Fortunately for me (but unfortunately for many), recent headlines about a shakeup in the technology space provide a great example of why it’s so important to look up and look around.
There are some Cinderella stories about smaller startups being bought by Facebook or Google for a bazillion dollars, making a few people instant millionaires. For example, Facebook recently acquired WhatsApp, a company with estimated 2013 revenue of only $20 million and 55 employees, for an astonishing $19 billion! Party time!
The other scenario that’s far more threatening is when one of these behemoth companies decides to disrupt the market by altering the scope of their services or price. What happens to the other companies (most of them smaller) operating comfortably in the same space?
That’s what’s happening in the cloud computing and storage space:
- Google Announces Massive Price Drops For Its Cloud Computing Services And Storage, Introduces Sustained-Use Discounts (TechCrunch.com, March 25, 2014)
- Microsoft Joins Amazon and Google in Cloud Price War (Recode.net, March 31, 2014)
Cloud computing has blossomed in recent years and will likely continue to do so. But can the many companies that have been providing this service survive this sudden game-changing price move by the heavyweights?
The tale is familiar for some. Remember West Coast Video and Blockbuster? They had cushy businesses until VHS tapes gave way to DVDs, which merely forced those companies to change their products. But Netflix changed the business model and looked like a champ for a while until they almost got caught napping with competing streaming services. (I’d say they picked their heads up just in time to notice the threat and react.) The story isn’t finished here and continues to force companies in the space to stay one step ahead of the others to avoid falling behind and becoming old and obsolete.
Contracts Won’t Save You
Sooner or later, cloud computing clients will begin to question why they should stay with their current provider instead of taking advantage of cheaper offerings by Amazon, Google, and Microsoft. And why shouldn’t they ask? Even happy customers need to reevaluate their service providers to keep them honest and attentive. It never hurts to shop the competition’s offering to either feel better about your current situation or make a change.
If your business runs on contractual agreements with your clients, you may be initially immune to big swings in your sector. But once those contracts begin to expire, you’ll be hard-pressed to justify charging more (or the same if your peers are charging less).
The key is to get out in front of a big story like this before your clients come knocking and expecting not only an explanation, but a discounted rate. Being proactive will give you a fighting chance, but what should you say?
Articulating Your Value: A Strong Offense is the Only Defense
Few businesses can rely on price as a successful long-term go-to-market strategy. Yes, there’s always an expensive option sold at a premium that’s counterbalanced by a bargain-basement-priced discounted offering. But anyone who believes that you get what you pay for will likely look higher up the food chain.
Before you fall victim to a cloud war discount scenario for your business, you must realize that there’s more to value than the price of your product or service. Especially if you’re smaller than your larger competitors or leading brands, you need to articulate the value you provide, not just, “we’re cheaper!”
How are you communicating and selling value? What value do you provide? Here are a few suggestions:
1. Measuring value delivered to the customer. You must be prepared to quantify the value you are delivering to your customer. This requires you to develop a simple but meaningful measurement approach and adopt the discipline to measure your impact on the customer’s business. This requires you to understand what’s important to the customer, how they define and measure success, and when necessary, educating them on how to measure success.
But measuring value is not enough. You need to communicate that value to the customer on a regular basis to ensure that they appreciate and buy into the value you are adding. This discipline gives you the opportunity to determine if your solution is working as expected, and if it’s not, it then gives you insight into how to correct course.
2. Capabilities and differentiators. Take a dispassionate view of your business’ capabilities and differentiators. What makes your offering different than everyone else’s, and why is this important to the customer?
Examine your product lifecycle from concept through delivery to identify capabilities to highlight. Examples include ingredients, manufacturing, processes, warranty, customer service, performance, security, organic, locally sourced and manufactured, imported, talent, size, and scope (broad or narrow).
The list can become quite lengthy. It is important to know what makes the most difference to why buyers will select you and how they’ll benefit from your offering.
3. What do others say about you? There is considerable insight to be gained by talking to others about what makes your company. Even if your assumptions are accurate, most people will still appreciate that you’ve asked for their opinions.
- Long-term customers, satisfied customers. It’s amazing how few companies take time to talk to their clients. Find out what they like about your product or service. What keeps them coming back? What do they see as the key benefits? Your assumptions could be wrong, which makes it worth asking.
- New clients from recent wins. When you’ve closed a deal for which you had to compete, it can be quite enlightening to know the reason you were chosen. It might be obvious, but there may be some surprises for you to further explore and leverage.
- Interview employees who used to work for your competitors. These people have a unique perspective that could help you to differentiate you from your peers. Without breaching any confidentiality or non-compete agreements, there is likely much to learn about the value you provide.
- Glowing reviews and case studies. If someone is willing to provide good feedback about their experience working with you, don’t keep it a secret! Use it.
4. Claims. What can you say about your capabilities that will help you stand apart and tell your story, and why are these important to the customer?
- “We were first.”
- “We took their idea a step further and improved upon it.”
- “This has been our core business for decades.”
- “We have a more efficient process and can therefore deliver the same (or better) product sooner/cheaper with a faster up time.”
It should go without saying, but be sure that you can substantiate any claims you make. Nothing is worse than undercutting your own credibility by making false claims. These statements should help you tell your story — one that is factual, not fiction.
5. Educate your salesforce. The final step is to ensure that your sales reps know the story to tell and can represent your business in a manner that highlights the true value you provide. Hone the messages and sharpen the delivery, but also, train your sales reps to listen for feedback that could impact perceived values (either positively or negatively).