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February 19, 2001

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the big picture:
The Multibillion-Dollar Answer

The reason your customers don't buy more, and more often, is very simple: They don't trust your products

By Leon A. Kappelman (kapp@unt.edu)

Leon A. Kappelman ear Mr./Ms. Software Maker:

I had breakfast recently with some four dozen CIOs. Together they control around $10 billion in annual IT spending. They're your customers, and they buy a lot of software.

They were there that morning to talk about what keeps them up at night and to do it in private, with only their peers and a few academicians. The group was representative of seasoned IT executives everywhere. Most had been at IT for at least 20 years. The industry mix was good and included not-for-profit and government executives, too. It was a credible sample of your biggest and best customers.

Turns out, your customers are very hesitant to buy anything from you. It doesn't matter what it is: new releases, upgrades, new products--anything, really.

They can afford it. They're not upset with you or anything like that. Sometimes they even want the improvements or new features you offer. But unless they have to buy, they won't. And apparently, you don't understand them well enough to know why.

Too bad for you. If only you took the time to get to know your customers a little, there's no telling where your sales could be.

I wasn't surprised by what these CIOs told me. I was surprised, but only a little, that 100% of them felt that way.

You see, I've asked the same question hundreds of times before, with audiences from all industries, and just about every customer group: techies and nontechies, students and executives, old and young, and everything in between. The answer is always the same. At least 98% of them feel the same way, and they aren't buying your software because of it.

The question I asked those CIOs that morning and that I've been asking all over the world, goes like this:

How many of you look forward to the next new software application or upgrade? Depending on the audience, I vary the question with phrases like "on your desktops" or "on your networks." For these CIOs, it was "in your environments." It doesn't matter; the answer is always the same. At most, 2% of the hands go up. Usually less. Get it?

Less than 2% of your customers look forward to your next product or upgrade.

Why? Again, the answers are always the same, regardless of the demographics. The key words are "instability," "unpredictable," "bugs," "downtime," and "hassle." To those CIOs, and everyone else, it means wasting precious resources. To the software industry it means fewer sales, less revenue, and smaller profits.

So what it comes down to is simply that they don't trust your products and thus aren't buying them. Certainly not as much as you wish they would. Not even as much as they'd be willing to, if they trusted you more. But they don't--trust your products, that is.

So there's the multibillion-dollar answer, the secret to more market share, and to billions of dollars in new revenue.

The sad thing is that the software industry could easily change this customer mistrust. But you don't. So instead of increasing your overall markets, the "size of the pie," so to speak, you fight over a pie that's smaller because of your own poor-quality products.

Want to sell more software? Then make better software. "Better" meaning more reliable, more interoperable, more stable, and thus less costly to install and operate. This is the key to long-term viability and growth.

Sure, new products will continue to come along and establish new market segments. But once you have customers, you want them to buy your new releases and maybe even purchase the occasional new product. It's those sales you're killing with your poor-quality goods.

Don't believe me? Are you pleased with the sales of your newest releases? Are they better than the earlier versions? Then why the disappointing sales?

I already gave you the answer. Your customers are giving it to you, too, by not giving you their dollars. I hope you're listening. I hope you do something about it. Your customers and shareholders are watching.

Sincerely,

Leon

Professor Leon A. Kappelman is director of the Information Systems Research Center in the College of Business Administration at the University of North Texas. You can reach him at kapp@unt.edu or on the Web at www.coba.unt.edu/bcis/faculty/kappelma.