ITEXPO begins in:   New Coverage :  Asterisk  |  Fax Software  |  SIP Phones  |  Small Cells
February 2007
Volume 10 / Number 2

Effective Marketing of VoIP Services —
Catch the Small Business Wave or Be Swept Aside



While traditional service providers are busy defending mass consumer markets, the silent majority of the small business market could be an even more lucrative target for nimble operators that recognize and act on the opportunity. With small business, you will win a customer for life if you get there first — but only with the right combination of technology know-how and a commitment to a long term relationship.

The Opportunity
For the past 20 years, customer premises- based key systems have been the overwhelming choice of small businesses for their voice services. But as consumers, small business owners are bombarded with information about new Voice over Internet Protocol (VoIP)-based solutions, and many are curious if this can also be cost effective for their businesses. With 32 million aging key systems in the U.S. alone, the replacement wave in the small business market has begun. However, harnessing this burgeoning market segment is more than a technical challenge or a marketing mission. Failure to understand the right marketing mix for small business has been largely responsible for previous failed attempts to address it, which in turn has led to an undeserved reputation as an unprofitable market for service providers.

The right blend of technology and powerful mass market channels presents savvy service providers with an opportunity to aggressively pursue growth strategies — largely at the expense of the vulnerable incumbent telephone companies. The prize is securing threeto five-year contracts earned through long-term partnerships that are vital to retaining small business clients. For their part, small business owners gain a trusted advisor to effectively manage their communications.

From the service provider’s standpoint, a key piece of the right solution is an effective channel program that blends a direct sales force with an indirect channel model. Each geographical market is unique and the key is to secure those local channels that small businesses already value and trust. From the small business perspective, they buy locally, generally within a 50-mile radius of their own offices. Small business owners want local relationships with real people, not an automated system that directs their concerns when they need service. Most of all, they want to be able talk to their providers on demand.

VoIP (define - news - alert) is a completely disruptive technology for the existing telecom channel model. Today’s common model has the network guy living comfortably on his side of the “demarc” point and the telecom VAR residing quietly on his side. In the brave new VoIP world, service providers have to reach all the way through to the end user desktop to deliver the bundle of services that users need and want. To reach this market profitably, service providers need to find and secure relationships with successful channels that understand how to serve the unique small business market.

The Challenge
The small business market may be huge in aggregate, but it is also highly fragmented, resistant to change, and cost conscious to the extreme. To even begin to understand the small business mindset, a vendor or service provider needs to have spent time in the trenches and learned the important lessons first hand. For example, even when a small business believes in your technology and can see its value, often cash flow constraints can cause your deal to fall through. A service provider with small business smarts knows that eliminating start-up costs or offering financing options is a prerequisite for this market.

In addition to money constraints, small businesses lack the on-site IT resources to install and manage customer premises equipment. They clearly lack the expertise to evaluate new technologies, so most small businesses stay with the tried and true systems and service providers that they have used for years. However, the tried and true systems have an overwhelming set of features that are complex and unnecessary. In small business, more is not necessarily better. Any service provider that wants to succeed with small business needs to deliver a simple set of features that are intuitive, easily accessible, and require no training.

For small businesses, vendor relationships are even more important than they are for larger enterprises. It’s paramount that you be a partner that small businesses can trust. Second only to cost savings, the next most important issue for small businesses is control. This is why their relationships are overwhelmingly local and the connection among you, your channel, and your customer is central to your success. Small businesses look for value for money, proximity, responsiveness, and respect from their vendors. If you can match your strength to an indirect channel that already understands this, you’ll be in a better to position than your competition to catch the key system replacement wave.

The Right Product
Hosted VoIP technology offers the right economics for this market, but not all solutions are created equal. The wrong product choice for this market is a repackaged residential play or a diluted large enterprise offering. The right product choice is one that is simple to sell, deploy, and support. It is more important to provide capabilities that are actually needed and easy to use than it is to offer a product that is overly complex and guaranteed to drive up support costs over the lifetime of the service.

The right hosted voice services product for small business must have the following key attributes:

  • Products must be self provisioning to address the lack of IT support. In a small business it is often the owner, office manager, or receptionist that is managing the telephone system.
  • A hosted solution that can be delivered without on-site technical support is essential. Complicated customer premises equipment leads to an unwelcome combination of truck rolls, capital cost, and operating expenses for you and your customer.
  • The product must be able to adapt to changing business needs. Whether it is part of a bundled solution or delivered à la carte, flexibility is a must have for the service provider. From your customer’s perspective, every small business is planning to grow, and your technology needs to be scalable to meet the expansion.

The kind of simplicity required by this market benefits you as well as your customer. A simple product is quicker to deploy. Today, some pioneering service providers can get their small business package up and running on site within 30 minutes. This is a huge change from the current situation, where even simple changes can take weeks.

Product simplicity is the competitive advantage that guarantees satisfaction for your customer and fast ROI for you. It allows you to add more customers with less effort in less time — a virtue of increasing importance as the key system replacement wave swells.

There is a clear link between successful products and successful channels. For example, complex products matched with highly skilled VAR channels have been proven successful for large enterprises, but at a high cost of entry. The right product for small business opens the doors to simple, effective, mass market channels — which is only possible if the product is extremely simple to sell and service.

The Right Channel
Given the importance small business places on current and local vendors, the right channel for you to engage is the channel that already has these relationships in place. These channels may not sell voice services today and would see VoIP as purely incremental business. When coupled with the right product, a simple channel model that reaches the small business market in a two-call close can give service providers growth rates of 35% quarter on quarter, with larger margins within that growth.

To achieve this magnitude and pace of growth, you also need to embrace small business expertise within your marketing, sales, and partner teams. To do so, you need a technology vendor with street experience and proven programs. These assets need to include the following:

  • Recruitment expertise — Teach your business development representatives how and where to hunt for the right prospective channel partners.
  • Marketing communications — Messaging and collateral that works for small business and speaks to their concerns.
  • Lead generation — Direct mail, email, and brochure content.
  • Sales training and support — Courseware, sales tools, rewards, and performance measures.
  • Reseller support and training — For developing the local channel relationships that are central to success with small business.

A successful vendor with history and deployed product in the marketplace will have the proven models and operational data to help you create the most targeted, most effective channel program. The same data that informs its product design choices on what features small businesses are and are not using can identify the most important pain points and messages for the customer and the most valuable training curriculum for your sales team and resellers. There is evidence that even those service providers that are successful with direct sales to small business can ramp up a targeted channel program faster and more cost effectively by leveraging an experienced vendor relationship.

Given the range of legitimate demands on the time of most service providers, it’s no surprise that most operators don’t have the in-house resources to research, prepare, and launch a successful small business marketing campaign. This is one of the invisible barriers you can face when trying to introduce new services or technologies. Acquiring the necessary knowhow through an experienced vendor partnership is simply good business practice.

In challenging times and with disruptive technologies, your traditional vendor relationship must be far deeper than just a technology transfer. Rather, it should now include sharing all of the associated knowledge for a complete business model from demand creation to service delivery to profitability. In effect, your technology vendor becomes a trusted advisor and partner who shares your business objectives because success is defined the same way for both of you.

The Perfect Storm
As a service provider, you will either catch the replacement wave in small business key systems or be swept aside. The process is already underway and is unstoppable. To service this surge in business, you need to choose both the right technology and the right blend of channel partners to grab the biggest piece of the market you can, as quickly as possible. The rewards are significant and sustainable if you invest the necessary time and effort to build the right relationships from day one.

David Cork is CEO of Natural Convergence ( (news - alert) He has over 20 years of experience in the telecom industry. Prior to cofounding Natural Convergence, he served in a variety of leadership and executive roles with Bell Northern Research, Mitel Corporation, ObjecTime, and Nortel.

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