Tuesday, March 01, 2016

Frugalnomics in Effect - Gartner predicts low IT spending growth for 2016

Gartner recently published their latest worldwide IT spending forecasts, and with a likely economic slowdown on the horizon, are projecting an anemic 0.6% YoY increase from 2015.

If you’re marketing or selling technology, this decline could have a significant impact, with buyers becoming even more cautious and economic focused.

Frugalnomics in Effect
IT spending has significantly changed, and you need to know these trends in order to succeed:

1) Do More with Less – Because of the Great Recession, companies learned how to cut expenses to improve the bottom-line, and have learned to permanently “Do More with Less”.

2) Central IT is Irrelevant? - Most technology spending decisions are now driven and controlled by business groups vs. formal IT. In fact, According to IDC, 48% of IT spending is controlled or influenced by the business. And Gartner is predicting that by 2020, as much as 90% of IT spending could be driven by the business.

3) Buyers are “Cold as ICE” - Purchase decision-making is now driven by a different kind of who is more:
  • In-Control - Highly empowered by access to incredible amounts of solution research and information via the Internet and social media, buyers have taken control of the decision making process with sales reps being invited later to the game, and ever more competition for each deal.
  • Cautious – buyers are Risk averse, afraid of making a wrong decision, not willing to spend as much per project, and more often than not, choosing to remain with business as usual / status quo rather than considering projects they view as too risky.
  • Economically Focused – today’s IT buyer is more frugal, with over 95% of technology purchase decisions now requiring a formal business case, with quantifiable ROI and fast payback (IDC). Financial justification is the new language of IT selling, where CFOs are more involved through all stages of the purchase decision, and procurement is there to demand a discount if you lead with product and price vs. value.
So how do you end up in the Winner’s Circle? - You need to factor Frugalnomics prominently into your sales and marketing strategies and investments.

Surviving Frugalnomics - The 3 Things You Must Do Now to Win in 2016
To help meet the challenge and Survive Frugalnomics into 2016 and beyond, we recommend three “must do” programs for this year and beyond:

#1 – Break the ICE - Engaging Prospects with Provocative Content
Todays’ buyers are more risk averse and frugal than ever, with 58% choosing to “Do Nothing” versus considering your solution (SBI).

Prospects will choose to stick with the status quo unless you can proactively and provocatively quantify that they have a pain worth addressing. 

And those opportunities you thought were progressing through the waterfall / sales process to “wins”? They stall unless you can help successively convince the prospect that the issue you can help solve is real, that it is a high priority worth addressing over all other issues on their plate, and that your solution / services represents a real low risk / superior value solution with unique competitive advantage.

In order to connect and engage with “Do Nothing” buyers, helping them through the decision making journey, you need to leverage content to help them realize:
  • Why Consider a Change? - the Prospect has a pain worth addressing and a significant cost of “Do Nothing”.
  • Why Change Now? – the Prospect should not wait to address the issue because every day is costing them, they are leaving good money on the table (significant bottom-line impact, ROI and fast payback), and they are falling behind competitively (illustrated through peer comparison benchmarks).
  • Why Your Solutions?– that your solutions / services can deliver unique and superior value at a lower total cost of ownership (TCO).
So how well does your current content marketing help answer these 3 key decision making questions, in a compelling and quantified way?

#2 – Empowering Sales with Value Messaging and Quantification
According to SiriusDecisions, the #1 reason why sales reps fail to meet quota is their “inability to effectively articulate the value of proposed solutions”. This past year reported by 71% of respondents. Unfortunately, despite best efforts, this is the 5th year in a row this has been the top quota issue.

Sitting in on typical sales presentations and you can see that most are product pitches or pseudo-solution selling, asking a few questions and then jumping into canned “death by PowerPoint” presentations. According to Forrester, prospects indicate that less than 12% of sales engagements are focused on outcomes and customer value.

And its not just your direct sales reps that have the issue. Many organizations are relying more and more on channel partners and inside sales to drive growth. And if it was hard to get your direct sales reps to become more value-focused, imagine how hard it will be to enable channel and inside sales to evolve from product to value.

Making the situation more complex, there are more stakeholders than ever – 43% more in each decision (8 for the typical technology decision), and many of these buyers are not who your sales reps are used to engaging. Each has a unique point of value, what matters most to them and what drives value.

So how well do your sales reps and channel partners communicate and quantify your value to a diverse set of decision makers?

#3 - Seal the Deal – Delivering a CFO-ready Business Case 
CFOs are large and in charge of many IT purchase approvals. According to a Gartner and Financial Executives Research Foundation research survey, the CFO is becoming the top IT decision maker in many organizations, with:
  • Over 75% indicating significant decision making involvement,
  • 41% indicating being the main decision maker for IT investments.

From the CFOs we talk to, they indicate that proposals:
  • Won't be considered a priority without a business case, and the larger the proposal, the more detailed and formal the case has to be,
  • Won't be advanced unless you show that the issue being addressed is a priority with a high cost of “doing nothing”, quantified savings / benefits from the proposed solution, and a significant ROI and fast payback,
  • Won't be approved unless you can prove your solution has a lower total cost of ownership (TCO) / better value than competitive offerings.
Although IDC indicates that 95% of proposals require an ROI business case, the research indicates that 2/3rds of your prospects don’t have the metrics, research, knowledge, tools and time to prepare the business case themselves, leaving it up to you to stand up and deliver if you want their business (or have your proposal approval significantly stalled and delayed). The research shows that 81% expect your sales reps to deliver a credible business case in order to win the deal.

With Finance playing such a key role in IT decision approvals, it is imperative that proposals contain the business case content that CFOs need to provide approval, otherwise your deals will be stalled or delayed in the final stages, and you may be losing critical deals to competitors who make the better CFO case.

So how well do you deliver the financial business cases / ROI that CFOs demand?

The Bottom-Line
It is likely there will be anemic or even  more likely negative IT spending growth forecasts for the next several years. With Frugalnomics in full-effect , technology solution / service providers need to implement a more value-focused approach to their sales and marketing strategy, content and tools.

If value marketing and selling are not accounting for Frugalnomics, the majority of your deals will stall, sales cycles will get longer, and heavy discounting will prevail.

If however you are able to implement a successful value marketing and selling program you will be able to create a significantly unique and more effective selling experience, and as a result, a competitive advantage to win more than your fair share of the challenged IT market.

For 2016 and beyond, IT sales and marketing professionals should consider three initiatives as a top priority to help Survive Frugalnomics:
  • Break the ICE - Engage Frugal Prospects with Provocative Content
  • Empower Sales with Value Storytelling and Quantification
  • Close the Deal with CFO-Ready Business Cases.
To learn more about our suggested best practices get the book: Frugalnomics Survival Guide – The definitive guide on using your unique value to market better, stand out and sell more (available now on Amazon).

Sources:
IDC 2014 Buyer Experience Study (Oct)
Forrester Sales Enablement Conference 2014
SiriusDecisions SiriusIndex, results from 2011 – 2015



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