Marketing Budget - Spend It On Marketing Or Sales

Does your company make and sale an excellent ENTERPRISE SOFTWARE? Do you have #1 market share? Not seen appreciable growth for the past few years. What to do?  One of the jobs of product marketing is to justify a marketing budget (or more hopefully, a budget was already allocated for your product). Using the traditional 4P marketing framework (product, price, placement, promotion), let's see how we should spend our marketing dollars:



   1. Improve the PRODUCT
   2. PRICE adjustment
   3. Make the product more available through better PLACEMENT
   4. Increase incentives to buy via PROMOTION


1. Improve the PRODUCT

This requires looking to perform a GAP ANALYSIS see if our product has any deficiencies against our competitor's and against our target customers needs. After performing a SWOT analysis, we discovered that our product sometimes had inferior performance, but other times we had superior performance. In order to tweak our products to make it perform as well as our competition, the customer had to do additional work to the product.

If the engineering team has the right sights but has not delivered, perhaps your marketing dollar can be used to motivate the developers, hire more developers, adopt new process (AGILE), deploy the latest tracking software such as Jira. But who wants to spend marketing dollars on product development?

2.  PRICE adjustment

The original title of this was "PRICE reduction". But GMs cringe at this.  The basic premise behind dropping the price our our product is to increase sales (lower ASP per product, but made up with volume). A  PRICING ELASTICITY graph will help to predict if we can sell more products should we drop the price. We have trained our sales teams to VALUE SELL. That is, we ought to price our product by the pain it saves. This thinking is a must, especially in our circumstance where our customers are usually hardware manufacturers and think mainly in terms of OPERATING, GROSS, or PROFIT MARGINS. It is a paradigm shift that all software vendors needs to hold steadfastly.


3. Make the product more available through better PLACEMENT (distribution)

The basic premise behind placement is that the more TOUCH POINTS your product has with your customer, the high chances they will buy. Coke made the a primary strategy in reaching their customers globally, poor or rich.

Software placement has seen a major shift. Up until about 2000, software were sold and installed ON PREMISE. On premise software has two basic licensing model : PERPETUAL or SUBSCRIPTION. With perpetual licensing, you pay once, install the software on your own computer hardware (PC, Mac, ...) and own it forever. Common examples of this are PC games. With subscription licensing, although you still install the software on your own computer hardware (Linux/Sun/HP workstation servers), you can only the use the software for a fixed amount of time (1 week, 1 month, 1 year, in rare circumstances you can use the software 99 years or forever).  The payment involves two portions : the upfront fee and the maintenance (or royalty) fee. After 2000, with the advent of CLOUD, Software-As-A-Service (SAAS), the software you buy is NOT installed on your local computer/workstation/server. The software now runs in a big DATA CENTER (aka cloud), located somewhere naturally cool with a much lower cooling utility bill.

What does this have anything to do with placement? With SAAS, anyone with a web browser (PC, Mac, iPad tablet, iPhone smartphone) or application (APP) can use SAAS. This is technology is  possible thanks to a concept called MULTI-TENANT. Salesforce (stock CRM) is a pure SAAS example.  With SAAS / cloud, selling software via subscription to any device is possible.


4. Increase incentives to buy via PROMOTION

What if you have the perfect product, ideal pricing, and global placement, but the product does not sell? Perhaps it is time to creative an INCENTIVE via promotion. There are two types of PROMOTION : PUSH and PULL. Pull promotion is adopted heavily in the B2C (business 2 consumer) sales which involves traditional coupons and 15%-off-sales. JCPenny tried to break away from that model and failed. Push promotion is normally deployed in B2B (business 2 business) enterprise software in addition to B2C.  The promotions usually are at motivating your SALES TEAM. One common way to do this is to create a Sales Performance Incentive Fund (SPIFF) that will create an incentive for your sales team to sell your product. Sales people often have multiple products to sell from the same company, so there is competition amongst product lines within the same company.

If you had a marketing budget, how would you spend it?