VoIP Business

Westcon Continues Spending Spree

It looks like consolidation isn’t just for IP based phone system vendors, it is happing in the voice and video space as well. Westcon, a multi-national specialty distributor of networking technology products servicing the solution provider, integrator and value-added reseller community, announced today that it has purchased Review Video, a major Polycom video solutions distributor for $25 Million in cash.

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How Much is Too Much?

One of the things that always strikes me as being odd is the thin line between offering customers not enough choice or too many choices. As a reseller, you are more likely to win a sale by representing multiple product lines (think good, better, best), but in doing so, you leave yourself open to the reality that multiple choices will confuse a perspective customer. This particularly true with the small medium business, a market sector in which how easily a particular solution is for a customer to comprehend and implement more than likely will predicate it’s success.

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Not All Consumers Understand VoIP

But you do not HAVE to make them fully understand the technology in order to get them to interested enough to purchase your VoIP service. You do, however, have to give them enough information and understanding of Voice over IP in order for them to be confident in making a buying decision. Here are some tips you can use, as a VoIP Service Provider, to help bolster your marketing efforts in order to increase your subscriber base.

VoIP Service Provider Marketing Tips

• Speak The Customers Language - Do not use tech speak. Keep acronyms to a minimum. If you had to tell a ten year old what it is that your company does, how would you describe it?
• Don’t Use High Speed or Broadband Internet to Describe an Internet Connection - 90% of consumers do not know what broadband means or if their service is high speed, after all, even dial-up services promote a higher-speed product. Instead, use DSL or Cable to describe the Internet connection necessary to use the service.
• Sell Devices That Mimic The Traditional Calling Experience - Telephone adaptors, while cheap, add a foreign device to the calling experience. Rather than wasting your time explaining what an analog telephone adaptor does, sell them and cordless IP phone. Customers are familiar with cordless phones and people like things that they are familiar with. It will save the time and headache of explain why you need and ata and how to install it. If you insist on having an ata, make sure you offer one that has PSTN failover, like a Linksys SPA-3102 or Grandstream GS-488.
• Explain What Happens When Their Internet Connection Goes Down - Do not just make this a bullet point in the fine print. Use it as an opportunity to differentiate yourself from your competition by explaining the issues and making sure your customers have a “back-up” plan such as a cellular phone or PSTN line for failover. Sure you might lose a customer or two, but the ones you gain will trust you. Trust build loyalty. Loyalty breeds lifetime customers.
• Show Them More Than Price - If the sole decision was price, then they would have switched year ago. Most non-technical customers needs reasons other than price savings to go through the “hassle” of switching their phone service. Promote the convienence of voicemail to email, how they can use a second number so others can call them for free, educate them on the benefits your features provide them.
• Do Not Make Switching a Hassle - No one wants a hassle. Make the sign-up process easy, have knowledgeable staff answering your phones, have a number porting system that constantly updates the customer on what stage of the number porting process they are currently in. Make sure devices arrive on time.
• Make Paper Invoices an Available Option - Believe it or not, many consumers WANT paper bills. Due to their “non-technical” nature, they may not be use to or comfortable with paying bills online. Do not make them do it “your way”, allow them to do it “their way.”
• Stop Assuming and Start Talking - Stop assuming you know what customers know about Voice over IP. I “thought” I knew what people knew about VoIP, but it wasn’t until I started selling VoIP in a brick and mortar retail environment that I started to “get it.” From there, I actually paid a friend to go out and get people to fill out surveys about their knowledge of VoIP. What I found was that most people know little, are filled with mis-conceptions, and really do not care about VoIP. But do not take my word for it, go out and talk to lots of people about Voice over IP.

While it is one thing to identify points that VoIP service providers need to market to, it is another thing to execute on them. Execution, after all, is just as important as strategy. These points are merely a starting point for enhancing the marketing of your VoIP service - do with them what you will.

Marketers Create Products, Engineers Build Them

Andy Abramson has an excellent post on innovation and why some companies fail. I find that the number one problem with most technology start-ups is that they are started by engineers, not marketers. Engineers are wired differently and because of this they encounter many of the issues you describe above.

No offense to any engineers, but if you take a true look behind why “big” companies do a better job of marketing products, is because they follow a different process. For these larger companies, the marketing department, through r&d, and product development create the new products, not the engineering team. The engineering team is there to execute on the product the marketing team wants. They simply “build the product” to the exact specifications. It is then back to marketing for launch and then finally sales.

With most tech start-ups, there is a good idea, a product is built, and then it is dumped in the lap of a marketing person and agency, with a “go market and sell this.” The product is usually something that creator thought was great, but quite possibly is missing much in terms of the functionality and user experience. Something a marketer who is “in touch” with the intended user(s) would have pointed out and would have been corrected at larger firm.

Use Your Money to Build a Great Product Then Sell It Online

I disagree with Andy’s assessment of the internet as a poor distribution medium, especially for a start-up. Now much of this is dependant on the type of product or service, but one of the reason retail distribution is so expensive is that unlike online, there is a finite amount of shelf space. That shelf space has a hard cost, and brick and mortar retailers have to make sure that before opening up the shelf space to this new product, it has the potential to sell well enough to cover that cost and turn a profit. Because of this factor brick and mortars are extremely cautious as to what they add to their shelfs (just look at all of the people who have great products, but never get in Wal-Mart).

Online, once a basic website framework is constructed, the cost for me to add a page, or even replicate that site is nothing more then the cost of man hours. For a start-up that means more dollars to allocate to other channels (like making a good product great).

For Retail VoIp The Numbers Don’t Add-Up

As for retail VoIP, I have a bit of experience from the retail kiosk project that ran with Vonage here in Buffalo and I can tell you that there are some fundamental problems preventing the further growth of this channel.

1. Consumers who are attracted by the “save money” pitch (which is the one that was/has been picked by VoIP providers) typically attracts consumers with low levels of both knowledge and experience of the internet. Sure, most of the people who actually use VoIP are college educated, and well paid, but that is because they can fully comprehend the technology. The vast majority of consumers you will encouter in a mall kiosk setting (or even at radio shack) just are not able to comprehend the technology. Not that it is that hard to comprehend, but from my own “market research” during the kiosk trial you wouldn’t believe how many people think AOL “is the internet.”
2. Finding staffing that has the ability to effectively comprehend the technology and the ability to transfer that knowledge to a consumer, for say $8-$10 per hour plus a modest commission is difficult. Good luck finding enough individuals to make this happen on a large scale.
3. Subscriber commissions. In the cell phone business, the average rate per user (arpu) is around $34-$40/month (and rising). Given that cellular companies force a one or two year contract, they can project “guaranteed” revenues of $400 - $500 per year from that new subscriber. There customer acquisition costs are based on this and retail partner commissions are calculated. These (from my friends still in that business) tend to range from $150 to $250 per subscriber, plus bonuses for other add-ons (like text, video, ringtones, etc).

For VoIP providers, the arpu has to be a tad below $24 per month, and given that none are currently requiring a one or two year contract, their customer acquistion costs need to be a bit more conservative and because the arpu is 30-40% less then that of cellular providers, they in turn are not able to offer the same sort of dollars for activation of new subscribers.

Why give shelf space to something that is harder to sell, harder to staff for, and is less profitable?