Trends in the SMB VoIP Market: How to Sell to End User Concerns
John Macario
President, Savatar
A few weeks ago my company, Savatar, was hosting a dinner for some of our clients. We decided that we would like
to give our guests a gift with our logo on it to keep our company at the top of their minds. Our office manager put together some
options: polo shirts, key chains, computer cases - the usual stuff. Despite differences in quality and pricing for the products
and companies we looked at, we found that each company we contacted had several things in common.
- When we called a company or went to their website to research a product, we were quickly able to
obtain the information needed for evaluation and purchase.
- We were always able to get detailed price quotes that allowed us to understand our total cost for each product
including customization and shipping.
- The pricing we obtained for each product offered a lower per unit cost if we purchased more of the item.
- Each company we contacted gave us a firm delivery date that would meet our business need.
In my experience, companies peddling gift items are not the only ones who give this kind of focused customer
attention to the Small and Medium Business (SMB) market. In the last year our small business bought everything from a terabyte of
managed storage space from EMC to office supplies from our local Staples. In each case, the vendors we contacted provided service
consistent with our gift buying experience.
In fact, over the course of last year there was only one group of companies who miserably failed to meet our
expectations for service to small business: VoIP providers.
Since 2003, Savatar has conducted regular market research studies into the SMB market for VoIP. As part of that
research, we work with an SMB client to help them evaluate and purchase a new, converged voice and data solution. This gives us a
first hand look at how service providers manage their sales process, price and position their products, and respond to SMB inquiries.
Each time, we are shocked at the difficulty of the sales process, the lack of focus on VoIP's key economic advantages and the utter
irrationality of the provider's pricing models.
The SMB market is primed to buy VoIP services but is being underserved. Our recent survey of 500 SMB owners and
decision makers shows when SMB owners look for information on VoIP services, there's no clear or preferred provider. There are breakout
sales opportunities for companies who understand this segment. And one of the key factors in capturing the hearts, and dollars, of
the SMB market is to demonstrate VoIP's economic advantages.
For the SMB customer, economic issues drive purchasing decisions. In our survey, when SMBs were asked the question,
"What factors are most important to you in deciding to purchase a new phone system?" the message was clear. 75 percent of
respondents said economic factors were the most important criteria in making the decision, far more important than easier system
management or product features.
But, for SMBs, economics is more than just acquisition costs or even pricing. This market thinks of their phone
system as a cost of doing business. They are interested in lower monthly recurring charges but, most importantly, a lower Total Cost
of Ownership (TCO). The bottom line? In discussions with SMB prospects about VoIP services, providers need to clearly articulate
economics benefits and help educate the market on how the TCO concept applies to their phone system.
In a recent review of SMB VoIP providers, we found a wide variation in TCO. As an example, for a 25 station
VoIP installation, we found the three year TCO ranged from a little over $59,000 for the lowest cost Hosted IP PBX solution to over
$130,000 for the highest cost - a 110% difference! Even more surprising, the two offers, sold by very recognizable name brands,
had exactly the same administration advantages and feature set.
How can any provider tout the economic advantages of VoIP with TCO numbers that large and compete against
commodity voice only services offering 3 cent a minute long distance? Providers can overcome this challenge by selling VoIP as a
converged voice and data solution. The right question for vendors to ask prospects is, "How much are you paying per user per
month for voice and data today?"
The offer described above with the lowest three year TCO costs the end user about $65 per user per month for
voice and data. We found that this competes very favorably with the status quo. Once the economic advantage is established,
system management benefits and portions of the feature set relevant to the prospect's business can close the sale.
How to Sell VoIP to SMBs
Our recent research study shows that SMB decision makers will buy converged voice and data solutions based on
economic advantages rather than system management benefits, product features, or even whether their current contract is ending.
Providers who are able to articulate TCO advantages to SMBs will be in a better competitive position to tap this underserved market.
If you want to win market share, you'll need to fine tune your message to SMBs to:
Make the Right Economic Argument - Providers need to help the market view VoIP from a unified voice and data
perspective and better understand the services it will supplant. Any economic discussion should be made in a way to demonstrate your
TCO advantage versus the status quo. Monthly cost per user for voice and data is a great starting point.
Pitch TCO not Return of Investment (ROI) - SMBs do not view their phone system as an investment; it is a
basic cost of doing business, so any talk of return on investment will fall on deaf ears. Show SMBs how they can save money, but don't
include soft costs, such as increased productivity or lower support costs. While these soft costs make sense for large enterprises,
they do not for SMBs.
Tout Easier System Administration and Relevant Features - SMBs do not spend a great deal of time thinking
about their phone system except when there is a problem. Show them how simple it is to change an extension, assign feature sets to
user groups and manage their own profiles. Then, learn about your customer and demonstrate a few advanced features relevant to their
business.
SMB owners understand dollars and cents, and want to know how they can save by switching to VoIP. Providers can
gain an advantage if they can discuss the Total Cost of Ownership of the systems and services they're providing, and demonstrate greater
value over the services they are replacing. If providers combine cost savings with some common sense pricing, they can motivate a
large percentage of the market to join their growing SMB customer roster.
Back to the February 2007 newsletter
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