts as targeting your market, lowering costs, and making it convenient for your potential customers to use your marketing collateral. Also considered are the various forms of marketing, such as hard copy, electronic, and e-mail. Finally, we consider the cost of changing marketing collateral and its reproduction.

However, before we start confessing our sins, we need to state the obvious. Marketing collateral must be tailored to your marketplace and products. To sell a car, you probably would emphasize miles per gallon, passenger accommodation, and maintenance costs. Applying these same metrics to software may not make a lot of sense or demonstrate the strengths of your software products. While it may go without saying, never lose sight of the obvious—know your marketplace. This simple statement is not considered one of the deadly sins because if you are committing this grievous offense, you need to go back to the basics and seriously rethink your marketing plan.

The good news is that committing one sin may not condemn you to marketing hell, but committing enough of them surely will. So, grab your holy water, prayer beads, or whatever your religion provides for protection, and let's proceed.

Sin #1. Hiding Your Message

Have you ever gone to a web site that is plastered with customer testimonials, but with either no indication of what it is selling or, at best, with its products or services written in small print? It's like lighting a candle and covering it with a basket. You need to tell your audience what you are selling, what services you offer, and what support you provide. Tell them up front that "We offer software designed for the process manufacturing industry," "We cater to the food and beverage industry," or "Our software was developed to support the field services industry."

To avoid the "hard sell" approach, it may be helpful to ease into the description of what you have to offer. Consider the example below for the food industry.

They say that "it's the ingredients that make food taste good." However, in a rapidly changing marketplace, it takes a lot more than ingredients to compete effectively and efficiently in the food industry. Our software is designed to take care of the production and operational issues of the food industry so you can focus on the freshness of the ingredients.

Don't assume that your audience already knows what you do. If they did, they probably would not need a marketing brochure in the first place. In creating marketing collateral, assume that the reader is seeing your company and its products for the first time. Stating the obvious is not a bad thing. With marketing collateral—hard copy or electronic—readers already familiar with a particular content can simply read on or scroll down.

In the case of the cluttered web site, consider your own buying practices. If you were buying a car, would you start by finding out what current customers say, or by finding the car that meets your needs? Your next-door neighbor may be enthusiastic about his truck, but you're hauling kids, not lumber. Marketing collateral, which includes the web site, must clearly state what you are about and leave no room for doubt. When developing a piece of marketing material, remember that this is probably a prospect's first introduction to your company and its products and services.

When driving down a highway late at night on a business trip, looking for a place to stop, does the bright neon sign say in big letters "Free HBO" and in small letters "Motel"? Of course not. Likewise, if your marketing material emphasizes effective formula management before you mention that you cater to the chemical industry, you may want to reverse the order.

Sin #2. Swerving off Course

Too often we give up before the finish line is in sight. We become impatient if the results of a marketing campaign are not immediate. Here are some simple facts. Getting more than a 1 percent hit ratio for a marketing campaign is considered a success. So, if you send out a mailer with a response card to 100 prospects and 1 responds, don't give up. It usually takes between eight and ten contacts before you can expect to get your foot into your prospect's door. Accordingly, when planning a monthly e-mailer campaign, make sure you have enough material for at least eight months, hopefully avoiding repetition. Think about your reading habits. If you are extremely busy, you probably push unsolicited mail into your wastebasket and e-mail into your "deleted items" folder. On those rare occasions when you have time, you may actually peruse the mail, if only briefly. This is why success takes so long. The mail habits of your prospects are not much different from yours. However, if you incorporate consistent, eye-catching graphics, the chances are better that visual recognition will kick in a little sooner than normal.

Constantly changing directions confuses your prospects. Let's say your most recent sell was to a computer manufacturer. Now you want to switch to the discrete manufacturing space, when all along you have been proclaiming software development for process. Sure, make the sale, but don't let it change your focus—at least not after the first sale. Constantly changing your marketing plan destroys your credibility. Trying to be all things to all prospects is a bad business plan—and a worse marketing strategy.

There was a local dentist whose slogan was "We cater to cowards." On every piece of literature he sent out, the slogan was prominently displayed. Now, he did not have the advertising budget that most companies have, but after three years, whenever someone mentioned his name, the response was "Oh, the dentist who caters to cowards." Staying the course does pay off.

Sin #3. Failure to Create Reusable Material

Being able to use a piece of marketing collateral for multiple purposes can significantly reduce your overall marketing costs and time to deployment. If considered from the onset, this is not a difficult objective to achieve. If not, there could be a lot of redundant effort.

Let's look at a simple example to illustrate this point. Typically, marketing collateral is available in hard copy for one-on-one meetings, and electronically for ease of transmission. A nice, professional-looking, hard-copy format is an 11 x 17 inch paper folded in half, giving four 8.5 x 11 inch sides to the brochure. While you could easily convert this to a PDF format for electronic transmission, anyone who has tried to read such a document online knows it is like paying Pac-Man with your scroll bar. Left, right, up, and down just to center the content on your screen, making it difficult for the reader to maintain a steady train of thought. However, the advantage of the 11 x 17 inch format is that it can be easily converted into four 8.5 x 11 inch pages. When this document is converted to a PDF, you just read straight down as you would a normal paper document. When advance consideration is given to the various ways of using a piece of marketing material, your overall costs can be reduced.

Agreeing on a standard format and content can eliminate the typical floundering phase that goes into any creative process. Don't be afraid to reuse textual content. An example will illustrate this idea. In process manufacturing, you are always talking about formulas, pack recipes, ingredients, and scalability. If one of the sections of the marketing piece talks about software functions and features, it is all right to repeat these common aspects in a brochure for the food and beverage industry as well as for the chemical industry. Some might say that you are being redundant. Of course you are. The industries are both process-manufacturing-oriented. Furthermore, you are not going to send the same prospect both the food and beverage and the chemical brochures. With this approach, you need only pepper the functions and features with the uniqueness of each industry—say, catch weight for food and beverage, and carcinogenic reporting for chemicals.

You also want to give some thought to the preferred method of delivery for marketing information to prospects. An electronic transmission with an attachment or an e-mail campaign is the least intrusive and least costly. The problem is getting the e-mail addresses. Unless you have made a concerted effort to obtain addresses over a sustained period of time, the campaign may not have much impact. While you can buy lists, you do not get the list. The owner of the list e-mails your message. Consequently, you must rebuy the list each time. E-books—brochures that you read online as if you were turning the pages of a book—present the most professional-looking, electronic delivery mechanism. Unfortunately, they are typically executable files, which many corporate servers reject as potential virus-spreading attachments.

Another technique is useful for trade shows, where you can expect to meet a cross section of prospects. For them, burn all of your marketing collateral onto a CD, indexed by industry and topic. Essentially, you are creating a highly adaptable CD-based marketing (CBM) environment. If you have ever been to a trade show, you know that repacking for the trip home can be a humbling and difficult experience. Let's face it: you have to leave room for the stress balls, tote bags, and, if there is still room, vendor brochures. CDs take up little room. Since marketing material rarely consumes all of the space on a CD, you can re-burn it with updated information. The major cost components—the physical CD, label, and case—are reusable.There are other ways to promote reusability and delivery options. Thinking about them in the early stages of design may save you dollars, pesos, or yen.

Sin #4. Ignoring the KISS Principle

To borrow a line from a popular movie, "An article should only be as long as it takes to drink a cup of coffee." You usually finish a cup in ten minutes. The KISS principle—keep it simple and short—takes this idea one step further. Namely, avoid complexity. In this hectic, go-go business world, prospects have limited amounts of time for reading marketing material, and probably less time to fully comprehend what they are reading.

Consequently, it is a good idea to highlight or "bulletize" the key messages you want to convey. The advantage of bullets is that it only takes one to hit the target. A reader's eye can quickly scan keywords, and one just might strike a sensitive cord. You should assume that your piece will be read by non-technical individuals who may not understand all of the information technology (IT) jargon and three letter acronyms (TLAs). In fact, you really want marketing collateral to be read by the decision makers—chief executive and chief operations officers (CEOs and COOs), and chief financial officers (CFOs). Just as techies may not know the differences between accrual and impress accounts, a CFO may not appreciate software designed to support a service-oriented architecture (SOA) environment.

A good rule of thumb is to let a non-technical editor have a go at the piece before finalizing the content.

Sin #5. Giving Away the Store

Is the purpose of a marketing piece to close the sale? If you have found such a brochure, stop reading this article, and just duplicate the piece. No, the purpose of marketing collateral is to encourage prospects to pick up the phone and call for more information. If you give away too much detail, prospects may feel that they have a full understanding, decide they don't need the product or service, and never make the call. The more likely scenario is that prospects misunderstand what you are trying to tell them. In either case, the prospect will not pick up the phone or send an e-mail requesting more information or answers to potential buying-signal questions.

Again, using an example for a software solution for the process manufacturing industry, let's say this was your main thrust:

Our enterprise-wide solution for the process manufacturing industry supports flexible formularization, separate pack recipes, and flexible pricing algorithms.

All of these functions are critical for process manufacturing. But so are scalability, catch weight, and repackaging. By not mentioning them, are you giving the misimpression that they are not supported? An alternative way of presenting this concept could be

Our software, designed specifically for process manufacturing industries to include food and beverage, chemical, pharmaceutical, and consumer products goods is a comprehensive, affordable, and full-featured ERP solution.
You have given the reader the basic information that you have targeted their industry and that your product should satisfy all the needs of process manufacturing. They can call and ask, "Can the software do this?" or "What about this scenario?" In either case, you should be able to do a much better job responding to a prospect's interest than any marketing brochure could. Right?

Sin #6. Showing Inconsistency

A nagging problem is in maintaining consistency across the spectrum of all marketing collateral. Did I say 1 + 1 = 2 in the brochure for the automotive industry, and 1 + 1 = 3 in the brochure for warehouse management? This inconsistency becomes embarrassing, since you are probably going to send both brochures to the same automotive prospect. Nothing puts you in a deeper hole than trying to explain away inconsistencies on your initial visit. And even if you can talk your way out of the hole, the prospect is looking for instances to push you back in.

Reusability can help greatly to maintain consistency or, at the very least, be consistently wrong. Remember, in a parade you can be out of step, but if everyone else is in step with you, who will notice?

Sin #7. Forgetting to Toot Your Own Horn

Marketing collateral is not the time when you step back and let others shower you with praise and adulation. If you don't praise your company and its products and services, no one is going to do it for you. But remember, the reader is not naive. If you say the software is the best thing since sliced bread or that your company walks on water, you are going to create more skepticism than goodwill. At least, make sure the water is frozen solid.

Summary

Of all of the sins, hiding the message and not staying the course are the two most common and fatal. Too often we create marketing materials as if we were the recipient. Being so close to the subject matter, we tend to assume that the reader has our level of knowledge. It is better to write down to the audience than above their heads. After your initial face-to-face meeting, you can assess and calibrate the appropriate level of knowledge.

Most busy professionals have little patience. Consequently, it is all too easy to forsake the current campaign and try something new. This creates confusion and doubt with some of your prospects, and with others, you never get to first base. At the very least, if you are going to change the strategy for marketing your software, have the good sense to segregate your prospects so that you do not appear to be abandoning relationships you have been attempting to cultivate.

Finally, when you are preparing your annual marketing plan, it may be helpful to add a column for the corresponding marketing collateral—brochures, e-mail campaigns, e-books, CBMs, web site updates, banner ads, success stories, press releases, white papers, and more. In so doing, you can help promote reusability, ensure consistency, and achieve a greater return on your marketing dollars.

If you have committed some of the sins mentioned in this article, you are absolved. Go my child, but sin no more. If you want to confess sins of your own or have better candidates for the seven deadly, let me know.

White Papers—Not so Black and White

Let’s face it; we’ve all had to deal with pushy salespeople.

How do they always get you to buy stuff—even when it’s something you didn’t need? It’s called the sales pitch. Every salesperson has one, and software vendors are no exception. In fact, they have several ways of pitching their products.

One such way is through a white paper—which often discusses particular problems that many companies may be facing. At the same time, it gives vendors the opportunity to enlighten you about the one possible solution that can “fix it.” However informative it may be, ultimately a white paper is a cleverly written sales pitch—a pitch containing certain buzzwords that gloss over the practical realities of their solution.

Here are ten of the most ambiguous buzzwords I’ve seen used in white papers—and they may make you think twice about whether or not a software vendor is truly focusing on your best interests.


The 10 Most Ambiguous White Paper Buzzwords of all Time

#10 - sustainable

Vendor spin
With environmental issues dominating the media these days, the word sustainable is everywhere—including the world of IT. Software vendors are now adopting this term to describe their software systems and how they are capable of standing the test of time. But technology is forever changing, so can a software solution really be considered “sustainable” when it will most probably have to be upgraded again at some point?

Dictionary spin
the ability to maintain a state or stay in existence over a period of time

#9 – tightly integrated

Vendor spin
Some software vendors believe that a tightly integrated system is the only way to go, because it allows for more monitoring and better control. But is being tightly integrated necessarily a good thing? Not always—and there are a few reasons why. For one, tight integration does not have the ability to scale (see scalability). Secondly, numerous integration points can actually cause “weak spots” in the system. Last, but certainly not least, integrating on an application-by-application basis can mean significant costs for a company.

Dictionary spin
to seamlessly combine two or more components to form a unified system

#8 – cutting edge

Vendor spin
This term is used when a software vendor feels it needs you to know that its product is well-advanced over others in the industry—a belief that it has a competitive advantage because it provides something the competition can’t! But is the product really all it’s cracked up to be? How advanced is it? And will your company truly benefit from all its bells and whistles?

Dictionary spin
a product that is at the frontier of progress in a particular field—for example, cutting-edge technology refers to the most advanced and original technology available in today’s market

#7 – turnkey

Vendor spin
Vendors use this word to describe just about anything—turnkey business, turnkey services, turnkey systems. Does that mean you just put the key in and away you go? There is a lot of effort that goes into implementing a system and getting it to actually work. Even out-of-the-box solutions can have issues once they’re installed. When a software vendor says it has a turnkey solution or system, it’s making a bold statement—too many unforeseen problems can occur in the software implementation process, and for a vendor to imply that you can just plug it in and turn it on is misleading.

Dictionary spin
fully equipped; ready to go into operation

#6 – mission critical

Vendor spin
Vendors use this term to claim that not only are certain business activities or operations “mission-critical,” but that the software systems behind them are equally critical. Beyond the vendor hype and drama, however, a software system is expected to improve performance—an essential element for any growing business. “Mission-critical”? Maybe. How about “does the job”?

Dictionary spin
indispensable; software considered essential to a company’s business operations and intolerant of failure, compromise, or shutdown.

#5 – features and benefits

Vendor spin
Vendors often promote their products by including a long list of features and benefits, but somehow the features themselves get confused with the benefits. With software, vendors use the word feature to describe the different product attributes—and then claim that these attributes will most assuredly benefit the user. These features exist even if there are no users—they are real. The benefits, however, exist only if the features of the product profit the user somehow—they are perceived. All the features in the world are of no use, if they don’t offer a true advantage to the end user.

Dictionary spin
(feature) a desirable characteristic; (benefit) an advantage or profit

#4 – paradigm

Vendor spin
It’s really just a fancy way of saying structure or model, but software vendors use it to describe the very essence of what their software solution is based on. They’re basically asking you to adopt a new way of thinking about what might be just an old idea that’s been “revamped.” Maybe by looking at their product from a newer perspective, you’d be more likely to buy it. What you should really do is go with your gut instincts—with all the facts in hand.

Dictionary spin
a conceptual model used to explain a concept or theory; a set of experiences, beliefs, and values that affect the way an individual perceives reality and responds to that perception—resulting from the three main branches of philosophy; metaphysics, epistemology, and ethics

#3 – synergy

Vendor spin
Used to describe how software vendors can bring various groups of people together, to form a harmonious union of technical expertise that will ultimately create the perfect solution. Combining forces to build a better product—which may not always be a good thing when it comes to software. Too many cooks can spoil the broth…

Dictionary spin
the effect of two or more agents working together to produce an effect that is greater than the sum of the parts

#2 – scalable/scalability

Vendor spin
This is tech lingo vendors use to describe a system that can be readily expanded over time. And while it is a desirable property, vendors want you to believe that a scalable system will adapt to your business’ increasing demands without significant modifications or additional investment. But be careful—although a scalable system is designed to help improve performance, can you be certain that your existing infrastructure can handle the load? Are there really no additional costs? Can a scalable system guarantee your company’s scalability?

Dictionary spin
a capability of being scaled or expanded; to easily expand or upgrade on demand

#1 – solution

Vendor spin
The concept is simple enough—you have a problem, you find a solution. Unfortunately, these days software vendors abuse the word . It seems technology companies aren’t just making products or offering services anymore; they are now providing solutions. These are magic potions that can enable experiences and make your strategic and tactical dreams come true. But how can you be certain that it’s the right solution for your company? Just because it’s called a solution doesn’t mean it’s the answer.

A New Customer Relationship Management Framework: Twenty-first Century Necessity, or Blowin' in the Wind?

What do you think about when you think customer relationship management (CRM)?

My bet is that you'll think that it's marketing, sales, and support functions, or a strategy that is designed to garner customer commitments of some sort, or an outlook and set of practices that will drive customer behaviors when it comes to product or services sales—and the words up-sell and cross-sell will be prominent in your musings. But that is oh-so-either-twentieth-century or so-five-minutes-ago that it just doesn't make it.

Why Not?

Simply put, the business ecosystem changed dramatically and for good about three years ago (five minutes in fashionista time). It shifted focus from corporate to customer, and the location of value changed with it. Where value had historically been located in the products and services produced by companies, it is now located in the value produced by the customer. The driver's seat is now occupied by that customer, whether the service is business-to-business or business-to-consumer or government-to-citizen. Ultimately, value now lies in the hands of the individual customer, and it is up to the company to both come to terms with that as the way the economy now runs, and to find ways of receiving that value from the customers through the provision of value to the customer.

Think I'm wrong? Look around you at what's successful these days. You hear tell of The Long Tail—niche markets that are successful over time by capturing the volume of individual responses through the creation of a highly specific market built around a personal desire of one sort or another. It's why you see a proliferation of successful mini-Starbucksian types of businesses. Some of the more colorful examples:

1. There are dessert-only restaurants in New York (US) and Barcelona (Spain), among other places, that have high-end desserts only on the menus.
2. There is a concept of fractional super car ownership that allows you, for some yearly sum at different levels, to use Porsches, or Bentleys, or Ferraris for weeks at a time, depending on what level you purchase for the year. It's the ultimate chichi car ownership model.
3. According to the author of The Long Tail, Wired's Chris Anderson, 25 percent of purchases at Amazon are from non-traditional booksellers who would otherwise have no chance of selling their books.

We can go on, but this is merely one representation of the transformation of the desires of the customer.

Peppers & Rogers have a different take on customer value. They call it "return on customer," which they see as a metric and set of performance indicators that are a true measure of a successful business. Their recent hit book Return on Customer makes it quite clear that whether or not you agree with their specific metrics, we now live in an age where the customer, not the company, determines the value.
What Is that Value?:The irony is that in the "old days" of CRM, you'd think that the value was determined purely financially. Bottom- and top-line stuff. Revenue, sales volume increases, margin and profit increases, number of products from your company owned by the customer, and so on. This is not the case in the age of the new customer. The customer's idea of what is valuable and the company's may be quite different.

What customers are looking for is "meaningful value." In other words, something that they think is worth it. Worth what? Something for which it's worth being advocates for your company. But we'll get into that in a short while. Customers are looking for a great experience with your company—an experience that is owned by them. They are looking to your company, not just as a manufacturer of products and services, but as an aggregator of experiences that they both drive themselves and co-own with you. This means they expect a certain level of transparency—also known as honesty—from you.

Don't underestimate this, because your underestimation of "truth, but not advertising" can be the deal-breaker that drives your customer from you. It is the reason that three years ago, no discernable percentage of companies were running business blogs, and that now 8 percent are, with 55 percent intending to, according to multiple studies recently released. Because honesty no longer lies (double entendre there) with the marketing department. Honesty is a corporate effort at conversation with a customer from all employees. Marketing in the way that we knew it is not as useful as it once was, which means that traditional CRM ways of looking at marketing (campaign management and the like) need some rethinking around the use of the new means of communication that customers are demanding, and around the new approaches to marketing taken by some of the big players like Procter and Gamble (P&G).

What do they do? They understand the value of intimacy with the customer—truth, and then some. For example, P&G has a network of 600,000 members they call Vocalpoint. Know what it consists of? Mothers. Yes, mamas, but with a unique twist. Each of the mommies has a social network of at least twenty-five other moms. Multiply that, readers, and what do you get? A minimum of fifteen million reachable targets that are living within trusted networks. So if Prime Momma in Network #33 says to Mommy #52 that they should take a look at this P&G product sample which Prime Momma thinks is really cool, Mommy #52 does and tells #53 about it too. Why shouldn't she? Prime Momma is a trusted friend.

This all works because P&G gets what the new customer demands and what this customer and potential advocate sees as value. Thus, they understand what the new CRM is. Read these quotes from P&G chief executive officer (CEO) A.G. Lafley real close, because they are an exact representation as to why we need a new framework for CRM going forward:

"We have to create a great experience every time you touch the brand, and the design is a really big part of creating the experience and the emotion. We try to make a customer's experience better, but better in her terms."

"I think it's value that rules the world. There's an awful lot of evidence across an awful lot of categories that consumers will pay more for better design, better performance, better quality, better value, and better experiences."

This latter comment was a direct counter to Wal-Mart's philosophy that "price rules the world."

Ultimately, what I'm saying here is that there is a new breed of customers in town who are both undeniable in their formidable presence, and who have demands that are non-negotiable. They are social customers who are as likely to trash your company as to be advocates for you. They are customers who are part of what Springwise likes to call "generation C"—creative, connected, and content-driven—regardless of which actual generation they belong to. It is the Blackberry users who use the device for personal stuff too and take it home at night. It is the kids who text message their buds, instant message (IM) them, or even call them. It is the people who look at what you do and think cool. But it is also the people who use the Internet to get the word out about what bad service a company provides. They get that "diss" to absolute strangers who automatically trust the bad comments and spread it to others—even though the only thing that you know about the person sending is that their e-mail handle is rabidbatman@robinzonked.com. To both counter the latter, and encourage the "cool" response and create an advocate, what you have to provide as a business is an experience with you, your products, and your services that distinguishes you from your competitors who can provide similar productts and services as cheaply and as easily as you—something that your customer is fully aware of, by the way. Think about it. You're a customer too. Don't you know that? Don't you think—I loved that hotel? or I hated that hotel?—and that can color your perception of an entire vacation. Imagine that thinking going on about all products, services, and companies these days.
That means that you have to differentiate yourself by providing customers with a personalized experience that they can find some meaningful value in. And that meaningful value could just be the satisfaction of outright "coolness."

Think that's an overstatement? After all, it's not easily metrically determinable. Well, think of this. A study that was commissioned in a joint effort by Intel and Toray Ultrasuede found that 76 percent of the survey respondents not only looked at someone's technology, but at the style of it—and that style was a critical factor in technology choice. Now, while this study indicates something about the new customer, Intel and Toray Ultrasuede's answer to the results indicates something about uncreative thinking—an ultrasuede-covered laptop. Sigh and Ugh.

But the underlying research is both sound and important. What is meaningful value to a customer can be emotional. What these customers want are the tools to fashion and sculpt their own experiences with you.

Disney Destinations Marketing, the vacation arm of Disney, made what they call a small change in their CRM acronym a few months ago. They started calling it CMR—"customer-managed relationships." They made what that meant clear when their spokesperson said, "CMR is our version of CRM—just a slight nuance regarding our philosophy that our guests invite us into their lives and ultimately manage our presence/relationship with them." While I think that's a lot more than a slight nuance, it indicates that there are a number of companies that know the new business models and especially the customer strategies, and thus, the processes that are determinate in the execution of those strategies now have to be built around features and functions that have some engaged customer value embedded—whether the feature or function is internal or external.

So a new framework for CRM has to be built. One that says, "we recognize that customer demands are different than they were; that customers want to be more engaged in the creation of personalized experiences with the companies they choose to collaborate with." In order for the company to get value from the customer, they need to both create an advocate and not create a verbal terrorist. The company has to be both a manufacturer of goods and services, and an aggregator of experiences that provides the tools and environment for the customer they need to make those experiences excellent and "cool." That means that blogs and social networks and user communities and cell phones and mobile device platforms and podcasts and you-name-it are all part of the customer strategy that wins during this part of the twenty-first century. The new framework for this now needs to be created. If it's not time, it's too late.

A Positioning Process Helps Product Marketing Managers Do More

At most business to business (B2B) software companies, product marketing is being asked to do more with less head count. There aren't enough hours in the day to stay on top of competitive issues, customer requirements, and the needs of product management. And let's not forget about marketing, the lifeblood of every company. If you don't market effectively, there's a good chance you won't sell enough product to make a profit, and we all know what that means.

So, whether your product marketing managers spend too much time on marketing or not enough, you can resolve either problem with a formal positioning process. A positioning process is a way of cloning your product marketing managers by documenting all their knowledge relevant to marketing and sales, and then creating a standard way of describing products and their benefits.

A Positioning Process Is Essential

While it's essential to have a positioning process, few B2B companies have a formal one, and as a result, resources—especially in product marketing—aren't maximized. Some companies get around this problem because they have marketing veterans under their employ who know where to go to get the information they need to create a brochure, a direct mail piece, or an advertisement. They have relationships with the right people who can tell them what they need to know.

Other companies, naturally, lean on product marketing. But product marketing doesn't always get optimum cooperation because of conflicting priorities. It's pretty hard for product marketing managers to justify devoting a lot of time to a marketing project when they face product-related deadlines.

The right time to lean on product marketing is when the high-level, product requirements document has been completed. That's when product marketing managers begin to think about the launch of a new version of their product and a revised positioning strategy. They have one less competing priority, and should be able to take an active role in the positioning process. That's when the cloning process should begin.

The First Step—Do the Research:

The first step in the positioning process is to do the research. The good news is that product marketing managers already have done most of the research as part of their job. To successfully position a product, you need a thorough understanding of customer problems, channel issues, and how competitors are positioned. The answers to these and other questions become part of a rationale document for your positioning strategy:

1. What is your target market (size, type of company, etc.)?
   
   
2. Who is the decision maker you want to target your message to, and what keeps that decision maker awake at night?
   
   
3. What pressing problem does your product solve for your prospective customer?
   
   
4. How is your prospect solving that problem today?
   
   
5. What specific benefit does your product deliver?
   
   
6. Why is your product better than the current solution and competitive alternatives?
   
   
7. Who are your key competitors; why and when do you win or lose to them?
   
   
8. How do your competitors position themselves in their marketing communications, including ads, direct mail campaigns, brochures, and web sites?
   
   
9. What makes your product unique in a way that is relevant to your prospect?
   
   
10. Are there any problems, unique challenges, or special needs of your channel?
    
    
11. What do prospects and customers like and dislike about your product?
    
    
12. Do prospects and customers share your belief of why your product is better than the competition's?
    
    
13. Are there any characteristics of a sales situation that indicate whether or not your product or service will be selected?

Now incorporate the answers to these questions in a rationale document. By doing so, all product knowledge is captured in one place and can be used as a reference guide when marketing and sales need it. The rationale document should be three to five pages and should include this information:

1. Product Category—Define the product's key features, advantages, and benefits. A matrix can help clarify these items.
   
   
2. Product Line Fit—Describe how the product fits into the overall company product strategy.
   
   
3. Situation Analysis—Describe the conditions that justify the release of this product, including why the company believes it can be successful.
   
   
4. Market Analysis—Profile target market(s) by size, revenue, market segment, operational type, or other relevant categories.
   
   
5. Audience Analysis—Profile key prospects within the target market(s), including job titles and functions (demographics) and their concerns, attitudes, and behaviors (psychographics).
   
   
6. Distribution—Describe how the product will be distributed and the impact of distribution on product communications.
   
   
7. Competitive Positioning—Describe the key competitors, their targets, and how they position their products.
   
   
8. Positioning Statement and Rationale—Evaluate the product positioning statement against the following four criteria: Is it important, unique, believable, and usable?
   
   
9. Support Points—Describe how the three support points make the positioning statement unique, believable, and important. If multiple markets or audiences require unique support points, explain why.

A rationale document transfers important product knowledge to those who need to know, but who don't have the time or expertise to find the information themselves. It's especially useful when creating a product message strategy that includes a positioning statement (number 8 in the rationale document) and three or four support points (number 9).

A Message Strategy Is a Time-saver:

Your positioning statement becomes the central idea and theme underlying all marketing activities. It is a short, compelling, declarative sentence that states just one benefit and addresses the target market's number one problem. It must be unique, believable, and important, or the target market will ignore the message. Once you have found the right message, your product marketing managers won't need to be involved in every planning session for every marketing campaign.

Supporting benefit statements tell the story in more detail. They also provide a structure for product demonstrations. While the positioning statement articulates a high-level benefit, the claims made in the supporting statements should be readily demonstrable. That is, in just a few steps, you should be able to show how the product delivers concrete benefits.

Make sure your message strategy has enough detail to support the creation of a standard product demonstration. This helps your product marketing managers to create a demo quickly. And there's another benefit—the product detail in the support points answers a lot questions before marketing and sales ask them.

A message strategy also facilitates delivery of the same message across all marketing media, including web sites, brochures, advertisements, and presentations to investors, industry analysts, and prospects. A standard outline format makes it easy for writers and other communicators to see the message strategy's benefit hierarchy, and to take full advantage of it.

A Rationale Document Captures All the Product Knowledge

In addition to documenting product knowledge, the positioning process improves marketing without intense, time-consuming input from product marketing. A message strategy is like the recipe for how to talk about your product. Follow the recipe rather than ask product marketing, and your marketers can create a compelling, accurate story about your product.

This does not mean that your product marketing managers no longer need to be involved in the planning and creation of marketing materials. They should provide input when appropriate. It's just that the process won't take up nearly as much of their time. That's because marketing gets most of its infusion of product knowledge by referencing the rationale document and message strategy. And that means your product marketing managers have successfully cloned themselves; they'll have more time for other competing priorities.

Conviction is the Intangible in a Successful Positioning Process

Conviction is an important intangible that can make or break your positioning strategy. You begin to develop conviction through research on your customer, competition, and channel. But that's not enough to give you the conviction you need to stand up to powerful political forces in your company who may shoot holes even in your most compelling positioning statement.

Complete conviction in your work comes from a positioning process that includes an evaluation criterion. An evaluation criterion gives you a simple mechanism to determine that one statement is good and another is not so good. All you have to do is answer the following questions about your positioning statement:

* Is it important? Does it address your target's most pressing problem?
* Is it believable? Does it "ring true" by referencing existing market conditions?
* Is it usable? Does it work well in any marketing medium?
* Is it unique? Are you the only one making this claim that meets all the other criteria? Does it differentiate you from your competitors?

The Importance of an Evaluation Criterion

An evaluation criterion improves your work throughout the positioning process. For example, during your first brainstorming session, you need to begin at the right starting point, or it will take forever to "cross the finish line" (agree on a positioning statement). Those involved are free to suggest any positioning statement they want. You'll hit the "bull's-eye" (the statement that works best) sooner if brainstorming ideas address your target buyer's most pressing problem. Reject those ideas that do not.

But we're jumping ahead in the process. Before you put together a team to develop a message strategy, a lot of research needs to be completed and documented. Successful positioning requires a thorough understanding of your customers, your competition, and your channel (that is, how you sell—either direct or through partners and value-added resellers [VARs]). You need to be able to answer the following questions before you start to develop a positioning statement and message strategy for your product or service:

1. What pressing problem does your product solve for your prospective customer?
2. How is your prospect solving that problem today?
3. What specific benefit does your product deliver?
4. Why is your product better than the current solution and competitive alternatives?
5. What makes your product unique in a way that is relevant to your prospect?
6. Can you communicate this difference in a way that sets your product apart from the competition?

Conviction Comes from Knowledge

Besides customer concerns, other psychographics, such as industry and technology trends, can affect your message strategy. So can demographics such as titles, standard industrial classification (SIC) codes, and company size. The more you know about your target buyer, the more confidence and conviction you'll have in the effectiveness of your proposed positioning strategy.

Differentiation is critical to successful positioning of your product. You can often discover how a competitor is positioned by analyzing its print advertisements and web site. A positioning statement—the idea or theme behind all of your competitors' marketing communications—usually appears in the first paragraph of an advertisement or in a prominent position on the home page of your competitor's web site. Becoming familiar with competitors' messages in other marketing communications, such as direct marketing pieces, brochures, press announcements, and trade show materials is a good idea. See if these messages have consistency and continuity. You'll be more confident about your work by recognizing the realities of your competitors.
A Rationale for Your Conviction

Now that you've done your research, create a rationale document that captures all the knowledge about your product's strengths and weaknesses, target market, market pressures, channel challenges, competition, etc. Eventually, the rationale document will include an assessment of your message strategy that consists of a positioning statement and three to four supporting benefit statements.

Let's assume your team has converged on a good draft message strategy. The positioning statement is unique, important, believable, and usable. It's twelve words or less (not including the product title), and through creating samples, you know it adapts to marketing mediums such as print ads, brochures, public relations, direct mail pieces, e-mail blasts, the web site, your trade show booth, etc. You've got conviction about your work, and you are ready to see what the rest of the company thinks of it.

Your positioning process should include both informal and formal feedback loops with stakeholders such as sales, channel members, marketing, public relations, product marketing, and management. Provide them with the draft message strategy, a rationale document that includes an analysis of the message strategy using the criteria, and sample applications of the message strategy.

The Way to Know Who's Right

Get ready for inevitable challenges to your work, because when it comes to positioning your product or service, everyone has an opinion. So who's right? With no criterion to judge alternative ideas, a cynical answer might be the person with the most political capital. Instead, even management's ideas can be rejected or given further consideration with this simple test and explanation: A good positioning statement needs to be important, believable, and unique, or your target audience will ignore your marketing efforts.

Just remember, there's always potential to improve your work by considering different, compelling alternatives. Be willing to discover an even better position at any time in the process. Even at the end. This is called belief with an open mind.

PowerPoint for the Powerful

When I was director of product marketing for Navision in Vedbaek, Denmark, the final step in our positioning process was a presentation to members of the executive management team. The team could approve the message strategy, suggest modifications, request that we do more field testing, or send us back to the drawing board.

Each product manager's presentation consisted of twelve to fifteen PowerPoint slides that explained the positioning process, summarized the research, and rationalized the proposed positioning strategy. The presentations followed the same outline, and were intended to give senior management confidence in the product manager's work. The presentations started with an assessment of the target market, target audience, and key buyer concerns. Then they provided answers to three fundamental questions we had asked in the beginning:

1. What problem does this product solve?
2. How are people solving the problem today?
3. Why is our product a better solution?

An assessment of the competition followed, with an analysis of its advertisements, web sites, and other marketing materials. This analysis resulted in a positioning statement for each competitor. Each one was placed on a quadrant, or perception map. Management could then see positioning opportunities not claimed by others—the territories still open for us to claim.

Finally, the product managers explained the last step they took in the positioning process by answering the following questions about their products:

1. What is it (that is, the product's main feature and the product category it is classified under)?
2. What does it do (that is, the product's advantage and description)?
3. What does it deliver (that is, the product's main benefit)?

Often, the product's main benefit seems so basic that nobody bothers to do the spadework needed to dig down below the obvious to the true foundation that builds a solid, unassailable positioning strategy. What the product delivers—the key benefit attuned to the needs of the customer—is typically very close to the right position.

At this point, the product managers introduced their proposed positioning statements and support points. Of course, an evaluation followed, assessing each positioning statement. Was it unique, believable, and usable? Was it concise enough to be remembered? Did it have meaning to the target market, and could it be used in a variety of marketing situations?

Make Them Earn Your Advocacy

During the positioning process, I worked closely with each positioning team, which was led by the product manager and included a writer and several product managers from key countries like the United States, Germany, Spain, and the United Kingdom. In addition to being a coach, my challenge to the product managers was that I had to support and approve the management presentation. They had to convince me before they got to go to the brass. We all understood that this was intended to be more than a dress rehearsal. I needed to be a strong advocate to stand with the product manager when the inevitable criticisms would come from the management team. Thanks to the evaluation criterion, we always went into the presentations with conviction about our work.

The management presentations were challenging and fun. Almost every question, comment, or objection was answered by referring back to the facts gathered and summarized in the presentation. The product team also had the opportunity to tap into the knowledge and experience of management. The process had also psychologically prepared the product managers. Just as they were never afraid to defend their positions, they were also prepared to discover a better position, if one appeared. Preparation had typically been so thorough, and the product managers so sure of their work—they had conviction—that almost every positioning strategy was approved in a single meeting.

Of course, some of these presentations went more smoothly than others. One in particular stood out. We could always count on the vice president (VP) of sales to challenge our work. In this case, he was particularly vociferous, tossing out one challenge after the other for more than forty-five minutes. Each challenge was handled adeptly by the product manager, who clearly had confidence in her work. Finally, the VP of sales gave in, and the product manager got her approval. As she left, she walked by the VP and patted him on the shoulder as if to say, "Good try. Next time, have more conviction when you decide to challenge me."

Dead on Arrival without Conviction

VPs win more challenges like this one than they lose. That's why the best positioning strategy may not win if it is not presented with conviction. Conviction comes from following a process; knowing you have gathered the critical facts; getting extensive input and feedback; and using criteria to evaluate your options.

Without a formal positioning process that includes an evaluation criterion, it's hard to have conviction, and your proposed positioning strategy could be "dead on arrival," meaning it could be rejected before it has even had a chance to be considered. You're likely to give in and try something different every time someone challenges your strategy. That's why many companies end up with muddled positioning strategies for their products or services. They jump from one concept to the next, with no way of judging or defending the latest one. Don't let this happen to you. Adopt a positioning process that includes an evaluation criterion—and have conviction in your work.

Factors Inhibiting the Widespread Adoption of Business Performance Management

Although business performance management (BPM) offers outstanding benefits, such as helping organizations align their performances to their business processes and their overall organizational strategies, widespread adoption has been slow at best. BPM vendors need to ask themselves why this has been the case, and what they can do to increase their market penetration. A step in the right direction would be to identify BPM's competitors within the overall business intelligence (BI) market, analyze the market penetration that BI solutions have sustained, and determine how BPM can reposition itself to increase its competitive edge.

Identifying Vendor Differences

Identifying the way vendors are positioning themselves in the market may help users find the vendors that most closely meet their requirements. Although there is a great deal of feature and functionality crossover, vendors market their differences aggressively. This may create confusion for user organizations. Differentiators among vendors are generally seen in business benefits, market positioning, and organizational uses, which often translates into how solutions are adopted and used.

BPM Vendors

Leading BPM vendors include Applix, Cartesis, CorVu, Clarity Systems, Actuate, and Hyperion. Analysts forecast that the BPM market will reach roughly $1 billion (USD) by 2011. While BPM vendors provide similar features as their BI counterparts, they primarily focus on planning, budgeting, forecasting, consolidation activities, etc. that center on an organization's financial performance. This can include sales and marketing efforts, human resources management, and vertical market solutions.

Traditional BI Vendors

Traditional BI vendors include Cognos, Business Objects, Information Builders, and MicroStrategy. In 2005, analyst consensus placed the overall BI market between $4 billion and $6 billion (USD) with high growth rates for subsequent years. BI vendors provide users with the ability to create and leverage data from within a data warehouse, and extract, transform, and load (ETL) functionality that pools data from across various applications to create a centralized data repository. Additionally, reporting, online analytical processing (OLAP), analysis, scorecard, and dashboard functionality provide the user with interface and front-end analysis tools. Lastly, many BI vendors develop solutions based on various vertical markets, or business functions, to meet the general needs of organizations out of the box, and increase their usage across the organization by providing specialized solutions.
Crossover Vendors

In addition to vendors with a strong presence in either BPM or BI markets, several vendors have expanded their product offerings and marketing strategies to compete in both spaces. Included in this list are Actuate and Hyperion, which have crossed over from BPM to include BI. Within the BI space, Cognos and Business Objects are examples of vendors positioning themselves in both markets. These crossovers give users more flexibility. For BI vendors, their expansion into the BPM market gives their customers the advantage of a BI platform, vendor viability, and features and functionality. Additionally, many customers that implement BPM solutions do so as expansions within their BI frameworks.

Operational BI Vendors

Operational business intelligence (OBI) has emerged to provide organizations the forward-looking analysis and real-time decision-making ability lacking in traditional BI. Operational BPM and BI use similar tools to measure and define an organization's performance, and to compare those defined measurements to identified metrics. However, the focus of each market differs slightly. BPM focuses on the departmental management of metrics, or key performance indicators (KPIs), to manage the application of strategic planning. OBI leverages the use of BI to embed those tools within organizational processes. OBI includes the development of analytics and dashboards to monitor various metrics and provide collaboration tools to interface with various departments. OBI tends to appeal more to operations users and lines of business (LOB) managers, while performance management tools appeal to financial applications users.

Factors Inhibiting the Widespread Adoption of BPM

Aside from market size and current market penetration, the perception of BPM is that it has less presence than its BI counterpart. In reality, BPM and BI each play to a different audience in terms of usage within the organization. BPM's main focus is financials, including budgeting, consolidations, planning, and so on. However, BPM vendors may offer some similar features and functionality as BI vendors. BI vendors focus on the breadth of their product offerings, which include data warehousing, OLAP, reporting, usage of dashboards, etc. This means that BPM vendors might have to fight to get their "foot in the door," because BI plays to a wider market.

Installed Base

BPM vendors compete in a skewed market where they are immediately disadvantaged. Why? BI has a large installed base. BI vendors use aggressive marketing campaigns to target their current customer bases and to increase standardization within organizations. This presence often creates a roadblock for BPM vendors. A BI vendor's installation base and crossover strategy makes the vendor a natural contender for growth within user organizations. BI vendors have greater success because it is easier to sell to a current, satisfied customer than to find new customers. Additionally, many BI vendors develop crossover strategies or market their BI functionality to meet an organization's BPM needs.

Platform Standardization

Standardization on a single platform by the information technology (IT) department represents a significant obstacle to BPM vendors. One of IT's goals is the creation of a stable and manageable environment. BI standardization involves the use of a common BI platform to meet the needs of an entire organization. It also allows BI vendors the advantage of expanding their installed bases to generate more revenue and to align themselves more closely with the IT department.
This means that once a BI environment stabilizes, the expansion of that environment may be seen as the easiest route to achieve both IT and business satisfaction. Vendors that try to enter these organizations may encounter resistance due to the additional time and resources necessary to install, maintain, and integrate the new tools within the current environment.

Similarly, organizations have been gravitating toward standardization on an overall IT platform—that is, Microsoft, IBM, SAP, and Oracle (MISO). Therefore, organizations are more likely to look to these vendors first for BPM or BI solutions. Although most BPM vendors can integrate within these environments, the seamless transition and the use of a single platform create more ease for the IT department.

Also, the products offered from the MISO vendors are built specifically for these platforms to make, in theory, the job of the IT department easier. Whether other BPM suites are better suited to the organization's needs becomes inconsequential, as the short-term benefits of an easy integration and general functionality may outweigh the payback of a full-scale project to evaluate other options.

Financial Resources

BPM vendors have another obstacle—the financial strength of BI vendors. With their substantial revenues and profits, many BI vendors have an advantage over BPM vendors in their ability to grow functionality or sales channels either organically through internal efforts, or inorganically through the acquisition of smaller vendors. The development of BPM functionality allows users to use their current platforms with minimum integration or training issues. This provides inherent value to current customers and allows them to take advantage of a vendor's far reach.

BI vendors that become crossover vendors through organic growth can increase their installed bases and focus on platform standardization. Alternatively, many BI vendors choose to acquire smaller, best-of-breed BPM vendors to broaden their market shares. A recent example is Business Objects' acquisition of ALG Software. Such acquisitions give larger vendors an automatic inroad into the BPM market. Additionally, by buying out BPM vendors, BI vendors increase their market penetration, customer bases, and overall presence. Once BI vendors do this on a large enough scale, they could dominate the market by default, making it difficult for best-of-breed BPM vendors to compete or to expand their market presence.

Learning Curve

BPM vendors are missing the boat by arguing ease of use against BI tools. User-friendliness occurs due to familiarity with the tool, and not because of its perceived intuitiveness. Training initiatives are required to get users "up to speed" (accustomed to) on whatever tools they will use. Their comfort using the installed applications creates an ease of use that cannot always be duplicated by a new system.

Basically, the unfortunate reality for BPM vendors is that BI is already in the organization. Even if the learning curve for a BPM tool is not as steep, it may not matter. The result is that BI's use within organizations creates its ease of use over time. For BPM vendors, arguing that they have an advantage in this respect may be a losing battle. A better strategy would be to focus marketing messages on addressing perceptions of BI instead of focusing on a point BPM vendors are not likely to win.
How BPM Vendors Can Accelerate User Adoption

BPM vendors and their messages of aligning corporate strategy and business processes to drive profit have gained momentum within organizations. However, the subsequent actualization of BPM's strengths has been adopted at a slower rate than its BI counterparts. BPM vendors need to identify and focus their market strategies on differentiating themselves further from BI and on using their key strengths to further penetrate the market.

Vertical Markets

BPM vendors could accelerate user adoption by expanding into key vertical markets. These markets include finance, banking, and government. BPM's strengths are within budgeting, planning, activity-based costing, and so on. Focusing on these areas may provide BPM vendors with the ability to show user organizations the inherent value of their software in a way that does not compete directly with their BI counterparts. Also, by providing these features out of the box, and because they require less customization, the implementation times are lessened, thus adding to users' perceived value.

In addition to a vertical focus, the features that BPM solutions provide to target these specific markets could give BPM vendors the edge in relation to more horizontal implementations. Once a vendor becomes known as a leader within a specific sector, its expansion across departments within organizations may be an easier transition. Additionally, based on a BPM vendor's strengths, it can partner with BI vendors that already have a strong foothold within the industry, but whose functionality may not include BPM. This would deliver benefits to both vendors, and enable BPM to extend its presence within organizations.

Seeing IT as an Ally, Not a Detractor

To ensure successful BPM, the IT department and business unit need to work together. Many BPM vendors abandon the sales effort if IT is involved in the decision-making process. In reality, these vendors may be "kicking themselves." In many cases the business unit may drive the process and choose the tool. However, the IT department provides the back end support and maintains the platform.

Due to its overall structure, such as being built using a data warehouse and ETL processes, IT's involvement in BI is great. The expansion of many BI projects is based on IT's buy-in to support the infrastructure. Because BPM appeals to financial departments, business units that manage metrics, and C-level managers, the involvement of IT might not seem as intuitive.

Vendors positioning themselves solely for business units may be missing the boat. IT's involvement, and bridging the gap between IT and business units, can help guarantee a vendor's positive perception by the organization. Alternatively, if buy-in from the IT department is not attained, the internal expertise to keep the system up and running may be lacking, and expansion throughout the organization will most likely not occur.

Tying Key Differentiators to Return on Investment

Within the BPM and BI markets, return on investment (ROI) seems elusive. These two markets have an overlap of various features and marketing messages, but the overall advantages and how to measure them are not straightforward. Common ROI measurements that reflect hardware and software costs do not provide the full picture, as BPM advantages tie in directly to the organization's strategy. Examples include an increase in sales, lower customer turnover, successful financial consolidations, and so on.

BI can provide the same advantages, where its focus aligns with that of a BPM initiative. This means that although BI can be measured in time versus cost savings, the additional ROI measurements attached to BPM only work if the solution is aligned with organizational strategy. Vendors can use ROI calculators to develop an ROI methodology that highlights their alignment to an organization's overall strategy to further differentiate themselves from their BI competitors.

Conclusion

The focus of BPM and BI vendors overlaps as BI vendors enter the BPM landscape and vie for domination within the market. Due to their current market presence, BI vendors have a perceived advantage over their BPM counterparts. BPM vendors can learn from BI's past successes to expand their presence in the marketplace. Additionally, they can leverage their key differentiators to make more inroads into expanding their customer base and to build upon their inherent advantages.