Why Traditional Enterprise Software Sales Fail
A careful balance of "volume" and "value" marketing strategies will help vendors avoid the three classic reasons for unsuccessful sales efforts.
By Gad Tobaly, Nastel Technologies
Jun. 02, 2010
Traditional enterprise software sales efforts fail for three reasons: your solution does not meet its market's needs, your sales force fixates on "big deals," or your business model is flawed.
The recent economic downturn means software vendors can no longer to afford to make classic mistakes. A closer look at these reasons for failure shows that software vendors can leverage diversified go-to-market strategies to find new levels of sales success.
Problem No. 1 - Poor Business Model
Not surprisingly, nine out of ten product launches fail because of a flawed business model. Business models from conception often suffer basic flaws, including the following:
The lesson? Stay simple and address your customers' pain points.
Problem No. 2 - Product Does Not Meet Market Needs
When companies launch a new product, they notoriously rush to strengthen sales efforts before testing the solution with multiple clients. Products thus often lack key features customers want or they don't work the way customers expect.
Selling untested solutions obviously causes long-term problems. Cash is burned while generating disappointing revenues.
Mark Leslie and Charles Holloway, authors of The Sales Learning Curve , say your entire organization must learn how customers will acquire and use your solution, a process the authors call the "sales learning curve." Leslie and Holloway show how a "learn before burn" strategy pays off. The authors, who grew Veritas Software into a $1 billion business, provide examples of numerous once-promising offerings aborted due to premature inauguration.
The lesson? While the sales learning curve is often ignored during product launches, incorporating it is one of the elements that are essential to marketing success.
Problem No. 3 - "Big Deal" Dependency and the "Hockey Stick" Effect
Another factor undermining successful enterprise software sales efforts is the allure of "big deals." After landing one or two big deals, it's not uncommon for a company's most talented sales reps to be consumed with pursuing more such deals. Even the most experienced sales professionals and managers, often convince themselves they have a breakthrough solution. Anticipation runs through the company as sales executives fixate on landing more big deals while ignoring smaller opportunities that they could later use as a beachhead to expand within their accounts.
Dependency on big deals triggers a "hockey stick" effect. A big deal requires a long sales cycle. That extended time increases the possibility of "surprises." Your customer sponsor could be reassigned, customer requirements could change, or a new vendor could enter the competition. Make no mistake, on a big deal, your client knows that your fortunes hinge on their purchase decision. Procurement professionals - who are rewarded for driving down what your client pays you - use this knowledge against you in negotiations, lengthening your sales cycle.
Dependence on big deals also creates a distinct type of financial pressure on your company because each client relationship carries high stakes and revenues are not predictable.
The lesson? Develop volume and value strategies employing a range of licensing models to diversify away from a dependency on big deals.
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The recent economic downturn means software vendors can no longer to afford to make classic mistakes. A closer look at these reasons for failure shows that software vendors can leverage diversified go-to-market strategies to find new levels of sales success.
Problem No. 1 - Poor Business Model
Not surprisingly, nine out of ten product launches fail because of a flawed business model. Business models from conception often suffer basic flaws, including the following:
- Weak value proposition
- Poorly defined target market
- Disorganized distribution scheme
- Ill-conceived sales strategy
- Fragile customer relationships
- High cost structure
The lesson? Stay simple and address your customers' pain points.
Problem No. 2 - Product Does Not Meet Market Needs
When companies launch a new product, they notoriously rush to strengthen sales efforts before testing the solution with multiple clients. Products thus often lack key features customers want or they don't work the way customers expect.
Selling untested solutions obviously causes long-term problems. Cash is burned while generating disappointing revenues.
Mark Leslie and Charles Holloway, authors of The Sales Learning Curve , say your entire organization must learn how customers will acquire and use your solution, a process the authors call the "sales learning curve." Leslie and Holloway show how a "learn before burn" strategy pays off. The authors, who grew Veritas Software into a $1 billion business, provide examples of numerous once-promising offerings aborted due to premature inauguration.
The lesson? While the sales learning curve is often ignored during product launches, incorporating it is one of the elements that are essential to marketing success.
Problem No. 3 - "Big Deal" Dependency and the "Hockey Stick" Effect
Another factor undermining successful enterprise software sales efforts is the allure of "big deals." After landing one or two big deals, it's not uncommon for a company's most talented sales reps to be consumed with pursuing more such deals. Even the most experienced sales professionals and managers, often convince themselves they have a breakthrough solution. Anticipation runs through the company as sales executives fixate on landing more big deals while ignoring smaller opportunities that they could later use as a beachhead to expand within their accounts.
Dependency on big deals triggers a "hockey stick" effect. A big deal requires a long sales cycle. That extended time increases the possibility of "surprises." Your customer sponsor could be reassigned, customer requirements could change, or a new vendor could enter the competition. Make no mistake, on a big deal, your client knows that your fortunes hinge on their purchase decision. Procurement professionals - who are rewarded for driving down what your client pays you - use this knowledge against you in negotiations, lengthening your sales cycle.
Dependence on big deals also creates a distinct type of financial pressure on your company because each client relationship carries high stakes and revenues are not predictable.
The lesson? Develop volume and value strategies employing a range of licensing models to diversify away from a dependency on big deals.
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