When I got to Red Condor, there was a lot of versions of the spam filter we were selling. That is a bit unfair as the software was singular – one version. The difference was how the software was packaged, and delivered to the customer. There were variants of SaaS, Hybrid and Appliance. Now all of that could be used in different use cases, but the biggest challenge was the overlap in use cases in the Small to Mid Sized Business Segment.
The Spam Filtering Market is mature and commoditized. Red Condor participated in primarily two segments, Internet Service Providers (ISP) and Small to Mid-Sized Businesses (SMB). The latter were businesses from a sole proprietor to a couple of hundred employees. There were two kinds of competitors in that market: Appliances and SaaS. Red Condor was scrambling for revenue and wanted to participate in both parts of the market. The difference from a product standpoint was whether the customer had a box on his premise or not. The Hybrid was something in the middle. Where the customer had a box, but redundant functionality was provided by a cloud service. Now, there are some minor differences for the customer but these variants competed against each other on price.
Now if these were all created equal from a cost standpoint, then this would not have been a big deal. But they weren’t the same. Not at all. The original SaaS solution was intended to create a self-service installation. That was not normally true with the appliance solution and it was definitely not true with the hybrid solution. On top of the lack of self-service, the appliance solution required us to buy, configure and sell boxes to users. We had to replace those boxes if they failed inside warranty. And they ofen caused us more customer service trouble. Customers would turn off racks or have network outages that we would have to deal with. We were running a managed services so any outage was visible to us, and until we investigated we had no idea if an outage was a customer issue or a Red Condor issue. These extra problems often cost us the profit from the first year of a subscription. The hybrid service needed some automation to be able to create it without human intervention.
So, where was the lack of clarity? We had 3 product offerings to address a single market. Some of these offerings were more profitable than others. You would think that the most profitable offering would be the one with the lowest price to encourage users to buy it. In fact, it was the one with the highest price when I arrived. There were reasons for this that were mostly bad, but it was true. I eventually was able to change the pricing to reflect the additional profit from the SaaS to drive customers to that solution. This is the place where everyone needs to be on the same page. If there is a reason for a customer to want a specific solution that costs more, then they can pay extra to get the value of the service. If there is no additional value to the service offered in a more costly manner, then you should consider the wisdom of the additional product offering. The goal of this pricing is to drive customers to the product that makes the most sense for you as a company and to align value with price.
The entire product needs to make sense. Your feature set, channel, pricing, service and support – all of it need to make sense on how you are delivering to your customer. Clarity is knowing who you want your customer to be, what they want to buy, and how they want to buy it. To top that off, you need a plan of how to make money doing business in a way that the customer finds excellent.
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