Best Practices: Insightful Evolves with Market Frontier (Part 1 of 2)
Product lifecycles drive the frontier of industry dynamics in high tech markets. High tech business-to business-markets additionally face the difficulty of complexity in value offerings, purchasing drivers, and buying committees, as well as non-transparent pricing and highly targeted markets. To manage the dimensions of competition while competing on a rapidly evolving product lifecycle, CEO’s and Sales & Marketing Executives must constantly examine their sales strategy, product strategy, positioning strategy, and pricing strategy. Enter Insightful.
Insightful Corporation (NASDAQ: IFUL, www.insightful.com) is a small cap company headquartered in Seattle, Washington. With 165 employees and revenue of $17.4 million in 2001, up 14% from year prior, Insightful is making decisions that improve their industry position.
Insightful’s data analysis software and services enable businesses to identify patterns, trends, and relationships through statistical analysis of digital text and image data. Their market includes over one thousand customers in the Global 3500 in vertical industries of Financial Services, Pharmaceuticals & Biotechnology, Telecom, Manufacturing, and Government. Their direct competitors are SPSS and SAS, and indirect competitors include NCR Teradata.
To understand how Insightful has been able to compete in this rapidly evolving market, I spoke with Shawn Javid, President and CEO, and Richard Leavitt, Sr. Director of Product Management. They shared with us the changes in Insightful’s sales, product, positioning, and pricing strategy. Each of their strategic changes reflects underlying principals of product lifecycle evolutions.
In 1987, early in the product lifecycle, over 95% of Insightful’s customers were expert statisticians with PhDs and graduate degrees. With the usual characteristics of early adopters, these expert statisticians were mostly interested in a product that functioned well and enabled them to do their job better. Furthermore, the market expressed a high level of latent demand. Thus, during the early years of ’87 to ’97, the sales function could be handled through a telesales department. (To review a similar approach, read the Wiglaf Journal article published on 28 August 2002 concerning IAR systems.)
By 1997 however, Mr. Javid noticed a shift in the market. The character of the buying committees was evolving to include Vice Presidents and Executive Vice Presidents with a less technical role and a stronger business role. The inclusion of executives in the buying committee reflected that the user group was broadening and their purchasing criteria were becoming more main stream business issues. At this stage, the product lifecycle was exiting the early adopter stage and entering the early maturity stage.
To adjust for the early maturity market, Mr. Javid re-designed the sales organization with two significant changes. One, he improved the quality of the sales process by adding direct sales to supplement telesales. Two, he refocused the sales force away from a horizontal product focus to a vertical market focus. These two changes addressed two market requirements. The first change, improving the sales force, enabled Insightful to address the broader concerns of the growing buying committee. The second change, becoming vertically focused, enabled Insightful’s sales force to learn their client’s industry jargon.
The result of reorganizing the sales force for the early maturity market has been dramatic. Since 1997, Insightful revenues have increased by 138%.
Driving the change in the buying committee was a broadening of the user group. To meet the demands of the larger user group, Insightful reformulated their product strategy.
In the early adopter phase of the product lifecycle, most of the individuals that had a need for heavy statistical analysis were expert statisticians. These expert statisticians were satisfied with desktop products and script interfaces, and able to write their own modifications to address specific challenges of their company.
As the industry evolved, the expert statisticians were becoming a bottleneck for Insightful’s customer businesses. There was a growing market demand to enable a larger set of knowledge workers to access the statistical capabilities of the expert statisticians. To meet this demand, Insightful’s products evolved.
At this time, two product changes were underway. One, Insightful’s S-PLUS flagship product was equipped with a graphical user interface (GUI) familiar to most Windows desktop tools. This made the product easier to use. Two, Insightful launched StatServer so that the expert statistician could write an analysis process once and publish it over a corporate intranet. These changes enabled the general company knowledge worker to perform sophisticated analysis without learning statistics.
As the market evolved, so did Insightful’s need to manage customer messaging. An example of re-directing their customer message can be found in their recent March 2002 launch of Insightful Miner, a full life-cycle data mining workbench.
Insightful Miner initially targeted solutions for CRM Analytics. The customer message focused on the ROI and price to performance metrics as compared to competing solutions.
Sales were not as robust as expected so Insightful undertook market research to understand why. Using customer interviews conducted by the product management team, Insightful learned that the price and performance metrics had less of an impact on purchasing Insightful Miner than other factors. Specifically, they identified a customer need to undergo internal changes prior to being able to deploy the power of Insightful Miner.
To address the specific customer concerns, Insightful is altering the promotional message for Insightful Miner to focus on its ability to bring sophisticated data analysis to other areas of the enterprise outside of CRM. This positioning also makes greater leverage of their reputation and their flagship product. Importantly, this new customer message addressed the organizational concerns of Insightful’s customers.
The most contentious strategic marketing issue within most organizations is the setting prices. Prices determine the ability of a company to capture value for both ongoing operations and shareholders. Set too low and the company will not receive the fuel required to grow and compete. Set too high and customers will select a competing product.
At a theoretical level, Mr. Leavitt uses the common adage that Customer Value equals Customer Benefits less the Cost to the Customer (V=B-C). He also supplements this adage with a determination of the relative value of Insightful’s offering to their competitors as well as managing the total value delivered through Insightful’s offerings.
At a practical level, prices are managed on two different levels. The core products of Insightful have horizontal applications in each of their target segments. As such, the base price of Insightful’s products is constant across their target verticals. However, the one-price strategy fails to price discriminate between vertical industries that receive a high value from Insightful’s products and those industries that receive a lower value. To capture the added value of Insightful’s products in specific vertical applications, Insightful creates industry specific add-on modules. By managing both the base price and the add-on module price, Insightful is able to capture value.
By managing each marketing issue of sales, product, promotion, and pricing, Insightful has been able to stay at the competitive frontier of a highly technical field. The dynamics of the evolving technology and customer demands has forced Insightful to continually apply pressure on their marketing strategy. Their ability to maintain pace with the market is demonstrated by both their revenue growth and their ability to penetrate deeper within their current install base.