Mark Shane, Sales manager at ICON reviews the opportunities for the vendor and channel reseller and the tactics for selling into this profitable segment of the market.
The inhibiting factors to sucessfull selling in the small business market : The bottom end of the market is far from homogenous. The inhibiting factors, features and motivations change quite dramatically from one niche to the next. For clarity it is sometimes convenient to think of the small business product market as splitting into 3: basic small business systems, value small business systems and professional small business systems.
The difference between these is not to do with the number of extensions but more to do with the size and characteristics of the small business.
To break into any of these the Channel Partner needs to understand the dynamics and motivations in the individual markets.
Basic small business systems - These are the real low end of the small business market. Small businesses in this market look for and buy a simple no thrills basic telephone system. Usually low price, these systems offer little more than the ability to take, make and switch calls. The low price means low margin for the reseller with often not much more than £20-30 made on each sale.
To “crack” this market and survive on the meagre pickings per sale means being able to generate volume sales, offer little or no after sales technical product support and looking to make profit from upselling installation and other services.
Value small business systems: These systems offer exceptional “bang for your buck” for the small business in terms of cost per feature. The best, such as the TalkSwitch distributed by ICON, offer performance and features comparable to those found on many enterprise phone systems but are priced for the small business market.
Small businesses buying these solutions want more than the make, take and switch functionality of the basic system. Passive sales (order taking) are usually from the more informed small business. To break into this market and actively sell the product the Channel Partner needs to take a more solutions sales approach. The opportunity for the Channel partner is to upsell the small business from a basic to a value small business system. The advantages are increased profit per sale.
The inhibiting factor in this market is lack of awareness and understanding of the contribution communications can make to business. Developing demand for the TalkSwitch genre of products means promoting the business benefits first. Traditionally something which resellers in the small business market do not do well.
Professional small business systems: These are the top end small business systems targeted at the small business which recognises the importance of communications in its business and sees it as a tool for increasing profits and productivity. The best of these such as the Wave IP 500 or Wave IP 2500 from Vertical provide similar communications services found on enterprise level traditional and IP PBX’s. Cracking this market means full on solution selling. Channel Partners without solution selling skills will struggle to sell into this market.
The hot solutions to sell into small firms: VoIP is the clear candidate. VoIP has excited the interest of many small businesses and this desire to “learn” about the technology is often a motivation for the purchase of a telephone system.
UC and FMC currently are not high priority communications services for the small business in the basic or value niche of the market.
In the professional small business niche UC of itself is not asked for but many of the individual elements/functions of a UC system (eg unified messaging, presence, and voice conferencing) are purchasing influencers for the small business owner. Often these are package as standard (as in the Wave IP business communications system from Vertical) along with other sought after services (call recording, desktop call management) in a solution which offers out of the box UC capability for the small business.
Mobility is an across the board requirement in the small business market. At the moment on-site mobility solutions such as the Polycom KIRK solutions are strong sellers into the small business market. The on-site / off-site mobility functionality provided by FMC solutions is not being bought by the small business but it is our view that in the medium term, and certainly in the long term, small businesses will be an important market for the on-site/off-site mobility provided by FMC solutions.The need for on-site mobility in a small business is strong. When a business consist of a handful of key staff it is important that they can be contacted anywhere on site. Classic examples are car dealerships and care homes (Polycom have just launched a DECT phone especially suited to use by care workers in the healthcare sector).
Some small business owners try to provide key employees with the mobility they need by using consumer grade DECT solutions bought from the high street retail shops. These are never a successful long term solution but do have the effect of showing the small business the benefits which can be gained from a mobility solution such as a Polycom KIRK. Vendors such as Polycom provide entry level IP DECT solutions which can be retrofitted to small business telephone systems and which are priced to suite the small business budget.
The health of the small PBX market: Our perception is that the low end of the small PBX market is flat if not showing a month on month decline. However, we believe that this might be seasonal especially given the winter we have just experienced. The bad weather and Christmas effectively closed UK Ltd for much of December and January. Order pipelines will have dried up and not yet been replenished. Longer term we would expect to see demand in the small business market pick up so that by the end of the year the market will have recovered to its previous level.
However, in our experience not all of the small business market has suffered. In the high end niches of the small business market sales of the TalkSwitch and Wave have been maintained. These niches seem to have some resistance to the downturn. This maybe because these solutions are seen by the small business as a key tool for increasing profits and business and decisions to buy are more considered and less influenced by external events.
CPE or hosted solutions?: Our experience is that small firms are buying CPE solutions. Sales of the Polycom KIRK IP mobility solutions which can be fitted to CPE or hosted solutions have been almost entirely for integration with CPE solutions.
Building loyalty in the small business market: There is very little evidence of any purposeful long term or medium term thinking on the part of dealers when making a sale. The focus is on the immediate deal and the cash injection this can bring to the business. Customer retention is important but deliberate planning on the part of the reseller to migrate a customer up the product family is not. However, the flexibility to expand the system to accommodate incremental growth in the business is a benefit at the time of sale.
Notwithstanding this, manufactures are building products which offer flexibility for expansion if this is required. For example the Wave business communications solution from Vertical has the capability of being expanded from a 10 handset (or less) solution up to a 350 user solution. Similarly the TalkSwitch small business solution can be expanded from entry level solution supporting up to 16 handsets to a 64 handset telephone system.
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