They said 2011 was going to be the year for IT execs to refocus on revenue growth versus cost savings, loosen budgets for backlogged / new projects, and return to innovation and growth. But that was then, and this is now. The now is after the U.S .credit ratings debacle, the European debt crises, renewed pessimism worldwide and, perhaps worse, a double-dip recession.
As 2011 unfolded, pundits’ predictions for significant IT spending growth were dashed. Forrester, originally estimating worldwide IT budget increases north of 7% at the start of the year, have now revised their predictions downward, as have many other analysts.
Let the good times roll?
In an interview with SearchCIO, Forrester analyst Craig Symons, analyzing the results of a pre-summer 2011 survey of 2,711 IT executives and technology decision makers worldwide, indicates that
“When IT budgets were put together in the beginning of the year, there was a lot of optimism, almost on a global basis, that we had been through the worst. That optimism proved to be unfounded.”
The Forrester survey revealed that along with a tightening of budgets, organizations are still spending a significant 70%+ for “keeping the lights on” operations, leaving a scant 25-30% of spending for new IT projects. With the majority of budget allocated to maintaining the status-quo, and the ratcheting down of budgets overall, sales and marketing efforts look no better going into 2012 than in 2009.
“What we are hearing anecdotally is that organizations have taken a much more cautious outlook on the economy and potential business growth, and that is going to be reflected in their IT investments going forward,” according to Mr. Symons.
Unfortunately, B2B solution providers seeking better times in the coming new year are in for a rude awakening. Sales and marketing will face more of the same, with buyers forced to do more with less and deals facing more fiscal scrutiny from executives than ever before – a condition called Frugalnomics. Achieving success in 2012 will require evolving or implementing new strategies to help buyers navigate tough budget waters, and help facilitate sales to connect and engage frugal buyers to achieve sales goals despite the challenged economy.
Four ways to achieve 2012 sales and marketing success
The following are our predictions of how economic pressures will define 2012, and the four tangible ways you can overcome these challenges with the right sales and marketing strategy and tactics:
Challenge #1: Budget uncertainty grows
Entering the new budget cycle, survey results indicate that only $1 in $4 for new project spending is set in stone at the start of 2012, leaving much of the budget up for grabs for the right business projects. According to research findings from Demand Creation Specialists (DCS), the discretionary budget allocation this year is substantially higher as a percentage of new project spending than in years past, indicating that buyers are in a wait-and-see mode about the economy. Savvy IT executives are allocating as little as possible up front in order to remain more agile to capitalize on growth opportunities, efficiency improvements or competitive investments.
This represents a unique opportunity, as the survey indicates that over 50% of the budget will be allocated on the fly for projects identified, prioritized and justified based on needs – either grabbing unallocated budgets or taking budgets from projects with less value or lower priority.
Advice: Be provocative. Because so much of new project spending remains unallocated in the new year, there is a unique opportunity for sales and marketing to consultatively and proactively convince the buyer that:
- A need exists and it is a priority.
- If the need is solved, it could return tangible and significant financial and competitive reward.
- The proposed solution is viable and can deliver significant return on investment (ROI) and fast payback.
Proactively, buyers need to be convinced that the status quo won’t do, and that there is a cost of doing nothing / priority worth pursuing. With more of the budget allocated on the fly in 2012, a provocative sales and marketing approach can help the customer identify significant opportunities while resulting in more sales opportunities and incremental revenue throughout the year.
This can be accomplished by:
- Providing content to help buyers prioritize the need the solution addresses. In some instances, the buyer might not even be aware of the issue and severity, while in other situations they know of the pain point but don’t realize what a priority solving it should be. Diagnostic assessments, case studies and research can help illuminate the opportunities and raise the priority.
- Providing tools and content to help quantify the “cost of doing nothing,” proving that the status quo just won’t do.
- Providing content and tools to help buyers quantify the bottom-line value of the project and justify the investment, especially proving higher return on investment (ROI) and quick payback compared to other projects.
Challenge #2: Discount demands increase
As one might expect when times get rough and budgets are constrained, price dominates the decision-making process for the vast majority of B2B buyers, with some 64% of 448 respondents indicating such in a TricomB2B / University of Dayton survey: The Considered Purchase Decision.
This means that discount providers will have an inherent advantage. Good news for them, but the majority of B2B providers are not price focused, and will have to adjust their sales and marketing strategy to overcome the discounting pressure and defend higher purchase prices.
Advice: Elevate the discussions beyond initial purchase price. In a price-focused environment, discounts gain attention and often can be enticing to frugal buyers. Appealing to the discount shopper in us all can prove successful; however, most solution providers need to elevate beyond the “discount dance.”
The good news is that certain buyer groups, such as senior executives, are more likely to consider how much it costs to own the asset or service over multiple years versus. just initial purchase price, and the incremental value that certain solutions might deliver over lower-priced alternatives.
To end the discount dance, sales and marketing should know which buyers to target, and form the right “value” messaging, especially as follows:
- Create content and tools that help quantify and prove lower total cost of ownership (TCO) over the useful life of the asset / service, helping buyers understand that the decision should not just be about lowest up-front costs.
- Deliver content and tools to help quantify the incremental business benefits their solution delivers versus the competition, looking at the total value of ownership and ROI, not just cost differences.
- Target senior executives who will likely be the most receptive to make decisions based on lower TCO / higher value messaging, proactively making the content / tools available via websites, portals and peer group sites, as senior executives often leverage online resources for independent research.
- Recognize that price will come up as a primary decision criteria and perhaps barrier to closing the deal, arming salespeople with TCO / value-focused tools and content to move the discussion beyond purchase price, proactively developing comparison reports and presenting competitive alternatives / solutions on a TCO / value basis to stakeholders and executives.
Challenge #3: More skeptical
Today’s empowered buyers are taking more time to make each decision (48%), and using a wider variety of sources to help make the decision (36%) compared to just 12 months ago, according to DCS buyer surveys.
The good news is that vendors are a key source leveraged in the decision-making process. However, when compared to peers and industry analysts, buyers are three times more skeptical / less trusting of vendor-provided content and tools.
Empowered with online resources, peer communities and social resources, buyers now have more independent sources of information and, as a result, expectations are elevated beyond mere sales pitches to value-added consultative content.
Sales and marketing strategies have had to quickly respond to this power shift. Back in the 50s and 60s, getting the message across was easier, primarily slogan based. Messaging migrated in the 70s and 80s to be more persuasive, and in the 90s and 2000s, to be more consultative and solution focused. In this new empowered-buyer decade, successful sales and marketing strategies are quickly progressing from consultative / solution focused, to now be more provocative, collaborative and outcome focused.
Advice: Only a matter of trust. Several different strategies are needed to help connect and engage today’s more empowered buyer, including:
- Leveraging third-party validated content for marketing and sales engagements, with content and tools developed / contributed by peers, influencers and research analysts. This is especially needed to validate opportunity, savings and value claims.
- Developing and delivering peer case studies, especially including video and audio testimonials to help buyers understand how others have solved priority opportunities using proposed solutions, particularly ways in which the customers achieved savings, drove business benefits and realized superior value.
- Adding social sharing capability to all marketing collateral, making it easy for buyers to share, comment, discuss and even contribute to the content.
- Establishing and cultivating advocate communities and user groups to help buyers learn from peers and influencers the best way to solve opportunities with the proposed solutions and realize expected outcomes.
- Providing “freemium” offers, demos and live trials, as today’s buyers are used to “try before you buy” when purchasing music and books, now expecting these consumer-like offers from B2B solutions.
Challenge #4: More overloaded
Forced to do more with less, buyers are consumed with “keeping the lights on” operations and have much less time to adequately research new opportunities and solutions. At the same time, according to research by the Vanella Group, buyers are more overloaded than ever before, receiving upwards of 15 sales calls per day and 200 marketing-related emails from solution providers each week. With buyers adding social media participation to the mix, the overload will only get worse, making it harder for buyers to keep up and making it more difficult for sales and marketing to “break through the noise.”
Buyers need help to more quickly research opportunities, select and justify solutions, and assure they are getting the best value possible. However, they are lost in an ocean of available resources and inundated with irrelevant content, offers and sales pitches.
Advice: Service short attention span theater. Buyers’ time is precious, and it is a currency. For the buyer’s time, are you providing a value-added connection and engagement? Here are some techniques to help drive sales and marketing to support this goal and address buyer’s overload and short attention spans:
- Use nurturing techniques to understand the buyer’s role and stage in the decision-making process, targeting emails and content for relevancy, in order to help facilitate their decision making.
- Keep content as short as possible, reducing the length of white papers, case studies, webinars, videos and podcasts to suit today’s time-constrained decision maker.
- Leverage new content designed to deliver more content more quickly, especially e-books.
- Make content such as white papers more personalized via intelligent interactivity – using the buyer’s profile to customize the content, making it more relevant to their role in the decision-making process, stage in the process, pain points, industry, size and location.
- Enable sales with content to make them more consultative and value add, helping elevate sales engagements beyond just what the buyer could find by themselves online, especially leveraging industry and competitive insights and benchmarks, intelligent diagnostic, roadmap / sizing and justification tools.
The bottom line
The much sought economic relief in 2011 never arrived, setting the stage for a budget-constrained, frugal 2012. Frugalnomics is in full effect, with buyers more uncertain about their budgets, more price focused, skeptical of vendor claims, and seriously overloaded.
Successful sales and marketing groups recognize the continued buyer’s woes, implementing new and improved value-focused strategies to help facilitate buyer decision-making and help buyers overcome these challenges. These savvy organizations will purposely address the frugal buyer of 2012, leveraging content marketing and sales enablement to be more provocative, reduce discounting, overcome skepticism and break through the noise – thereby achieving better connections, engagements and sales performance despite the challenges.
Tom Pisello is chairman and founder of Alinean.
- Report: Economy in turmoil, IT budgets and new projects fading, Linda Tucci, SearchCIO, November 2, 2011
- The Best Content For Short Attention Span Theater – Demand Creations Specialists & Alinean, September 2011
- Five Ways to Best Connect, Engage and Sell to Senior Executives – Vanella Group & Alinean, October 2011
- The Considered Purchase Decision, September 2011, TricomB2B / University of Dayton
- Frugalnomics in Full Effect, October 2010, Tom Pisello, the ROI Guy Blog