Where should outsourcing vendors invest their marketing dollars in this climate?

Being an analyst, you get a broad view of all the entities competing for the same service provider dollar. You also get a good perspective on how service providers can get the best bang for their marketing buck. And being a blogger, you also pick up a strong sense for the effectiveness of media outreach, but I'll save that discussion for another time.

There is no one-stop support shop for vendors to find and attract new clients, and influence the market - they need to gauge where they need to build influence, using both direct tactical measures - i.e. speaking at conferences or advertising, and indirect measures - i.e. influencing influencers or subliminal branding. The current pull-back in discretionary spending from vendor marketing budgets is seriously exposing the bloated array of firms feeding off the vendor marketing-dime, and with a lot less to go round, we're going to see some firms exit the market, some market consolidation, and others simply going out of business. We'll also see some boutiques linger around the industry because their owner has no idea what else to do, and his only costs are living and travel expenses, and maintaining a website.  Desperate times call for desperate behavior and none more so than for many of those entities forging their living selling to IT services and BPO firms.

And spare a thought for the outsourcing vendor - it has to tackle razor-thin margins with being the smartest, the most innovative and the most operationally efficient; while having a great brand, a great corporate culture, a credible Green strategy, an advisor relations strategy, great analyst write-ups, spotless client references; while being incredibly visible to business decision-makers... and be able to do this with smart media outreach with its market-makers speaking at the best conferences.

Long gone are the astronomical sales and marketing spending-sprees of yesteryear. Now, every expenditure is scrutinized, and vendors have to demonstrate actual lead-generation attribution for every dollar that flows out of the organization - especially with firms with whom they do not have an existing relationship. Moreover, those vendors which can successfully manage the right marketing-ecosystem within a reasonable budget outlay are likely to be emerge from this slump in a much stronger market position than those who are incapable of changing their ways and learning how to tackle their market-management. So let's take a look at the current marketing ecosystem facing vendors in the outsourcing industry:

Today's marketing ecosystem for the outsourcing vendor

Marketing, Branding & PR:  There are a few discreet firms which specialize in marketing strategy and tactical PR outreach. Vendors need to make tough

decisions whether to retain much of this work inhouse, or slim down its internal marketing function to use a third-party.  Most vendors will not be able to afford both. With some vendors, they are going to benefit far more from a third-party marketing firm that has a deep understanding of the industry and can execute programs and campaigns that are measurable and actionable. My advice is to put prospective marketing agencies to the test and challenge them on how exactly they can bring both direct and indirect influence and visibility to the organization. Many vendors could actually save money outsourcing many of their marketing activities to a nimble marketing agency, but they need to ensure they handpick the right marketeers who can drive their marketing agenda in this climate.

Information Providers:  In the past, some vendors have spent a lot of money on research firms (some call themselves "analysts", but they are really in the information-provision business). In this market, much of the information vendors need on their market and their competitors is freely available. If you have a couple of smart inhouse analysts, you can do a lot of the information gathering you need inhouse and avoid spending a lot on expensive information that you could have pulled off the web yourself. Besides, are your competitors really dumb enough to expose their competitive secrets to firms which produce publicly available competitive profiles?  Like the former category, vendors should decide whether to retain this work internally, or use a third-party firm. Having both is likely to be wasted money.

Industry Analysts:  Like it or not, some industry analysts have a significant amount of influence over your prospects and customers. Most of the FORTUNE 1000 relies heavily on analyst validation - they trust their advice. Analysts can be a very influential indirect channel. However, that means you need to focus on analysts that spend a lot of time with buyers, and have a lot of buyer-clients. The more you can convince them you are the real deal, and the more happy clients you can deliver up to bear all about their experience with you, the more assured analysts will be of your delivery excellence. However, that means you need to conduct some due-diligence on which analysts are actually influencing, before investing a lot of executive time with them. Some branded analyst firms only have vendors as their clients; they are not really influencing anyone, besides you and your competitors. They will really struggle in this recession, as their only real value to you is market insight, which might be superb, but is - at the end of the day - a discretionary cost. My advice: invest in analysts who influence your prospects and clients. And one easy rule-of-thumb:  if they fail to impress you, they probably also fail to impress your clients...

Sourcing Advisors:  As we have discussed here on several occasions, some sourcing advisors can play a pivotal role in managing outsourcing evaluations and escorting clients through to a contract. Investing in a couple of executives to mine relationships with some of the key advisors in a no-brainer:  you need to ensure you are on the radar-screen of advisors when they send out an RFP. In addition, you have probably also noticed that most of them are now targeting vendor marketing dollars to supplement their revenue streams in this market, with services that can help your marketing and sales strategies. However, my advice is not to confuse investing money with sourcing advisors with influencing their "favor" with a deal they may be running - it doesn't (and shouldn't) work that way. Project directors in advisors who run individual deals are highly unlikely to pay any attention to (or have any knowledge of) the fact you have invested funds in one of their training, marketing or research programs. Judge their vendor-offerings on face-value: if they provide you with critical support, then evaluate them like any other third-party service offering, like those described above.

Media:  Gaining visibility with decision-makers has never been so challenging in today's information-cluttered market place. However, in cost-constrained times, not everyone can afford sporting-heros or prime-time commercials. Moreover, broad-sheet business media (the most read by C-suite execs) is still very expensive, and the cost of buying up mindshare in the Journal is going to significantly eat into other areas of your marketing budget. Laser-focused targeting is required to capture mindshare through the media. My advice is to use micro-targeting to pinpoint specialist media that has the readership you want (which may be a step or two down from the C-suite) and also research which social media is impacting your client base (i.e. LinkedIn / Google / popular blogs). Again, evaluate niche marketing boutiques that can take on this task for you - they should know exactly where you should invest, and have the negotiation experience to get you some good media sponsorship deals.

Conferences:  This is a tough year for the conference circuit. Many vendors are opting to pay entry fees to network with clients and prospects and avoid buying up expensive booth-space or paid speaking spots. This is a time to get a good discount from your conference provider. However, having the right prospect see you present could net you millions of dollars. Tough times these may be, but being at the right conferences is still a great way to meet people. Just take time to ask around which conferences will get you the client access you need. Avoid mass-marketed trade shows which tend to only attract other vendors and junior folk from clients in this market. Moreover, a good conference should still get you access to multiple advisors/analysts/clients that you can schmooze in one quick-hit, so these are still a good use of your time and money.  In addition, really ramp up your webcasts this year - clients are much more accustomed to desk-based discussion is this market, and the cost-effectiveness of driving a compelling presentation and Q&A to a few hundred prospects is the best bang you will get, provided you promote it right and have interesting stuff to talk about.

Industry Associations:  Some are good, some are jaded, some were jaded and have bounced-back, and some never were any good in the first place (but never seem to go away). I'm not going to "out" any on here, but ask around the industry to find out which associations still attract new members, have good leadership with passion and energy, and are respected throughout the community at large. You may be surprised...

Client Hospitality:  Investing in your loyal clients and hot prospects in this market is money well-spent. It's time to get tighter with what you have, in addition to going after new business. Investing good money in entertaining your clients, have them network with each other, and meet other industry experts who can offer insight and value is very smart.  I've been to several vendor-client dinners this year and can honestly say the goodwill gained from the host vendor easily outweighed the cost of the shmancy restaurant bill.  Plus, who turns down good food and booze in this economy?

Direct Sales:  You can't fault the old fashioned way of bringing in business, but you can't just call up firms and ask to "talk with whoever is in charge of outsourcing". Save your money and send your market-makers to the right conferences where they can talk to those "outsourcing executives". 

Comments

[NM]

Hi Phil,

Most interesting article and one I really enjoyed reading amongst many others that you post regularly. Has anyone ever thought that their marketing expense can come down significantly if only they had more intelligent and marketing savvy sales teams? It is often that one comes across a sales team in the Outsourcing Industry who do not understand the dynamics of marketing. The only thing they can do is, with a lot of help, sell. Imagine if you had a sales team which required very little help, then the whole cost conundrum of having a sales support function would disappear. Like someone rightly pointed out - intelligently designed and well marketed content on the company website would save precious telephone talk time and hours of presentations and documentation submissions in trying to make the customer understand what you're really trying to sell and what your value prop is.

Few suggestions that I would give to most companies include:

1. Educate your sales team and have a sales team that not only sells but markets your company and positions it correctly

2. Marketing does not necessarily understand or appreciate the word "No" or "Impossible" in its dictionary but most CMO offices have this term etched in bold partly because of their own inabilities or inability to convince others. Look beyond yourself.

3. Outsourcing one's marketing activities is wise as long as you give it to someone who knows what they're doing. That doesn't necessarily mean going to someone who has been in it for dog years. Preferably go for someone who has the spunk and demonstrates the ability to go beyond conventional thinking.

4. Use every possible mode of communication not just to market but to sell. Right from a hello to the point where both parties are tipsy after one too many a drink

5. On analyst reports and research papers from the big analysts that everyone subscribes to - They are human and they get it as wrong as you on your own. So, try not to believe everything in those reports and for the price they charge, its not really worth having stale bread in a new garb with a hefty price tag. You can get your own if you'd take the effort to walk a little and maybe even get lucky with something rather fresh

6. And most importantly, if you have a marketing team, make them work and don't outsource everything. Classic example is an outsourcing company with more than 10 members in their marketing communications team. A little too many for a $60Mn firm who outsource everything - don't really understand the company's business - outsource to vendors that cost a lot more with poorer quality but do so within their city because they feel things will get worse beyond their line of sight [fact is, it might just better] - and please my fellow outsourcers, pl do not overestimate the value of a degree from a big fat college for simple undergrads can beat the hell out of them and cost a whole lot less with lesser attitude, hunger for growth and superior quality of work.

And finally, Good Luck!

[Matt Smith]

Phil,

Excelent article. An additional, alternative approach for market development, which particularly niche and emerging outsourcers should consider, is developing in-direct sales opportunities via alliance relationships with larger, full service outsourcing leaders.

We believe this is particularly true for smaller firms such as specialized BPOs or providers operating in highly commoditized industries such as desktop support, product acquisition or transactional-based services.

As you have illustrated very well, large end-to-end outsourcers must possess highly effective methods to deliver, manage and transform their contracted client environments and they have to do so in a very cost competitive fashion. Many times the larger outsourcers look to alliances to help them achieve these results. The end-client benefits, the outsourcer reaches their goals, and as a subcontractor, the niche outsourcer has revenue opportunities they would not win independently.

[dsinha]

Didn't see Industry/Market consultants in your ecosystem. They're out there too.

By the way, we've focused our marketing spend in the following ways. Considering that, for most service providers, over 90% of revenue comes from existing clients it's pretty clear that client attrition is a much more important risk/opportunity than client acquistion:

1. Sharp focus on Account Based Marketing
2. Customer Intimacy Programs (e.g. Customer Advisory Councils)
3. Market research to clearly define challenges for key accounts, and developing campaigns based on target solutions
4. Specific focus on "Power Analysts and Advisors" with spend on building visibility and salience with them
5. No trade shows, and no 'above the line' stuff

Cheers.

[Mayank Agarwal]

Marketing efforts of the organisations needs to focus on 2 things, namely:

1. Getting new business - This can achieved by working with "market influencers" namely Sourcing Advisors (as most large / sizeable deals are led by them) and Market Analysts (most F1000 IT decision makers would refer to their report before making outsourcing decisions)

2. Protecting and increasing existing business - This is achieved by demonstrating capabilities by existing client decision makers by creating and sharing collaterals for existing engagements.

[Arnold Britto]

Phil,

As an outsourcing company, one must hedge one's bets and invest in a two-fold strategy:

1. As an overall company strategy, invest into focused analyst events and specialized trade shows that will generate qualified or warm leads. Idea is to remain visible and active in the vertical/horizontal/domain of interest.
2. As a specific account strategy, invest into existing business and try to stay engaged through the tough times. The idea here is to reassure your customer that you will stand by them.

Thanks,
Arnold

[Frits Bos, PMP]

Phil,

How about outsourcing the marketing effort? Why would outsourcers do it all in-house when they claim to be the experts at complementing clients who (in their opinion) should stick to their core competencies? The truth is that outsourcing per se may be good neither for the goos nor gander, a collosal hype about benefits of superior services at much lower cost. The use of outsourcing specific competencies to complement what the firm is capable of internally is not the same thing as wholesale outsourcing. The answer lies in your question: the CMO of an outsourcing firm would not be inclined to outsource and eliminate his marketing domain. Many CIOs are discovering that they are superfluous when their domain is no longer part of the organization. Hence your CMO may find it more difficult to find any audience where there are viable CIO fish to catch (those that lack skills to maintain the competency of running a lean and effictive IT organization) for wholesale outsourcing, unless they develop specific competencies that are truly supportive of the client organization.

Frits Bos

[Jerry E Durant]

Industry analysts are great when they aren't pursuaded by tier 1 promotion dollars. Where we are seeing this tainted is when obvious information sharing isn't properly evaluated using a consistent and time proven qualification device. Up until a month before Satyam exposure the leading analysts were still being the favor drum for this source. The company is good but the fiscal/viability was questionable.

[Nandakumar Somasundaram]

As we are an outsourcing company, We follow some of the things to market our company.. But as of now we dont have any budget .. We are developing applications in social media, So we do most of our marketing through online activities like SEO, SEM & Blogs ..

Regards,
Nandakumar
CEO & Founder of NDOT
http://ndot.in

[Bill Lennon]

Hello Phil,

Business development and lead generation.Specifically, outsourced lead gen/sales.Companies still must feed their pipeline even during these challenging times, and by outsourcing this function they can reduce cost and still gain new clients. Really, best of all worlds.

Regards,

Bill Lennon

[Dr Vikram Venkateswaran]

Most vendors would need to spend their dollars on market intelligence. It is becoming increasingly clear that most firms are moving towards the super vendor philosophy. Of late many deals have gone to sole source rather than the multi vendor deals we saw earlier.

Picking when and where to fight would become the name of the game in the coming months.

[Rob O'Malley]

Like every business, it has to be in direct and measurable sales and marketing activity. I would avoid advertising and those conferences where it tends to be vendors speaking to other vendors. Focus on good business development people backed up by small, measurable forms of direct marketing and speaking engagements. The forward thinking companies are expanding their sales teams right now whilst the backward thinking companies are reducing them.

[Jaideep Kewalramani]

Phil, this is one question that is on the mind of every outsourcing vendor since Oct 08. I believe that the best way to spend on marketing is to build networks and relationships during this period. Increasing the feet on the street is also a highly recommended option. Therefore spending on face to face meetings, networking events and conferences will help.

Jaideep Kewalramani

[Phil Fersht]

Hi Bruce - good input. I include content development in the marketing, branding and PR category. As stated, firms should consider using third-parties / independents for these type of services, if they do not have well-honed professional writing skills inhouse. Good marketing agencies should be linked up with professional writers so they can bring them in to their clients when needed,

PF

[Bruce McCracken]

Good post, Phil. But you left out an area that may fall under your media category, the content on the provider's Web site. Many prospective buyers will have staff look into providers and perusing Web sites is the avenue for investigation.

At this point, content becomes king. It is frequently quite obvious that communication is not a core competency of many providers. To those suppliers I put forth the following question:

Are Some Companies Fishing for New Business Using Dead Bait?

Like people, companies never get a second chance to make a first impression. The content on the Web page frequently creates that first impression. I have perused many Web sites and read hundreds of case studies and white papers. Some sites are stellar in the content, while many more pale by comparison.

Ineffective communication is detrimental to branding. Yet that is what is occurring for many companies as they view communications as an expense instead of an investment. By focusing upon the cost of the writer instead of the quality of the writing, they lose dollars chasing dimes.

The quest for market share is intensely competitive. What once was a fine line has become a razor’s edge. A seasoned business technology writer can help in communicating corporate messages more persuasively to the executive decision makers of prospective clients. Engaging a professional writer with business writing as a core competency is a wise investment. The question is not if the company can afford to bring on a professional, but rather if it can afford not to.

[Ravi Raman]

Phil, Good times or bad times, it is important that the vendors should focus on the "customer" and listen a lot to them. In Boom time it was still acceptable for the vendors to look inward and think that business and profits were coming from within their organisation. But universal truth is that the vendors who were ready to look at their clients and "make them win" always succeeded.

I would put my dollars in Industry (client industry) forums and focus groups than IT/ITES association meetings.