Enterprise software buyers begin by identifying an opportunity or problem that can, in part, be addressed by purchase or development of software. Second, the buyer moves on to create a long list of alternatives. Third, the prospective customer begins to test to see which option best fits their requirements. Fourth, they worry abut and evaluate risks. Fifth and finally they negotiate price.

In the worst case, software vendors are "in the room" in only step five—desperately discounting at the end of the quarter. More commonly, vendors begin to be proactive in step three, filling out RFP feature checklists and warming up the sales team to "overcome objections" in step four. Despite all the talk about creating business value for customers, rarely do software vendors understand and target step one—identifying the business or IT opportunity or problem that starts the purchase process.

As the software industry ramps up marketing spending they would benefit by looking over the shoulder of manufacturers of other big ticket capital goods. Machine tool makers invest substantial sums in understanding their customers' manufacturing process, quality issues, shifting raw materials costs and availability, labor market fluctuations and union negotiations, and overall business health. They understand how the factory and warehouse works not just how their tool or controller is used. Those insights inform everything form product design to post sales service. Those insights define marketing messages targeted at the opportunities and problems that trigger the buying process.

I am not talking about superficial observations about industry trends gleaned from reading the trade press. The best of these companies put their engineers in customers' factories and vice versa. They survey their customers' customers and work closely with suppliers of other equipment and construction firms. They build operating and process models of customer factories and warehouses. They fund academic research into best practices.

The best of them get invited "into the room" when customers are planning new factories or retooling of old ones or solving quality, cost or labor problems. Their marketing positions them as purveyors of leading edge knowledge who happen to sell a few NC tools or PLCs. They build service and education offerings that go beyond their products to help customers manufacture goods at lower cost with higher quality and greater worker safety and satisfaction.

Yes, they have spec sheets, attend trade shows, court analysts and consultants who review products, buy ads in the trade press and invest in PR events to launch products. But the winners win because they know the customers' heart and mind better than the competition.

Effectively understanding customers' real needs and uses of products requires active listening and an open mind. I've talked to many customers whose vendors have advisory councils and extensive surveys and those customers say that the vendors "just don't understand". The barriers to understanding are common: software managers hold strong biases about "market requirements"; engineers have too much influence over product features and marketing messages; sales leaders use customer input solely to find ways to talk around product issues. Vendors draw a picture of the customer with their product at the center when the customer sees it as less important than other products, business processes, regulations or hiring and training investments.

It is good new to see the industry regaining the confidence to spend more marketing dollars. Here's hoping that dollar one will go toward building a deep understanding of customers and the opportunities and problems that cause them to buy software in the first place.

Mike Nevens recently retired from his position as managing partner of McKinsey & Company's Global High Tech Practice. He currently serves on several high tech boards as well as the board of the Mendoza School of Business at the University of Notre Dame where he also lectures on information technology and corporate governance.