Selling Features vs Selling Benefits - Part 2
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In my previous blog entry, I discussed the issue of selling "Features" vs selling "Benefits". I used Socialtext and comments by its founder/CEO Ross Mayfield as a starting point. I'm thrilled to see all the great comments, thanks everyone for sharing your thoughts!
Features or Benefits?
According to Ross - his company sells "Features" of their enterprise wiki software product, and lets the customers figure out the "Benefits" for themselves.
This runs counter to one of the most important high-tech Product Marketing and Product Management concepts - that of identifying product "Benefits" and using that to create marketing/sales messaging (instead of just the "Features").
That being the case, how has Socialtext managed to achieve success so far? Is it an exception to this concept?
First There Are 'Early Adopters'
The answer to this question is found in the popular Crossing the Chasm
In this book Moore talks about what became known as the "Chasm Theory", which is best explained with the image below (this image is loosely derived from the book, but not identical):
When a new technology product is introduced in the market, it is initially adopted by customers Moore refers to as 'Innovators' and 'Early Adopters' - who usually make up ~5-10% of most markets. In order for the product to become a mass market success, it needs to be adopted by customers he refers to as 'Early Majority' and 'Late Majority' who make up ~70-80% of most markets.
Then Comes the Chasm
Moore points out that there is a huge "Chasm" between 'Early Adopters' and 'Early Majority' segments. Why so?
The main reasons are these. 'Innovators' and 'Early Adopters' buy interesting and cool technical tools, and figure out how to use those tools to their own benefit. They don't need to be told what the benefits are by the technology product vendors. They also don't need references from other customers, success stories, etc.
On the other hand, 'Early Majority' customers expect the technology product vendors to tell them what problems their product addresses and what benefits it offers to them. Not just that, they expect customer references and success stories too. And clearly defined ROI (Return on Investment). They buy solutions to business problems, not cool technical tools.
Most Startups Never Cross the Chasm!
Most technology startups never cross the chasm because they never figure out a compelling benefit or ROI for a target market. But many fall under the illusion that they've made it while the small part of the market made up of 'Innovators' and 'Early Adopters' is scooping up the product.
As a result they never master the critical techniques needed to successfully cross the "Chasm", such as choosing a target market, creating the "whole product" for that market, positioning the product, building a focused marketing/sales strategy, etc.
My Take On Socialtext
Coming back to where we started - is Socialtext correct in saying that it can simply sell features and let customers figure out the benefits themselves, because it is a Web 2.0 software company?
My answer to that question is "Not really". I believe that they're yet to cross the chasm - they're selling to 'Innovators' and 'Early Adopters' and hence don't need to demonstrate benefits or ROI.
However, in order to really make it big by crossing the chasm - they must do what every successful "enterprise software" company does. Demonstrate benefits, prove ROI, provide customer success stories, etc - basically answer the most important question the prospective customers have: "What does your product do for me?".
It is still about the "Benefits", not just the "Features". Even for the so-called Web 2.0 class of software which are all the rage these days - expecially in the VC community in Silicon Valley.
About the Author: I'm your author, Michael Shrivathsan, an expert in product management and product marketing with successful experience spanning two decades. I live in Silicon Valley, USA. For my day job, I manage the product management & marketing teams at Accompa, makers of requirements management software and product management tools.
Comments
Nice post, Michael. I have a lot of thoughts (and questions!) in my head after reading this post - I'll leave comments later.
Posted by: Josh Thomson | February 26, 2006 08:16 PM
It is an interesting post. Moore's Chasm Theory is also interesting. But you still don't fully grasp what Web 2.0 is all about. It is very different than other software - the whole point of Web 2.0 is that the user has all the power. The user can decide how he wants to use Socialtext wikis. Why should Socialtext tell the user how to use it? It will be arrogant to do so - yet that is what most software companies do. That is why Web 2.0 sofware companies will kill all other software companies sooner or later.
Posted by: Dave Toms | February 26, 2006 10:56 PM
Hi: I'm an MBA student in the UC system http://www.universityofcalifornia.edu/. Can I use an excerpt from this blog post for an industry case study I'm doing with a classmate? I have also sent an email to the email address provided in your blog. I'd really appreciate if you will allow it. BTW it is a nice post, very illustrative. Thanks! Dongbin.
Posted by: Dongbin | February 26, 2006 11:25 PM
Dongbin,
Feel free to use content on this blog, as long as you provide the URL of this blog as a reference i.e. http://michael.hightechproductmanagement.com . I'm sharing the entire blog under Creative Commons license http://creativecommons.org/licenses/by-nc-sa/2.5/.
Posted by: Michael | February 27, 2006 10:42 AM
Mmmm this is interesting theory about Socialtext. It will be interesting to watch how their marketing message evolves and how much success they achieve.
Posted by: John | February 27, 2006 01:52 PM
Here are my thoughts on this so far.
* It makes sense early adopters will buy a cool technical tool and figure out benefits for themselves. There are some friends I can think of who are the equivalent of this on the consumer side. They by cool tools for the sake of coolness, not usefulness.
* It also makes sense early majority will demand proof of value - since most of the business buyers have their reputation on the line - sometimes even their jobs!
* I have read the book before, but after reading this post, I want to reread it. Thanks for the inspiration!
Some questions I have:
* You said Socialtext has Fortune-500 customers. Is this true? How do you know it?
* If so, how did they buy a cool tool. Most, if not all, Fortune-500 customers would want to see business value proposition before puchase. Don't you agree?
Posted by: Josh | February 28, 2006 12:48 AM
Josh,
Good comments. See my responses to your questions below:
Hope that helps.
Posted by: Michael | February 28, 2006 08:44 PM
Socialtext are the ones who don't get it. Whether they do the telling, or their users do it via word of mouth, someone has to explain what this thing is for.
I am often an innovator or early adopter of products and technologies in domains that I care about. However, unless it is absolutely obvious, I still look for suggestions about who the vendor thinks the product is for, when I would use it, why it's cool, and what it's purpose is. And remember, that's when I'm in early adopter mode, or actively searching for something to fill a need.
For many other products, I'm like everyone else. I wait to see how the market shakes out, until the bugs are worked out or until the price comes down. The reason? Because I don't have time to sort out every single innovation and valuable product category that I might ever use. In this case, I rely very much on the messaging, who else is using it, clarity of purpose, marketing, etc. to make my decision.
Surprise. This isn't just me. It is universal. So, any company or entrepreneur that smugly claims they are smarter than the rest of us, and that their users are so smart they can figure out why they should buy it, well, they're the truly stupid ones. Like all the dotbomb sites that were going to have billions of sticky eyeballs to sell, just because. Where are they now?
Look, if Socialtext is useful, and they can get their user community to tell the benefits story for them, that's great, but don't deny that the benefits story is important. If Socialtext doesn't know what the benefits are, and they aren't listening to what their users say and building more of what they want into the product, then they won't be around long, and we won't have to listen to dumb anti-marketing commentary. On the other hand, if they are listening, and do know how important it is, then they are being shallow and trite. They are also doing a disservice to themselves, because although we don't need goofy ads of cowboys herding cats to sell us a product, we do need the vendor to make it simple and genuine for us, or we'll choose products from another vendor who does.
Web 2.0 is not a badge of honor. It is, at least in this case, a badge of stupidity.
Posted by: Paul | April 28, 2006 09:05 AM