SOLUTIONS MARKETING
Application: Sales Strategy, NPD/NSD
The Concept
This is an attempt to sell a customized package of products and services rather than a pre-defined product. It aims to capture additional revenue from associated services or, perhaps more importantly, by understanding the real needs of buyers. Suppliers frequently edge competitors out of their customers’ installations by offering packages that work across all technologies. As a result, the word “solutions” is common parlance in many industries and conferences. A “solution”, a customized offer, should be an attractive, high margin experience for which the buyer is pleased to pay more than the individual components. It should be a firm’s equivalent of a Saville Row suit or custom car; something expensive, sexy, and enjoyable. Self-evidently it should be more expensive than any pre-packaged offers available in the market and, glitteringly expensive though it is, it should tempt customers to buy.
History, Context, Development, and Criticism
“Solutions marketing and selling” evolved from the need to approach customers, particularly business customers, at the moment when their requirements are ill defined; to “move up the value chain” (see organizational buying behaviour). It first appeared as a concept in the computer industry during the 1980s. For example, in his 1986 book about his career at IBM, the retiring global head of sales and marketing dedicated a whole chapter to “solution-minded selling” (Rodgers, B., 1986). At that time suppliers’ main proposition to customers was to buy a new product because it would be faster and cheaper than the one they already had; but what was often missing was any analysis of changing needs. They were not, generally, listening to their customers or taking care to understand their real needs.
The “solutions” approach was created to encourage sales people (who had become used to focusing on the upgrade of existing products or overhauling their “installed base”) to learn to focus on real customer needs. Because customers had a mish-mash of different technologies and products that had to be taken into account, a process evolved whereby the seller conducted a technical audit of customers’ needs and proposed a “solution”, initially called a systems integration project, which customized new and existing technology to meet changing requirements. “Solutions marketing” has since been successfully used by a wide range of different companies in a host of different industries, to act as a catalyst for a change in the behaviours of their sales force. It has been seen in: computing, telecommunications, document management, healthcare, and heavy engineering, to name but a few.
However, in the enthusiasm to adopt this approach, and use it as a catalyst of change, the difficulties it causes have been disguised, neglected, or ignored. The first, and most important, is that it can cause an erosion of margin and a fall in price. When companies sell products there are established prices and controlled discounts which a sales person can apply. But when putting together a package of products and services, the discount is frequently applied to supplementary items outside the discount controls on products; services for instance. When a company moves wholeheartedly into “solution selling”, their own products can be a small percentage of most orders. If it has no cost information on the other elements of the sale or, perhaps more importantly, no discount controls in place for service items or competitor equipment, the move to solutions will lose money.
Secondly, if a supplier is seeking to run or grow a large business on volume sales, then one of its keys to success is scalability. It needs to “industrialize” its products and services, packaging its offer to customers as much as possible. Many large companies are based on this ethos. Their marketing, sales, distribution, and delivery are all based on volume. Yet, this is in conflict with a sales approach that customizes every single sale through a solutions selling philosophy. Unless the company genuinely uses some form of mass customization process and technology, the conflict in this strategic emphasis will cause inefficiency, higher costs, and poor quality. A company which has spent fifty years making money through volume production simply cannot customize each sale to each customer without major change to its internal processes and attitudes, together with serious investment in technology.
The third problem is that the marketing of solutions doesn’t tend to create or communicate a clear value proposition. Customers need a simple proposition if they are not clear about what they are looking for or if they are going to change their buying habits. An appealing description and attractive packaging are important ingredients in the marketing of even complex business offers and service experiences (see features analysis and value propostions). Solutions marketing has led, by contrast, to extravagant claims, odd sounding marketing messages, and some ridiculous product names. The satirical British magazine, Private Eye regularly listed some of the sillier examples, such as:
- “Accommodation solutions”: Flats/apartments.
- “Integrated care solutions”: Residential, day-care.
- “Extra-care solutions”: Nursing homes.
- “Chilled food solutions”: Ready meals.
- “Outsourced vehicle movement solutions”: Car deliveries.
- “Carestream radiology solutions”: X-rays.
- “Integrated vegetable supply solutions”: Greengrocers.
- “Client solutions team”: Complaints department.
- “Integrated solutions, Oiling the wheels of industry with the knowledge to care for the environment”: Consultants.
- “Intelligent solutions. A complete IT solution, including hardware, networking and e-commerce”: Consultants.
- “Inbound solutions guarantee to take the pain away from all telephony and application-related aspects of your organization”: Consultants.
Voices and Further Reading
- “An IBM marketing rep’s success depends totally on his ability to understand a prospect’s business so well that he can identify and analyze its problems and then come up with a solution that makes sense to the customer … the people in the field have to be a combination of analyst, consultant, application specialist, technologist and salesperson …” Rodgers, B., 1986.
- Stone, M. and Carasle, M., Business Solutions on Demand: Creating Value at the Speed of Light. Kogan Page, 2004.
- “Transforming the organization into a solutions provider is tricky. Few executives truly comprehend the enormity of the challenge, let alone what ‘solution provider’ really means.” Kumar, N., 2004.
Things You Might Like to Consider
(i) The king really does have no clothes. This is poor English, bad marketing, and really idiotic businesses strategy. Architects take an approach to their work that is similar to the “solutions methodologies” suggested by those who have specialized in this field. They understand their client’s needs, often helping them to craft a “requirements specification”. They then analyse the site and design a “solution” to their needs, before assembling a multi-disciplinary team to build the building. Yet at the end of the project they deliver a house, a garage, or an office block; not an odd sounding, meaningless package. Marketers need to get a grip on this and make up their mind what their market claim really is. Are they offering a bespoke, customized, expensive offer or more of an industrialized, streamlined, and packaged experience?
(ii) It is easy for firms to take a share in markets dominated by companies who have taken a customized, solutions approach to every sale. If they package their offers, they are likely to be able to undercut the price of established suppliers and improve their own profit.
(iii) Some present this concept as though “the move from products to services to solutions” is an inevitable evolution in any industry. It clearly is nothing of the kind. Some customers are quite satisfied with a packaged offer and some companies are geared to produce only packaged volume offers. This is as much about getting the best mix of features as in the creation of any other marketing offer.
Nokia Services’ Business Solutions Portfolio
Nokia is a world leader in mobile communications best known for its consumer handsets. Yet, in 2005, it embarked on a major change programme for its business-to-business networks division (since combined with Siemens into a new venture) to differentiate itself from its competition by shifting focus from selling technology to providing customer-orientated services. Fundamental to this change was the creation of a “Nokia Services organization” in the company’s networks division. At that stage, several service organizations and capabilities were combined from across the company into one business unit. This amalgamation made the existing service businesses more visible because it represented over 25% of the Nokia Networks’ revenues.
The company had started to put in place “solution selling” some years before, encouraging sales people to work systematically with its customers, defining their needs, and combining different stand-alone offers into more customized and comprehensive projects. By 2005, the company had trained 1,200 people in “solution selling” methods and practices, so (in 2006), Nokia Networks was prepared for an extensive roll-out of its newly formed “Business Solutions Portfolio”. By June of that year, Nokia Services represented more than a third of the Nokia Networks’ total revenues with very strong potential growth.
BACKGROUND
The international “mobile network infrastructure” industry had been undergoing a number of significant changes, driven by technology, consumer demand, and increasing competition. In mature markets, the boom years had passed and network operators (Nokia’s customers) were entering a phase of stability and saturation. Faced with declining revenues from traditional voice services and increasing encroachment from other communications and media industries, they were under enormous pressure to cut costs and earn revenue through new data and entertainment-based services. In developing economies, by contrast, the number of consumers continued to expand very fast, so operators needed to deliver profits from a growing number of low revenue customers, while also updating their service portfolios to attract and retain higher value users.
As consumer expectations rose, and as technological convergence enabled new competitors to enter the market, these pressures on operators were increasing. To meet the new challenges, they needed more than mere technology vendors. They needed what Nokia called “strategic solution providers” who could help them determine which markets they should be in, which services would maximize profits, and which combination of components (infrastructure, applications, content, and user devices) would yield the greatest long-term competitive advantage. In short, they needed a supplier who could take a true end-to-end view of their business and work closely with them to help deliver their strategic goals.
Historically, though, operators of mobile networks had seen little change in the way their suppliers had behaved and communicated with them. For example, as recently as February 2005, it was clear that most participants at an industry exhibition called 3GSM (the single most important event in the mobile telecom industry calendar) still had little to differentiate their offerings and were relying more on “technology push” rather than “customer pull”. Even Nokia, whose “customer first” strategy had been launched in 2000, had not fully articulated its service-led approach, and this despite the fact that (as the world’s no 2 mobile networks infrastructure provider and no 1 handset manufacturer) its capabilities and skills made the company better qualified than anyone to deliver true end-to-end “solutions”.
Although Nokia thought there was still an opportunity in the mobile market place to create the innovation, excitement, and growth of a few years ago; a new approach was needed. This should be from a new, customer driven, “outside-in” perspective (rather than the traditional technology driven “inside-out” perspective). And the only things preventing the company from taking this approach were its own way of working and own way of thinking. The company therefore set itself the goal of transforming its thinking, processes, and tools to support true cross-business synergy in a way that addressed actual customer needs, and delivered the full business value they required in the competitive environment they now faced. It was that transformation that led directly to the creation of the “Nokia Services Business Solutions Portfolio”.
THE FIRST STEPS: UNDERSTANDING CUSTOMER/MARKET NEED
Understanding customers and their needs is the cornerstone of all opportunity analysis. But the radical nature of the new “Business Solutions Portfolio” programme demanded a re-think of the process by which this information was collected. Traditionally, the company’s view of markets had been gained through globally standardized tracking research into customer satisfaction, customer loyalty, market size, and other metrics. However, all these processes were driven by the global organizational structures and, thanks to Nokia’s heritage, took a predominantly product-related perspective. The challenge was, therefore, firstly, to re-orient processes around business challenges (rather than simply analysing customers’ purchasing behaviour) and secondly, to localize the collection of information in order to anchor it in the realities of market and customer experiences.
For the first step, market information which the company already owned (for example, research on customer efficiency and end-user behaviour) was used to understand the reality and challenges of the company’s customers. This was important because this knowledge could now be drawn upon to define “market opportunity hotspots”. For the second step, Nokia used the “eyes and ears” of the organization (the customer account teams) to de-centralize market understanding and gather relevant information on an operator-by-operator basis. By mid 2005, five area meetings, with around thirty participants in each, had been run, including Nokia Networks’ sales directors, “solution managers”, and “solution consultants”. On the agenda were the hottest themes and challenges the company’s customers were facing in their markets.
By the end of the programme Nokia had distilled a wealth of new knowledge into approximately fifty clearly identified business challenges. This data was consolidated into five important “customer challenge domains” which, Nokia believed, addressed the industry’s toughest issues. It was these five domains that formed the platform on which the Business Solutions Portfolio was built and communicated to the market. The results of this long and detailed process were tested in around ten customer workshops and the feedback was extremely positive.
MAKING IT HAPPEN
The first step toward the “Solutions Portfolio” was to create a dedicated team and a few quick wins with a handful of solutions that the company knew it could rapidly bring to market. Initially this “Solution Marketing Team” was created in the services marketing function, working with the individual business lines to create solutions that addressed customer issues of cost-efficiency and market differentiation. These first offers were the starting point of the new portfolio and were used for illustrative purposes in customer workshops and external events and communications. They were also the basis of the first “Solutions Portfolio” brochure and the business challenges-based Portfolio development work mentioned previously.
CHANGING INTERNAL PERCEPTIONS
Since the primary challenges facing Nokia were within its own walls and across its many internal boundaries, it became clear that it was necessary to send out a concrete internal message and raise the innovative spirit needed to create the new approach. This in turn meant additional work with management to ensure full buy-in and support for the project.
The goal was to create a clear identity and associated behaviour to support the programme. Through a series of management workshops and with creative help from one of the agencies, the “Solutioneer” concept was born. More than a marketer, more than an engineer, more than a sales person, the Solutioneer identity pointed at a combination of a strong and proud engineering heritage with a commitment to solve the customers’ business challenges in a holistic way and symbolically defined who the company was. The idea was launched internally throughout the Nokia Networks division and set the scene for the solution-based thinking needed in order to deliver the external promise. To support the message, a range of collateral (giveaway puzzles, T-shirts, etc.) and an internal “inspirational video” was developed to help explain the shift the company was taking in interacting with customers.
ORGANIZATIONAL RE-TOOLING
As the programme moved forward, the resourcing for solutions work needed to move beyond the marketing organization and into the individual business lines, in order to make the promise real. This phase was the most difficult, and although the Solutioneer campaign helped oil the machinery, it was nevertheless probably the single true test of whether or not the Solutions Portfolio would fly. Marketing continued to lead the project, but now business lines needed to take responsibility for practical delivery to customers.
Identifying business owners for solutions which crossed several organizational boundaries was a major milestone, and through this work alone Nokia made significant progress in bringing down walls and silos within its organization. As responsibilities were clarified and delivery work continued, a “Solutions Portfolio Council” was created to oversee the development and approve new proposals.
THE IMPORTANCE OF CREDENTIALS
Providing proof that the solutions actually worked was just as important as creating and developing the Portfolio itself. As solutions were piloted, rolled out, and delivered, a special campaign was launched in which sales had to generate and agree customer testimonials on business successes (with the best examples given awards by management in sales meetings). In this way, the company not only generated a critical element of its external marketing tool kit, but also helped to sustain internal momentum and encourage further buy-in.
BRINGING THE STORY TO MARKET
As a major pillar of the external communication programme, a new sales tool was developed, the Services Sales Kit, to make it as easy as possible for account teams to put the new Solutions Portfolio approach into action. Using a new user interface, sales people could access appropriate materials by defining the customer challenge, specifying the document type, or by asking questions and prompting answers from within the Sales Kit solutions, using a dynamic search engine.
CONCLUSION
From the beginning, the project took a twin-track approach: on the one hand re-positioning the Services organization within the mobile networking market place as a true solution provider, while on the other hand working internally at every level of the organization to develop full understanding and buy-in for the changes required to deliver the external promise. By ensuring equal clarity of communication for both external and internal audiences, and by engaging all levels of management in evangelizing the Business Solutions Portfolio story, the project has been instrumental in aligning real customer needs with real Nokia skills and capabilities.
RATING: Toxic