David & Goliath - how small software companies can beat big competitors
Beating a competitor that is much bigger than your company is challenging. It is also frustrating because while a big competitor has far more resources (people, money, marketing etc...), you know that your software is superior in many ways from what your large competitor has to offer. But you need to overcome the perception that the bigger company is a safer choice. This is the "nobody ever got fired for buying IBM" syndrome. Beating a big competitor is especially challenging when they are an incumbent and already installed at the customer.
As a salesperson, there is not much you can do about the software you are selling so let's focus on the things that are within your control. Here are 3 actions you can take to beat a big competitor in a head-to-head competition to win a new customer;
1. Be more nimble and responsive - this mostly comes down to execution and having a better sales process. Deliver your proposal, quotes, and answers to questions faster than your competitor. You want to contrast how easy it is to work with your company compared to your slow moving and bureaucratic competitor. This will give the customer a sample of what it is like to work with your company. You also want to get your proposal in front of the customer first so that you are setting benchmarks through the pricing and terms and conditions you are offering.
2. Be flexible - Even if the customer does not ask for certain terms and conditions you may want to offer them in order to differentiate your proposal from the competition. Obviously, you don't want to offer concessions that your company is not prepared to make. But some areas of differentiation to explore could be;
payment terms - if your competitor offers 30 days, you offer 35 days.
cancellation terms - if your competitor has a 90 days notice to cancel, you provide 60 days notice.
pricing - look to offer a non-standard pricing model that will differentiate your offer and align more closely with the customer's needs. A big software vendor is going to be hindered by strict revenue recognition rules. Can you offer contingency based pricing? - price based on certain measurable goals being achieved. Can you offer graduated pricing? - charge less in year 1 and gradually increase pricing in subsequent years. Can you offer a software licensing model that is different from the competition and one that matches more closely with how the customer is going to use the software? For example, if you think the competition is going to license per user can you offer an enterprise license?
Since you got your proposal in first, you have set some benchmarks by which the customer will compare other proposals. What will happen if the customer asks your big competitor for the same terms and conditions? A big company, especially if they are publicly traded, has lots of approval processes and strict guidelines with respect to the terms and conditions that can be offered. While your competitor is bogged down trying to get all the necessary approvals you have already delivered your proposal. Many weeks can go by before your competitor will be able to deliver their proposal and during this time you can start working with the customer on the next steps in their buying process. You can be providing references and reviewing contracts and the customer still may not have a proposal from the competitor. Moreover, when they do finally get the proposal they will likely not be able to match the customized offers that you provided to the customer.
3. Anticipate and be prepared for everything the customer will need during the sales process
Every company big and small is going to ask for similar things as part of their buying process. You can anticipate what these are going to be - references, review contracts, demos etc.. - and proactively work with the customer by offering these up before they even ask for them. Big software companies won't be as proactive. The sales reps hope not to have to provide these as they will lead to yet more internal approvals and hurdles that they will have to overcome. Getting proposed contract changes reviewed and approved by a Legal department inside a large software vendor is a particular kind of hell that no sales rep wants to have to deal with. So you want to send over your simple software license agreement to the customer in Word format and emphasize to them that you are prepared to review and negotiate on all reasonable change requests they may have.
What you want to achieve by being more nimble, flexible and anticipating customers needs is to convey how easy it is to do business with your company. Here is the key lesson - "How you sell is just as important as what you are selling". You want to mitigate the perception that the big competitor is a safer choice by showing the customer what a pain they will be to deal with. You can't control how your big competitor will act but if they are a typical large software company their internal processes and bureaucracy will help highlight how easy it is to work with your company in comparison. Impress the customer by delivering an exceptional sales experience and you will be well on your way to slaying Goliath.
About the Author: Bryan Socransky is the Principal Consultant of Disruptive Consulting Group. Bryan's experience spans over 25 years in some of the most competitive B2B sectors including enterprise software and SaaS. Now he is applying this experience to help small and medium sized B2B tech companies acquire and retain more customers.