Business VoIP Featured Article

How to Build a Winning Sales Proposition for the VoIP SMB Market

August 21, 2006

If you’re waiting for the small and medium business (SMB) market to jump onto VoIP, that train has already left the station and is gaining momentum.
Where only twelve months ago, 14 percent of SMB companies were just considering or getting ready to evaluate VoIP, in a new survey of this market by Savatar in Q1 2006, 30 percent of SMB companies are highly familiar and interested in VoIP, and the majority of those who had already converted to VoIP said their system met their expectations.
While that’s good news for VoIP equipment and integration providers, the window of opportunity in this lucrative market is beginning to narrow. Where just a year ago, there were no clear preferred providers among a packed field of traditional telcos and new hardware suppliers, small and medium firms are now looking beyond the early VoIP providers who were just selling price and features. They’re now looking to companies that offer a broader sales and value proposition.  
In fact, the selling proposition has actually turned around, or perhaps matured, as business owners look for more sophisticated Total Cost of Ownership (TCO) buying rationales and ease-of-management benefits in their evaluation. If your VoIP sales organization is leading with glitzy features and lower monthly local and long-distance charges, they’re spiraling into a low-margin commodity sell.
Before addressing the specific cost and feature needs of your target customer, a service provider must first meet the basic prerequisites of service. The first of those is low service risk—showing that you provide reliable VoIP services with voice quality.
Then, there is low vendor risk to make it clear that your company has a proven track record serving similar customers. On top of this, most SMBs want assurance that there will be no change to their existing telephone number (Local Number Portability) and that they will have directory listings available. 
The Foundation of Total Cost of Ownership
Of course “price” sits at the head of the table of any buying decision, but our research on the SMB market shows that buyers are moving beyond simple local and long-distance cost factors and are now evaluating a broad range of Total Cost of Ownership issues. The foundation of your VoIP system or service go-to-market value proposition has to address factors such as acquisition costs, monthly recurring charges and maintenance. 
For example, are you positioning and pricing your offer with true acquisition costs in mind? Are you factoring in the full range of installation fees, hardware, advanced cabling and service fees to manage the LAN update?  
SMBs are looking at these factors and will press VoIP providers if they’re not ready to do side-by-side competitive comparisons on these features. Many suppliers are looking at bundled services, such as data and voice combined with hosted email and web hosting, as a way to reconfigure their price and value proposition.
Total Cost of Ownership also looks at Monthly Recurring Charges (MRC), not just traditional monthly phone charges. For example, what will the end-user pay on a monthly basis for per seat costs of IP Centrex, local and long distance charges, equipment lease charges or even recurring data transport charges? 
Even maintenance costs such as annual fees or upgrade charges, traditionally not factored into VoIP evaluation, are surfacing in negotiations for new VoIP systems. To effectively address all the cost savings, there needs to be an easy way to communicate and present the Total Cost of Ownership.
VoIP providers can build significant competitive advantage by working TCO numbers into their product and pricing positioning. Add to TCO new voice and data bundling strategies and VoIP companies are in a position to change the value proposition that moves them ahead of traditional ROI models.
As VoIP providers change the pricing debate to TCO, they’re in a position to continue moving up-market in their sales position to other evaluation and purchasing factors such as system management benefits. Customers that have been converted to this kind of economic rationale may eventually want to hear about those bells-and-whistles features that the market often mistakenly leads with.
Making a Systems Management Case
Our research tells us that the next level in the positioning hierarchy for SMBs should be a focus on the ease and cost-benefits of simplified system management. As SMBs convert from traditional digital PBX and Centrex systems, they’re probably not even aware of many of the new capabilities VoIP offers, though they’re learning fast. 
This is especially important given the host of self-management tools for number routing and call management that are now accessible for local and field employees. Again, VoIP providers need to be touting ease-of-use interfaces and web-based management tools in their value proposition. The days of installing handsets and passing out 50-page never-to-be-read feature manuals are over. 
SMBs making the leap to VoIP need to know that the system management benefits being “sold” to them are accessible and easy to use across their organization.  
Can end-users easily self-configure and manage their own services in real time, while, at the same time, rules-based controls are in place? These are issues SMBs may not see right away, but they represent a competitive differentiation that, if articulated well in marketing and sales communication, move your positioning beyond the commodity ROI pitch.
Features—Selling Parity First, Then the “Cool” Factor
Eventually, as we move up the value proposition chain, we do find that SMBs look for, and want, the enhanced features that VoIP offers. But contrary to most of the positioning we see in this market, the “features sell” should be at the end of the evaluation process, not the lead.   We can further segment this phase into the “feature parity” and “cool” features stages.
Communicating features parity may be simply getting the “table stakes” out of the way and demonstrating all the “most commonly used features”, but these are important to new SMB VoIP users. As VoIP moves up the quality and performance scale, SMBs need to hear that what you’re offering has “parity” with traditional phone/key systems they’re used to.  Issues over basic “dial tone” quality are still a concern. 
What the industry considers base-line services, such as transfer, call-forward and conference calling, still need to be communicated or else, where’s the incentive to change? We’ve already established that “lower phone costs” are not enough to create a buying imperative.
Selling the “cool” stuff at the end of the sale really has the most impact. If you’re not in the market for a luxury car, talking about advanced navigation systems doesn’t make sense. In fact, it’s a turn off.  But when all the other barriers to transitioning to VoIP are overcome, new and advanced VoIP features can actually help close the sale. “You get everything you’ve always had, with business economics that make the case to act now (read “TCO”), and you get more than before.” 
One strategy for closing with an advanced feature sell is to organize these features according to the end-user needs or their business process needs. An SMB operating in multiple locations will respond more to on-net dialing or abbreviated calling between offices, than an organization with a mobile workforce that wants to know about features such as find-me, follow-me or simultaneous ring. 
What kind of operating environment does the SMB work in? Are Microsoft Office users, wowed by their MS Outlook Telephony Toolbar, looking for point-click functionality within Outlook?
In short, make sure your positioning and messaging doesn’t forget parity features, before using “gee-wiz” features to help close the sale, and make sure those features are relevant to the business processes that senior management care about, not just the IT folks.
Timing’s Right—Are You Ready?
As our data shows, the VoIP market is accelerating quickly. Prospective customers are past the “should I” stage and well along into their “consideration” phase. But don’t let the rush to market lead you to think that a quick SMB brochure and an updated Web site will build market share. The VoIP market is crowded with traditional and new players all vying for a piece of this space.
VoIP providers gaining traction in this market are making commitments all across their entire sales and support organizations.  From a marketing vantage, they’re working hard to make rational decisions about segmentation, and are investing in demand generation all centered on new value propositions beginning with TCO.
Their sales processes are being realigned with dedicated sales reps with deep product knowledge who know how to engage in a consultative sell. Successful
VoIP providers are looking for ways to redouble their sales engineering and installation support to ensure flawless deployment and reduce the margin-killing repeat installation visits. Equal attention is being paid to ongoing operations and customer support needed to create effective trouble-shooting organizations that can deal with disparate network and application environments. Not an easy set of tasks.
So the VoIP SMB market is ready, primed and actually moving ahead with encouraging speed, according to our recent research. What SMB owners are telling the market is they’re ready to listen; and they want to hear the case for VoIP in clear and relevant terms that go beyond “lowering costs,” and that speak to solid total cost of ownership values. That’s a case that can be made.
Richard Grange is president and CEO at New Global Telecom, provider of the 6DegreesIP wholesale VoIP solution, and outsourced switches services. John Macario is president of Savatar, a consultancy that provides business partner relationship, sales, marketing and customer management services.



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