Articles by Larry Walsh

I’ve been talking with marketing managers at vendors and large integrators, and they share a common complaint: their efforts are unappreciated and often dismissed by their sales counterparts.

No shock. Research conducted by VARBusiness last year found that marketing and business development ranked among the least valued items for improving sales and growing a business. Conversely, greater management focus and expanding sales teams was ranked among the best actions to drive growth. In other words, brute force wins over strategic development.

Nothing could be further from the truth. In fact, channel dogma holds that resellers (solution providers, integrators and system builders) generate leads on behalf of their vendors. The reality, however, is solution providers don’t generate leads, are horrible at marketing and don’t do enough to promote their own brands.

What’s to blame? Two of the great evils of the IT industry: compensation plans and vendor brand supremacy.

Innovation and growth require risk taking. Compensation plans, however, counter risk taking. As products become commoditized and markets become saturated, vendors and solution providers will bring new and complex products to create new revenue streams. Sales teams are often compensated on gross revenue of best selling products. When they’re given a goal for sales, sales teams will often devote the bulk of their attention to products that will get them to their goal fastest without consideration to overall growth of the business. This is also why companies create special sales teams when introducing new products and services; they’re unencumbered by legacy sales and products.

Solution providers don’t do enough to develop and promote their own brands. Instead, solution providers rely upon their vendors’ brand strength to drive sales and the vendors prefer it this way. To draw an analogy to the automobile industry, no one buys a car body, engine, tires, drive train, seats, windows and lights and then builds a car; they buy a car that is the final product of scores of suppliers. Nissan Motors, for instance, has more than 10,000 suppliers that feed parts to the manufacturer for the assembly of its various cars. Yet, the general public knows few of those suppliers even if they are the best parts makers in the industry. The contrary is true in the IT industry, where vendors want brand supremacy over the brands of their resellers, integrators and solution providers. No one buys an IT system; they buy the pieces and then pay someone to assemble them.

Vendor brand supremacy has the unfortunate effect of creating partner reliance upon the vendor for marketing and lead generation. So long as vendors continue to promote their brands over the brands of their channel partners, the solution providers will look to their vendors to either supply marketing or underwrite their marketing efforts.

To achieve real growth, businesses must be willing to take risk. Corporate leaders may understand the risk imperative; what they need to do is remove the obstacles to risk and structure their channels and compensation plans to encourage their field teams to embrace the challenge of risk rather than just maintaining their personal revenue streams.

Send Larry your thoughts and feedback: lmwalsh@twentyonetwelve.biz or at www.twentyonetwelve.biz

Everyone talks about the midmarket as some magical land of endless riches. It’s as if technology vendors and solution providers will be blessed with pots of gold if they catch the midmarket leprechaun—lucky charms included.Few technology companies are cracking the midmarket or anything below the “enterprise” level because they’re incorrectly sizing up the segmentations. Part of the problem is how they’re defining the various market bands.

The most common market segmentation model is the following:

• Enterprise - Greater than 1,000 employees/seats
• Midmarket - 100 to 999 employees/seats
• Small business - 10-99 employees/seats
• Consumer/home - Less than 10 employees/seats

The market breakdown is far more complex and segmented. Business consumers cannot be unilaterally placed in arbitrary bands based on their number of employees or gross revenue because even though “we” may say they’re midmarket, some very small companies have the IT infrastructure and support needs of very large organizations. Likewise, very large organizations may have thousands of employees, but very few “knowledge workers,” or people who use the IT infrastructure.Some vendors and analyst firms have subdivided the midmarket into upper and lower midmarket; midmarket and SMB; or midmarket, small enterprise and enterprise. Regardless of how they carve up the midmarket, they continue to treat the customers in this aggregated band as the same type of customer. This monolithic thinking typically results in unfocused marketing, higher cost in sales and lower revenue returns.

Technology companies should adopt a more flexible market segmentation model that approximates the position of customers in more realistic bands that reflect the maturity of their business and then adjust their position based on their unique characteristics.

In general terms, 2112 segments the market in the following bands:

• Large Enterprise - Greater than 1,000 employees/seats
• Small Enterprise - 250-999 employees/seats
• Midmarket - 50-249 employees/seats
• SMB - 10-49 employees/seats
• Consumer/Retail - Less than 10 employees/seats

Some may dispute designating the midmarket in the 50 to 249 seat band. Conventional thinking would say that it’s simply too low. The reality is far different. According to Internal Revenue Service reports, there are 31.3 million businesses in the United States, of which 29.9 million gross less than $1 million a year. If you assume that a million-dollar business can only support five to 10 employees, the bulk of the identifiable market actually falls below the SMB level. Once a company gets above the 50 seat level, they start to take on the characteristics of a formal business, but they remain informal and entrepreneurial. Once they peak above the 250 seat mark that they start to take on the characteristics of an enterprise. They have more formal departments, management hierarchy and purchasing policies. In other words, they look and act like an enterprise on a smaller scale. More importantly, they want to be treated like an enterprise.

Because many technology companies don’t understand that size doesn’t matter when you’re talking to a customer, they fail to engage with their prospects on a level that is meaningful to them. Don’t try to tell a $50 million company with 300 employees that they’re a small or midsized business. They may be small compared to ExxonMobil or Goldman Sachs, but they’re the big dog on their block and expect to be treated that way.

Correctly segmenting the market has a direct impact on go-to-market strategies, sales planning and cost of sales. Technology vendors and service providers should reassess whom they consider to be SMB, midmarket and enterprise, and then apply a right-sized products, focused market strategies and appropriate sales models to successfully reap the greatest return with the lowest cost of sales.