effective marketing strategies for ip telephony markets

Effective Marketing Strategies for IP Telephony Markets

Mary Margaret GibsonPittiglio Rabin Todd & McGrath (PRTM)

For further information, please contact:

Mary Margaret Gibson, DirectorMarketing and Sales Practice Pittiglio Rabin Todd & McGrath14131 Midway Road, Suite 650Addison, Texas 75001Tel: (972) 980-8200Fax: (972) 980-8208Cell: (972) [email protected]

February 5 – 7, 2003Internet Telephony Conference and ExpoHotel Intercontinental, Miami, Florida

Pittiglio Rabin Todd & McGrath

© Copyright 2003 Pittiglio Rabin Todd & McGrath8574TX / 01/31/03

1

Agenda

Introduction 10 min.u Challenges for Marketing and Sales Executives

Creating the Right Go-to-Market Model 30 min.u Market Segmentation and Profiling

u Sales Engagement Model

u Channel Selection and Management

u Compensation Plan

u Process

u Metrics

Conclusion 5 min.

Questions and Answers 10 min.

Introduction


3

IP Telephony markets are young, and young markets require different strategies than mature markets

The younger a market is, the more corporate effort is focused on strategy and marketing, product/market matching, and go-to-market strategies and plans

As the market matures, emphasis tends to balance strategy with sales, operations, and a mix of marketing and campaign efforts

Market Maturity

Cor

pora

te E

ffor

t

Product Development, Portfolio Management, and LCM

Sales Development, Management, and Sales Operations

Business Process, Systems, Business Operations

Market Strategy, Go-to-Market Strategy, Market Management

New Mature


4

Companies selling early stage services and products need to cover basics, even before they have products!

Inve

nti

on

Wh

ite

Pap

er

Sm

all T

ech

nic

al (

Go

vern

men

t-Sp

on

sore

d) C

on

fere

nce

Go

vern

men

t Dev

elo

pm

ent G

ran

ts

Co

nsu

ltin

g a

nd

R&

D im

ple

men

tati

on

s

Initi

al C

om

mer

cial

Inte

rest

—S

pec

ializ

ed A

pp

licat

ion

s

Lar

ge

Co

nfe

ren

ce

So

me

Co

mm

erci

al P

R

Un

iver

sity

Invo

lvem

ent

Leg

itim

ate

Tra

de

Pu

blic

atio

n

Ind

ust

ry B

oar

ds

and

Sta

nd

ard

s

Pro

du

ct D

evel

op

men

t Ser

vice

s

IP M

anag

emen

t an

d D

esig

n S

ervi

ces

Services toThree to FiveCompanies

with Commercial

Products

Pre-Customer

Dev

elo

pm

ent o

f Co

mm

on

Lex

ico

n

$ from Special Applications andOutsourced Design Services

First to MarketCompanies


5

There are some signs that a market is maturing and that you should have your products ready to sell

Peak Decline ObsolescenceTime

Revenue

Early Market Growth

Early AdoptersRevenue from Special ApplicationsPre-Customer

Inve

ntio

n

Whi

te P

aper

Sm

all T

echn

ical

(G

over

nmen

t-Spo

nsor

ed) C

onfe

renc

e

Gov

ernm

ent D

evel

opm

ent G

rant

s

Som

e C

omm

erci

al P

RU

nive

rsity

Invo

lvem

ent

Dev

elop

men

t of C

omm

on L

exic

on

Con

sulti

ng a

nd R

&D

(mil.

spe

c.) I

mpl

emen

tatio

ns

Initi

al C

omm

erci

al In

tere

st—

Spe

cial

ized

App

licat

ions

Larg

e C

onfe

renc

e

Legi

timat

e T

rade

Pub

licat

ion

Indu

stry

Boa

rds

and

Sta

ndar

ds

Rea

l Pro

duct

Dev

elop

men

t

Ren

ewed

Com

mer

cial

Inte

rest

3 –

5 C

ompe

titor

s w

ith

Com

mer

cial

Pro

duct

s

Market entry strategies,sales channel strategies andimplementations, and directsales operations and management should be planned as products are developed—not after they are developed!

Companies can make money even before they have products, but once the market has matured enough to have its own conference and magazine—better have a product ready to go!


6

Building early market channels for products like IP Telephony requires a multi-market view

The most significant issue in developing IP Centrex channels is to decide the focal point for the service so that channels can be built to customers

Mixed UseApartments and

RetailCampus

AutoDealers

Vendor’s Sales Organizations Vendor’s Support Organizations

Smart Building

Integrators

Regional ISP with VoIP Expertise orVendor’s JV with national ISPs

Telecom VAR or Integrator

Sells and Installs Systems

Sells and Installs Systemand Resells or Provides

Services

Sells IP Centrex Services


7

A variety of channels can serve IP Telephony, but most companies must field a direct sales force, too

Companies seeking low-cost ways to link both Internet and phone or who have a need for collaboration across a supply web can benefit from an IP Telephony solution

Small to Mid-sizedEnterprises with

Web Retail

Companieswith extensivesupply chains

Realtors or otherservices

companies

Vendor’s Sales Organizations Vendor’s Support Organizations

RetailASPs

IP Telephony VAR/Integrator with established Sales Channels

Telecom Integrator working with DSP (Dealer

Systems Provider)Sells IP Tel

serviceSells and Installs System and Resells or Provides

Services

Sells IP Tel Product with Their Solution


8

So, if there’s all this opportunity, why is the demand side of the business so difficult to manage?

Sales professionals are unable to close on a predictable schedule because market factors make the “buy side” process more difficult in troubled economic times—sales management is critical today

Customer Activities

Vendor Activities

Marketing & SalesService & Support

u A demand pattern is comprised of short spurts of concentrated activities separated by long periods of little or no action

u Even though the vendor is “in charge” of the selling process, the timing of the selling process is in the hands of the customer

– Customers may initiate spontaneous activities that are NOT controllable– Vendors are forced to respond to them

u The number of opportunities in the pipeline is not large enough to manage the selling process using “average” statistics

Creating the Right Go-to-Market Model

u Segmentation and Profilingu Sales Engagement Modelu Channel Selection and Managementu Compensation Planu Processu Metrics


10

Segmentation and profiling of prospects allow effective use of a vendor’s limited resources

Target Segment Name

IusacellTelefonica , D2, One2One,

Vodafone

AWS, One2One, M1, China Mobile

AWS, Sprint, Verizon,Cingular

Sample Target Segment

Operators

NoneNoneLab System tested at minimum

W911 DeployedDeployed Location Services

LowMedium to highMedium to highHighLevel of Product

Innovation

South America and

Eastern Europe

Western EuropeAll regionsNorth AmericaRegion

Operators relying

on voice traffic for primary source of revenue growth

Deployed SMS,

looking to drive increase in usage

North American

Carrier with Deployed W911, Innovative, Outsource Strategy

Description

Emerging Market

Operators

SMS LeadersPrevious TrialsEmergency

Expansion

Distinguishing

Characteristic

Target Segment Name

Iusacell, Telmig, Eurotel, MobiFon

Telefonica , D2, One2One,

Vodafone


AWS, Sprint, Cingular

Sample Target Segment

Operators

NoneNoneLab System tested,Deployed Location Services

LowMedium toMedium toHighLevel of Product

Innovation

South America and

Eastern Europe

Western EuropeAll regionsNorth AmericaRegion

Operators relying

primary source of revenue growth

Deployed SMS,

looking to drive increase in usage

Previously purchasedNorth American Description

Emerging Market

Operators

SMS LeadersPrevious TrialsEmergency

Expansion

Distinguishing

Characteristic

AWS, Sprint, Verizon, Cingular

Sprint, Cingular, Vodafone

Alltel, VerizonAWSSample Target Segment Operators

W911 Deployed-No or PlannedNo CommercialDeployed Location Services

-Deployed with Multiple Vendors

Deployed with Partner as Incumbent

-Infrastructure/ SMSC/ WAP System

---LargeOperator Size

North AmericaA n yAnyA n yRegion

North American Carrier with Deployed W911, Innovative, Outsource Strategy

Mixed Infrastructure so not to be tied to any one Large Vendor

Strong Relationship with existing SGSF Partner

Large Size no commercial services deployed, historic largest in Market

Description

Emergency Expansion

Vendor MixPartner FriendlyFollowersCharacteristic









North AmericaA n yAnyA n yRegion





Description

Emergency Expansion


Iusacell, Telmig, EuroTel , MobiFon

Telefonica , D2, One2One, Vodafone


AWS, Sprint, Verizon , Cingular

Sample Target Segment Operators

NoneNoneLab System tested or more


BuyBuyBuyBuyOutsource Strategy

NoneY – Any --SMSC Deployment

LowMedium or Higher

Medium or HigherHighLevel of Product Innovation

South America and Eastern Europe

Western EuropeAnyNorth AmericaRegion

Operators relying on Voice Traffic for primary source of revenue growth

Deployed SMS, looking for services to drive increase in usage

Previous Purchaser of LI Labsys , or LI trial


Description

Emerging Market Operators

SMS LeadersPrevious TrialsEmergency Expansion

Characteristic

Iusacell, Telmig, EuroTel , MobiFon

Telefonica , D2, One2One, Vodafone


AWS, Sprint, Verizon , Cingular

Sample Target Segment Operators

NoneNoneLab System tested or more


BuyBuyBuyBuyOutsource Strategy

NoneY – Any --SMSC Deployment

LowMedium or Higher

Medium or HigherHighLevel of Product Innovation

South America and Eastern Europe

Western EuropeAnyNorth AmericaRegion

Operators relying on Voice Traffic for primary source of revenue growth

Deployed SMS, looking for services to drive increase in usage

Previous Purchaser of LI Labsys , or LI trial


Description

Emerging Market Operators

SMS LeadersPrevious TrialsEmergency Expansion

Characteristic









North AmericaAnyAnyAnyRegion





Description

Emergency Expansion










North AmericaAnyAnyAnyRegion





Description

Emergency Expansion


AWS, SprintNTT DoCoMoSprint, NTT DoCoMoSample Target Segment Operators

Planned or Yes (Probably W911)

Yes- Multiple-Deployed Location Services

Deployed or Contracted for Deployment

--Deployed Positioning Technology

--HighNeed for In-house Product Control

-HighHighLevel of Product Innovation

North AmericaWestern Europe, Asia/Pacific

-Region

Deployed Location Infrastructure

Deployed Multiple apps ready for or using location data

Innovative with high need for control

Description

Location ReadyLocation LeadersInternal Innovators

Characteristic

AWS, SprintNTT DoCoMoSprint, NTT DoCoMoSample Target Segment Operators

Planned or Yes (Probably W911)

Yes- Multiple-Deployed Location Services

Deployed or Contracted for Deployment

--Deployed Positioning Technology

--HighNeed for In-house Product Control

-HighHighLevel of Product Innovation

North AmericaWestern Europe, Asia/Pacific

-Region

Deployed Location Infrastructure

Deployed Multiple apps ready for or using location data

Innovative with high need for control

Description

Location ReadyLocation LeadersInternal Innovators

Characteristic

All segments and profiles

For illustrative purposes only

Target segments and profiles

service system

or tried location-based


12

Sales channels and capabilities must span all the types of offers in the VoIP marketplace

Different go-to-market plans are needed for products and services that focus on only one level of offer complexity

Companies selling over the entire spectrum must plan multiple channels to reach the various customers at each level

Off

er C

om

ple

xity

Tec

hn

ical

Sal

es E

ffo

rt

Aftermarket Transaction

CommodityProduct Transaction

Product + ServiceIn a Contractual Relationship

Infrastructure Solution forOperator/Carrier Use

Infrastructure Solution + Applicationfor Consumer Use in a

Contractual Relationship

Customers

Operators, Consumers,Enterprise Buyers

Consumers, EnterpriseBuyers, Operators Buying Outsourced Services

Operators, Consumers,Enterprise Buyers

Operators

Operators


13

If selling into an operator environment, sales must be targeted at several levels in the organization

Technical

CFO

CEOCTO**

Business

Target Account

Business Development Managers

Marketing Specialists

VP, MarketingVP, 3G MarketingDir. Marketing*Dir. Consumer/Business Mktg.*

VP, Network Planning

VP, Net-work Tech

Dir. Network Tech/Planning*

Manager, Network Tech/Planning

Acct. Mgr.

Acct. Mgr.,

Prod. M

gr. of

Bundles,

& Bus. Case

. They

manage

VP & Sr. Mgm

t. acce

ss.

Acct. Mgr.

Acct. Mgr. with

Sales Eng. They

manage VP and

Sr. Mgmt. access.

Dir. Prod. Dev.*Dir. Network Marketing

* Champions

Vendor’s Sr. M

gmt.

Vendor’s VPs

Decision Makers

InfluencersDir. (Head), Value-Added Services*

Vendor’s

VPs

Vendor’s Sr. Mgmt.

u There are multiple decision makers and influencers who can dictate the outcome of a saleu For complex solutions, financial resources have to be pulled from many sources as there is no

budget allocated for an early market product


15

Sales force and channel selection depend on the stage of the product/technology life cycle

Pre-FCS

EarlyMajority

Early Adopter

Majority Late Majority End-of-Life

Early Market Growth Peak Decline Obsolescence

Business Development

Strategic Partners Channels with

Low DistributionCosts

Direct Inside/Outside Sales Teams

Direct Sales

Partnership with Established Firmsin Target Market

Partnership with OEMs

Direct Sales and Telesales

Catalog,Electronic or

Print

Customer Service

High Margins Declining MarginsGreatest Volumes

Distributors andResellers

Executives Cultivate Key Relationships

Integrators and Consultancies

Stage

Indirect distribution

Telesales, catalog, etc.

Direct, multi-tiered distribution partners

Direct sales force, SIs, VARs, OEMs

Business development, select partners

Preferred channel

MarginsMarginsCoverageRapid revenue growth

Presence, reference accts.

Key requirement

ObsolescenceDeclinePeakGrowthEarly Market


16

The sequencing and balancing between direct and indirect resources are the same for each target market

Target Market 2

Target Market 3

Target Market 1

Market Development

u Create demand inside initial two to three key prospects,then expand

u Establish brand recognition for the company

u Understand market requirements and opportunities, make needed modifications to products

u Identify incumbent channel partners in key prospects and engage them at the branch level

Direct Sales

u Sell to the first two to three key prospects and create reference accounts

u Build long-term relationships for add-on and up-sell opportunities in these accounts

u Team with incumbent and best channel partners to leverage channel resources

Channel Development

u Select and recruit the first incumbent channel partner willing to become a partner in each market, then build on that base with other partners

u Ramp the first incumbent partner with joint sales support at selected branches

Channel Sales

u Develop regional channel partners based on opportunities

Bus

. Dev

.

Dire

ct

Sal

es

Cha

nnel

D

evel

opm

ent

Cha

nnel

S

ales

Bus

. Dev

.

Dire

ct

Sal

es

Cha

nnel

D

evel

opm

ent

Cha

nnel

S

ales

Bus

. Dev

.

Dire

ct

Sal

es

Cha

nnel

D

evel

opm

ent

Cha

nnel

S

ales


17

Channel partners are carefully selected based on strategic fit along multiple dimensions

Niche vertical or geographic coverage only

Existing customer base and sales channels

Existing customer base and sales channels

Coverage in target markets

Niche market or technology position

Top five in single marketTop five; can jeopardize company’s position if partner with competition

Market position

Limited to niche or geography

Joint and co-fundedJoint and co-fundedDemand creation capability

New company or limited brand recognition

Market maker in a single market or region

Market maker in multiple markets or regions

Brand visibility and equity

Market assets

>$5M/year>$10M/year>$20M/yearRevenue potential for partner

$1 – $5M/year$5 – $10M/year>$10M/yearProjected yearly revenue to company

Revenue potential

Preferred (Sapphire)Strategic (Gold)Imperative (Platinum)

Partner CategorySelection Criteria

Strategic ImportanceCritical Peripheral



18

Channel partners are carefully selected based on strategic fit along multiple dimensions

YesYesYesIncentive/targets for project team

YesYesYesOngoing training in place

NoYesYesResource commitments

Support capability

YesYesYesCommitment to be an innovator

Cultural fit

Complementary VASValue-added complementary products scheduled for launch within six months

Value-added complementary products available now with existing market share

Complementary product availability

Smaller company, good innovation

First or fast followerFirst to marketAbility to innovateSolution functionality

Preferred (Sapphire)Strategic (Gold)Imperative (Platinum)

Partner CategorySelection Criteria

Strategic ImportanceCritical Peripheral


Continued


20

The compensation plan must be designed to promote progress toward strategic initiatives in addition to sales

All expenses paid trip to Hawaii

4.5% commission on revenue above plan

N/AReward high performers

$2,000 for completing 10 VP-level meetings per month in target segments

N/AN/ACreate awareness of vendor’s solutions

Examples

N/A3% commission on direct sales and 5% commission on net revenue from channels

N/APromote collaboration between direct and indirect channels

$5,000 for exceeding quarterly targets

50% commission (half on bookings and half on shipment)

50% salary Encourage bookings

BonusCommissionBase

Strategic Objective


22

Efforts of all customer-facing personnel must be coordinated to sell early-market products

2) Product Definition

2) Product Definition

3) Sales Tool Development3) Sales Tool Development

4) Market Development

4) Market Development

6) Market Awareness Creation

6) Market Awareness Creation

13) Proposal Preparation

13) Proposal Preparation

22) Post-Sales Technical Support22) Post-Sales

Technical Support

14) Short List

14) Short List

23) Aftermarket Sale

23) Aftermarket Sale

19) Installation & Integration Planning

19) Installation & Integration Planning

1) Market Definition1) Market Definition

PartnerSelectionPartner

Selection

Marketing Phase Pre-Sales Phase Sales Phase Post-Sales Relationship Management Phase

Marketing and Sales Process

Customer Services Process

Channel Development and

Management Processes

Core BusinessFunctions

8) Demand Creation

8) Demand Creation

24) Feedback24) Feedback

21) Training21) Training

PartnerRecruitment

PartnerRecruitment

7) Account Targeting

7) Account Targeting

ContractingContracting

Partner Ramp-upPartner Ramp-up

Partner Sales and Account ManagementPartner Sales and Account Management

Installation & Training

Installation & Training

Ongoing Support, Help Desk & Maintenance

Ongoing Support, Help Desk & Maintenance

18) Account & Project Planning18) Account &

Project Planning

20) Installation & Integration Execution

20) Installation & Integration Execution

Solution Delivery Phase

5) Account Intelligence Gathering

5) Account Intelligence Gathering

10) Needs Assessment10) Needs

Assessment

11) Opportunity Qualification

11) Opportunity Qualification

12) Solution Creation

12) Solution Creation

15) Intent to Award

15) Intent to Award

16) Award16) Award

17) Contract

17) Contract

Account Management

Acct./Quota Assignment

Proposal Creation Contract Signed ATP

9) Account Qualification9) Account

Qualification


24

A set of carefully chosen metrics helps align the sales organization to strategic objectives

ExamplesStrategic Objective

%Total maintenance and support revenue divided by total product license revenue

Maintenance & support to product license index

%Contracted price divided by initial bid pricePrice erosion index

Demonstrate a path to profitability

%Discounted price passed on to channels divided by standard price

Average channel discount

%Number of awarded contracts divided by number of submitted proposals

Proposal close rate

DaysElapsed time from partnership contract to achieving anticipated run rates

Channel partner ramp cycle time

DaysElapsed time between receipt of proposal description to submission of signed off proposal

Quote cycle time

DaysElapsed time between opportunity identification and initial payment

Opportunity to cash cycle time

%Recognized revenue to planned revenueRevenue to plan

%Actual to planned bookingsBookings to planDemonstrate top line growth§$100M in bookings§$75M in recognized revenue

UnitDefinitionMetric

Conclusion


26

An integrated model is necessary for successfully selling in the IP Telephony market

Organization

Process Metrics

Sales Engagement Model

Information System

Channel Partners

Channel Selection and Management

Customer

Segmentation

Support Infrastructure

Compensation Plan

Vendor Sales Organization

Questions and Answers

effective marketing strategies for ip telephony markets

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