As a specialist application hosting provider (amongst other things!), our solutions and therefore sales cycles tend to be complex procedures, involving multiple people, teams and companies.
We have been looking into the impact that sales complexity has on the costs of acquiring new customers – a subject that many technology solution providers will likely struggle with as customer acquisition costs continue to soar and product offerings become ever more complex.
Technology sales have their own unique challenges:
- The topic is not simple – multiple companies are often involved in each customer project.
- Requires multiple people to reach a purchasing decision, often due to the scale of the project and the costs associated. Often, the buyer themselves isn’t aware of their own organisation’s decision making process.
- Mission critical – projects often impact on the entire business, so risks are high if something goes wrong. This is an uncertainty that technology suppliers have to remove for their clients.
- High costs if project fails (e.g. data loss, significant financial impact, or disruption to business systems).
- Expensive – high cost to the purchaser, and can often take a long time to realize ROIs.
- Affects many other IT systems, people or departments – change can be tough.
- Requires the purchase of other elements, or integration/development work to make a complete solution. This can be complex to design and deliver concurrently.
- Customers require reassurance, so previous experience and case studies necessary to be selected.
- Pricing complexity – costs are often based on complex configurations with different margin positions blended across an entire solution.
- Custom contracts need to be negotiated – and legal T&C’s have to be agreed.
So how do you go about acquiring customers against such a complex sales process?
Obviously, in order to generate profit, the customer acquisition costs need to be lower than the life time value of the customer. To achieve this, we focus our efforts on the higher value end of the market, where clients have an understanding that they are engaging with a non-commodity based organization and where value is driven around relationships, uptime, urgency and the removal of pain from their side.
The combination of these elements creates our USP as we don’t have one unique proposition but a combination of strengths that deliver a complete business proposition.
The acquisition of customers within the enterprise B2B market is expensive, as field sales and the supporting operational infrastructure is not cheap to maintain, coupled with the high cost of ongoing demand generation. Ironically these cost challenges also give us protection as they deliver high barriers to entry into the market for other technology suppliers.
Despite these challenges of selling in a complex environment, there are benefits to the supplier once you move past the acquisition stage:
- Clients are looking for long term relationships and once trust is built, clients are very loyal to your business.
- Organisations want to work with specialists and in many cases do not consider the large, multinational corporations when they are selecting a technology partner as they want to feel ‘close’ to their tech partner.
- Due to the nature of the technology market, clients with enterprise IT requirements are usually quite large and so more financially secure than some SME’s.
- The technology purchased is to be used for a significant time period and so the associated hosting will usually match this time.
- There are only a small number of competitors with the required skill sets who can compete with you if you are a specialist provider.
- Once you have a number of hosted clients within a certain sector and gain targeted knowledge about your customers, you can become the go-to organisation for an industry.
- Although the acquisition costs are high, the extended relationship periods means that the lifetime value of the customer can be significant.
- The business model around hosting enables the creation of recurring revenue delivering real value to staff and shareholders, who can predict revenue levels with more accuracy.
- Disruption in the market is kept to a minimum with fewer new market entrants than consumer markets.
While commoditized players who are focused on the consumer sector can benefit from low cost of sale and the strengths of the internet, suppliers in complex markets have to look for more long-term growth and acquisition strategies in order to build profitable business generation campaigns.
At C24, we do this through a network of established partners who we work with closely to build sales programs and joint marketing initiatives. We also focus closely on developing content around our specialties; ERP, legal hosting and analytics – so that we can build a thought leadership platform and help advise customers on what we are seeing in the industry.
B2B companies are also starting to utilize the more long-form types of social media posting, such as Quora and LinkedIn publishing to reach new customers, in a way that Twitter and social sharing doesn’t always allow for complex industries.
Despite this web-focused activity, we still find that the majority of our customers come to us through referrals; we focus on building long-term partnerships with other vendors and complimentary solution providers so that we can together target new clients, rather than focusing on end customer marketing activities.
C24 is a specialist applications hosting provider and business analytics expert, focused on the manufacturing, legal and hospitality sector. Find out more at http://www.C24.co.uk .