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What phase of the product lifecycle will the enterprise software industry be in by the year 2017?

Introduction

Growth

Maturation

Decline


SMB Market Ė What is the secret sauce for success?

By Vas Srinivasan, Vice President of Marketing, Sonasoft Corporation

In the past couple of years there has been increased focus and interest in selling to the Small and Medium Business (SMB) market. Some of the reasons include increased spending in the SMB market, lack of growth in the enterprise sector and limited opportunity for smaller players in the enterprise market to mention a few.

Typically, the enterprise market is owned by entrenched big players and it is very difficult to penetrate. In addition, the cost of entry is very high, the sales cycle is very long and the growth potential is limited. In comparison, the growth potential in the Small and Medium Business (SMB) market is very attractive. According to IDC, the SMBs spent $133B in 2006 on information technology and it will increase by 8% to $144B in 2007.

Big players have realized the potential of the SMB market; and Microsoft, for example, will be spending $10B targeting this segment. IBM spent $1B on product development, marketing initiatives, incentives and partner programs to get increased traction in the mid-market. HP is very aggressive and has been quite successful in selling to the SMB market.

Challenges
Even though the SMB market looks very attractive, potential aspirants to conquer it face many hurdles. The SMB market is highly fragmented, diverse and unconventional. Prospecting for SMB customers is not an easy task. Contrary to what is expected, the sales cycle can be as long as that of enterprise companies if it is not handled properly. Also, conventional approaches and channels used to reach enterprise customers will not yield the desired results.

SMB Market Requirements
Like their enterprise counterparts, SMB customers look for product sophistication, but at a price point which is an order of magnitude lower. The SMB market also looks for highly automated, easy to deploy/implement, easy to maintain and reliable solutions. Typically the IT department has only one or two people basically taking care of the entire company. Any solution that needs much customization and hand-holding wonít be attractive to SMB customers. Thatís why SMB customers are attracted to appliance-based solutions that can be implemented quickly and easily.

The SMB market needs someone to advise them, not only to buy a particular technology, but also to work with them, understand their needs and propose solutions for the life of their business.

Messaging/Positioning
The SMB market is very attractive, as it offers vendors the opportunity to start a relationship with a company early in their existence, and grow with the company. As the company grows, the projects and the needs get bigger, offering very lucrative payoffs. The SMB market is price sensitive, but at the same time looks for sophistication and robust functionality in a product. Customers in this segment typically select a product that offers maximum value for the price paid.

That is the reason why many big companies trying to miniaturize their existing enterprise solution for the SMB market fail miserably. One has to consciously develop products from the ground-up for the SMB market, and then position and price the product effectively. By understanding the target market and customers clearly and offering solutions that address customersí pain points, vendors can be very successful.

The payoff will be high if you precisely identify the sweet spot within the SMB market. This will come from experience and also by clearly analyzing your existing customer base. Based on your analysis, for example, you may find out that your sweet spot is companies with 300 to 500 employees. Also, one has to decide whether going after a particular vertical makes sense or not. From a focus perspective, it definitely helps to target a particular vertical(s), but a lot depends on the specific problem addressed by your solution.

Medium
SMB customers rely on the Internet for most of their information and they typically perform Google searches to obtain comparative information about various products before making any technology buying decisions.

Hence, it is very effective to advertise to the SMB market through online marketing campaigns, including targeted email campaigns, banner ads, webinars, etc. Print advertisement is not very effective and also costs a lot more. In addition, more and more people are relying on electronically delivered messages for getting their information. In choosing the correct online medium, one has to diligently choose the appropriate websites or mailers that reach their target audience. Another inexpensive way to get the message out is by writing articles, giving speeches and participating in forums. SMB customers also rely on blogs and popular Internet sites to get answers to their questions.

If you are visible enough, then potential prospects in this segment will find you. You donít have to go looking for them. Thatís why cold calling to solicit SMB prospects doesnít yield spectacular results. Since the average size of the deals are much lower than that of enterprise deals, you need to generate enormous amounts of leads through telemarketing efforts. To find a prospect, one has to make the same number of calls, irrespective of who the end customer is. Hence, cold calling to SMB customers is not as effective as finding enterprise prospects.

Conclusion
In conclusion, the SMB market offers great opportunity to potential technology vendors. The secret for success is identifying the sweet spot, creating an attractive value proposition and delivering the message through the appropriate medium. At Sonasoft, we have implemented many of the techniques discussed in this article with excellent results. With proper focus, planning and execution, companies can be very successful in selling to the SMB segment.



Vas Srinivasan, Ph. D., has twenty years of marketing, engineering and research experience in high-tech and manufacturing fields. At present, Vas is Vice President of Marketing at Sonasoft, a provider of integrated data protection, high availability and disaster recovery solution for the Microsoft Platform. Vas also has extensive product marketing/management experience at Commerce One & US Steel, and product development experience at Ford Motor Company. Vas can be reached at vas.srinivasan@sonasoft.com.


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