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Marketing Gods Make Software Kings - Part One

Marketing Gods Make Software Kings

Part one

Software is a technical business, but the fate of a software company (Enterprise or product) largely depends on

marketing.

One rule suggested: For each new developer, there should be two new sales and marketing people.

In a successful company, a revealing statistic:

41% of employees were in marketing/sales - Successful company

31% of employees were in marketing/sales - UNsuccessful company

Being ONE of the top players in a product segment is NOT enough - it is CRUCIAL to be the TOP.

WHY?

- Recover massive R&D costss
- Law of increasing returns (see chapter one)

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How can software product companies build market leadership with marketing efforts, either as a start-up company or

as an established player with a new kind of software product?

Building Market Leadership

Case study - INTUIT QUICKEN

1983 - Scott Cook's wife commented about how much time it took to manage their personal finance.
He and his friend Tom Proulx created Quicken.

They were the 43rd personal finance software package in the market.

1997 - Revenues of $600 MILLION with a 70% market share

How did they do it?

It was NOT because solely by the technological sophistication of the program; it was by CREATING A COMPELLING VALUE

PROPOSITION.

While its competitors were heavily focused on promoting technical software features, Intuit focused on SOLUTIONS AND

A CLEAR VALUE PROPOSITION.

Scott (the founder) had a fixation on WHAT THE BENEFIT of the software product was, NOT WHAT IT DID!

Example,

Competitor ad - "Automate your banking"

Intuit - "End your financial hassles"

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Building the product portfolio

- The key to a good value proposition is a product marketing story.

- Breeding new products inside the Company.

- Buying businesses to create the winning product portfolio

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Being FIRST does not always mean being the best.

Superior marketing players often eclipse the earliest movers.


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Highly focused customer selection

Failure model:

Midsized software company - 14 product lines. Target group NOT clearly defined. Any potential customer with a

request simply received the "best-fitting" product.

Successful model:

They clustered its potential customers in specifically designed matrices that listed the customer's needs and other

criteria.

They targeted a customer group with sales potential large enough to recover their massive R&D costs - but kept the

target group SMALL ENOUGH to FULLY SATISFY the needs of the group.

Why?

Becuase of the "bowling alley market development" approach.

Making into the target group would lead to other "knock over" products to sell to that group.

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How to make themselves known?

Creating "Self-fulfilling" Successes - announcing that the new product is on its way to market leadership BEFORE it

has taken off!

PR
Top managers of the successful software companies spent up to 35% of their total time on general conferences, public

appearances, media contacts and interviews which involve no direct sales activities.

Obtain favourable product reviews
Create technology evangelists to "preach to the world".

Aggressive advertising
7% of revenues spent on advertising rather than 3% for less successful companies.

Advertising the BRAND, NOT the technology
"Many software companies share this problem. Heavily technological driven, they tend to focus their communication on

product features. We have found however, that the greatest success from advertising is reached by marketing Company

BRAND NAMES, NOT product features.

The successful companies we surveryed spent 78% of their advertising budget on the company NAME and just 22% on

specific product features.

LESS SUCCESSFUL COMPANIES DID IT EXACTLY THE OTHER WAY AROUND"

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The advantage of Company Brands

Brands hold the value propositions in the minds of the customers even if the products change or are discontinued.

Value propositions are key to building market leadership.

Brands also help in recruitment because they have the ability to convey positive images of the company and its

culture.



Marketing business value propositions
It makes sense to market the business value propositon of the products TOGETHER with the brand. Especially for

enterprise software.

SAP's example -
"SAP - We don't just make better software. We make better companies"

Bann
"Baan - Simply Better Business"

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Making customers try out the product - demo products

Fixed costs converted to variable costs -
a. IBM charges developers for development tool ONLY when they make money - Software AS a service

b. Usage based pricing

c. Usage fees based on volume

Fixed Price Guaranteed
- SAP - they fixed a price for implementations for biz less than $130million in annual revenues. The package

includes, software licence, hardware, installation and a range of services.

Piracy
It is the costliest way to market leadership

A concerted multichannel effort to reach target customers
- Flooding retail stores
- Involving system integrators as multipliers
- Preinstallations

Aggressive Sales Force

Sales people of successful software companies earned on average 38% of their total compensation through a variable share.

In less successful companies the figure was 20% or even less.

End of Part One

Software development

Chapter 5

Software development

One thing in common: FAILURE

84% of all software projects DO NOT finish on time, on budget and with all features installed according to a survey by the Standish Group which covered 8,000 software projects in the US in 1995.

30% of all projects were CANCELLED before completion!

What does all this mean?

The chance of FAILURE is HIGHER than that of success.

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Why is software development so prone to failure?

1. Extreme complexity involved
Simply put -> Close to 100% of a software program has to be accurate to work even somewhat correctly!

We all know how many bugs Windows 95 has right? But have we considered that Win95 has 11 million lines of codes?
And how many OTHER million lines of codes interact with it?

If you build a car, if a nut came off, you may not even notice it.

With a software program, a bug is highly disruptive and will most likely give you an error result!

2. Extreme uncertainties from the outset - Why?

a. Unclear customer requirements - what would the system be used for? who will be using it? will it be changed? will it need to be upgraded constantly?

b. Design not entirely predictable - structure of the software may be wrongly decided on. Should we use VB.net? ASP.net? Php 4/5? Mysql?...each design is different.

c. Changing requirements - Yahoo! made 3 changes THREE TIMES before lanching MyYahoo! Enough said!

d. Changing technology - php 4 today php 5 tomorrow! Win XP today Win Vista tomorrow??


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HOW software projects commonly fail

a. Overly optimistic developers
Adding people to a project does not mean a shorten schedule. This is a common mistake. Interdependencies require certain task to be done sequentially.
For e.g. Can you come up with the Invoicing module of an accounting program if your Customer database has not been setup?

Fred brooks put it "It takes nine months to bear a child, no matter how many women are assigned"!!

b. Underestimating the efforts required to make products out of projects.

Professional services firm follows a common failure pattern. They try to develop a standard product after they have developed similar systems for various clients.

Mass-market software is designed MORE BROADLY. Meaning, you have to take into consideration 1000 users instead of just one.

Enterprise software - with enterprise software, the environment, the user, the requirements are more or less made known early on. For the mass market product, different operating systems would cause problems.

Fred Brooks estimates that the effort to create a successful product is three times as high as for a comparable individual system.

c. External pressure from marketing, customers and management

Martketing department try hard to shorten schedules.
Management has unrealistic expectations.
Wishful thinking can be attributed to the marketing and management dept.


d. Feature creep

A quote that says it all "Nobody would force a builder to rebuild the basement after having put on the roof, but in the software industry, that's common practice."


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HOW TO COMPLETE THE IMPOSSIBLE MISSION?

1. Prepare for uncertainty, rather than ignoring it.

2. Establish flexibility - use this system

i. Must-do features (basic features and to make the system run)

ii. Should-do features (implement IF time is left)

iii. Could-do features (normally delayed till next release)

3. Adapt to the upstream-downstream

i. Phase 1 - Creativity phase

ii. Phase 2 - Implementation of phase 1 ideas NO OTHER DISTRACTIONS permitted.

4. Spend time to save time

Late fixes to software design costs an astonishing 50 to 200 times the effort of an immediate fix. A superior product architecture bears many advantages in terms of expandability, scalability, and maintainability of the later product and can thus be a real competitive advantage.

Leaders of successful software firms emphasized that problems should be resolved in the EARLY phases of the development project.

5. Stongly invest in people

6. Creating powerful team structures

7. Holding on to top talent

8. Invest in process for higher performance and more more freedom

9. Involve project stakeholders extensively

10. Marketing experts married to development managers. (Prevent future feature creep)

11. Frequent project reviews with all stakeholders.

12. Have daily builds - test and debug daily. This means the WHOLE system.


IS THERE A SILVER BULLET? NO, THERE ISN'T.

But follow closely the above, and you won't go far wrong.

Read the book Secrets of Software Success for more.