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 book by Geoffrey Moore:

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.

Posted by michael at 06:03 PM | Permalink | TrackBacks (0) | 8 Comments | Post Comment

I attended a panel discussion at a forum event in Silicon Valley last week. The topic was "Web 2.0" - which I think is mostly a meaningless buzzword. In any case, on with the story...

Ross and Socialtext
One of the panelists was Ross Mayfield, founder and CEO of Socialtext a Silicon Valley startup that sells "enterprise wiki solutions" - basically software to create and manage wikis.

A member of the audience asked a very relevant question: "What problems does your software address?". I thought Ross will give a summary of Benefits.

Features, not Benefits?
Instead, he gave a long answer the gist of which was "We sell features. Our customers figure out the benefits".

Really! I was surprised to hear this answer from the CEO of a company that describes itself as an "Enterprise software" vendor. Other panelists, made up of VCs and analysts (not sure any of them had marketing/sales operational experience at a real high-tech company), mostly concurred.

For those of us who have done Product Marketing and Product Management in the high-tech industry, we've always been told that we should emphasize "Benefits" over "Features" when creating product messaging (brochures, sales presentations, etc). Was that wrong? What is the deal?!

Au Contraire!
I discussed this topic over lunch with four friends who have lot of experience in marketing and sales at successful large as well as startup companies in the valley. The unanimous opinion was that it is most important to clearly communicate product "Benefits" if you hope to achieve mass market success.

What about Socialtext then? They have real customers who pay them real money, and real VCs who have given them much much more real money! The answer to this riddle is found in the popular Crossing the Chasm book by Geoffrey Moore. Can you guess what it is? Till next time...

- Michael

Posted by michael at 12:41 PM | Permalink | TrackBacks (0) | 10 Comments | Post Comment