Over the last 7 years I’ve been in the software-as-a-service space. More specifically, I’ve been in the web analytics space. My first analytics startup, Crazy Egg, helps you understand how people interact with your website. And my second one, KISSmetrics, helps you understand your customers so you can maximize your lifetime value.
In the analytics world, the biggest player in the space, by far, is Omniture. And although they aren’t a direct competitor to either of my startups, I’ve had the privilege of watching them go from being just another analytics company to turning themselves into a 1.8 billion dollar company.
Here are 7 most important lessons I’ve learned from watching my competitor Omniture dominate the analytics space:
Lesson #1: Best Product ? Biggest Company
By no means does Omniture have the best product out there. And no, I am not just saying this because I own 2 analytics companies.
Their product is hard to use; it’s slow; they’ve had a ton of instances of data loss; and they constantly get customer complaints. If you don’t believe me, just Google Omniture Sucks.
That’s actually the main reason I got into the market. Years ago, I used to own a consulting company, and we used to help our customers use Omniture. They hated it although they kept on paying for it.
So, what did I learn exactly? Of course, you want to try to have the best product out there, but even if you don’t, that’s not a valid excuse for not making money. Before Omniture sold to Adobe, their revenues were well into the 100s of millions. In 2008 (they sold in 2009), they had $296 million in revenue. This brings me to lesson number 2.
How I applied this to my business: Although we focus heavily on product at KISSmetrics, we hired a VP of Sales a bit more than a year ago to build out our sales team. You can’t just focus on either product or sales, you have to focus on both.
Lesson #2: Sales is the quickest way to grow a software company
I’ve always had the belief that you need a finished product before you can start selling. The reality is you don’t. I didn’t learn this until I sat on a sales call from a rep at Omniture. Here are the specific things I learned from digging into their sales process:
- PowerPoint presentations can be more effective than real product demos – if you have an incomplete product, the last thing you want to show someone is a half working product because it’s really hard to convince someone to pay for something that isn’t built. And if your product is built but has bugs, it’s also a bad idea to show someone a demo of a product that doesn’t work 100% of the time. Through PowerPoint presentations, Omniture was able to dance around all of these issues because they were able to show their customers the problem they were going to solve for them. And if you happen to close a deal before your product is done, you can always tell a company you won’t be able to start till X date as you are backlogged from customer demand.
- Always sell with case studies – the more case studies you include in your pitch, the more validation you bring to your product. Case studies show that your product does what it is supposed to do. If you can’t use case studies, try to use data and facts to back up how your product will make a company more money or, at the very least, save them money.
- Don’t forget to score leads – if you are an ideal candidate for Omniture, you can expect one of their sales guys to constantly hound you. If you aren’t, you’ll notice that their sales reps won’t bother you too much. It’s not because they don’t want your business, but it is because they are lead scoring. They know that if you aren’t ready to buy, it’s best to throw you back to marketing, where they can continue to educate you until you are ready to talk to a sales rep. This is smart because sales reps are really expensive and you don’t want them talking to people who aren’t ready to pay.
- Educate first, sell second – just like in the lead scoring example above, Omniture has a tendency to educate first and then sell. It helps drive up the demand for their product, which makes the job easier for sales reps. They do this through webinars, whitepapers, conferences, booths and countless other forms of marketing. But if you look closely at all of the methods I mentioned above, you’ll notice one thing in common: all of their marketing methods involve collecting your contact information so their lead qualifiers can follow up with you later on to figure out when you are ready to buy.
- The bigger the pitch, the bigger the money – Omniture doesn’t sell you analytics. They sell you a solution to your problem. And the bigger the problem they can solve, the more money they can charge. A good example of this is that they don’t help you with just your SEO or PPC needs; instead, they help you with your digital marketing strategy. They know large corporations are shifting their budgets towards digital marketing. If you look at Google Trends, you’ll notice that more and more people are interested in digital marketing. In essence, they are riding the wave of what’s popular as that tends to be where the big bucks are.
How I applied this to my business: Throughout the last year, we’ve been building out our sales team at KISSmetrics. We are now at the point where we are adding a new sales rep each month.
Lesson #3: The more you integrate, the higher your lifetime value
Although Omniture doesn’t have the best product, one of the main reasons companies keep on paying them is because of integrations. Their product integrates with Salesforce, Exact Target, Double Click and dozens of other large software providers.
At a quick glance, this may not seem to be a big deal, but their ideal customer uses a lot of those other services. And if their customers are reliant on those other services, they are also going to be reliant on you as your product integrates with them and goes through valuable data.
So, even if people hate your product, it’s going to be harder for them to cut you as you are deeply integrated into other software solutions they need to keep their business up and running.
Plus, if a newcomer enters the market with a better and cheaper product than yours, which also integrates with other software solutions, you are still likely to keep your customers. It’s because the cost to rip out your software solution and switch at this point will typically cost a lot more than the savings a company might generate by switching.
If you want to boost the lifetime value of your customer, integrate with all of the major software providers your customers use.
How I applied this to my business: KISSmetrics now integrates with other software providers that our customers use such as SalesForce. This has helped us boost our average selling price and our lifetime value.
Lesson #4: Mindshare = sales
The one thing Omniture did better than any other analytics company is that they got mindshare really fast. They spent more money on marketing and were much more creative with their marketing than their competitors, which helped them capture more mindshare.
For example, I was at a conference called Search Engine Strategies Chicago, which was held during the winter. Omniture was at the event, and they were handing out Omniture branded scarfs. This was very effective as most of the audience was traveling in from other destinations, and they weren’t used to the cold weather. Within hours, thousands of people were walking around wearing Omniture scarfs.
In addition to this, they also did all of the other marketing campaigns that their competitors did such as pay-per-click advertising, SEO, speaking at conferences, creating white papers and using banner advertising. But the one thing that they did better than the competitors is that they created most of their mindshare by partnering up with thousands of ad agencies in the U.S.
So if an ad agency had a customer that needed analytics, Omniture made sure they were always recommended. They did this by providing ad agencies with a referral fee on each deal they brought in.
If you want to grow your business, you have to capture as much mindshare as possible. Yes, this will require advertising. Although you may not be getting a good ROI in the short run, remember that there is value in branding as well.
How I applied this to my business: With both Crazy Egg and KISSmetrics, we try to capture mindshare through our blog. It’s worked well for us over the years, and it has been cost-effective.
Lesson #5: If you can’t beat them, buy them
Although Omniture had a ton of mindshare in the market place, they didn’t have all of it. For a long period of time, there were 3 big competitors in the space: Web Trends, WebSideStory and Omniture. There wasn’t a clear winner in the space, so what Omniture decided to do was to buy out some of the other players in the space.
Omniture ended up buying out WebSideStory, Offermatica and Mercado. Through these acquisitions, they became the leader, which was a very smart move as the value of your company drastically increases if you become the leader.
For example, a company in the analytics space may be worth 4X revenue, but if they are the leader in the space, they could be worth 7X revenue. Omniture was buying companies at a lower valuation, and by combining all of them under the Omniture brand, they were able to skyrocket the valuation of their company because they became the leader.
How I applied this to my business: With Crazy Egg, we recently acquired Hellobar to increase our market share.
Lesson #6: It’s better to have short-term pain and long-term gain than it is to have short-term gain and long-term pain
As Omniture continued to grow, they ended up with a handful of products. And although these smaller products didn’t account for the majority of their revenue, they did account for a good portion.
A good example of this is Hitbox. It was a product that they owned through their WebSideStory acquisition, which they could have continued to run as it was making good money. But they decided to cut it as well as other products so they could focus on their main Omniture suite.
By cutting these products, they were decreasing their revenue in the short run, but this allowed the whole company to focus on the big picture, which helped boost their revenue in the long run.
If you want to create a large company like Omniture, you need to focus all of your efforts on one product instead of trying to create dozens of smaller ones. Even if this hurts you in the short run, you’ll benefit from it in the long run.
How I applied this to my business: At KISSmetrics, we sold KISSinsights and Sharefeed. Both of those products were doing well financially, but we wanted to focus all of our efforts on KISSmetrics.
Lesson #7: Location matters
Where do you think a 1.8 billion dollar tech company would be located? You probably guessed San Francisco, California, but that wasn’t the case for Omniture.
Do you know where they are based? In Orem, Utah.
Most people try to start companies where everything is happening, and in most cases that is San Francisco. What was smart about Omniture is that they started where their ideal employees were located: Utah.
Utah has a large population of Mormons. Many of them are missionaries. They travel the world and go door to door convincing people to switch to Mormonism. Because Omniture is a sales-driven organization, being based out of Utah was perfect for them. They were able to recruit a ton of these missionaries and turn them into sales reps as they already had the basic sales skills. This allowed them to grow their sales team at a rapid pace and at an affordable rate as the cost of living is lower in Utah.
In an ideal world, your potential employee pool would be located in San Francisco, but that’s not always the reality. So, if you want to set up a company, don’t just go to where everything is happening. Instead, look for where all of your potential employees are located and set up shop there.
How I applied this to my business: We ran Crazy Egg as a virtual company, but with KISSmetrics, we set up shop in San Francisco because that is where a large portion of our talent pool is located. We do have some virtual employees, but most of the team is located in San Francisco.
Just because someone is your competitor doesn’t mean you can’t learn from them. Although Omniture isn’t my direct competitor, we do share some of the same clients and, every once in a while, fight for the same deals.
If you want to create a successful business, don’t ignore your competitors. Whether you think they are dumb or smart, it doesn’t mean you can’t learn a thing or two from them.