… and convince your customers with your services, not reduced prices
Achieving customer attention in the age of the Internet is the key to success. The best service offer, the highest quality, or the lowest price will not boost your sales if no one notices your brand. Easier said than done. Nowadays, you compete not only with your neighbor’s shop, but also with the whole world.
How to gain customer attention was the question I was asking myself when we developed our strategy for our IT outsourcing company subsidiary in Kyiv, Ukraine, 10 years ago. At that time, outsourcing was well established in the US, but still somewhat new in Germany. Therefore, the question arose as to how to convince customers to trust or at least try outsourcing?
For this we had to go a step back, because: To convince, and not to persuade, we needed to find those customers for whom outsourcing is the right choice and that we are their best option.
There are thousands of IT outsourcing companies out there, many of them are pretty cheap, others – highly professional.
A tempting strategy to improve sales is to reduce prices. Search engines will detect that and rank you at a higher level.
Unfortunately, this is very often the first step into non-existence. Profit will shrink, and be sure, there is always someone out there, who is even cheaper.
When we checked the market, we saw that there were many IT outsourcing companies who offered their services at a much lower price than even salary market rate in the capital, Kyiv.
How could that be? Many of them were located in the countryside, with lower costs. Other were far east in India or even China. Other had simply only average employees. And then there were of course highly professional companies with low prices, very often of smaller size.
Therefore, we could not get just cheaper. To stay with our rates, we needed to become better.
Unfortunately, IT services are complicated to compare with. It is not a standard product like a book or a plane ticket. I wondered to myself - how do we convince our potential customers that our services are better?
At that time, I read a book “Der Weg zum erfolgreichen Unternehmer” from management consultant Stefan Merath. which is about “Engpassorientierte Strategy EKS”. It is a systematic approach to find your best product offering and your market. It can be translated as Theory of Constraints for Strategies. Invented by Prof. Wolfgang Mewes in 1970, it took some time for the industry, and in particular medium-sized companies, to understand its power in a diversified world.
It has four basic principles:
1.Focus on your strengths
2.Find a constraint in your market, which blocks the development of our customers and accelerate their business if it is solved
3.Innovate a solution for that constraint
4.Become a leader in that market niche
Finding the constraint is the most essential part here. If you offer a service, which is tempting and unique enough, your customers will not argue much on price and stop searching for other options among your competitors. It requires in-depth knowledge of solutions, your market and creative thinking.
By checking the skills and ambitions of our team and our successful customers, it became apparent that only working with agile customers using cutting-edge technologies we were successful. Conservative customers hesitated to use our services, as an offshore business frequently means a lack of control for most people. Old PHP stuff bored our employees, and it was challenging to convince them to work for a more extended period on such a project.
So we focused on cutting-edge technologies. At that time, it was Liferay. Nowadays, it is responsive front-ends with Angular or React and microservice architectures in a cloud DevOps environment. And the technology stack varies depending on the requirements.
Finding the market niche and their constraint needed some design thinking. Technology is essential to our customers but even more important is the delivery in-time, in-budget, and in-scope.
Outsourcing IT development is stressful for many IT managers, as they cannot control their team as they were used to doing. Moreover, many of them had bad experiences with Indian developers who kept saying “No problem, Sir” and then delivered something completely different to what was expected. In these cases, such outsourcing failures obviously led only to career and reputation damages.
Micromanagement via daily calls, code quality checks, and desktop monitoring might help, but usually no one has time for that. And, in the end, you need a policy for every developer. No one can afford or wants that.
Fix price projects, where the scope and budget are clearly defined, will not help here as well. In the agile world, requirements are set on the go. And any change of requirements means too often in this case: a lot of money to be paid.
So how we could offer an agile approach with all flexibilities and still let our customers stay in control?
The K&C answer is to develop a very transparent model, which shows our customers all the time how we work and what they get. This full reporting includes the way we find candidates, build the team, calculate the budget, track the progress, and ensure the quality. We call it “Controlled Agile”, as it combines the best of both worlds.
The niche we are serving is a market where speed is vital, and IT is not just something additional, but the basis for business success. These are all companies that were impacted by the digital transformation.
To them intransparent way of working is not an option as they cannot accept any risk in failing to deliver. Average developers take too long to deliver, and smaller companies are not able to scale.
With our message and market segment we were able to focus our marketing and sales activities.
In the old times we wasted our energy with startups without any fundings. We nicknamed them “make me rich“. They had ideas like Pokemon-Go 2.0 and wanted to pay us with shares. At the moment paying by coins for the ICO of another blockchain currency became popular.
Or we talked to managers of large insurance companies who were very interested in our skills as they need it urgently for their it strategy. It failed in the end because German language is a must.
Now we know from the very beginning of a sales process if we are fitting. Our strengths are important to them. They need having a partner with established procedures, small enough to be agile, big enough to serve their ambitious goals. With our delivery model they stay in control, know all the time the status, as if the team were nearby to them. Benefiting from the global talent pool at the same time, they get highly experienced developers and consultants. Our competitive prices they of course appreciate as well.
Developing such a strategy is an ongoing process. It takes time to understand, to implement and to validate. And markets are changing all the time, and so have we.
Change became constant for us.