In the world of enterprise software, a lot of the products are unique or highly specialized - yet many of them do not have a brand name - the product has name but the name has not become a brand name. There are thousands of such products which just have a name but the names have not elevated to the status of a brand name.
Branding a product goes way beyond naming the product. A Brand represents a promise to the customer, a vision of the producer (manufacturer), belief & perceptions of the customer, mission for the employees and the very soul of the organization. In short a brand has strong implications on every person who comes in contact with the product: Customers, employees & owners.
In the consumer products world, everyone understands the importance of branding - but the same level of priority/importance is missing in enterprise software world. To illustrate this point, here is a pop quiz: "Can you name ten enterprise software brands?" (Name the product and not the company). As you are reading this blog, I am sure that you would have found some difficulty in naming ten product brands. I tried this pop quiz in my company & most engineers who are developing enterprise software failed to come up with five names. (worse still, many could not name five products from the business group they were working for).
All this points to a simple fact that branding in the world of enterprise software has a long way to go and there is tremendous competitive advantage to be gained by being the first to brand a product in a particular market segment.
Why brand Enterprise Software?
The most common reason for companies not to brand their product is: We are the only players in this segment or we are in the top three vendors in this segment or we are the market leaders in this segment. Other common statement is "Customers who buy Enterprise software do not buy the product based on the name, the real purchase decision is made on in depth analysis of the product functionality Vs requirements... etc."
I agree that every customer will do their due diligence before buying the product, but product branding goes beyond the customer's buying decision. Branding a product is lot more important than just influencing the buying decision.
Branding a product is therefore essential to gain competitive advantage.
Branding Triangle
Product Branding has serious emotional impact on a wide range of people - employees, customers, and collaborators ( suppliers, partners, etc.)
Branding triangle is a visual representation of the impact of branding on various stakeholders. Branding has a powerful impact on all the stakeholders. Let is examine the impact of branding on each of the stake holders.
Customers
Customers are essential for any business. When customers buy a product, the emotions which the brand invokes plays a crucial role in the purchase process. To understand the impact of branding, one needs to understand the buying process. In the B2B world, there are three types of buying situations:
- Straight Re-buy
- Modified Re-buy
- First time purchase
Straight Re-buy:
This is the most common and accounts for more than 50% of the customer expenses on enterprise software. Companies routinely buy additional licenses, renew license agreements, pay annual maintenance fees etc. Here the customer's emotional involvement is low and the customer is satisfied with the product and wishes to continue buying & using the product.
If the customer is buying a branded product - say Oracle Database or SAP R/3 or Microsoft Office or Adobe Acrobat Professional, then the customer/buyer internally builds a relationship with the vendor with each purchase. The relationship is purely emotional in the minds of the buyer - and the buyer feels good for using/recommending/buying into the well known brand.
If the buyer/customer/user is experiencing a positive emotion during the purchase- i.e. feeling good about it, then the company's effort to brand the product is paying off. With a stronger brand name, vendors can extract a little premium in terms of price.
Modified Re-Buy:
In case of modified re-buy, the customer still has a strong need for the product/service but the customer would like to explore other alternatives. In short the customer is not fully satisfied with the current offerings and is looking for a change - either change in the vendor or change in the prices.
In a modified re-buy situation, having a strong brand name helps in a big way. Company can retain the customer by changing the pricing or payment options or offering add-ons at a lower price. In the world of enterprise software, the actual selling price differs greatly from the list price. So offering a discount in the selling price or offering a waive off on the annual maintenance fees or offering additional products at a discount can be done effectively without affecting the brand value as the terms of the sale are usually confidential.
In case the customer is looking to replace a non-branded product, then strong brands have a distinct upper hand as the stronger brand name can help the key decision makers minds and thus influence the sale. In the world of enterprise software, this is very common especially when it comes to cutting edge technologies. Often times a startup would have developed a new product and would won several customers, and then a major player would enter the same market with their offerings which is backed by a big brand name. So in case of a modified re-buy, the bigger brand wins. For example, take the world of Network operating systems. Novell Netware was the original inventor and market leader, but when Microsoft entered the race with Windows NT, Netware lost its market share rapidly. Another example is that of WindRiver systems - maker of RTOS (Real Time Operating Systems). Wind River was the early innovator and market leader in RTOS, but as embedded Linux gained popularity, Wind River lost out - and was eventually acquired by Intel.
First Time purchase:
World of business is ever changing and there is always a new need to be met. Company starts out with requirement gathering/analysis and comes up with a wish list. Vendors will now have to match their product/service against the wish list. In such situations, the product which meets all the requirements has the upper hand. But in reality it will not be possible to meet all the requirements, so under such situation, the customer is facing uncertainty and is running a risk.
In such cases, having a strong brand name helps. Customers are often more comfortable dealing with established vendors - particularly if they already have a business relationship in place. So having a strong brand name will help in pushing a sale. Also is possible to influence the customer requirement analysis such that the situation is favorable to the big brand vendor.
In the world of Enterprise software, companies such as IBM, HP, EMC, Oracle can influence the customer's requirement to be favorable to them and in cases where there are major gaps between the customer requirements and the product offerings, the vendor can offer consulting or professional services to fill in the gaps in the product functionality.
Handling the Buying Center
Strong brand names can help the vendor go beyond the product capabilities. Purchase decisions are often vetted by senior executives who run a "Buying Center". A buying center is a team of people who manage the buying process. Typical buying center consists of the following players: Initiators, Users, Influencers, Gate keepers, Decision makers or approvers, & Buyers.
The buying center consists of so many players who may not have full understanding of the product - but if the product has a reputed brand name, they are unlikely to dig in deep and investigate the product before buying. People in the buying center are not the power users and therefore can be easily influenced by the brand name.
A pop quiz: If you were to make a choice of buying Opsware or Voyance Control - and you are aware that both the products are more or less equal, which one will you choose?
I am sure that this will be a tough question to answer - for any person who is not familiar with network management systems. So if I were to rephrase the question as:If you were to make a choice of buying HP OpenView Opsware or Voyance Control - and you are aware that both the products are more or less equal, which one will you choose?
Now, you can clearly see the advantage of having a strong brand name. HP being a leader in computer industry and OpenView being a market leader in Network Management Software, the decision would be lot more easier for any person who is not familiar with network management systems.
Partners
In the B2B world no single product can exist without having a need for adjoining product to provide the complete solution. Often times to win in the market place it is vital to have good and strong partners. The company's ability to attract a strong partner is greatly influenced by the brand name.
Enterprise software product companies need distributors, Value added resellers, channel partners, system integrators etc. While there are well established players in each category of partners, getting them to sign-up with you company will not be easy unless you have a significant market share or a strong brand name.
Just as an example, Microsoft is calling for third party development partners for its Dynamics ERP tools. If the word goes out that Microsoft is looking for partners, then there will be a huge list of companies eagerly waiting to partner with Microsoft - and that gives Microsoft an upper hand in choosing the right kind of business partners. On the other hand if Ramco systems were to call for partners for its ERP solution, the list of willing businesses will be very small.
Now just think that if you are a small company developing a niche software - then what is the possibility of getting companies such as IBM Global services or Accenture or EDS to partner with you? This partnership will be very tough to start off with - unless you have an established brand name like EMC or Cisco or Brocade.
Employees
Branding has a huge impact on employees. The product brand messaging has several deep impacts for employees. The brand message often serves as aspirational value for employees - has several benefits:
1) Employees understand what the brand stands for? and What it promises?
2) Employees connect with the brand and then help deliver on the brand promise.
3) Employees choose to work for company as they believe in the brand & its value.
4) Employees who believe in the brand value will become brand ambassadors & promote the brand.
5) Employee brand ambassadors will attract other high quality talent into the organization.
Winning brands consistently win two crucial moments of truth:
The first moment of truth occurs when customers buy the product after having evaluated all other offerings of the competition. The second moment occurs when they use the product and the brand and feel the product has delivered as promised in the brand messaging.
Employees play a big role in delivering on the brand promise. Therefore branding to employees is critical to ensure that employees understand what the brand stands for & what it promises. Only when employees understand the brand promise, they will work towards fulfilling the promise to the customer. Once employees fully believe in the brand promise and deliver on it, employees will feel a sense of belonging with the company - this in turn increases their work dedication & loyalty.
Once employees start delivering on the brand promise, they tend to act like brand ambassadors - promoting the brand in all possible channels/occasions. Such employees also market the brand and the company to their friends/contacts and help in attracting high quality talent into the organization as well.
If employees do not understand what the brand stands for or what it promises, then it will have adverse effect on the brand & the product. If employees do not understand the brand message, they do now know what they are working for and that will eventually lead to bad customer experience - which will erode brand value.
For example, SAP R/3 has built a great brand name within the SAP AG organization - and almost every SAP employee I have met could not resist talking about their great product, but I cannot say the same for employees from several other ERP companies. The same can be said about Intel (where I once worked). Intel employees are one of the strongest supporters of Intel brand and they take pride in their products.
Closing Thoughts
Branding is essential for all products - be it consumer products or enterprise products. While the needs of branding consumer products are well understood and practiced, the branding of enterprise products are often neglected - this is more so in enterprise software segments where products are positioned as solutions to customer's needs. Enterprise software companies tend to spend a great deal of time & energy to sell a solution and ignore the branding aspects.
Branding enterprise products has several benefits - apart from increasing sales. The company's ability to influence partners and employees is vital for success in the long term - and ignoring the product branding will relegate the product into a commodity - thus leading to lower profits and shareholder returns.
Brand management for enterprise software products and services represents a unique and effective opportunity for establishing enduring, competitive advantages.
